Djordjevich v Rohrt
[2021] VSC 178
•15 April 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2020 00457
| DAVID DJORDJEVICH | Plaintiff |
| v | |
| RICHARD TRYGVE ROHRT (in his capacity as liquidator of ACN 091 518 302 PTY LTD (in liq) ACN 091 518 302) | Defendant |
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JUDGE: | DELANY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 January 2021, 12 February 2021 |
DATE OF JUDGMENT: | 15 April 2021 |
CASE MAY BE CITED AS: | Djordjevich v Rohrt |
MEDIUM NEUTRAL CITATION: | [2021] VSC 178 |
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CORPORATIONS – Insolvency – Application for investigation into liquidation – Insufficient basis for complaint into the liquidator’s conduct – No jurisdiction to order an inquiry – Application seeking to vindicate private rights – Not an appropriate case for an inquiry –Investigation not in the public interest of honest and efficient administration of liquidations – Westpoint Corporation Pty Ltd (in liq) v Yeo [2018] VSC 705; Hall v Poolman [2009] NSWCA 65; ASIC v Wily and Hurst [2019] NSWSC 521 cited, ASIC v Edge [2007] VSC 170 distinguished – Corporations Act 2001 (Cth) ss 477(2)(b), 533, 545, Schedule 2, clauses 90-10, 90-15, 90-20.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Levine | Maciel Pizzorno & Co |
| For the Defendant | Ms C Gobbo | Mills Oakley |
TABLE OF CONTENTS
A.. Introduction.................................................................................................................................. 2
B.. The applicable principles........................................................................................................... 4
C.. The grounds relied upon by the plaintiff in support of an order for an inquiry............ 7
D.. The liquidation............................................................................................................................. 9
E... The s 533 reporting obligation complaint............................................................................. 25
F... The complaint of improper delegation of work to solicitors............................................ 30
G.. The complaint that unnecessary and excessive costs and expenses were incurred...... 32
H.. The complaint of failure to report to creditors and to meet creditors............................. 41
I.... Failure to know at an earlier time of the existence of Westpac as secured creditor...... 43
J.... The complaint the Liquidator failed to prosecute the 2017 Proceeding.......................... 44
K.. Complaint concerning the derivative leave application.................................................... 50
L... The alleged lack of good faith concerning the proposed assignment of the Westpac Claim........................................................................................................................................................ 51
M. Disposition.................................................................................................................................. 53
HIS HONOUR:
A. Introduction
By an amended originating process dated 5 May 2020, the plaintiff applies for an order that the Court conduct an investigation into the liquidation of ACN 091 518 302 Pty Ltd (‘the Company’) pursuant to clause 90-10, 90-15 and 90-20 of Schedule 2 of the Corporations Act 2001 (Cth) (‘the Act’). The plaintiff seeks other orders, including that the defendant, Mr Rohrt (‘the Liquidator’), pay compensation to the plaintiff and to the Company for his conduct as liquidator.
Clause 90-10(1) in Schedule 2 of the Act provides that the Court may inquire into the external administration of a company on the application of a person with a financial interest in the administration of that company. There is no contest that the plaintiff, Mr Djordjevich, is a person with such an interest.
In Westpoint Corporation Pty Ltd (in liq) v Yeo,[1] in the context of the predecessor legislation to clause 90-10 of the Act, Sloss J described a three stage process:
a)The first stage is the determination on whether to conduct an inquiry into the conduct of the liquidator;
b)The second stage is the inquiry into the conduct of the liquidator;
c)The third stage is the determination of the appropriate orders.
[1][2018] VSC 705 (‘Westpoint’), [301].
This decision concerns the first stage of the process, whether an inquiry should be ordered into the conduct of the Liquidator.
In support of the relief claimed, the plaintiff relied upon the affidavits of:
(a)David Djordjevich, the plaintiff, dated 6 January 2020 (‘Djordjevich Affidavit’);
(b)Leo Chellicovski, dated 24 August 2020; and
(c)Sam Angelatos, solicitor for the plaintiff, dated 24 August 2020.
In opposition to the application the Liquidator relied upon his affidavit dated 16 July 2020 (‘2020 Rohrt Affidavit’) and two affidavits from his solicitor, Hannah Carne, dated 20 October 2020 and 27 January 2021.
The first stage hearing took place on 28 January and 12 February 2021. An application by the plaintiff to cross-examine the Liquidator was refused. The issues on the application were the subject of points of claim dated 22 September 2020 and points of defence dated 14 October 2020. Both parties filed written submissions.[2] Oral submissions on behalf of the plaintiff traversed issues going well beyond those raised in the points of claim, the points of defence, and in the affidavit evidence. Counsel for the Liquidator was able to respond to the additional matters. In those circumstances it is appropriate to determine the application on the broader basis which encompasses all issues of which the plaintiff made complaint.
[2]The plaintiff filed the following five sets of submissions: Outline of submissions of paragraph 3 of the originating process, dated 27 March 2020 (‘Plaintiff’s March 2020 Submissions’); Outline of submissions, notice to produce, dated 7 September 2020 (‘Plaintiff’s September 2020 Submissions’); Further Outline of Submissions, dated 11 November 2020; Supplementary outline of submissions, dated 9 February 2021; and Further supplementary outline of submissions dated 10 February 2021. The defendants filed two sets of submissions: Outline of submissions, dated 7 September 2020 (‘Defendants’ September 2020 Submissions’); and Further outline of submissions, filed 15 December 2015.
In addition to the affidavit evidence, the plaintiff relied upon documents from the Liquidator’s files, an earlier affidavit of the Liquidator sworn 31 July 2018 (‘2018 Rohrt Affidavit’) and a Mills Oakley Lawyers (‘MO’) trust account statement of account as at 28 January 2021. Some of the documents were the subject of objection on behalf of the Liquidator.
The hearing was conducted on the basis that I would rule on the admissibility of those documents as part of the determination of the application. For the most part, the documents in question were relevant, counsel for the Liquidator addressed the Court in relation to them and it is appropriate that the Court have regard to them in determining the application.
Having considered all of the evidence and the submissions, I am left in no doubt that the application for an inquiry must be refused. I am not satisfied that the Liquidator has failed to comply with the Act or that he failed to fully and faithfully perform his duties as liquidator. I am not satisfied that there is a sufficient basis in the material to order an inquiry. There is nothing in the evidence to suggest that it is in the public interest to conduct an inquiry such that the jurisdiction of the Court is invoked. Even if I were satisfied there was something that required an inquiry, as a matter of discretion it would be inappropriate to order an inquiry in this case. Considerations against ordering an inquiry include circumstances where what the plaintiff seeks to do is to vindicate asserted private rights using the provisions of the Act, that are not intended to and ought not be permitted to be used for such a purpose.
