In the matter of Aboriginal Community Benefit Fund Pty Ltd (in liq)

[2022] NSWSC 1784

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Aboriginal Community Benefit Fund Pty Ltd (in liq) [2022] NSWSC 1784

Hearing dates:

8 December 2022

Date of orders:

8 December 2022

Decision date:

23 December 2022

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Orders appointing special purpose liquidators made.

Catchwords:

CORPORATIONS — Winding up — Liquidators — Appointment of special purpose liquidator — Where question arises as to apparent independence of general purpose liquidator — Whether special purpose liquidator should be appointed to conduct certain investigations and possible proceedings.

Legislation Cited:

- Corporations Act 2001 (Cth), s 5F

- Corporations (Ancillary Provisions) Act 2001 (NSW)

- Court Suppression and Non-Publication Orders Act 2010 (NSW)

- Funeral Funds Act 1979 (NSW), ss 74, 74A

- Supreme Court Act 1970 (NSW), s 75

Cases Cited:

- GDK Projects Pty Ltd v Umberto Pty Ltd (in liq) [2018] FCA 541

- Korda, in the matter of Ten Network Holdings Ltd (admins apptd) (recs and mgrs apptd) (2017) 252 FCR 519; [2017] FCA 914

- Lo v Nielson & Moller (Autoglass) (NSW) Pty Ltd [2008] NSWSC 407

- Re FW Projects Pty Ltd (in liq) [2019] NSWSC 892

- Re Jabiru Satellite Ltd (in liq) and NewSat Ltd (in liq) [2022] NSWSC 459

- State of Victoria v CTM Training Solutions Pty Ltd (in liq) [2017] VSC 47

- Onefone Australia Pty Ltd v One.Tel Ltd (in liq) (2003) 48 ACSR 562; [2003] NSWSC 1228.

Category:

Principal judgment

Parties:

Australian Securities and Investments Commission (First Plaintiff)
Minister for Fair Trading (Second Plaintiff)
David Michael Stimpson in his capacity as liquidator of the Second to Eighth Defendants (First Defendant)
The Aboriginal Community Benefit Fund Pty Ltd (in liq) (Second Defendant)
Aboriginal Community Benefit Fund No 2 Pty Ltd (in liq) (Third Defendant)
ACBF Funeral Plans Pty Ltd (in liq) (Fourth Defendant)
Community Funeral Plans Pty Ltd (in liq) (Fifth Defendant)
Youpla Administration Pty Ltd (in liq) (Sixth Defendant)
Youpla Pty Ltd (in liq) (Seventh Defendant)
Youpla Group Pty Ltd (in liq) (Eighth Defendant)

Representation:

Counsel:
S Maiden KC/C Hamilton-Jewell (First Plaintiff)
D Barnett (Second Plaintiff)
C D Coulsen (First Defendant)

Solicitors:
Ashurst (First Plaintiff)
Holding Redlich (Second Plaintiff)
Hall Lawyers (First Defendant)

File Number(s):

2022/321916

Judgment

Nature of the application

1. By Originating Process filed on 27 October 2022, the First Plaintiff, the Australian Securities and Investments Commission (“ASIC”), seeks an order under s 90-15 of the Insolvency Practice Schedule (Corporations) (“IPSC”) and s 75 of the Supreme Court Act 1970 (NSW) for the appointment of special purpose liquidators to Aboriginal Community Benefit No 2 Pty Ltd (in liq) as trustee for the Aboriginal Community Benefit Fund No 2 (“ACBF2”), Youpla Administration Pty Ltd (in liq) (“Youpla Administration”), Youpla Pty Ltd (in liq) (“Youpla”) and Youpla Group Pty Ltd (in liq) (“Youpla Group”). The Second Plaintiff, the Minister for Fair Trading (“Minister”), seeks a corresponding order under the IPSC as applied as a law of New South Wales by s 5F of the Corporations Act 2001 (Cth), under s 74 of the Funeral Funds Act 1979 (NSW) and under other provisions in respect of The Aboriginal Community Benefit Fund Pty Ltd (in liq) as trustee for The Aboriginal Community Benefit Fund (“ACBF1”), ACBF Funeral Plans Pty Ltd (in liq) (“ACBF Plans”) and Community Funeral Plans Pty Ltd (in liq) (“ACBF Community”), and ASIC brings that application in the alternative. ACBF1, ACBF Plans and ACBF Community are registered as funeral contribution funds under the Funeral Funds Act.

