Lo v Nielsen & Moller (Autoglass) (NSW) Pty Ltd

[2008] NSWSC 407

CITATION:	Lo v Nielsen & Moller (Autoglass) (NSW) Pty Ltd [2008] NSWSC 407
HEARING DATE(S):	30/04/08
JUDGMENT DATE :	2 May 2008
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Order for appointment of special purpose liquidators to be made
CATCHWORDS:	CORPORATIONS - winding up - creditors voluntary winding up - application for appointment of special purpose liquidator - whether court has jurisdiction to appoint - where significant creditor presents cogent case for investigation of dealings in period immediately before voluntary administration that led on to creditors voluntary winding up - that creditor lacks confidence in existing liquidator - creditor willing to fund investigations if undertaken by different liquidator - need for financial regime to be defined
LEGISLATION CITED:	Corporations Act 2001 (Cth), Parts 5.3A, 5.9, ss 502, 503, 511, 564, 588R Corporations Regulations 2001 (Cth), regs 5.6.21(3), 5.6.21(4)
CATEGORY:	Principal judgment
CASES CITED:	Advance Housing Pty Ltd v Newcastle Classic Development Pty Ltd (1994) 14 ACSR 230 McGrath; Re HIH Insurance Ltd [2006] NSWSC 385 Onefone Australia Pty Ltd v One.Tel Ltd [2003] NSWSC 1228; (2003) 48 ACSR 562 Onefone Pty Ltd v One.Tel Ltd [2006] NSWSC 815; (2006) 58 ACSR 466 Re Cobar Mines Pty Ltd (unreported, NSWSC, Santow J, 22 June 1998) Re Eastern Properties Pty Ltd [1981] 1 NSWLR 499 Re Midland Land and Investment Corporation [1887] WN (Eng) 58 Re Obie Pty Ltd (No 4) (1984) 8 ACLR 967 Re Spedley Securities Ltd (1991) 4 ACSR 555
PARTIES:	Maggie Yeung Lo - Plaintiff Nielsen Moller Autoglass (NSW) Pty Limited - First Defendant Christopher Thomas Wykes in his capacity as liquidator of Nielsen & Moller Autoglass (NSW) Pty Limited - Second Defendant
FILE NUMBER(S):	SC 2490/08
COUNSEL:	Mr J T Svehla - Plaintiff
SOLICITORS:	McInnes Attorneys - Plaintiff

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

FRIDAY, 2 MAY 2008

2490/08 MAGGIE YEUNG LO v NIELSEN & MOLLER AUTOGLASS (NSW) PTY LIMITED

JUDGMENT

1 Nielsen & Moller Autoglass (NSW) Pty Ltd (“Nielsen & Moller”) is subject to the form of creditors voluntary winding up that follows on from voluntary administration under Part 5.3A of the Corporations Act 2001 (Cth). The liquidator is Mr Wykes. He was originally the administrator under the antecedent voluntary administration, having been appointed on 31 January 2008.

2 The present plaintiff, Ms Lo, is a creditor of Nielsen & Moller. She obtained a judgment against it in the sum of $38,895.69 in the Federal Court of Australia on 26 October 2007, which judgment remains unsatisfied.

3 Ms Lo has applied to this court for an order that two official liquidators nominated by her be appointed additional liquidators of Nielsen & Moller for confined and specific purposes reflected by a statement of powers set out in Schedule 1 to her originating process. Those powers entail investigation of certain financial dealings between Nielsen & Moller and Mr Rankine (alone or together with his wife) and Mr Moller, including loans made by Mr and Mrs Rankine to Nielsen & Moller and a charge granted by it to them. Mr Rankine was the sole director of Nielsen & Moller at the time voluntary administration began. Mr Moller had previously been a director. The powers and functions specified in Schedule 1 are as follows (the references to “the first defendant” being references to Nielsen & Moller):

“1. Investigate the creation and registration of the fixed and floating charge (“ Rankine Charge ”) by the First Defendant to Geoffrey James Rankine and Karin Elke Rankine as trustees for the Rankine Family Superannuation Fund (the “ Rankines ”).