B. The applicable principles
The statutory predecessor of Clause 90-10(1) is s 536 of the Act. The inquiry jurisdiction conferred by that section was described by the New South Wales Court of Appeal in Hall v Poolman[3] as:
… a broadly expressed supervisory jurisdiction over the conduct of persons in control of the affairs of a corporation, in circumstances where normal market forces and the exercise by shareholders of their rights to control are attenuated or non-existent.[4]
[3](2009) 75 NSWLR 99; [2009] NSWCA 65 (‘Hall’).
[4]Ibid, [53].
In Westpoint,[5] Sloss J referred with approval to earlier observations concerning the purpose of the inquiry power and the interest that such an inquiry is intended to serve:
285.In BL & GY International Co Ltd v Hypec Electronics Pty Ltd[6] Barrett J, after tracing through the history of s 536, said that the process is one directed to the ‘regulation, supervision, discipline and correction of liquidators in the interests of honest and efficient administration of the estates of companies subject to winding-up’.[7] Importantly, his Honour emphasised, the ‘interest to be served is a public interest’ and s 536 ‘is not concerned in any direct way with vindication of private rights’.[8] Nor, he said, should a s 536 inquiry ‘be the occasion for trying what is really an action for negligence or other breach of duty by a liquidator’.[9][10]
[5][2018] VSC 705.
[6](2010) 79 ACSR 558; [2010] NSWSC 959 (‘BL & GY International’).
[7]Ibid, 569 [41].
[8]Ibid.
[9]Ibid, 566 [35].
In ASIC v Edge,[11] Dodds-Streeton J described the essential functions of a liquidator:
… to identify, take possession of and realise the company’s assets, to investigate and determine the claims against the company and to apply the assets to the satisfaction of those claims in accordance with the statutory scheme of priority.[12]
Her Honour went on to say:
The liquidator is a fiduciary on whom high standards of honesty, impartiality and probity are imposed both by the Act and the general law. As an officer of the company, the liquidator has a statutory duty of care, diligence and good faith.[13]
[11][2007] VSC 170 (‘Edge’).
[12]Ibid, [40].
[13]Ibid, [44].
In Edge, Dodds-Streeton J held that all that is needed to justify an inquiry is that the liquidator either failed to comply with the Act or that there has been a sufficient failure to faithfully perform his duties.[14] In Hall,[15] the Court of Appeal said that an inquiry should be ordered as long as the liquidator has not been fully and faithfully performing his duties; it is not necessary that there be a finding of impropriety.[16]
[14]Ibid, [637]-[639].
[15](2009) 75 NSWLR 99; [2009] NSWCA 65.
[16]Ibid, [68], [82], [122].
Clause 90-10 does not say how a Court should go about determining whether an inquiry should be conducted on the application by an interested person. Clause 90-5, which provides that a Court may on its own initiative inquire into the external administration of a company, similarly does not say how a Court should proceed.
The parties were in agreement both as to the three stage process described by Sloss J in Westpoint[17] and as to the task to be undertaken at the first stage as described by Brereton J in ASIC v Wily and Hurst:[18]
35.The present application involves the first of those three stages, which involves two questions: first, whether the jurisdiction is invoked, in that there is a “complaint” to the Court with respect to the conduct of a liquidator in connection with the performance of his or her duties; and secondly, whether as a matter of discretion an inquiry should be conducted. …
36.… Nonetheless, an inquiry is not a roving commission of inquiry at large: it is an inquiry into the subject matter of a complaint, and there must be at least a “well-based suspicion indicating a need for further investigation”, in which context the notion of “suspicion” involves a “positive feeling of actual apprehension or mistrust, as distinct from mere wondering”.[19]
37.… It is for the applicant for an inquiry to persuade the Court that its discretion should be exercised to order an inquiry. That discretion is exercised having regard to the purpose of such an inquiry; namely, the regulation, supervision, discipline and correction of liquidators in the interests of honest and efficient administration of the estates of companies subject to winding-up. The section serves a public interest and is not concerned, at least directly, with the vindication of private rights.[20] …
38.Thus, although to obtain an order for an inquiry a complainant does not necessarily have to establish a prima facie case in the strict sense, and the relevant considerations are broader, the “first stage” nonetheless serves functions somewhat similar to a preliminary hearing or a committal hearing, in deciding whether there is sufficient cause to conduct an inquiry into the complaint.[21]
[17][2018] VSC 705.
[18][2019] NSWSC 521 (‘Wily’), [37]. Refer to Plaintiff’s March 2020 Submissions, [5]-[6]; Defendants’ September 2020 Submissions, [15]-[20], [22]; Plaintiff’s September 2020 Submissions’, [4].
[19]Kennards Hire Pty Ltd v RMGA Pty Ltd [2010] NSWSC 1387, [35]–[37]; Lollback v Brakepower, [22]–[23]; this formula has its origin in the judgment of Kitto J in Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266, 303; [1966] ALR 855.
[20]Kennards HirePty Ltd v RMGA Pty Ltd [2010] NSWSC 1387, [37]; Lollback v Brakepower, [22].
[21]Wily [2019] NSWSC 521, [35]-[38].
It is the applicant for the inquiry who bears the burden of persuading the Court that there is a ‘complaint’ such that the jurisdiction of the Court is invoked. In Burns Philp Investment Pty Ltd v Dickins,[22] Young J said ’the court must be given some material to suggest that it would be in the public interest to conduct an enquiry’.[23] This means that the party seeking an inquiry ’must put forward material which prima facie satisfies the court of that matter’. What is necessary is that the plaintiff show there is a prima facie case that something needs to be investigated.[24]
[22](1993) 11 ACLC 272.
[23]Ibid, 273; cited with approval in Hall 75 NSWLR 99; [2009] NSWCA 65, [56].
[24]Hall 75 NSWLR 99; [2009] NSWCA 65, [56]–[60], [79].
In Leslie, Re Aboriginal Councils and Associations Act 1976 v Hennessey,[25] the Full Federal Court said:
[W]e believe that both Young J and Drummond J[26] were describing something less formal than a prima facie case according to some evidential burden of proof. Their Honours meant only that an applicant must show a sufficient basis for making an order, that there is something which requires inquiry. The court then has a discretion which it must exercise.[27]
[25][2001] FCA 371 (‘Leslie’).