2. I previously granted leave for the Plaintiffs to be represented by separate solicitors and Counsel in the proceedings where the two parallel applications raised the same issues. The Defendant to the applications is Mr David Stimpson, the general purpose liquidator of The Aboriginal Community Benefit Fund Pty Ltd (in liq) and several other associated entities associated with it, who did not oppose the orders sought.

3. I was satisfied that the orders sought by ASIC and the Minister should be made and I made them at the conclusion of the hearing on 8 December 2022. These are my reasons for making those orders. I have drawn on the helpful submissions of Mr Maiden with whom Ms Hamilton-Jewell appeared for ASIC and Mr Barnett who appeared for the Minster in this judgment

Affidavit evidence

4. Both ASIC and the Minister led affidavit evidence in the proceedings, some of which is the subject of orders made under the Court Suppression and Non-Publication Orders Act 2010 (NSW) (“CSNPO Act”).

5. ASIC relied on the affidavit dated 26 October 2022 of Ms Melissa Smith, who is a senior executive leader in the financial services enforcement division of ASIC, for which no suppression order was sought. Ms Smith outlined the nature of the business conducted by ACBF1 and other relevant entities (“Youpla companies”). That business broadly involved the offer of funeral products over the past thirty years, for which periodic premiums were payable, which were predominantly marketed towards First Nations’ customers. Ms Smith observed that ACBF, ACBF Plans and ACBF Community were registered as funeral contribution funds for the purpose of the Funeral Funds Act, as I have noted above.

6. Ms Smith referred to the appointment of Mr Stimpson of SV Partners as liquidator of the Youpla companies, other than ACBF2, on 11 March 2022 and to Mr Stimpson’s subsequent appointment as liquidator of ACBF2 and as receiver and manager of trust assets of certain funds. Ms Smith indicates ASIC’s view that Mr Stimpson could properly remain as general purpose liquidator of the several entities, since he has established relationships with consumer representative organisations during the liquidation, although ASIC and the Minister now also seek the appointment of a special purpose liquidator. Ms Smith also notes several matters which Mr Stimpson has identified as requiring further investigations, including the payment of certain dividends and payments to Crown Insurance Services Ltd to underwrite death benefits.

7. Ms Smith indicates that ASIC has formed a concern that “a fair-minded lay observer might perceive that Mr Stimpson might not bring the required independence” to potential investigations, because a former legal adviser to several of the Youpla companies is both the spouse of a partner in Mr Stimpson’s firm and a shareholder in a company associated with Mr Stimpson’s practice. These matters were disclosed in the Declaration of Independence, Relevant Relationships and Indemnities lodged by Mr Stimpson in respect of several of the Youpla companies at the time of his appointment. Ms Smith outlines the factual matters which indicate those connections between that former legal adviser and Mr Stimpson, which are not in dispute. She also notes the operation of the Assetless Administration Fund administered by ASIC, which may be available to fund investigations by a special purpose liquidator, to the extent they are not funded by the Minister as noted below.

8. By a second affidavit dated 11 November 2022, Ms Smith refers to correspondence with several community representative groups and law firms concerning the liquidation of the Youpla companies, which generally support the application, relying on the importance of the appearance of independence in respect of the special purpose liquidator’s application.