2. Investigate loans made by the Rankines to the First Defendant, and the subsequent application of those funds prior to and after creation and registration of the Rankine Charge.

3. Investigate the solvency of the First Defendant prior to and after creation and registration of the Charge, up to and including the date of entry into Liquidation.

4, Investigate whether Geoffrey James Rankine and Karin Elke Rankine were shadow or de facto directors and otherwise involved in the management and control of the First Defendant and, if so, for what periods of time.

5. Investigate whether the First Defendant was trading whilst insolvent for any period of time and if so whether Carl Christian Moller (“ Moller ”) and Geoffrey James Rankine as directors of the First Defendant and Geoffrey James Rankine and Karin Elke Rankine as de facto or shadow directors and otherwise involved in the management and control of the First Defendant were relevantly aware of such insolvent trading.

6. Investigate whether any unfair preferences or uncommercial transactions were entered into by the First Defendant and if so whether Moller and Geoffrey James Rankine as directors of the First Defendant and Geoffrey James Rankine and Karin Elke Rankine as de facto or shadow directors and otherwise involved in the management and control of the First Defendant were relevantly aware of such matters.

7. Investigate the extent to which any debt secured by the Rankine Charge remains outstanding.

8. Investigate the manner of exercise of the Rankine Charge.

9. Investigate the appointment and conduct of Geoffrey James Rankine as controller of the First Defendant on or about 31 December 2007.

10. Investigate the circumstances in which the Second Defendant was requested to become and was appointed administrator of the First Defendant in or about 31 January 2008.

11. Investigate the circumstances in which Southern Cross Autoglass Pty Ltd (“ Southern Cross ”) was registered on or about 21 December 2007 being the date when a petition to wind up the First Defendant was lodged in the Supreme Court of New South Wales by one of the First Defendant’s creditors.

12. Investigate the circumstances in which Geoffrey James Rankine became the sole director and shareholder of Southern Cross at that time.

13. Investigate the circumstances in which the entire assets and undertaking of the First Defendant was transferred to Southern Cross in or about late December 2007 or January 2008 and prior to the appointment of the Second Defendant as administrator of the First Defendant, and in circumstances where no money may have been received by the First Defendant or the Rankines from Southern Cross and where only some of the creditors of the First Defendant were assumed by Southern Cross, leaving behind unsecured creditors of the First Defendant in circumstances where the First Defendant had no assets or ability to pay those creditors.

14. Investigate the conduct, involvement and knowledge of Southern Cross concerning its acquisition of the assets and undertaking of the First Defendant.

15. Investigate whether Southern Cross holds the assets and undertaking of the First Defendant on a trust for it and their value and whether they are being dissipated.

16. Investigate the degree of control which Geoffrey James Rankine and Karin Elke Rankine had over the First Defendant including through the 80 ordinary shares in the First Defendant registered in the name of GDF Nominees Pty Ltd (“ Nominees ”).

17. Investigate any breaches of duty, whether under the Corporations Act 2001 , at common law or in equity, by Moller and Geoffrey James Rankine as directors or officers of the First Defendant and by Geoffrey James Rankine and Karin Elke Rankine as de facto or shadow directors of or as persons involved in the management and control of the First Defendant.

18. Investigate the conduct and knowledge of Gabriel & Partners and the directors of Nominees in relation to some or all of the above matters.

19. Investigate the conduct and knowledge of Geoffrey James Rankine and Karin Elke Rankine as trustees for the Rankine Family Superannuation Fund or otherwise in relation to some or all of the above matters.

20. Prepare with instructing solicitors and counsel a draft Application for Examination and supporting Affidavit of Reasons of the Liquidators under Sections 596A and 596B of the Corporations Act 2001, subject to legal clearance of supporting grounds, so as to make an application to this court to conduct examinations into some or all of the matters in paragraphs 1 to 19 above and for that purpose to issue summonses or orders to attend and be examined to persons and orders for the production of documents to persons and entities.