[26]The Full Federal Court was here referring to the decisions of Young J in Burns Philip Investments Pty Ltd v Dickens (No 2) (1993) 10 ACSR 626 and the decision of Drummond at first instance in Leslie, in the matter of the Aboriginal Councils and Associations Act 1976 v Hennessy [2000] FCA 1532.
[27]Leslie [2001] FCA 371, [6].
Clause 90–15 of Schedule 2 lists amongst the matters which the court may take into account when making orders in relation to the external administration of a company, whether the liquidator has faithfully performed his or her duties and, separately, whether an action or failure to act by the liquidator is in compliance with the Act and the Insolvency Practice Rules (Corporations) 2016 (Cth) (‘the IPR’).
In BL & GY International[28] Barrett J emphasised the importance of context in exercising the discretion to order an inquiry, once the jurisdiction is invoked:
The task of the court at the second stage is to make a judgment about the liquidator’s conduct, viewed in the light of the whole of the requirements applying to liquidators and taking account, of necessity, of the circumstances of the particular winding up. What the liquidator ought properly to have done will be conditioned by circumstances. Thus, for example, a liquidator without funds will not be expected to act in the same way as an adequately funded liquidator. In the same way, a liquidator has a degree of freedom in allocating available resources and prioritizing work. Leaving to one side matters of dishonesty, lack of due care and obvious failure to address the decision at hand, it can never be said in the abstract that a liquidator who fails to take a certain step (or, for that matter, one who takes a certain step) thereby engages in misconduct. Context is all-important.[29]
C. The grounds relied upon by the plaintiff in support of an order for an inquiry
[28](2010) 79 ACSR 558; [2010] NSWSC 959.
[29]Ibid, [44].
The plaintiff contends that the Liquidator has not faithfully performed his duty as liquidator. He has assembled and seeks to rely upon a raft of complaints concerning the conduct of the liquidation of the Company in support of his application. The points of claim list 34 separate complaints. Further areas of complaint were advanced in oral submissions. The Liquidator denied each of the complaints in the points of claim. He also contested each of the additional complaints advanced at the hearing.
In his points of defence, the Liquidator contended first, that the allegations against him do not raise any matter that constitutes a sufficient basis for ordering an inquiry. Second, that there are no matters which demonstrate the due administration of the winding up or that the public interest would be served by an inquiry. Third, that in any event, the Court ought not exercise its discretion to order an inquiry when the complaints made do not raise any proper matter of controversy requiring the regulation, supervision, discipline and/or correction of the conduct of the Liquidator in the interests of the honest and efficient administration of the Company.
Given the number of individual allegations and the breadth of matters of which complaint is made, it is convenient to group the subject matter of the complaints and to address them on that basis. By reference to the Djordjevich Affidavit, the points of claim and the written and oral submissions, the following areas of complaint emerge:
(a)failure by the Liquidator to comply with the reporting obligations in s 533 of the Act;
(b)the alleged improper delegation by the Liquidator of his work and functions to his solicitors, MO;
(c)complaints concerning allegedly unnecessary and excessive costs and expenses of MO and of the Liquidator’s remuneration, together with complaints concerning the alleged failure to provide details of costs, and failure by MO to comply with the Legal Profession Uniform Law (‘LPUL’),[30] and various complaints concerning the sum of $23,200 paid by the plaintiff to MO;
(d)the Liquidator’s failure to report to, or meet with, creditors;
(e)failure by the Liquidator to learn at an earlier point in time of the existence of Westpac Banking Corporation Limited (‘Westpac’) as a secured creditor to whom the Company remained indebted;
(f)failure by the Liquidator to take appropriate steps to preserve the Company’s assets by refusing to prosecute proceeding S CI 2017 03318 (‘2017 Proceeding’);
(g)failure by the Liquidator to act in good faith in relation to the plaintiff’s application for derivative leave in proceeding SCI 2018 02277 (‘the Derivative Leave Proceeding);
(h)failure by the Liquidator to act in good faith to assign the cause of action in the 2017 Proceeding.
D. The liquidation
[30]As set out in Legal Profession Uniform Law Application Act 2014 (Vic), Schedule 1.
Due to the multiplicity of complaints, it is necessary to set out in some detail the events that happened concerning the liquidation. In addition, to refer to some of the very many communications that took place between the plaintiff’s solicitors, Marcel Pizzorno & Co (‘MPC’) and counsel on his behalf, and MO on behalf of the Liquidator. This context is needed to determine whether there is a proper jurisdictional basis to order an inquiry and, if so, whether it is appropriate in the exercise of the discretion to do so.
Mr Rohrt is not the original liquidator of the Company. He was appointed liquidator on 14 October 2016 following a successful application by Mr Djordjevich reinstating the registration of the Company pursuant to s 601AH(2) of the Act.[31]
[31]Mr Rohrt was appointed liquidator pursuant to the Orders of Efthim AsJ dated 14 October 2016 in proceeding S CI 2016 03446 (‘14 October 2016 Orders’).
The Company had been placed into external administration in 2003. That external administration ended in 2010 and the Company was deregistered:
(a)on 19 February 2003, Ian Carson and Nicholas Martin were appointed receivers and managers (‘Receivers’);
(b)on 30 July 2003, the creditors resolved to wind up the Company and to appoint Paul Vartelas (‘Former Liquidator’) as liquidator pursuant to s 439C of the Act;
(c)between 30 July 2003 and 19 November 2009, the Former Liquidator conducted the liquidation of the Company (‘First Liquidation’);
(d)on 1 December 2005, the Receivers ceased as receivers & managers;
(e)on 16 November 2009, the Former Liquidator retired as liquidator;
(f)on 24 November 2009, the Former Liquidator lodged a statement of presentation of final accounts of creditors’ voluntary winding up with the Australian Securities and Investments Commission (‘ASIC’) (‘Form 524’);
(g)on 17 February 2010, the Company was deregistered pursuant to s 509 of the Act, on the basis that the affairs of the Company had been fully wound up.
The 2016 application for reinstatement was supported by evidence from the plaintiff that he was aggrieved and that the Company owed him money. The purpose of the reinstatement was recorded in ’other matters’ in the 14 October 2016 Orders as ’to fund an action by the Company’. That action was an action that the plaintiff believed the Company had against St George Bank Limited (now Westpac).
