In the Matter of Bernsteen Pty Ltd (in liq) - [2018] SASC 76

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
IN THE MATTER OF BERNSTEEN PTY LTD (IN LIQ)
[2018] SASC 76
Judgment of The Honourable Justice Doyle
6 June 2018
CORPORATIONS - SUPERVISION - COURTS - POWERS - AS TO IRREGULARITIES
PROCEDURE - STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY - DECLARATIONS - WHO MAY APPLY
Application for declaratory relief under s 1322 of the Corporations Act 2001 (Cth) by former liquidator in relation to meetings of the company’s committee of inspection at a time when he was the liquidator of that company.
Consideration of the meaning of an “interested person” for the purposes of s 1322(4) of the Corporations Act, and in particular the relevance of a direction or requirement by ASIC, following its investigation of the administration of the company’s affairs, that the plaintiff bring these proceedings.
Held per Doyle J (dismissing the plaintiff’s claim):
1. While a former liquidator might in other circumstances be an interested person, in the particular circumstances of this case he was not an interested person.
2. The direction by ASIC that the plaintiff bring these proceedings, while relevant, is not sufficient to make the plaintiff an interested person.
3. Application for declaratory relief under s 1322(4) is dismissed.
Corporations Act 2001 (Cth) s 477, s 1322; Supreme Court (Civil) Rules 2006 (SA) r 89; Corporations Rules 2003 (SA) r 2.13, referred to.
Re Golden Gate Petroleum Ltd (2010) 77 ACSR 17; Twin v Deputy Commissioner of Taxation [2004] 1 Qd R 450, considered.

IN THE MATTER OF BERNSTEEN PTY LTD (IN LIQ)
[2018] SASC 76
Civil.
DOYLE J:

The plaintiff is the former liquidator of Bernsteen Pty Ltd (in liq). He has brought an application seeking declaratory relief under s 1322(4) of the Corporations Act 2001 (Cth) (the Act). The declarations relate to the conduct of meetings of the committee of inspection of Bernsteen that occurred in November 2005 and September 2011, when the plaintiff was the liquidator of Bernsteen.
A threshold issue has arisen as to whether the plaintiff is an “interested person” for the purposes of obtaining relief under s 1322(4). In contending that he has the requisite interest, the plaintiff relies upon his status as the former liquidator (and the liquidator at the time of the relevant meetings), in combination with the fact that ASIC has directed him to bring this s 1322 application.
In the particular circumstances of this case, I am not satisfied that the plaintiff is an interested person for the purposes of s 1322(4) of the Act. While a former liquidator may in other circumstances have a sufficient interest, I do not consider that the plaintiff has such an interest in this case. These are my reasons for reaching this conclusion, and hence for also concluding that it is appropriate to dismiss the plaintiff’s application.
Background
The plaintiff was appointed liquidator of Bernsteen, and another company (Newmore Pty Ltd (in liq)), on 21 December 2001.
On 14 November 2005, the plaintiff convened concurrent meetings of the committees of inspection of these companies at which resolutions approving the plaintiff’s remuneration as liquidator for the period 1 March to 31 October 2005 were passed. The minutes of the Bernsteen committee meeting on that date did not include reference to a Mr Routledge being in attendance, despite the plaintiff’s position being that he was in attendance, and indeed his attendance being recorded in the minutes of the concurrent Newmore committee meeting. In the absence of Mr Routledge’s attendance, there would not have been a quorum for the resolution approving the plaintiff’s remuneration to be passed.
Between about January 2010 and June 2011, ASIC conducted a review of the liquidation of Bernsteen. ASIC was concerned by the apparent irregularity mentioned above in relation to the minutes of the 14 November 2005 meeting. ASIC also had other concerns, including in relation to the approval and funding of some litigation on behalf of Bernsteen (referred to as the George proceedings).
Accordingly, and at ASIC’s direction, the plaintiff convened concurrent meetings of the Bernsteen and Newmore committees on 8 and 21 September 2011. At those meetings the Bernsteen committee confirmed the attendance of Mr Routledge at the 14 November 2005 Bernsteen committee meeting; passed a resolution approving the plaintiff’s remuneration as liquidator for the period 1 March to 31 October 2005; and provided approval pursuant to s 477(2B) of the Act for Bernsteen’s funding of the George proceedings.