21. To prepare and conduct such examinations as may be authorised by the Court with the assistance of instructing solicitors and counsel.

22. To give consideration to claims available to the First Defendant or its liquidator arising from the investigations and examinations in paragraphs 1 to 21 above and from an examination of the First Defendant’s books and records.

23. To commence and prosecute any legal proceedings in the name of the First Defendant or as liquidator of the First Defendant arising from the investigations and examinations in paragraphs 1 to 21 above and from an examination of the First Defendant’s books and records.

24. To take steps, including legal proceedings, to ensure preservation and protection of assets of the First Defendant, whether or not in the possession of the First Defendant, and `including against Geoffrey James Rankine, Karin Elke Rankine, Moller, and Southern Cross.

25. Undertake such other or further matters in relation to the liquidation and affairs of the First Defendant as the Court considers appropriate.”

4 The written outline of submissions furnished by Mr Svehla of counsel, who appeared for Ms Lo, says that there is a need to investigate whether there was a “scheme to have Nielsen & Moller avoid paying debts of certain creditors and to avoid prospective claims against its directors and for the Rankines to keep the benefit of the business”. The outline of submissions continues:

“20. Lo contends that the evidence enables the inference to be drawn that the Rankines or Rankine and also Carl Christian Moller (“ Moller ”), together possibly with some assistance from the officers of GDF Nominees Pty Ltd (“ Nominees ”), who were also accountants in the firm practising as Gabriel & Partners, were to various degrees involved in a scheme to transfer the assets of Neilsen & Moller to a new company, Southern Cross Autoglass Pty Ltd (“ Southern Cross ”) owned and controlled by Rankine, leaving behind over $160,000 of unsecured creditors, including the five referred to above.

21. Various transactions and events warrant investigation and these are identified in Schedule 1 to the Amended Originating Process.

22. The inference is available that Wykes has become an unwitting participant in this scheme, initially accepting appointment as administrator, then as the liquidator under a creditors voluntary winding up, being paid by or at the direction of Rankine to effect the administration and then liquidation (the procedural and statutory requirements) outside the control of the court, effectively burying Neilsen & Moller and avoiding any investigation of its activities, and of those controlling it, because of lack of funds and the Rankines’ voting control.

23. Such a scheme or plan of action to avoid any or any proper investigation of the affairs of Neilsen & Moller and those controlling it to the detriment of its creditors, warrants intervention of this court in the exercise of its supervisory jurisdiction of liquidators and liquidations.

24. Furthermore, the inference is available that Neilsen & Moller was put down by the Rankines or Rankine, with varying degrees of assistance of the other persons mentioned above, in circumstance where Neilsen & Moller had lost defamation/misleading conduct proceedings brought against it, inter alia, by Lo and Ouyang. Relevantly, also Moller was found liable in the same Federal Court Proceeding to National and Ouyang in the amount of $22,300.”

5 There is also reference to a need to investigate steps apparently taken to avoid legitimate claims arising out of court judgments and whether there was an abuse of Part 5.3A.

6 The overall thesis is, in summary, that all assets of value and some favoured creditors were, as it were, shifted out of Nielsen & Moller and into Southern Cross, leaving non-favoured creditors with Nielsen & Moller which was then subjected to voluntary administration in circumstances where no return for those remaining creditors could be expected. Part of the means of achieving this appears to have been action by the Rankines as holders of the charge affecting the whole of the company’s property.

7 Based on publicly available records, evidence adduced in the Federal Court proceedings, her own observations at the first meeting of creditors in the voluntary administration of Nielsen & Moller, documents issued by the administrator (now liquidator) and correspondence to which she or her solicitors have been parties, Ms Lo has given evidence which is the foundation for the following parts of the outline of submissions:

“27. In or about December 2003 Rankine and Moller had discussions about incorporating a replacement windscreen wholesale business. On 21 January 2004 Neilsen & Moller was incorporated.

28. There were 100 issued ordinary shares. Moller held 20 and 80 were registered in the name of Nominees. Although the documents lodged at ASIC recorded Nominees as the beneficial owner of these 80 shares, in fact Nominees held them in trust for the Rankines.