The unchallenged evidence of the Liquidator is that an initial meeting took place shortly before 26 August 2016 with the plaintiff’s counsel Mr Levine, the plaintiff’s solicitor Mr Anamoulis and the plaintiff, Mr Djordjevich. No documents were provided at that meeting. The Liquidator:
(a)was asked to consent to be appointed as liquidator of the Company should the proposed Reinstatement Application be successful;
(b)was told the Company had a potential cause of action against Westpac (the ‘Westpac Claim’) that, if he were appointed as liquidator, Mr Djordjevich wanted assigned to him;
(c)said that based on initial discussions it was not likely that he, as liquidator, would pursue the Westpac Claim as he would not have funding to do so;
(d)said that given his statutory duties and obligations to the creditors, he would need to obtain independent legal advice about the Westpac Claim, and that if appointed he would engage MO to provide advice as they had previously advised him regarding valuing an assignment;
(e)estimated, on the basis of the information provided and on the basis that the assignment of the Westpac Claim would be straight forward, that his remuneration as liquidator would not exceed $20,000 (not including disbursements such as legal costs of advice as to the value of the assignment) (‘Remuneration Estimate’).[32]
[32]2020 Rohrt Affidavit, [11]-[14]. In the 2018 Rohrt Affidavit, [6]-[8], the Liquidator did not refer to the August 2016 meeting. He referred to discussions with Mr Levine, and his understanding from those discussions that he could either be funded by the plaintiff to run the Westpac Claim in the name of the Company or to assign the claim to the plaintiff. The first alternative is consistent with the recital in other matters in the 14 October 2016 order, the second alternative is what the Liquidator was told was envisaged at the August 2016 meeting.
The ‘other matters’ in the 14 October 2016 Orders referred only to the Company pursuing the Westpac Claim. However, as is the evidence of the Liquidator, it is clear that, at the August meeting, he was told the intention was to reinstate the Company and then have him assign the Westpac Claim to the plaintiff. None of the other persons present at the August 2018 meeting, the plaintiff, his solicitor and his counsel, has given evidence to contradict the Liquidator’s account of that meeting in the 2020 Rohrt Affidavit.
Following his appointment, the Liquidator contacted the Former Liquidator and the Receivers requesting books and records of the Company, but they had none.[33] The Liquidator completed a risk management assessment dated 13 October 2016, which included a handwritten note that the Company was not trading and had no assets. A creditor’s checklist, which included amongst the items listed the requirement to undertake a company search and to convene a meeting of creditors within 11 days of appointment, was tendered on behalf of the plaintiff during the hearing.
[33]2020 Rohrt affidavit, [16].
During the hearing, the plaintiff also tendered and relied upon an undated file note from the Liquidator’s files of a meeting, inferred to be made in late 2016 or early 2017, which noted that the cause of action proposed against Westpac was a fraud claim.
The plaintiff placed reliance upon an email chain dated 13 February 2017 which included confirmation on the part of the Liquidator that he had read three folders of material concerning the proposed cause of action against Westpac. In the course of those emails, the Liquidator said ‘It is difficult for me to form an opinion as to the likelihood of success should your client seek to commence an action … I am still prepared to support your client and seek to meet again to discuss what arrangements can be put in place to cover the obvious risks associated with any proposed action’.
On 23 June 2017, Mr Levine, counsel for the plaintiff, informed a solicitor at MO engaged by the Liquidator to advise on the proposed assignment of the Westpac Claim, that he, Mr Levine, considered that a limitations date of 17 August 2017 applied to the claim. Mr Levine also informed the solicitor that he expected the draft Westpac Claim pleading to be provided to MO for review in the next couple of weeks, after it had been settled by silk.[34]
[34]2020 Rohrt Affidavit, [21].
On 25 July 2017, as MO had not been provided with a draft pleading, a solicitor from that firm contacted Mr Levine seeking an update. The email drew attention to the following:
(a) the limitations date, thought to be 17 August 2017, MO being conscious of the time required for the steps that need to be taken;
(b) a planned cost estimate that would be provided to the Liquidator by MO once the draft pleading was provided, for MO’s fees for advice concerning the proposed assignment of the claim (including advice as to the value of the claim);
(c) the next steps, comprising:
(i) arrangements between the respective clients in relation to the costs of the advice;
(ii) preparation and the provision of the advice to the Liquidator; and
(iii) the terms of any assignment of the claim to be agreed and documented.[35]
[35]Ibid, [24].
The draft pleading, ‘not yet settled by silk’ but prepared by Mr Levine, was provided to MO on 4 August 2017, 13 days before the expected limitation date.[36] The Westpac Claim concerned a loan of $1.88 million made to the Company by St George Bank in November 2001 for a period of 12 months. The claim alleged that the loan transaction was authorised by only one of two directors of the Company, was not for the benefit of the Company and was entered into by that director in breach of fiduciary duties owed to the Company. The loan was alleged to be part of a dishonest and fraudulent design on the part of that director. The proposed proceeding named Westpac and two solicitors, Mr Gaylard and Mr Flory, as defendants. The solicitors were alleged to have been acting for the Company in connection with the November 2001 loan and related transactions. The draft pleading, which included claims against each of the defendants including Westpac for the tort of deceit and Barnes v Addy[37] causes of action, was long and complex.[38]
[36]Ibid, [25], Exhibit RTR 4.
[37](1874) LR 9 Ch App 244.
[38]In his reasons in proceeding 2018 02277 (‘the Derivative Leave Proceeding’) delivered 23 October 2019, In the matter of ACN 091 581 302 Pty Ltd (in liquidation) (formerly Pinnacle Investments Pty Ltd) [2019] VSC 699, Connock J considered the claims made in the writ as issued were such that Mr Djordjevich ought file and serve a document specifying and identifying each cause of action sought to be pleaded by Pinnacle against each of the defendants to the Westpac Claim.
On 10 August 2017, MO sent an email to MPC referring to the need for the Liquidator to seek advice as to the merits of the Westpac Claim,[39] specifically as to whether there was a proper basis for the claim, as to his ability to assign it, what value the claim should be given for the purposes of any assignment, and ongoing risks to the Liquidator arising from any assignment. Those risks included, by way of example, exposure to adverse costs orders and any further involvement required of the Liquidator in the proceeding. The letter stated that MO had provided the Liquidator with an estimate of $12,000 plus GST for the provision of such advice. It noted the Liquidator was without funds and that the plaintiff had indicated his preparedness to fund the Liquidator to have the claim assigned to him.