9. ASIC also read a confidential affidavit dated 2 November 2022 of Ms Smith, as to which orders were made under the CSNPO Act, which broadly addresses correspondence with Mr Stimpson concerning the question whether he lacks the appearance of independence in respect of relevant investigations, and the factual matters relevant to that concern. I have had regard to that affidavit but do not address its content further given that suppression order. ASIC also relies on an affidavit dated 1 November 2022 of Mr Peter Connor, who is a senior investigator with ASIC, as to which a suppression order was also made under the CSNPO Act. Mr Connor outlines the issues which are likely to require further investigation by a liquidator or special purpose liquidator of the Youpla companies. I also have regard to those matters but do not address their content further given that suppression order.

10. ASIC and the Minister also rely on an affidavit dated 27 October 2022 of Ms Suzanne Crowle, who is the Executive Director of Licensing and Funds in the Better Regulation Division of the New South Wales Department of Customer Service (“Department”). Ms Crowle addresses the regulatory structure in respect of funeral contribution funds, identifies several of the Youpla companies that conduct contributory funeral funds for the purposes of the Funeral Funds Act and recognises the legislative structure applicable to such funds. Ms Crowle also indicates a concern that the person conducting investigations should have no connection with the Youpla companies and a perception that Mr Stimpson’s connection with the former legal adviser to that group may deprive him of apparent independence, although she does not suggest that he has been influenced by that connection in his work to date. Ms Crowle also identifies that funding will be provided to a special purpose liquidator by the Department, on terms which are addressed in a confidential affidavit. ASIC and the Minister also rely on a second affidavit dated 16 November 2022 of Ms Crowle, as to which a suppression order was made, which annexes a proposed funding agreement.

11. By their affidavits dated 16 November 2022, Ms Melissa Humann and Mr Derrick Vickers, who are registered liquidators with the firm of PricewaterhouseCoopers, consents to their joint and several appointment as special purpose liquidator of the Youpla companies. Ms Humann and Mr Vickers have also provided a consent of liquidators (Ex A1).

The parties’ submissions and determination

12. Mr Maiden refers to the nature of the business conducted by the Youpla companies and to the matters which have given rise to ASIC’s concern as to a perceived lack of independence on Mr Stimpson’s part, which I have noted, in general terms, above. He identifies a number of issues in which the former legal adviser to the Youpla companies had a role which may require investigation by the liquidator or a special purpose liquidator and identifies ASIC’s concern that a fair-minded lay observer might perceive that Mr Stimpson might not bring the required independence to such investigations, by reason of his connection with that former legal adviser.

13. Mr Maiden addresses the Court’s power to appoint a special purpose liquidator under s 90-15 of the IPSC and points to ASIC’s standing to bring the applications in relation to ACBF2, Youpla Administration, Youpla and Youpla Group under s 90-20(1)(c) of the IPSC. Mr Maiden also outlines the regulatory structure applicable to funeral contribution funds under the Funeral Funds Act, and notes that the winding up of a “funeral contribution fund” is an excluded matter for the purpose of s 5F of the Corporations Act in relation to the provisions of Ch 5 of the CorporationsAct, and is an applied corporations legislation matter for the purposes of Pt 3 of the Corporations (Ancillary Provisions) Act 2001 (NSW), subject to modifications set out in s 74A of the Funeral Funds Act. Mr Maiden submits and I accept that these provisions have the effect that the Minister has standing to bring the application in addition to ACBF1, ACBF Plans and ACBF Community, so far as they are funeral funds under the Funeral Funds Act. It is not necessary to address ASIC’s alternative submission that it also has standing to bring that application.

14. Mr Maiden in turn points to the recognition in the case law of the need for a liquidator to be, and seem to be, independent. The relevant principles were been reviewed in Korda, in the matter of Ten Network Holdings Ltd (admins apptd) (recs and mgrs apptd) (2017) 252 FCR 519; [2017] FCA 914 at [71]-[80] and in my judgment in Re FW Projects Pty Ltd (in liq) [2019] NSWSC 892 at [100], where I observed that:

