Low v Hopkins - [2018] WASC 173

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   LOW -v- HOPKINS [2018] WASC 173
CORAM:   CHANEY J
HEARD:   21 FEBRUARY 2018
DELIVERED          :   13 JUNE 2018
FILE NO/S:   COR 165 of 2017
BETWEEN:   JENNIFER ELIZABETH LOW as liquidator of BARRINGTONS YOUR BUSINESS ADVISORS PTY LTD
First Plaintiff
BARRINGTONS YOUR BUSINESS ADVISORS PTY LTD
Second Plaintiff
AND
RICK GAVIN HOPKINS
First Defendant
BRYNLEY SCOTT THOMAS
Second Defendant
JUSTIN STEPHEN MANOLIKOS
Third Defendant

Catchwords:

Liquidators - Deferred expenses - Whether failure by defendants to provide property and books of company - Company in liquidation holding bank trust account - Liquidators requiring audit of trust account before releasing funds to those beneficially entitled - Whether liquidators expenses reasonable - Whether costs should be paid by defendants or paid from trust funds

Legislation:

Corporation Act 2001 (Cth), s 479, s 530B, s 545, s 1324
Rules of the Supreme Court 1971 (WA), O 66
Trustees Act 1962 (WA), s 77, s 92, s 97

Result:

Claims against defendants dismissed
Direction as to limited entitlement to recover costs from trust fund made

Category: B

Representation:

Counsel:

First Plaintiff	:	Mr M F Holler & Mr C J Terren
Second Plaintiff	:	Mr M F Holler & Mr C J Terren
First Defendant	:	Mr M D Douglas & Ms Y C Fang
Second Defendant	:	Mr M D Douglas & Ms Y C Fang
Third Defendant	:	Mr M D Douglas & Ms Y C Fang

Solicitors:

First Plaintiff	:	Roe Legal Services
Second Plaintiff	:	Roe Legal Services
First Defendant	:	Tottle Partners
Second Defendant	:	Tottle Partners
Third Defendant	:	Tottle Partners

Case(s) referred to in decision(s):

AAA Financial Intelligence Ltd (in liq) [2014] NSWSC 1004
Barringtons Accounting Pty Ltd v Barringtons Your Business Advisers Pty Ltd (in liq) [2015] WASC 56
Re Glengrant Civil Pty Ltd (in liq) [2017] NSWSC 843
Re Mackie Group Pty Ltd (in liq) [2017] VSC 477
Re Mamounia Pty Ltd (in liq) [2017] VSC 230
Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171

CHANEY J:

The first plaintiff, Ms Jennifer Low, is a registered liquidator. On 28 October 2014, an order was made in this court that the second plaintiff (BYBAPL) be wound up and Ms Low be appointed as liquidator.
Each of the defendants was a director of BYBAPL until the date of the first plaintiff's appointment as liquidator of that company. A fourth person, Mr Charles Napoli, on whose application BYBAPL was wound up, was also a director of BYBAPL at that time.
At the time of the order for its liquidation, BYBAPL held a bank account (CBA trust account) with the Commonwealth Bank of Australia (CBA) as trustee for clients of the accounting practice to which BYBAPL provided services. The first plaintiff has sought, over a period of approximately three and a half years, to obtain information in order to satisfy herself as to the proper entitlements to the funds held in the CBA trust account. In doing so, she has incurred significant costs (deferred expenses).
By originating process filed on 21 July 2017, Ms Low seeks orders that the defendants pay the deferred expenses or alternatively a direction that she may, if the assets of BYBAPL are insufficient, deduct moneys from the CBA trust account to pay her deferred expenses. The terms of the orders sought are set out later in these reasons.
In addition, the first plaintiff and BYBAPL seek orders that each of the defendants deliver up to the plaintiffs all property and books of BYBAPL which are in their possession, custody or power which have not already been delivered up, and that their costs of the application be costs in the winding up of BYBAPL and be paid by the defendants or alternatively recoverable from the funds held in the CBA trust account.
In the alternative, the first plaintiff seeks a direction pursuant to s 479(3) of the Corporations Act 2001 (Cth) or alternatively pursuant to item 45‑1 of Schedule 2 - Insolvency Practice Schedule (Corporations) to the Corporations Act 2001 (Cth) (Schedule) that, in her capacity as liquidator of the second plaintiff, she would be acting properly in making a proposal to the first, second and third defendants broadly to the effect that she retire as trustee of the CBA trust account on certain specified terms and conditions.
To understand the application, it is first necessary to understand the context in which BYBAPL operated prior to its liquidation, and the events that transpired following the first plaintiff's appointment as liquidator.