On 30 January 2012, the plaintiff convened a further meeting of the Bernsteen committee, at which the committee passed a further resolution confirming its earlier approval of Bernsteen’s funding of the George proceedings under s 477(2B).
As a consequence of its investigation into the affairs of Bernsteen, ASIC also directed the plaintiff to bring proceedings under s 1322(4) of the Act seeking declaratory relief in relation to the November 2005 and September 2011 committee meetings.
Consistently with that direction, the plaintiff commenced these proceedings on 23 April 2012, seeking declarations pursuant to s 1322(4) of the Act to the effect:
1. that the minutes of the Bernsteen committee meeting of 14 November 2005 be amended to reflect the attendance of Mr Routledge at that meeting;
2. that the resolution passed at the Bernsteen committee meeting of 14 November 2005, approving the plaintiff’s remuneration as liquidator for the period 1 March to 31 October 2005, was validly made by a requisite quorum, pursuant to s 549(3) of the Act; and
3. that the approval of the funding of the George proceedings, as reflected in minutes of the Bernsteen committee meeting on 8 and 21 September 2011, was valid for the purposes of s 477(2B) of the Act, and authorised the plaintiff’s entry into a funding arrangement for, and subsequent funding of, the George proceedings on Bernsteen’s behalf.
In May 2012, Mr Viscariello (who claimed an interest as a shareholder, creditor and former director of Bernsteen) filed an application for leave to intervene in these proceedings, pursuant to r 89(1) of the Supreme Court (Civil) Rules 2006 (SA).[1] He was later given leave to be heard as a non-party pursuant to r 2.13(1) of the Corporations Rules, without his application for intervention being determined.
[1] This rule being applicable by reason of it not being inconsistent with the Corporations Rules 2003 (SA) and hence its operation being given effect by those rules.
Kourakis J (as he then was), who was then managing these proceedings, adjourned these s 1322 proceedings pending his hearing of separate proceedings brought by Mr Viscariello against the plaintiff in relation to matters arising out of the latter’s role as liquidator of Bernsteen (the Viscariello proceedings). The solicitors for the plaintiff were to be notified when the s 1322 proceedings were to be re-listed.
On 9 December 2014, Kourakis CJ delivered his reasons for judgment in the Viscariello proceedings.[2] In his reasons, his Honour addressed some of the matters raised in the s 1322 proceedings. The plaintiff had been cross-examined in the Viscariello proceedings about the factual circumstances surrounding the meetings and resolutions the subject of the s 1322 proceedings, although the plaintiff contends that these were raised only as matters going to his credit.
[2] Viscariello v Macks [2014] SASC 189.
The plaintiff contends that Kourakis CJ’s findings or conclusions in relation to the matters raised in the s 1322 proceedings were made in circumstances where no relief had been sought in relation to these matters and without the plaintiff being given an opportunity to be heard fully in relation to these matters. Mr Viscariello takes a different view, contending that these matters were fairly in issue, and appropriately dealt with by Kourakis CJ. It is not necessary for me to form or express any view about the merits of these rival contentions. They are relevant only by way of explanation of the procedural background to the present issue.
On 15 April 2015, in light of the outcome in the Viscariello proceedings, the plaintiff consented to an order by Kourakis CJ that he be removed as liquidator of Bernsteen. An order to this effect was made.
On 29 June 2015, Kourakis CJ heard argument on the plaintiff’s application that he recuse himself from these s 1322 proceedings (on the basis of findings made by his Honour in the Viscariello proceedings), and Mr Viscariello’s application to stay the s 1322 proceedings on the basis of an abuse of process or Anshun estoppel by reason of the determination of these matters in the Viscariello proceedings. Kourakis CJ reserved his decision in relation to these applications.
While Kourakis CJ was reserved on these applications, the plaintiff pursued his appeal in relation to the Viscariello proceedings. The notice of appeal originally included a ground of appeal which challenged the removal of the plaintiff as liquidator, and which in turn challenged some of the findings made by Kourakis CJ in relation to the matters the subject of the s 1322 proceedings. However, that ground was not ultimately pursued and so these matters did not need to be, and were not, addressed by the Full Court.
The Full Court delivered judgment on the appeal on 22 December 2017.[3] The plaintiff was partially, but not entirely, successful in his appeal. Some of the findings and orders made by Kourakis CJ were set aside.
