Liquidators of Y Pty Ltd and Diboll
[2020] FamCA 180
•24 March 2020
FAMILY COURT OF AUSTRALIA
| LIQUIDATORS OF Y PTY LTD & DIBOLL | [2020] FamCA 180 |
| FAMILY LAW – INSOLVENCY – Liquidators – Application by Wife for orders under schedule 2 to the Corporations Act for registered liquidator to review liquidator’s remuneration – Insolvency Practice Schedule (Corporations) s 90-23(6) – Application in a Case dismissed |
| Family Law Act 1975 (Cth) Family Court Rules 2004 (Cth) Corporations Act 2001 (Cth) ss 461 472, 477, 513A, 1337C, 1578, 1581, 1615, Sch 2 ss 90-23, 90-25, 90-26, 90-27, Ch 5 |
| ACN 159 605 188 Pty Limited (in liquidation) (formerly Securimax Pty Limited) [2018] NSWSC 356 |
| APPLICANT: | Mr X & Mr Z, Liquidators of Y Pty Ltd (in Liquidation) |
| RESPONDENT: | Ms Diboll |
| FILE NUMBER: | WOC | 455 | of | 2013 |
| DATE DELIVERED: | 24 March 2020 |
| PLACE DELIVERED: | Canberra |
| PLACE HEARD: | Canberra |
| JUDGMENT OF: | Gill J |
| HEARING DATE: | 12 March 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr G Howard |
| SOLICITOR FOR THE APPLICANT: | Chamberlains Law Firm |
| SOLICITOR FOR THE RESPONDENT: | Appearing on her own behalf |
Orders
The Wife’s Response to an Application in a Case filed 31 October 2019 is dismissed.
The proceedings are adjourned to the Registrar’s List pending further application or the listing of the matter for trial directions.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Liquidators & Diboll has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT CANBERRA |
FILE NUMBER: WOC 455 of 2013
| Mr X & Mr Z, Liquidators of Y Pty Ltd (in Liquidation) |
Applicant
And
| Ms Diboll |
Respondent
REASONS FOR JUDGMENT
The parties to this matter are Mr X and Mr Z, the Liquidators of Y Pty Ltd (the Liquidators), and Ms Diboll, the Respondent Wife.
Each were parties in the property proceedings between the Wife and her Husband that were finalised by Deputy Chief Justice Faulks on 24 October 2016.
The Liquidators, by an Application in a Case filed 27 July 2019 and amended on 22 November 2019, seek that the Wife make a number of payments to them, totalling approximately $77,000, that they assert are due pursuant to the orders made by Faulks DCJ for their remuneration in the following terms:
In addition to any sums recovered by the liquidators in the proper execution of their duties, in furtherance of Order 3 made by me on 13 March 2015, each of the parties will pay one half of the proper costs to the liquidators in relation to [Y] Pty Ltd on the basis that each will be responsible for one half of the amount outstanding taking into account that $7,500 had, at the date of the last order already been paid by the Respondent.
They allege that the Wife has not met her obligations under this order, and they further seek payments in respect of their attempts to enforce these orders.
The application that is the subject of this judgment, however, is one made by the Wife by a Response to an Application in a Case filed 31 October 2019 that seeks the appointment of a reviewing liquidator, to review and report on the remuneration of the Liquidators, with the costs of such to be met equally by the Liquidators and the Wife. In the alternative, the Wife seeks the appointment of a Single Expert to report on the same matters. This is in furtherance of her position on a final basis that she has already met her obligations pursuant to the Orders of Faulks DCJ.
The Liquidators oppose such a step.
The underlying issues for resolution in these proceedings thereby relate to the proper costs of the Liquidators and the Wife’s remaining liability in the light of those proper costs.
Material relied upon
The Liquidators relied upon the following:
a)Affidavit of Mr L filed 18 June 2019; and
b)Affidavit of Mr L filed 22 November 2019.
The Mother relied upon the following:
a)Affidavit of Ms Diboll filed 24 September 2019.
Principles
As noted above, the Wife seeks the appointment of a person to provide evidence in relation to the issue of the proper costs of the Liquidator. To do so she relies on two separate sources of power.