[39]2020 Rohrt Affidavit, [25], Exhibit RTR-4.
The email advised that the Liquidator had so far incurred almost $10,000 in costs and disbursements for which he required funding. If the plaintiff was not prepared to provide such funding then the Liquidator could not continue to undertake work on the liquidation (other than to comply with his bare statutory duties). The letter asked for $23,200 to be transferred to the MO trust account as soon as possible. It advised that upon receipt MO would be in a position to commence preparing the advice for the Liquidator.
On 11 August 2017 $23,200 was paid into MO’s trust account by or on behalf of the plaintiff.
There was insufficient time between 11 and 17 August 2017 for the Liquidator to obtain advice, both in relation to the merits of the draft pleading and whether the claim had a proper basis, but also in relation to the assignment for which his consent had been sought.
On 16 August 2017, so as to preserve the Westpac Claim from becoming statute barred, the Liquidator provided MPC with limited authority to file, in the Company’s name, but not serve, a generally indorsed writ,[40] substantially in the form prepared by Mr Levine.
[40]Ibid, Exhibit RTR-7.
On 17 August 2017, the Company filed the Westpac Claim as a generally endorsed writ in the 2017 Proceeding.
Subsequently, the Liquidator became aware that Westpac was a creditor of the Company for approximately $1 million and held a security interest over all personal and after-acquired property of the Company registered on the Personal Property Securities Register (‘PPSR’). When he provided the Remuneration Estimate in around August 2016, the Liquidator had not been told by the plaintiff, and was unaware, that Westpac held a registered security interest and remained a secured creditor of the Company.[41]
[41]Ibid, [31]-[32].
On 20 November 2017 MO sent an email to MPC informing them of the position concerning Westpac and of their opinion that the effect of reregistration of the Company was to restore Westpac as a secured creditor. The emails said that given the Westpac Claim is property of the Company captured by the Westpac security, the Liquidator required the consent of Westpac before the claim could be assigned. It observed that Westpac was unlikely to give its consent and, even if it did and the claim was successful, the proceeds as to the first $1 million would be payable to Westpac. That is, unless orders were made that affected the validity of that security. The email suggested a meeting to discuss resolution of those issues.[42]
[42]Ibid, Exhibit RTR-8.
On 23 November 2017 MPC responded. They expressed their disagreement as to the effect of reregistration of the Company, and their disagreement that Westpac held a security interest that attached to the Westpac Claim, now the subject of the 2017 Proceeding.[43]
[43]Ibid, Exhibit RTR-9.
A meeting took place between the respective clients and their legal advisers on 23 November 2017. What occurred at that meeting is not described in the affidavit evidence.
On 24 January 2018 MO sent a detailed five-page letter to MPC in which they outlined their opinion concerning issues with the proposed assignment of the Westpac Claim. The letter referred to practical difficulties confronting the Liquidator given that the Company was liquidated and deregistered seven years earlier and no longer has any assets, that the Liquidator’s remuneration and expenses are not funded and the Liquidator has no information or books or records from which to identify the existing creditors. The letter said that given the Company was reinstated on the application of the plaintiff, the Liquidator was committed to working with him to do what he could to give effect to the plaintiff’s aim of pursuing the Westpac Claim. That is, subject to and within the confines of his statutory obligations. To that end, as had apparently been discussed at the November 2017 meeting, details were provided of a proposal for a Deed of Company Arrangement (‘DOCA’), including details as to both legal and Liquidator costs associated with taking 15 identified steps required to implement such a proposal. The letter advised the Liquidator would require $100,000 to be paid into the MO trust account prior to commencing the DOCA process. It concluded by seeking a response from the plaintiff by 2 February 2018 and reiterated the timetable was based on the plaintiff immediately providing a list of creditors, as previously requested.[44]
[44]Ibid, Exhibit RTR-11.
If a DOCA had been successfully pursued, this would have put the plaintiff in control of the Company and the liquidation would have been terminated.
The 1 February 2018 response from MPC was combative. It alleged that MO had a conflict of interest arising from that firm’s relationship with Westpac. It asserted the plaintiff was willing to fund the Supreme Court proceeding and ’the reason for the failure of the Liquidator to prosecute the Supreme Court proceeding was entirely due to your firm’s conflict of interest’. It went on to assert that the Liquidator had breached his duty to act with reasonable care and diligence in retaining MO. It concluded by requesting the Liquidator undertake to resign immediately, provide a fully itemised bill of his costs and of MO’s costs, agree to refund all payments made by the plaintiff that ’have been unnecessarily incurred’, including when MO was allegedly acting in a conflict of interest. The letter demanded the Liquidator pay the plaintiff’s costs of $25,000 arising from dealing with MO’s conflict of interest. It demanded delivery up of the MO file in relation to legal advice said to have been provided in breach of the firm’s conflict of interest. The letter included the following:
there are sufficient circumstances to warrant the Supreme Court conducting an investigation into the liquidation … (Clause 90–10, 90–15 and 90–20 of the Insolvency Law Reform Act) … The Supreme Court upon undertaking the investigation may make such orders as it thinks fit that include:
(a)a liquidator cease being the external administrator…
(b)the liquidator pay costs and compensation for their conduct and
(c)the liquidator’s remuneration is reviewed and that the liquidator be disentitled to part of their costs and expenses , as being unnecessarily incurred.[45]
[45]Ibid, Exhibit RTR-12.
Unsurprisingly, there was a prompt response from MO. By letter sent on 2 February 2018 they denied any conflict of interest. They informed MPC that MO was not on Westpac’s legal panel and did not receive instructions to act for it. The letter referred to the seriousness of the Westpac Claim which included claims of fraud and that MO would not sign off on such a claim without substantial further work. The letter denied that the Liquidator had failed to prosecute the 2017 Proceeding due to a conflict of interest which MO said was ’blatantly incorrect’. The Liquidator had not prosecuted the Westpac Claim because he was not satisfied it was in the interests of the Company’s creditors or in his own interest to do so. As a result, he had not given instructions to serve the writ.
The letter went on to reiterate obstacles in the path of the Westpac Claim including that in excess of $900,000 was required to satisfy Westpac’s security before there would be any return to unsecured creditors making the commercial basis for an assignment ‘hard to find’. It expressed concern about unfunded costs being incurred by the Liquidator in an attempt to find a way forward to enable the plaintiff to pursue the Westpac Claim. It said that if there was no resolution by 16 February 2018 the Liquidator would proceed on the basis that the assignment of the Westpac Claim would not be achieved in a way that was in the best interests of creditors and that he would take steps to conclude the liquidation.[46]
[46]Ibid, Exhibit RTR-13.