29. From its commencement, Moller was the sole director of Neilsen & Moller.

30. However, from its very commencement the Rankines were involved in the day to day running of the business activities of Neilsen & Moller and Rankine and Moller had control of the cheque book and signed cheques.

31. In fact Rankine, through himself and his wife who had of 80% of the shares, controlled the business.

32. On 4 September 2007 Rankine took overt control replacing Moller as the sole director and secretary of Neilsen & Moller.

33. Rankine did this after the evidence (April 2007) in the Federal Court Proceeding had finalised and prior to delivery of judgment on 26 October 2007.

34. Rankine gave evidence in the course of his cross-examination in the Federal Court Proceedings in mid April 2008 that Neilsen & Moller could be sold, someone had approached him about this, that he had not discussed this with Moller, but that its business could be sold to the right bidder.

35. In fact, in about ten weeks of the judgment in the Federal Court Proceedings, the entire assets and undertaking (business) of Neilsen & Moller was transferred to Southern Cross (ie. at the very end of December 2007 or in the first week or two of January 2008).

36. Southern Cross had been incorporated by Rankine on 21 December 2007 (some 10 days prior to the asset transfer). 21 December 2007 was the same day on which Famous lodged an application in this Court to wind up Neilsen & Moller.

37. Rankine was the sole shareholder and director of Southern Cross. Rankine caused Southern Cross to take over Neilsen & Moller’s entire assets and undertaking at net book value at some $335,000, employees entitlements and selected unsecured creditors whilst the others (about $160,000) were left behind. The Commissioner of Taxation is one of the creditors left behind in the amount of $65,000.

38. Rankine informed the first meeting of the creditors of Neilsen & Moller in administration on 8 February 2008 that he did not wish to answer the question which had been put to him as to why only some of the creditors had been taken over by Southern Cross.

39. At the time of the transfer of Neilsen & Moller’s business to Southern Cross:
(a) Famous, the petitioning creditor to wind it up, had been owed some $32,430 in relation to freight and forwarding services provided in the period from August 2006 to October 2006 – that is, those debts were outstanding for over 16 months;
(b) Lo, Ouyang and National who obtained judgments in the Federal Court Proceedings, had not been paid them by Neilsen & Moller and a creditors statutory demand had been issued upon Neilsen & Moller in December 2007.


40. For the 2½ years [sic] from 1 July 2006 to 31 December 2007, Neilsen & Moller traded at a loss and had a net deficiency of assets to liabilities increasing from ($285,868) to ($560,666), whilst the support from the Rankines by way of loans to Neilsen & Moller did not increase in the same amount at which the deficiency of assets to liabilities increased.

41. There is a very real issue as to Neilsen & Moller’s solvency for a considerable period.

42. Wykes’ initial investigations is that Neilsen & Moller’s financial difficulties, were not only attributable to the legal fees in defending several court actions and competition and market driving prices down, but Neilsen & Moller’s inability to reduce costs and inadequate margins on sales.

43. On 20 October 2006 the Rankines entered into a fixed and floating charge over Neilsen & Moller’s assets in respect of existing and future advances to Neilsen & Moller.

44. The charge was registered at ASIC on 1 December 2006.

45. At that time the Rankines had lent Neilsen & Moller $558,693 (existing indebtedness).

46. At the time the charge was created and registered Neilsen & Moller had a liability to Famous of $25,019, the outstanding legal action commenced in the Federal Court Proceedings (the hearing had not yet commenced) as well as liabilities to the Commissioner of Taxation, at the very least.

47. At the date of transfer of Neilsen & Moller’s assets and undertaking to Southern Cross, the Rankines were owed $649,693 (a further $91,000). The loan account records significant debits and credits in this period on that loan account.

48. There is a temporal relationship between the creation and registration of the charge in favour of the Rankines and the failure to pay certain creditors and the ongoing trading deficits referred to above.