“I recognise that a liquidator must be independent of the company, its directors and shareholders and individual creditors and must act impartially in the discharge of his or her duties and responsibilities: Re Allebart Pty Ltd (in liq) [1971] 1 NSWLR 24 at 30; Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; (2003) 45 ACSR 612 at [123]; Re ACN 151 726 224 Pty Ltd (in liq) previously Ridley Capital Holdings Pty Ltd [[2016] NSWSC 1801] at [51]; Re Bellafountain Pty Ltd [2017] NSWSC 391; Re Ji Woo International Education Centre Pty Ltd [2019] NSWSC 93; (2019) 134 ACSR 448 at [39]. I also recognise that a prior involvement with a company in liquidation does not necessarily prevent a person’s appointment as liquidator, if that involvement is not likely to impede or inhibit him or her from acting impartially in the interests of all creditors, or give rise to a reasonable apprehension that he or she might be so inhibited or impeded: Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR 230 at 234; 12 ACLC 701; Re St George Builders Hardware Pty Ltd (1995) 18 ACSR 451 at 452; 13 ACLC 1801. The Plaintiffs also referred to the observations of Hodgson CJ in Eq (as his Honour then was) in Unifor Office Systems Aust Pty Ltd v Brewer Partnership Pty Ltd [1999] NSWSC 137; (1999) 17 ACLC 642, expressing a general preference that investigations into a company’s affairs should be undertaken by a person independent of the directors, and seeks to extend that proposition to a statement that the liquidators should not be chosen by directors of the company.”

15. Mr Maiden also draws attention to applicable professional standards, as set out in the Code of Professional Practice Published by the Australian Restructuring Insolvency and Turnaround Association.

16. Mr Maiden notes that the Court can appoint a special purpose liquidator where a reasonable observer would consider a liquidator to be in a position of conflict: Onefone Australia Pty Ltd v One.Tel Ltd (in liq) (2003) 48 ACSR 562 at 565; [2003] NSWSC q228. He also refers to other circumstances in which a special purpose liquidator can be appointed which include, relevantly here, that a creditor may be prepared to fund the investigation and recovery actions brought by that special purpose liquidator: Lo v Nielson & Moller (Autoglass) (NSW) Pty Ltd [2008] NSWSC 407 at [17ff]; State of Victoria v CTM Training Solutions Pty Ltd (in liq) [2017] VSC 47 (“CTM Training”) at [35]-[37]. He submits, and I accept, that an essential question for a Court in determining whether a special purpose liquidator should be appointed is whether that appointment would be just and beneficial for the general body of creditors: CTM Training at [32]; GDK Projects Pty Ltd v Umberto Pty Ltd (in liq) [2018] FCA 541 at [32]ff.

17. I summarised the applicable principles in Re Jabiru Satellite Ltd (in liq) and NewSat Ltd (in liq) [2022] NSWSC 459 at [25]ff as follows:

The Court has power to appoint a special purpose liquidator under s 90–15(1) of the Insolvency Practice Schedule (Corporations) (“IPSC”) which authorises it to “make such orders as it thinks fit in relation to the external administration of the company”, and s 90–15(3)(c) expressly includes the power the make an order that another registered liquidator be appointed as an external administrator of a company.

In Re GDK Projects Pty Ltd v Umberto Pty Ltd (in liq) [2018] FCA 541 (GDK Projects) at [33], Farrell J observed that:

The power to make orders conferred by s 90–15(1) contains no equivalent of [former] s 511(2) which permitted the Court to accede to an application if satisfied that … the exercise of power will be just and beneficial. The power is, in its terms, unconstrained. Section 90–15(4) lists some matters the Court is entitled to take into account but that list is expressed to be [w]ithout limiting the matters which the Court may take into account when making orders. In Re Walley (as administrators of Poles & Underground Pty Ltd (admins apptd) and Icon Plant Pty Ltd (admins apptd)) [2017] FCA 486 , Gleeson J observed at [41] that the question of whether to exercise the power under s 90–15 of Sch 2 can be answered by reference to principles that applied to the exercise of the discretion under the provisions previously contained in ss 479(3) and 511. I agree that those cases can be a useful guide. Despite the breadth of the power conferred by s 90–15(1), it is difficult to envisage circumstances where the power would be exercised if the Court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration.