Relations between the parties and their respective legal advisers continued to deteriorate. On 5 February 2018, 11 of 15 numbered paragraphs in a letter from MPC to MO commenced with the words ’we disagree’. That is indicative of the tone of the correspondence. The letter included an assertion that the Liquidator should obtain directions from the Court to clarify the matters in dispute.[47]
[47]Ibid, Exhibit RTR-14.
On 27 February 2018, by letter from MO, the Liquidator said that if he was funded he would apply to the Court for directions. The letter included a detailed discussion of legal issues concerning the effect of the Westpac charge.[48]
[48]Ibid, Exhibit RTR15.
That MO should apply for directions on behalf of the Liquidator was not acceptable to the plaintiff who continued to allege MO to have a conflict of interest. On 14 March 2018 MPC said the plaintiff would fund an application for directions, but only if the originating process was filed by MPC, not by MO. Even though no basis for the asserted conflict of interest was identified, the objection to MO continuing to act for that reason was repeated.[49]
[49]Ibid, Exhibit RTR-16.
On 3 April 2018 MO wrote to MPC to confirm the willingness of the Liquidator to apply for directions on the question of whether the Westpac Claim could be assigned to the plaintiff. It advised MPC that in circumstances where MPC acted for the plaintiff seeking to take the proposed assignment of the claim, the Liquidator was of the view that it had a conflict of interest and could not advise the Liquidator on the application for directions. It advised the Liquidator’s unfunded remuneration costs and expenses to date were $26,962. It noted the Liquidator was without funds in the liquidation. Referring to s 545 of the Act, unless there was confirmation of funding of those amounts plus the costs of a directions application, estimated at $35,000 – $50,000 the Liquidator would finalise the liquidation of the Company.[50]
[50]Ibid, Exhibit RTR-17.
On 20 April 2018 MPC responded, disputing that they had a conflict of interest in applying for directions on behalf the Liquidator. They asserted the plaintiff did not accept that MO had the expertise to make such an application. They repeated that MO had a conflict of interest. The letter from MPC requested ’a proper particularised estimate of costs claimed’. It accused the Liquidator of refusing to act with reasonable care and diligence.[51]
[51]Ibid, Exhibit RTR-18.
On 11 May 2018, MO suggested that given the apparent impasse, in the alternative the plaintiff may wish to consider seeking derivative leave to pursue the Westpac Claim in the name of the Company. At the same time a detailed breakdown of MO’s cost estimate for the proposed application for directions was provided.[52]
[52]Ibid, Exhibit RTR-19.
On 18 May 2018 MPC advised their client would be making an application to the Court within seven days for removal of the Liquidator with orders that he pay costs and damages. The letter asserted that the Liquidator’s consent to appointment was on the basis he would progress the claim against Westpac and ‘as the Liquidator was well aware, the Company was reregistered solely for this purpose’. The letter asserted that it was in the creditors interests to prosecute a claim that ‘has already been determined by the Supreme Court to be bona fide’ when the Court ordered reinstatement.[53]
[53]Ibid, Exhibit RTR-20.
On 15 June 2018, the plaintiff instituted the Derivative Leave Proceeding, seeking orders:
(a)for leave to continue the 2017 Proceeding as a derivative action; and
(b)for a direction the Liquidator assign that proceeding to him.
The Derivative Leave Proceeding was not served on the Liquidator or his solicitors until 11 July 2018. The first directions hearing was the next day. The Liquidator appeared by counsel at that hearing.
The Liquidator swore the 2018 Rohrt Affidavit in the Derivative Leave Proceeding. The affidavit exhibited a detailed breakdown of the Liquidator’s costs, expenses and remuneration.[54]
[54]Ibid,[42], [44], Exhibit RTR- 22.
In August 2018, the plaintiff issued an application to extend the period for validity for service of the 2017 Proceeding, as that proceeding would lapse on 16 August 2018 if not served. On 3 August 2018, the Court extended the period of validity of the writ for service until 4.00 pm on 10 February 2020.
The Liquidator was legally represented at directions hearings in the Derivative Leave Proceeding and on the first day of the trial of that proceeding before Connock J on 19 February 2019. Prior to the trial, Westpac, Mr Gaylard and Mr Flory, the proposed defendants to the Westpac Claim, were added as parties to the derivative leave proceeding. The Derivative Leave Proceeding was heard over eight sitting days commencing 19 February 2019 and ending on 23 August 2019.[55]
[55]In the matter ofACN 091 581 302 Pty Ltd (in liquidation) (formerly Pinnacle Investments Pty Ltd) [2019] VSC 699.
At the directions hearing in the Derivative Leave Proceeding on 8 February 2019, counsel for the Liquidator informed the court that, if put in funds the Liquidator would be prepared further to explore on the Company’s behalf, the merits of the legal position in relation to the Westpac Claim and to work out whether the claim should or should not be pressed. Further, that subject to receiving appropriate advice and costs protection, the Liquidator was willing to proceed as considered appropriate.[56] The Liquidator’s position was repeated by his counsel at the outset of the Derivative Leave Proceeding.[57] In his subsequent reasons, Connock J observed that counsel for the Liquidator responsibly assisted the court by clarifying his position in the lead up to and at the time of hearing in the then prevailing circumstances, as was appropriate.[58] His Honour found:
To the extent that it was submitted that the liquidator has acted unreasonably by carrying out a limited merits assessment to date, I do not accept that submission. To the extent that it occurred, it was appropriate to do so and remains appropriate for liquidator to be satisfied that it is in the interests of creditors if litigation is to be pursued.[59]
[56]Ibid, [99].
[57]Ibid, [104].
[58]Ibid, [155].
[59]Ibid, [164].
On 13 February 2019, six days before the start of the trial in the Derivative Leave Proceeding, by letter from MO, the Liquidator invited any interested party to make an offer to take an assignment of the Westpac Claim by 18 February 2019 on terms as follows:
(a)pay a purchase price in excess of $126,500 (being the Liquidator’s remuneration, costs and expenses including of the hearing listed for 19 February 2019) in order for the Liquidator to ensure that the assignment results in a return to creditors;
(b)confirming that Westpac’s consent is not required for assignment of the Westpac Claim; and
(c)the Liquidator obtain court approval to assign the claim on the terms agreed between him and the proposed purchaser.[60]
[60]2020 Rohrt Affidavit, Exhibit RTR-25.