49. After Rankine caused Southern Cross to be incorporated on 21 December 2007, when Famous commenced its winding up action against Neilsen & Moller, some ten days later, Rankine was appointed controller of Neilsen & Moller under the charge.

50. Wykes investigations as administrator were that by early January 2008, Rankine, as controller, had gone into possession of the assets and undertaking of Neilsen & Moller, on behalf of the Rankines pursuant to the terms of the charge, caused the business assets and undertaking and some of the creditors to be transferred to Southern Cross at a net book value of $354,215.

51. Relevantly there was no amount recorded in the books of Neilsen & Moller for goodwill of the business so that this was transferred at nil value. Rankine, through his ownership and control of Southern Cross, has obtained the benefit of Neilsen & Moller’s goodwill for no consideration.

52. Southern Cross immediately commenced to trade the business from the same business premises using the same employees, stock etc. as if nothing had happened.

53. No money was received by Neilsen & Moller. Instead, the Rankines say that they were no longer owed $649,693 from Neilsen & Moller but $295,478, being the difference after bringing to account the assets and business and undertaking taken over by Southern Cross less the discrete creditors and liabilities assumed (in a total amount of $191,590), giving rise to the net book value of $354,215.

54. It is unclear how Rankine as the controller could take control of liabilities so that some unsecured creditors could be advantaged or paid out by this means and others left behind with an empty shell.

55. It is not known whether Southern Cross paid any money to the Rankines for these assets.

56. There is a very strong inference available that at the time these events occurred, and at least for a number of months prior to that, Neilsen & Moller was insolvent and trading as such.

57. It is also appropriate to investigate whether the charge is valid not only by reason of insolvency, but whether its purpose was to protect the Rankines’ loans and the business, including from any judgment in the Federal Court Proceedings, which Lo and others might obtain.

58. Thus, on 27 February 2008 Neilsen & Moller was wound up voluntarily pursuant to a creditors voluntary winding up by reason of the interactive operation of sections 439C(c), 446A(1)(a), (2), (3), (4), 491, 494, 497 and 499(1) of the Act.

59. Wykes was appointed the liquidator to an empty shell. He has been funded to date by third party contribution of some $16,500.

60. Wykes has indicated in his report to creditors pursuant to section 439A that:
(a) he will be lodging a report with ASIC pursuant to section 438D as to offences etc.;
(b) Neilsen & Moller may have traded whilst insolvent giving rise to directors liability under section 588G (which would include Rankine);
(c) breaches of directors duties may have occurred if Neilsen & Moller traded whilst insolvent which is arguably the case;
(d) it appears that Rankine as a director may have breached his duties to Neilsen & Moller in relation to the transfer of the business to Southern Cross;
(e) there may be an action to avoid the charge;
(f) there may be an action in relation to breach of duty and the transfer of the business which would include the Rankines (as the lenders/chargee), Southern Cross and Rankine.


61. All these fall within the matters Lo seeks to have the Special Purpose Liquidators investigate as identified in Schedule 1 to the Amended Originating Process.

62. On the day following Neilsen & Moller being placed into creditors voluntary winding up, Famous’ application to this Court to wind up Neilsen & Moller was withdrawn, as it had to be. Neilsen & Moller, Rankine and others avoided court scrutiny.”

8 It is, of course, neither necessary nor appropriate to make findings on these matters at this point. But it can be said that they point to a need for investigation by the liquidator of Nielsen & Moller and indicate a possibility that various recovery proceedings might be pursued or, at least, considered by the liquidator in the interests of creditors.

9 Mr Wykes, the current liquidator, made a report to creditors dated 19 February 2008 in his capacity as voluntary administrator. It is referred to in the extracted material above. He noted that there were unresolved questions about the charge granted by Nielsen & Moller to Mr & Mrs Rankine in October 2006 and the amount, if any, secured by it. He referred to the possibility of recoveries for insolvent trading and said that if any creditor wished to take such proceedings under s 588R, he would consent. Under the heading “Breach of Director’s Duties”, he said:

“For example, the director would be in breach of his duties as director if the company traded whilst it was insolvent as is arguably the case.
It also appears the director may have breached his duties in relation to the transfer of business.”