In Fitz Jersey Pty Ltd v Fraser (2018) 129 ACSR 238; [2018] NSWSC 1189 at [90] –[91] (Fitz Jersey), Ward CJ in Eq (as the President then was), referred to several cases which had indicated that a creditor should not be permitted to appoint the liquidator of its choice solely on the basis that it declined to fund any other liquidator, and summarised the principles applicable to the appointment of a special purpose liquidator as follows:

… the authorities make clear that on such an application it is necessary to identify with specificity the special purposes (or powers) for which the appointment of the special purpose liquidator is sought (see, for example, Re Ambient Advertising Pty Ltd (in liq) [2015] NSWSC 1079 at [13] (Ambient Advertising); Re 77,738,930,144 Pty Ltd (in liq) (formerly Commercial Indemnity Pty Ltd ) [2017] NSWSC 452 at [23] and [82(2)] (Commercial Indemnity); GDK Projects Pty Ltd v Umberto Pty Ltd (in liq) [2018] FCA 541 at [2] (GDK Projects); Re ACN 152 546 453 Pty Ltd (formerly Hemisphere Technologies Pty Ltd) (in liq) [2018] NSWSC 1002 at [22] (Hemisphere Technologies)).

Again, a special purpose liquidator will not be appointed unless it would be just and beneficial to creditors. In GDK Projects, Farrell J (at [33]) considered that the power should not be exercised if the Court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration. Similarly, in Hemisphere Technologies, Gleeson JA at [21] determined the question by asking whether an additional liquidator was necessary (having regard to the special purposes identified in the amended originating process).

In Melhelm Pty Ltd v Boka Beverages Pty Ltd (in liq) (2019) 138 ACSR 95; [2019] FCA 1184 at [57] –[58] (Melhelm), Gleeson J identified matters that may support the appointment of a special purpose liquidator including that:

(1)    there are matters that require investigation by a liquidator with a view to possible recovery for creditors;

(2)    the current liquidators have insufficient funds and insufficient prospects of obtaining funding to pursue an investigation;

(3)    a creditor is prepared to fund investigations and recovery actions but only on the condition that another liquidator be appointed; and

(4)    such an appointment would be beneficial to the winding up and the creditors as a whole: Deputy Cmr of Taxation v Italian Prestige Jewellery Pty Ltd (in liq) (2018) 129 ACSR 115; [2018] FCA 983 (Italian Prestige Jewellery) at [34].

As to the first matter, it is necessary to identify with specificity the “special purposes” (or powers) for which the appointment of the special purpose liquidator is sought: Atlas at [90] citing, inter alia, GDK Projects at [2] and Hemisphere Technologies at [22]. Examples of purposes that have been identified as matters for investigation by an SPL include whether any of the directors or officers of a company breached their statutory and or fiduciary duties to the company; whether transactions between the company and a specified third party were voidable transactions within the meaning of s 588FE of the Act; any dealing with an asset owned legally or beneficially by the company to a specified third party; and any claim that the company may have or may have had against a specified third party.

It is not necessary or appropriate to make findings on the potential claims in determining the application for the appointment of the SPLs: GDK Projects at [36]; Italian Prestige Jewellery at [37].

In Shangri-La Construction Pty Ltd v GVE Hampton Pty Ltd (2021) 152 ACSR 19; [2021] VSC 161 (Shangri-La) at [75]ff, Connock J in turn noted the Court’s power to appoint a special purpose liquidator under IPSC s 90–15 and factors relevant to the exercise of that power, and noted a common circumstance in which that power would be exercised was where “it has been demonstrated that there are matters that require investigation with a view to possible recovery for creditors in circumstances where it is of utility and just for such matters to be investigated by a different liquidator. His Honour also observed (at [87]) that:

Matters to be taken into account in relation to whether an SPL should be appointed typically include how the SPL will be funded, whether the appointment of an SPL will burden the Company with added costs, and how else the appointment might impact upon the liquidation and potential return to creditors. (citations omitted)