[3] Macks v Viscariello [2017] SASCFC 172.
In April 2018, Kourakis CJ recused himself from the s 1322 proceedings. I was allocated the future management of these proceedings.
On 17 April 2018, ASIC confirmed that it still required Mr Macks to continue to prosecute the s 1322 proceedings and to seek the relief set out in the originating process. As a result, and at the first return of these proceedings before me, the plaintiff indicated his intention and desire to proceed with the hearing and determination of his claim for relief under s 1322(4).
Mr Viscariello sought to intervene, or at least to be heard, on the issues raised by the s 1322(4) proceedings. Mr Viscariello also challenged the plaintiff’s standing to seek relief under s 1322(4). He did so on two grounds. The first ground was that the proceedings had been issued in the name of the plaintiff in his capacity as liquidator, whereas he no longer had that status. The second ground was that the plaintiff, as merely a former liquidator, was not an interested person for the purposes of s 1322(4). Mr Viscariello also contended that the plaintiff’s pursuit of relief under s 1322(4) was an abuse of process, or that he was precluded by an Anshun estoppel from pursing such relief. Mr Viscariello relied in this respect upon the agitation of, and findings in relation to, matters underpinning the claim for relief under s 1322(4) in the Viscariello proceedings.
The plaintiff opposed Mr Viscariello being heard or intervening in these proceedings, and rejected the contention that he was precluded from seeking relief on account of either an abuse of process or any some form of Anshun estoppel.
I listed these preliminary matters for argument on 1 June 2018.
Having foreshadowed an intention to amend his originating process to make plain his status as a former liquidator of Bernsteen, the plaintiff pressed that application at the hearing on 1 June 2018. For the brief oral reasons given at the time, I allowed that application.
Argument then proceeded on the issue of whether the plaintiff had a sufficient interest to qualify as an “interested person” for the purposes of s 1322(4). While the parties accepted that the nature and extent of the plaintiff’s interest may be relevant to the ultimate exercise of the Court’s discretion to grant relief under s 1322(4),[4] nevertheless there was a threshold issue of whether the plaintiff had a sufficient interest to qualify as an interested person at all. The parties agreed that this could be, and should be, dealt with separately. Given the significant time and expense likely to be associated with a full hearing of the matters relevant to determination the plaintiff’s claim under s 1322(4), I considered this was a convenient and appropriate course. The parties also agreed that it was appropriate to defer consideration of Mr Viscariello’s entitlement to be heard more generally, and his allegation of abuse and estoppel, pending determination of the threshold issue of whether the plaintiff is an interested person.
[4] Twin v Deputy Commissioner of Taxation [2004] 1 Qd R 450 at [16].
Whether the plaintiff is an interested person for the purposes of s 1322(4)
Section 1322 is a remedial provision.[5] It follows that the concept of an “interested person” for the purposes of s 1322(4) should not be narrowly interpreted.
[5] Elderslie Finance Corp Ltd v Australian Securities Commission (1993) 11 ACSR 157 at 160; Re Golden Gate Petroleum Ltd (2010) 77 ACSR 17 at [38].
In Re Golden Gate Petroleum Ltd,[6] after summarising the nature of the Court’s jurisdiction under s 1322, McKerracher J said the following of the concept of an interested person under that section:[7]
The legislature intended that s 1322(4) be available to a wide class of applicants. It is wide enough to include an applicant whose material legal rights or pecuniary or other economic interests are or may be substantially affected by the matter in issue …
[6] Re Golden Gate Petroleum Ltd (2010) 77 ACSR 17
[7] Re Golden Gate Petroleum Ltd (2010) 77 ACSR 17 at [44], citing Twin v Deputy Commissioner of Taxation [2004] 1 Qd R 450 at [15]-[16].
Similarly, in Twin v Deputy Commissioner of Taxation,[8] Holmes J expressed the view that as the section had a remedial purpose, it was probable that the legislature intended the relief provided by it to be available to a wide class of applicants.
[8] Twin v Deputy Commissioner of Taxation [2004] 1 Qd R 450 at [16].
Here, the focus of the plaintiff’s submissions in relation to his interest was the fact that he had been requested or directed to pursue these proceedings by ASIC. Further, despite the initial direction or request having been made over six years earlier, when the plaintiff was still the liquidator and there remained a number of issues or concerns in relation to the administration of Bernsteen, ASIC had maintained its direction or request despite all that had occurred since that time.