10 In relation to funding of possible actions by a liquidator, Mr Wykes said, in effect, that there were no funds immediately available for this purpose and that any proceedings would have to be financed by creditors (with the possibility of priority participation in any recoveries being granted pursuant to s 564) or by external litigation funding (which he did not think would be available). Mr Wykes has been funded wholly from an unidentified external source to date.

11 After Mr Wykes had issued this report, the second meeting of creditors was held and it was resolved that Nielsen & Moller be wound up. Mr Wykes thereupon became the liquidator.

12 Ms Lo had been one of several creditors who had sought to have Mr Wykes replaced as administrator at the first meeting of creditors in the voluntary administration. A poll was taken on the question and the chairman (Mr Wykes himself) declared that “the motion was lost under both scenarios” – a reference to the fact that votes had been counted on two different bases, one recognising a company called Paccon as a creditor for $3,000.00 and the other not including Paccon. On the former basis there were four creditors accounting for 11.81% by value in favour and three creditors representing 88.19% by value against. On the alternative basis, there were three creditors accounting for 11.45% by value in favour and three creditors accounting for 88.55% by value against.

13 As I have said, Mr Wykes, as chairman, took the view that “the motion was lost under both scenarios”. That, it seems, may have been an erroneous conclusion, at least if understood as a statement that, in terms of regulation 5.6.21(3) of the Corporations Regulations 2001 (Cth), the resolution was “not carried”. For that result to apply, it is necessary that “a majority of creditors voting (whether in person, by proxy or by attorney) vote against the resolution” and a second condition regarding value is satisfied. That was not the case on either of the bases considered: in the first case, a minority voted against; and, in the second, the number voting against was equal to the number voting in favour. It appears, therefore, that the chairman’s casting vote became available to be exercised under regulation 5.6.21(4). The matter of the casting vote was mentioned. The minutes record the following:

“There was a brief discussion regarding the Chairman’s casting vote.
The Chairman noted that he had not used his casting vote and was not required to use the casting vote.”

14 Ms Lo’s concern is that the three creditors who voted against Mr Wykes’ replacement were Mr Rankine, one of the holders of the charge which Ms Lo believes played a part in the transfer of the Nielsen & Moller business to Southern Cross, Gabriel & Partners (a firm of accountants with apparently close connections with Nielsen & Moller principals) and a business advisory firm which had introduced Mr Wykes to Mr Rankine, the director by whom he was in due course appointed administrator. The creditors who voted in favour (including Ms Lo herself) were all arm’s length creditors.

15 The three creditors who, in addition to Mr Lo, voted in favour of replacement of Mr Wykes are Harvey Ouyang, National Autoglass Supplies and Paccon. All of them have indicated to Ms Lo that they support her present application – as has another creditor, Famous Pacific Shipping which had filed the application to have Nielsen & Moller wound up in insolvency which was eventually overtaken by the voluntary administration and its sequel.

16 Ms Lo’s thesis is that Mr Wykes, having been selected for appointment in the first place by Mr Rankine, continued in office only because of the support of Mr Rankine (whose conduct she believes requires scrutiny by an independently minded liquidator) and persons connected or allied with him.

17 The other point Ms Lo makes is that she is willing to finance investigations by a liquidator only if that liquidator is not Mr Wykes. None of the other creditors appears willing to provide funding either to Mr Wykes or to an alternative liquidator to undertake investigations of the kind to which Ms Lo refers.

18 Ms Lo has received from Mr Lord and Mr Crowe-Maxwell of PKF, chartered accountants, a statement of the basis on which they are prepared to act as special purpose liquidators. The work envisaged is described in stages. Stage 1 involves investigation of the creation and registration of the charge granted to Mr & Mrs Rankine, loans by them and the solvency of Nielsen & Moller at and before the creation of the charge and until commencement of the winding up. Also included are matters of potential insolvent trading and statutory contraventions. Stage 1 will culminate in a report on these matters, prepared with legal advice. Stage 2 involves examinations under Part 5.9 of the Corporations Act and a report on the results. Ms Lo will provide an agreed sum to Mr Lord and Mr Crowe-Maxwell to enable work to be completed to the end of Stage 2. She says in her affidavit that she is prepared to undertake to the court to fund Mr Lord and Mr Crowe-Maxwell for the Stage 1 and Stage 2 work on the terms required by them. She will likewise undertake to meet associated legal costs. The expenditure to which she would commit is potentially quite substantial.