Firstly, she relies upon provisions from the Corporations Act 2001 (Cth) that deal specifically with mechanisms for the review of liquidators, namely s 90-23(6) of the Insolvency Practice Schedule (Corporations) (“the IPSC”), which is Schedule 2 to the Corporations Act 2001 (Cth) (“Act”). Civil jurisdiction under the Corporations Act2001 (Cth) is vested in the Family Court by s 1337C of that Act.
Secondly, the Wife relies on mechanisms within the usual procedure of this Court for the resolution of contentious expert issues through the Single Expert process.
Section 90-23(6) of the Insolvency Practice Schedule
The Liquidators (pursuant to s 472(1) and s 477 of the Corporations Act2001 (Cth)) were appointed by order of Faulks DCJ on 2 October 2014, pursuant to a winding up order (s 461 of the Corporations Act2001 (Cth)) in relation to Y Pty Ltd.
The Wife identified s 90-23(6) of the IPSC as the applicable provision for the appointment of a reviewing liquidator. The Liquidator opposed the appointment, but did not appear to dispute that this provision contained the appropriate mechanism for the review of the conduct and remuneration of a liquidator discharging duties related to the external administration of a company.
The question arises as to whether such a step ought to be taken.
Section 90-23(6) falls within the broader structure of the Corporations Act2001 (Cth). Chapter 5 of that Act deals with external administration. Section 472 deals with the appointment of liquidators by the Court, and s 513A deals with a winding up order made by the Court.
The IPSC was not enacted at the time of the orders made by Faulks DCJ. It did not enter into force until 1 March 2017. Accordingly, attention needs to be given to the transitional provisions. Part 10.25 of the IPSC deals with transitional arrangements. Sections 1578 and following deal with transitional arrangements in relation to remuneration. Section 1581 provides that the replaced provisions continue to apply in relation to remuneration for administrators already appointed, however, s 1615 provides that Division 90 of the IPSC applies in relation to ongoing external administration, whether the matter occurred before or after the commencement day. The effect appears to be that the remuneration remains the subject of the replaced provisions, but, even though 90-23(6) was not enacted until after the orders were made by Faulks DCJ,[1] it still has application in relation to reviews regarding the conduct and remuneration. The provisions are as follows:
[1] ACN 159 605 188 Pty Limited (in liquidation) (formerly Securimax Pty Limited) [2018] NSWSC 356.
90-23 Appointment of reviewing liquidator by ASIC or the Court
Appointment by the Court
(6)A registered liquidator may be appointed by the Court to carry out a review into a matter that relates to the external administration of the company.
(7)The Court may exercise the power under subsection (6):
(a) on application under subsection (8); and
(b) if the Court considers it appropriate to do so.
(8)Either of the following may make an application under this subsection:
(a) ASIC;
(b) a person with a financial interest in the external administration of the company.
(9)If the Court appoints a registered liquidator to carry out a review, the Court must specify:
(a) the matters in relation to the external administration of the company which the liquidator is appointed to review; and
(b) the way in which the cost of carrying out the review is to be determined.
Appointments by ASIC or by the Court-limit
(10)A matter referred to in paragraph (5)(a) or (9)(a) must not relate to remuneration which an external administrator of the company is entitled to receive under subsection 60-5(2) (remuneration if no remuneration determinations made).
90-25 Reviewing liquidator must consent to appointment
A registered liquidator cannot be appointed under this Subdivision as a reviewing liquidator in relation to a matter unless:
(a)the liquidator has consented in writing to the appointment; and
(b)as at the time of the appointment, the liquidator has not withdrawn the consent.
90-26 Review
Review-general
(1)If a reviewing liquidator is appointed under this Subdivision in relation to a matter, the reviewing liquidator must carry out a review into that matter.
Reviews relating to remuneration, costs or expenses
(2)If the matter is, or includes, remuneration of the external administrator of the company, the review may (but need not) include an assessment of whether the remuneration is reasonable.
(3)If the matter is, or includes, a cost or expense incurred by the external administrator of the company, the review must include an assessment of whether the cost or expense was properly incurred by the external administrator.