The evidence relied upon by the plaintiff did not identify any other relevant circumstance, other than of course the fact that the plaintiff was the former liquidator, having been the liquidator at the time of the relevant meetings and resolutions. Nor did his written submissions identify any other relevant circumstances. In the course of oral argument, the plaintiff contended that the Court’s determination of the s 1322(4) claim, insofar as it would involve the Court reaching a conclusion as to the validity or otherwise of steps taken by the plaintiff while he was liquidator, had the potential to reflect upon his conduct and hence upon his professional standing or reputation. He also acknowledged that the determination of the s 1322(4) claim might also have potential ramifications in terms of the possibility of someone (such as a creditor or the new liquidator) seeking to take consequential steps including, for instance, attempting to claw back remuneration paid to the plaintiff.
However, the plaintiff frankly acknowledged the theoretical or hypothetical nature of these matters. He was not aware of any foreshadowed, let alone imminent, steps by others that might be impacted by the outcome of these proceedings. Indeed, given the significant disputation that had already occurred in relation to the administration of Bernsteen, and the time that had now passed since the relevant meetings, he considered that any such action now was only a remote possibility and would, in any event, be difficult to sustain.
In summary, while pointing to his status as the former liquidator, and not entirely eschewing any personal interest, the plaintiff did not advance any real and identifiable interest in terms of his financial or legal position, or his professional standing or reputation. Certainly he did not identify any interest of a substantial or practical nature. He also frankly acknowledged that were it not for the continued ASIC direction he would not have brought these proceedings, let alone have continued to press them given all that has happened in the six years since they were instituted. In other words, in bringing and pursuing these proceedings, the plaintiff was not motivated by any personal or subjective desire on his part to address or vindicate the propriety of his conduct as the former liquidator of Bernsteen. To the extent he had any personal or professional motivation, it was merely that of ensuring that he complied with the requirements of ASIC.
That left the focus of the argument as to the plaintiff’s interest upon the significance, if any, that should be attached to ASIC’s direction to the plaintiff.
Ordinarily, the mere fact that a plaintiff has been directed or requested by someone to bring proceedings would be a matter of no relevance or weight in determining whether they have a relevant interest.
I accept that it is of some significance, however, that the direction or request in this case came from ASIC. It is significant because ASIC is the relevant regulator, and had in this case investigated the affairs of Bernsteen and had taken the view that there were irregularities that should be addressed. But even if relevant, I do not think this takes the matter very far. It is, at best, a matter of general background relevance, and even then only really as a proxy for the general public interest in ensuring that the affairs of a company in liquidation are conducted regularly and in accordance with the law. While the plaintiff has a parallel interest in relation to the regularity of the affairs of Bernsteen, it is significant that he is no longer the representative of that company. That responsibility rests with the new liquidator. Insofar as an interest in ensuring the regularity of Bernsteen’s affairs might be a sufficient interest for the purposes of s 1322(4), it is not clear to me that this is an interest that resides in the plaintiff (as opposed to, say, the new liquidator or ASIC) in the circumstances of this case.
I should add that I do not have any concern with the propriety of ASIC requiring that the plaintiff commence these proceedings. While Mr Viscariello makes various criticisms of ASIC’s conduct in continuing to require that the plaintiff bring these proceedings given subsequent events in the Viscariello proceedings, that is not a matter that I need to address for present purposes. My only concern in the present context is whether the fact that ASIC has required that the plaintiff bring and maintain these proceedings is sufficient to constitute him an interested person.
The position would have been different back in 2012 when the plaintiff was still the liquidator. Further, I can envisage circumstances in which even a former liquidator may well have a sufficient interest. However, in the circumstances of this case where the former liquidator is not able to advance any real and identifiable interest beyond his mere status as the former liquidator, and certainly not any interest with a substantial or practical significance, and where he has effectively disavowed any personal or professional motivation for seeking to vindicate his past actions other than that of complying with what ASIC has required of him, I consider that the plaintiff’s interest is too slight and insubstantial to qualify him as an interested person under s 1322(4).

For these reasons, I dismiss the plaintiff’s claim for declaratory relief under s 1322(4) of the Act.