19 The position is thus simple and clear. There are aspects of the affairs of Nielsen & Moller which require examination and investigation with a view to possible recoveries for creditors. This is a view not only shared by Mr Wykes and Ms Lo but also borne out by the evidence before me. Mr Wykes has no funds with which to undertake investigations and there appears to be no likelihood of his obtaining funding. Ms Lo is prepared to provide funding for the pursuit of investigations by Mr Lord and Mr Crowe-Maxwell but will not fund any investigations undertaken by Mr Wykes. It is in these circumstances that Ms Lo seeks to have Mr Lord and the Crowe-Maxwell appointed additional liquidators for the specific purposes stated in Schedule 1, including pursuit of the Stage 1 and Stage 2 examinations and, if thought fit thereafter, initiation and pursuit of legal proceedings based on the results.

20 Mr Wykes has indicated that he consents to the appointment of the additional liquidators. He does not, however, seek to resign or consent to being replaced. An obvious means of achieving the result that Ms Lo seeks would be for her to apply for orders removing Mr Wykes and appointing Mr Lord and Mr Crowe-Maxwell in his place. She says quite candidly that she does not wish to embark upon (and spend money on) a potentially contested application for Mr Wykes’ removal and that, while she lacks confidence in Mr Wykes’ ability to pursue objectively and dispassionately the matters of concern to her, she does not seek to assert the kind of “cause” that it would be necessary to show in order to obtain an order for his removal.

21 Ms Lo is entitled to have her application dealt with on its merits. I therefore leave to one side the question whether she might or should have sought removal of Mr Wykes.

22 I am satisfied that it will be beneficial to the administration of the winding up and in the interests of the general body of creditors for the work Ms Lo envisages for the additional liquidators to be undertaken. Any recoveries that resulted would benefit creditors as a whole. Ms Lo could achieve a position of superior claim upon the recoveries only if she was successful in a subsequent application under s 564.

23 One potential difficulty in cases where additional liquidators are appointed for specific purposes is allocation of financial resources between the two administrations: see, for example, Onefone Pty Ltd v One.Tel Ltd [2006] NSWSC 815; (2006) 58 ACSR 466. That problem will not arise here because Ms Lo will finance the activities of the special purpose liquidators. Part of the regime to be put in place in connection with the appointment should be to the effect that funds in the hands of Mr Wykes will not be applied to the activities of the special purpose liquidators and funds made available by Ms Lo will not be available otherwise than for those activities – in other words, that the two administrations will be financially independent of one another.

24 Ms Lo has made out a case for the creation of means of pursuing the investigations she wishes to see undertaken, subject to incorporation of appropriate financial measures.

25 It remains to consider briefly the source of the court’s jurisdiction to appoint an additional or special purpose liquidator.

26 In the case of a court ordered winding up, it was held by Needham J in Re Eastern Properties Pty Ltd [1981] 1 NSWLR 499 that where several liquidators are appointed, one of them might be designated to attend to a particular matter. His Honour referred to the statement of Chitty J in Re Midland Land and Investment Corporation [1887] WN (Eng) 58:

“In a liquidation, whether compulsory or under supervision, the
Court has jurisdiction to give the conduct of any particular matter
arising in the course of the liquidation to one of several liquidators.”

27 The same passage was relied upon by Thomas J in Re Obie Pty Ltd (No 4) (1984) 8 ACLR 967, the case probably most often cited in connection with the appointment of an additional liquidator in an already existing winding up by the court. His Honour said at 971:

“It was submitted for the Lewises that the court has no power to give a limited function to a particular liquidator; that an additional liquidator can only be appointed on a winding up, resignation, removal or occurrence of a vacancy; and that in any event the transference of this issue to an independent liquidator ought to be postponed until the removal proceedings are completed.