The 13 February 2019 letter from MO was before the Court on the hearing of the Derivative Leave Proceeding.[61]
[61]In the matter ofACN 091 581 302 Pty Ltd (in liquidation) (formerly Pinnacle Investments Pty Ltd) [2019] VSC 699, [100].
The response from MPC on 15 February 2019 accused the Liquidator of ’trafficking’ in litigation. It asserted the timeframe in the 13 February 2019 letter for the receipt of offers to assign the Westpac Claim was unacceptably short and favoured defendants who had sufficient financial resources to make an offer in a short period of time. The letter noted the condition of the offer that it be sufficient to meet remuneration fees and expenses that had not been approved either by the creditors, a committee of inspection or the Court and therefore had not been fixed. It concluded by asserting that the Liquidator had ‘acted improperly throughout the liquidation that has crystallised in making the offer in the letter’. The letter threatened to refer the Liquidator’s conduct to ASIC as a matter of urgency. It reserved the plaintiff’s right to make an urgent application returnable on 19 February 2019 for removal of the Liquidator.[62]
[62]2020 Rohrt Affidavit, Exhibit RTR-26.
During 2019, before the conclusion of the hearing of the Derivative Leave Proceeding, which extended on separate days over many months, there were extensive communications between MPC and MO. Those communications included:
(a) On 8 May 2019 MPC complained the accounts lodged by the Liquidator with ASIC did not refer to $23,200 transferred on 11 August 2017 to MO’s trust account. MPC sought confirmation whether the sum had been dispersed or was still held in trust and why it was omitted from the Liquidator’s accounts. The letter referred to the 2018 Rohrt Affidavit which referred to remuneration costs and expenses totalling $75,692.76[63] and noted that amount had now increased to $125,000.[64] The letter ’required’ the Liquidator to specify the basis on which he contended that remuneration had been fixed under the Insolvency Law Reform Act2016 (Cth). A response was sought within two days.[65]
[63]2018 Rohrt Affidavit, [42].
[64]2020 Rohrt Affidavit, Exhibit RTR-27, citing an earlier letter from MO dated 10 April 2019.
[65]Ibid, Exhibit RTR-27.
(b) On 10 May 2019 MO responded. MO contended the time specified for a response was unreasonable and was relevantly a lesser time period than specified under the Insolvency Practice Schedule (Corporations),[66] and the IPR. MO said the omission of the $23,300 paid into the MO trust account from the accounts lodged with ASIC was inadvertent and in error. It confirmed that $23,200 had been applied solely to disbursements (being part payment of MO’s fees and counsel’s fees). The letter advised that to date, MO had only advised of the quantum of remuneration the Liquidator had incurred. That remuneration had not been determined under the IPS and the Liquidator had never contended that his remuneration had been so determined.[67] It is to be noted that MO’s trust account records produced on the hearing of this application show on 4 April 2018 $13,200 was transferred by MO from its trust account to office on account of costs/disbursements of bill 247879. On 7 December 2018 $5840 was transferred to office on account of costs/disbursements of bill 305721 and on 6 May 2019 $4160 was transferred to office on account of costs/disbursements of bill 325091.
(c) On 13 May 2019 MPC asserted that the amount of $23,200 was not transferred to the Liquidator for the payment of counsels’ fees and that remuneration would need to be determined pursuant to s 473(3) of the Act. The letter repeated the plaintiff’s intention to refer the Liquidator to ASIC for investigation. It asserted the Liquidator placed improper pressure upon the plaintiff to accede to requests for payment of his remuneration costs and expenses in the letter of 13 February 2019. It expressed a reservation of rights to make an application to the Court in respect of the Liquidator’s conduct.[68]
(d) On 1 August 2019 MPC forwarded a proposed interlocutory process to the associate to Connock J, seeking an investigation into the liquidation pursuant to clause 90-10 of Schedule 2, an order that Mr Rohrt cease as liquidator of the Company and that he pay compensation to the plaintiff for his conduct as liquidator. MPC sought a return date on 23 August 2019. The Court determined not to deal with the proposed application as part of the Derivative Leave Proceeding.
[66]In the Act, Schedule 2 (‘IPS’).
[67]2020 Rohrt Affidavit, Exhibit RTR-27.
[68]Ibid.
On 23 October 2019, the Court dismissed the Derivative Leave Proceeding.[69] Connock J found while it was not necessary for him to consider whether the statutory criteria in s 237 was satisfied, had it been necessary to do so and, assuming each of the causes of action in the Westpac Claim raised serious questions to be tried, his Honour would have concluded that the statutory criteria in s 237(2)(c) of the Act were not satisfied.
[69]In the matter of ACN 091 518 302 Pty Ltd (in liq) (formerly Pinnacle Investments Pty Ltd) [2019] VSC 699.
His Honour found the plaintiff did not establish that it was in the best interests of the Company that he be given leave to bring the proceeding.[70] He found the plaintiff had not established that security offered by him in the form of a third party property in which there was said to be equity of about $380,000 was likely to be sufficient to provide an appropriate measure of costs and expenses protection to the Company and to the Liquidator.[71] His Honour’s assessment of prospects of success of the Westpac Claim was a matter weighing against the grant of leave being in the best interests of the Company as required by s 237(2)(c).[72] His Honour said:
… for completeness, I add, on the evidence presently before the court, the plaintiff has not established that there is a serious question to be tried or a reasonable prospect of success in respect of the cause of action.[73]
[70]Ibid, [124].
[71]Ibid, [135].
[72]Ibid, [136]-[137].
[73]Ibid, [136].
His Honour observed:
[T]he position remains that the merits of the … Proceeding, and any steps to be taken in relation to it, can properly be further explored and acted upon, by the plaintiff putting the liquidator in funds … Further, leaving the … Proceeding and the issues associated with it in the hands of the liquidator to determine, after taking appropriate advice, how best to proceed, also sits comfortably with the observations that had been made in other cases regarding the appropriateness or desirability of leaving litigation in the hands of liquidators … The liquidator is also well-equipped and best placed to consider the interests of all the creditors – which remains the position even if Westpac’s position is put to one side.[74]
[74]Ibid, [152].