I also bear in mind that the Court must have regard to the broad terms of s 90–15 and the particular circumstances before the Court: Glenfyne International Holding Ltd v Glenfyne Farms International AU Pty Ltd (in liq) (2019) 101 NSWLR 358; [2019] NSWCA 304 ; Shangri-La at [84]. The relevant factors were also reviewed, in largely similar terms, in Commonwealth of Australia (Department of Education, Skills and Employment) v Phoenix Institute of Australia Pty Ltd (in liq) [2020] FCA 937 and Lewis v Battery Mineral Resources Ltd (in liq) (2021) 156 ACSR 162; [2021] FCA 963 at [79] ff (Battery Resources), where Griffiths J also noted (at [121]) that:

While it may be accepted that the Court is not required to make final findings on the plaintiffs’ claims, the caselaw has also emphasised that the appointment of a SPL must have sufficient utility and be just for the interests of creditors … That necessarily requires the plaintiffs to demonstrate that the appointment of a SPL for the specified special purposes could potentially lead to a recovery for the benefit of creditors (see Italian Prestige at [34] per Markovic J; Shangri-La at [85] per Connock J).”

18. Mr Maiden in turn identifies the matters which raise a potential appearance of lack of independence on Mr Stimpson’s part and points to their relationship with the matters which may require investigation by the liquidator of the Youpla companies. Mr Maiden also refers to the availability of funding if a special purpose liquidator is appointed. He submits, and I accept, that the Court can be satisfied that there is a proper basis for the appointment of the special purpose liquidators on both of these bases.

19. I also have regard to the fact that funding may be available to the special purpose liquidators from ASIC’s Assetless Administration Fund in respect of investigations relating to the Youpla companies to which ASIC seeks their appointment, although that funding is not guaranteed, and the special purpose liquidator’s position in that respect is better and no worse than would be the position of Mr Stimpson as general purpose liquidator of those companies.

20. Mr Barnett, who appears for the Minister, in turn submits and I accept that the Minister has standing to apply for orders for the appointment of the special purpose liquidators in respect of ACBF1, ACBF Plans and ACBF Community , where they are all funeral contribution funds under the Funeral Funds Act. Mr Barnett points to the Department’s willingness to provide funding to the special purpose liquidators to carry out relevant investigations and recovery proceedings in respect of the funeral contribution funds, up to a specified initial amount, and to the terms on which that funding would be provided, which protect the interest of funds members against the erosion of assets which might otherwise be available to meet their claims against the funds. He points to evidence that the special purpose liquidators are prepared to enter into funding agreements on the basis offered by the Department. He also submits that there are transactions and matters relating to the relevant funds that ought to be investigated; that those investigations and associated recovery proceedings have the potential to increase the pool of assets available for distribution to creditors and contributories; that the connection between the Mr Stimpson and the former legal adviser raises an issue as to the appearance of independence on his part; and that funding would be available for the special purpose liquidators to carry out relevant investigations and recovery proceedings in respect of the funds. All of these matters support the appointment of a special purpose liquidator to ACBF1, ACBF Plans and ACBF Community to undertake the relevant investigations and bring any associated actions.

21. Mr Stimpson, fairly, did not oppose the making of the orders sought, on the basis that he retained the ability, which is recognised by the orders sought, to bring an application for remuneration in respect of his future work that may be required to assist the special purpose liquidators. The merits of such an application is a matter to be determined if and when it is made.

Conclusion and orders

22. I am satisfied that the matters identified by ASIC and the Minister undermine the apparent independence of Mr Stimpson, and the appointment of special purpose liquidators to the Youpla companies – who will be funded by the Department for investigations in respect of the funeral funds and may be able to access the Assetless Administration Fund in respect of the other Youpla companies – has sufficient utility and is just for the interests of creditors, where it addresses the issues concerning Mr Stimpson’s apparent independence and could potentially promote the prospects of recovery for the benefit of the Youpla companies or at least the funeral funds’ creditors.

23. For these reasons, I made the orders sought at the conclusion of the hearing on 8 December 2022.

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