It has long been held that the court has jurisdiction to give the conduct of any particular matter arising in the course of the liquidation to one of several liquidators: Re Midland Land and Investment Corporation [1887] WN 58. In my own experience courts have made such orders when there is a matter to be dealt with in a liquidation which it would be embarrassing for the liquidators to handle. In such circumstances an additional liquidator is appointed to handle that matter, and the great expense and loss of efficiency involved in resignation and replacement in a partially completed administration is avoided.”

28 Other cases in which a subsequent appointment has been made in an existing court-ordered winding up are Re Spedley Securities Ltd (1991) 4 ACSR 555, Advance Housing Pty Ltd v Newcastle Classic Development Pty Ltd (1994) 14 ACSR 230 and McGrath; Re HIH Insurance Ltd [2006] NSWSC 385.

29 The cases to which I have referred have turned upon the court’s statutory power to appoint a liquidator in the case of a winding up by the court. There is no such explicit power in the case of a voluntary winding up, except under s 502 (where “there is no liquidator acting”) or s 503 (where a liquidator is removed by the court and needs to be replaced). There are nevertheless cases in which an additional or special purpose liquidator has been appointed by the court in a voluntary winding up. The case that comes most readily to mind is Onefone Australia Pty Ltd v One.Tel Ltd [2003] NSWSC 1228; (2003) 48 ACSR 562 where, as here, the winding up was a creditors voluntary winding up that followed on from voluntary administration. The statutory source of the jurisdiction to appoint was not identified in that judgment. But it had been identified in the earlier case of Re Cobar Mines Pty Ltd (unreported, NSWSC, Santow J, 22 June 1998) which also involved a creditors voluntary winding up that was a sequel to voluntary administration. Santow J there said:

“It is clearly established that in a winding up by the court, the court has power to appoint an additional liquidator. Under s 511 of the Corporations Law on an application by the liquidator (amongst others) in a voluntary winding-up, the court may exercise any of the powers it has where the company is being wound up by the court, if it is satisfied that such exercise will be just and beneficial.”

30 Section 511 of the Corporations Act, so far as relevant, is as follows:

“(1) The liquidator, or any contributory or creditor, may apply to the Court:
(a) to determine any question arising in the winding up of a company; or
(b) to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court.

…

(2) The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just.”

31 Ms Lo, being a creditor, has standing under s 511. The power to appoint an additional liquidator for a special purpose is a power that, in accordance with the cases to which I have referred, would be exercisable by the court if this were a winding up by the court. Therefore and as Santow J held in the case before him, it is open to the court to make an order under s 511 that additional liquidators be appointed in this voluntary winding up, provided that it will be “just and beneficial” to do so.

32 For the reasons I have given, I consider it just and beneficial to the winding up of Nielsen & Moller that Mr Lord and Mr Crowe-Maxwell be appointed additional liquidators for the Schedule 1 purposes.

33 The financial assurances to be given by Ms Lo should be incorporated into the funding agreement she will make with Mr Lord and Mr Crowe-Maxwell. She should then give to the court an undertaking to perform her obligations under that funding agreement. In the same way, Mr Lord and Mr Crowe-Maxwell should give to the court an undertaking that they will not look to, or assert any entitlement to resort to, funds or property of Nielsen & Moller and available to its liquidators (otherwise than by virtue of the agreement with Ms Lo) for the purpose of defraying their remuneration or expenses incurred by them. As to quantum, their remuneration, of course, can only be fixed in the manner provided by the Corporations Act. The point mentioned at paragraph [23] above should also be covered.

34 Subject to these matters being satisfactorily dealt with, I shall make orders appointing Mr Lord and Mr Crowe-Maxwell as additional liquidators and defining the special sphere of activity to which they are to confine themselves according to Schedule 1 in the Originating Process.

35 I will direct that a draft of the orders and undertakings be filed so that they may then be settled.

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