After derivative leave was refused, the plaintiff asserted in correspondence from MPC to MO that MPC, who had been provided with a limited authority to commence and preserve the 2017 Proceeding, could not keep acting in that proceeding.[75] On this application, the plaintiff submitted that contrary to the affidavit of the Liquidator,[76] the plaintiff had no standing to make an application for a further extension of the period for valid service of the 2017 Proceeding. MPC had limited authorisation only in 2017 to issue that proceeding and an implied authorisation to extend the time for service. However, because the reasons for decision of Connock J said that the cause of action had to be left in the hands of the Liquidator, it was no longer up to the plaintiff to apply for an extension of time.
[75]2020 Rohrt Affidavit, [66].
[76]Ibid, [93(c)].
On 6 February 2020, MPC advised MO that the plaintiff ‘has no interest’ in entering into a funding agreement for the prosecution of the 2017 Proceeding with the Liquidator.
The Liquidator, having sought one extension to the validity period of the 2017 Proceeding and not being funded to seek a further extension or to prosecute the proceeding, did not apply to extend the validity period of service of that proceeding beyond 10 February 2020.
On 11 February 2020, the period of the validity for service of the writ in the 2017 Proceeding expired.
E. The s 533 reporting obligation complaint
The failure by the Liquidator to provide a s 533 report was one of the key matters relied upon at the hearing in support of the application for an inquiry.
Section 533 is in the following terms:
Reports by liquidator
(1)If it appears to the liquidator of a company, in the course of a winding up of the company, that:
(a)a past or present officer or employee, or a member or contributory, of the company may have been guilty of an offence under a law of the Commonwealth or a State or Territory in relation to the company; or
(b)a person who has taken part in the formation, promotion, administration, management or winding up of the company:
(i)may have misapplied or retained, or may have become liable or accountable for, any money or property of the company; or
(ii)may have been guilty of any negligence, default, breach of duty or breach of trust in relation to the company; or
(c)the company may be unable to pay its unsecured creditors more than 50 cents in the dollar;
the liquidator must:
(d)as soon as practicable, and in any event within 6 months, after it so appears to him or her, lodge a report with respect to the matter and state in the report whether he or she proposes to make an application for an examination or order under section 597; and
(e)give ASIC such information, and give to it such access to and facilities for inspecting and taking copies of any documents, as ASIC requires.
(2)The liquidator may also, if he or she thinks fit, lodge further reports specifying any other matter that, in his or her opinion, it is desirable to bring to the notice of ASIC.
(3)If it appears to the Court, in the course of winding up a company:
(a)that a past or present officer or employee, or a contributory or member, of the company has been guilty of an offence under a law referred to in paragraph (1)(a) in relation to the company; or
(b)that a person who has taken part in the formation, promotion, administration, management or winding up of the company has engaged in conduct referred to in paragraph (1)(b) in relation to the company;
and that the liquidator has not lodged with ASIC a report with respect to the matter, the Court may, on the application of a person interested in the winding up, direct the liquidator so to lodge such a report.
The plaintiff submitted the responsibility for reporting is personal to the Liquidator and that his failure to report to ASIC as required by s 533 constituted a dereliction of duty. Reliance was placed upon the decision in Edge,[77] where ignorance of the obligation to provide a s 533 report was held not to be an answer to a complaint that the Liquidator had failed in his duties.[78]
[77][2007] VSC 170.
[78]Ibid, [262]-[263].
It is common ground the Liquidator did not report pursuant to s 533. The primary position of the Liquidator was that the discharge of the s 533 obligation was a matter for the Former Liquidator. In response, the plaintiff said there was no evidence the Former Liquidator had provided a report and, in any case, the Liquidator could not rely by way of delegation upon actions of the Former Liquidator.
In his points of defence, the Liquidator said that to the extent investigations had not been undertaken by the Former Liquidator:
(a)despite enquiries of the Former Liquidator and Receivers, the Liquidator was unable to locate or access any books and records of the Company (to the extent that any remain in existence) given the time since the deregistration; and
(b)pursuant to s 545 of the Act, given there was insufficient property of the Company, he was not required to incur the expense of investigating the circumstances which precipitated the liquidation as pleaded in the 2017 Proceeding.
Sections 533(1)(a) and (b) of the Act, taken together with s 533(1)(d) and (e), are primarily directed to the reporting by a liquidator to ASIC of conduct that has taken place by persons involved in the affairs of the Company prior to winding up. If it appears to the liquidator in the course of the winding up that conduct as described in either of subsections (a) and (b) has occurred, the liquidator is obliged as soon as practicable and, in any event, within six months, to lodge a report and to state in that report whether the liquidator proposes to apply for an examination order under s 597. The same six month reporting obligation applies in a case to which s 533(1)(c) has application, where it appears to the liquidator that the Company is or may be unable to pay its unsecured creditors more than $0.50 in the dollar.
The Former Liquidator was appointed on 30 July 2003, 13 years before the appointment of Mr Rohrt. There is no evidence that the Former Liquidator did or did not provide a report pursuant to s 533. The Former Liquidator retired on 16 November 2009 after a liquidation that lasted for six years. At around the time of his retirement, the Form 524 lodged by him in November 2009[79] reported that no dividend would be paid to any class of creditor.
[79]Refer to paragraph [26] above.
Section 533(1)(c) and the related provisions in s 533(1)(d) and (e) have application to the Company. Those sections had application in relation to the First Liquidation. At a point in time in the six years of the First Liquidation, no later than the date on which the Former Liquidator filed his final Form 524 in November 2009, it must have been clear to the Former Liquidator that there would be no return to unsecured creditors. The obligations which flow from s 533(1)(c), to report and to provide access to information and documents to ASIC, were obligations of the Former Liquidator.
In Edge,[80] Dodds-Streeton J described the purpose of s 533(1)(c):
263.A s 533(1)(c) report is fundamental to the Act’s scheme of protection for creditors, shareholders and the public, because an officer of two or more companies which may have failed to pay more than $0.50 in the dollar may be the subject of a “show cause” notice and ultimately disqualified from managing corporations for up to 5 years … Such reports are essential to monitoring, and where appropriate removing, the directors of successive “bad debts” companies from continued activity which may place the public at risk.[81]
The application and therefore the proceeding is dismissed.
The parties should file short submissions concerning costs, limited to no more than four pages each. Those submissions should be filed and served no later than 14 days from the date of publication of these reasons. Unless the parties are advised otherwise, costs issues will be determined on the papers.
[10]Westpoint [2018] VSC 705, [285].
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