Note: Insolvency Practice Rules made under section 90-29 may provide for the meaning of properly incurred.
(4)A reviewing liquidator must not review:
(a)remuneration of an external administrator of the company that relates to a period; or
(b)a cost or expense incurred by the external administrator of the company incurred during a period;
unless the period is:
(c)for a reviewing liquidator appointed by the Court under paragraph 90-28(2)(c) or (3)(b)--the period determined by the Court; or
(d)otherwise--the prescribed period.
Report of review
(5)A reviewing liquidator must prepare a report on the review.
90-27 Who pays for a review?
(1) The cost of carrying out a review under this Subdivision:
(a)in the case of a reviewing liquidator appointed with the agreement of the external administrator of the company under subsection 90-24(5)--is to be borne by the creditors or members referred to in that subsection; or
(b)in any other case--forms part of the expenses of the external administration of the company.
(2) Subsection (1) has effect subject to an order of the Court under section 90-28.
Should a reviewing liquidator be appointed?
The appointment of a reviewing liquidator pursuant to these provisions requires the exercise of the discretion to be in accordance with the conditions imposed by the provisions.
A number of issues arise. The first is that the proposed reviewing liquidator is required to be a registered liquidator. This has not been established. It is also required that the reviewing liquidator consent to the appointment. This did not appear to be controversial.
The second issue relates to remuneration for the proposed reviewing liquidator.
Section 90-27 provides that the cost forms part of the expenses of the external administration of the company. It is to be noted that the application made by the Wife seeks that the payment not be made in this manner, but rather that it be shared between the Liquidator and the Wife. The orders proposed by the Wife do not appear to fall within the jurisdiction of the Court, s 90-27 being mandatory in its terms.
In any event, the evidence is not suggestive of there being funds available from the administration of the company sufficient to meet such an expense. Such a conclusion is, perhaps, suggested in the order sought in relation to payment, and that such be met by the Liquidators and the Wife.
The third issue is that it is required that the Court determine not only the scope of the review but that, pursuant to s 90-23(9)(b), the Court is required to determine the manner in which the costs of the review are to be determined. Evidence has not been presented to allow this to be determined.
The fourth issue is that a review of remuneration under the provisions is not available unless there is a relevant remuneration determination. Although the Liquidator in this case asserts that all of the remuneration claimed has been the subject of remuneration determinations by the meetings of creditors, this is challenged by the Wife at [58] where she alleges that an amount claimed by the Liquidator of $15,390 for May 2015 was never approved pursuant to s 60-10 of the IPSC. This, if correct, would act as a limited bar to review.
If all of these hurdles were to be overcome, the appointment of the reviewing liquidator by the Court is conditioned by 90-23(6), that is whether the Court considers that it is appropriate to make the appointment. This is the key provision conferring the discretion upon the Court to appoint the reviewing liquidator.
The Wife identifies a number of issues relevant to this issue, including the fact that the costs claimed by the Liquidators far outweigh their initial quote of $10,000, alleged failure to pursue monies and alleged irregularities in creditors’ meetings.
However, the other deficiencies in the application mean that further consideration of appropriateness is not required. Those deficiencies mean that the application pursuant to s 90-23(6) fails.
The application to appoint a single expert
The failure to appoint pursuant to s 90-23(6) leaves the Wife’s application for the appointment of a Single Expert witness pursuant to the Family Court Rules.
The first ground of opposition to this course made by the Liquidators is that the IPSC provides a comprehensive and specific scheme for dealing with such an issue. Where such a legislative scheme is in place, it tells against an appointment being made for a Single Expert as such is inconsistent with the specific scheme. This is a valid criticism, and strongly counters the application for a Single Expert.
Further, the appointment of the Single Expert sought is frustrated by a lack of evidence as to qualification and remuneration.
Under those circumstances the application will be refused.
Conclusion
The interim order of the Response to an Application in a case filed by the Wife on 31 October 2019 is dismissed.
The matter will be removed to the Registrar’s list pending being listed for directions to be given to finalise the matter.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Gill delivered on 24 March 2020.
Associate:
Date: 24 March 2020
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