Structure of the Barringtons accounting practice

An accountancy and advisory practice known as Barrington Partners was first established in 1986.
In the 2008/2009 financial year, the partners in Barrington Partners were Essfor Pty Ltd (Essfor), a company associated with the first defendant, Mr Hopkins, Nereus Pty Ltd (Nereus), a company associated with the third defendant, Mr Manolikos, and Trecco Bay Pty Ltd (Trecco), a company associated with the second defendant, Mr Scott. Mr Napoli joined the practice on 1 July 2009.
As from 1 July 2009, there were two partnerships involved in the practice. The first was a partnership which 'owned' the clients of the practice known as 'Barringtons Partnership' (BP partnership), the partners of which were Essfor, Nereus, Trecco and Mr Napoli. The second was a partnership which serviced the clients of the practice and paid a licence fee to the BP partnership, known as Barringtons Your Business Advisors (BYBA Partnership). The partners in the BYBA Partnership were Little Tiger Pty Ltd (Little Tiger), a company associated with Mr Hopkins, Gwyngalchu Pty Ltd (Gwyngalchu), a company associated with Mr Scott, Nereus and Silverline Asset Pty Ltd (Silverline), a company associated with Mr Napoli. I will refer in these reasons to the operations of the two partnerships as 'the practice'.
BYBAPL was incorporated on 22 May 2009. Each of the four directors held 25 fully paid ordinary class shares in BYBAPL.
According to the unchallenged evidence of Mr Scott, from July 2009 onwards, BYBAPL acted as agent for the BYBA Partnership, employing staff of the practice with all costs, including salaries and related costs, being met by the BYBA Partnership.
BYBAPL, as agent for the BYBA Partnership, operated two overdraft facilities at CBA into which clients of the practice made payment for invoices rendered to them. Invoices were rendered by BYBAPL as agent for, and for the benefit of, the BYBA Partnership. All fees and disbursements generated by, or from, the practice were recorded as income in the BYBA Partnership financial statements and were reported and lodged under the BYBA Partnership ABN for GST purposes and each partner's tax return for income tax purposes.
In addition, BYBAPL, as agent for the BYBA Partnership, operated the CBA trust account into which funds belonging to clients of the practice were deposited from time to time. Funds deposited into the CBA trust account included clients' income tax and GST refunds from the Australian Taxation Office and other moneys received on behalf of clients.
BYBAPL did not receive, or share in, any of the income of the practice and did not otherwise trade, incur liabilities or hold assets in its own right.
On 23 January 2013, Mr Napoli called a meeting of the directors of BYBAPL and announced his intention to retire from the practice. That commenced a sequence of events which led to various court actions between the partners, some commenced by the partners other than Mr Napoli and Silverline, and others commenced by Mr Napoli and Silverline.
In January 2014, Mr Napoli commenced proceedings in this court to wind up BYBAPL and three other companies associated with the practice. By May 2014, the partners of the BYBA Partnership were Essfor, Trecco and Nereus, and the partners of the BYBA Partnership were Little Tiger, Gwyngalchu and Nereus. On 29 May 2014, Mr Hopkins (as a director of Essfor and Little Tiger), Mr Manolikos (as director of Nereus), and Mr Scott (as director of Trecco and Gwyngalchu) resolved to place each of the companies associated with them into voluntary liquidation and to appoint Messrs Matthew Woods and Hayden White of KPMG as voluntary liquidators of the partnership companies.
Shortly before that occurred, on 23 May 2014, Messrs Hopkins, Scott and Manolikos, on behalf of each of the partners of the BYBA Partnership, wrote to BYBAPL recording that BYBAPL had provided services to the BYBA Partnership since July 2009 and 'for the sake of good order' set out the terms upon which the services were to be provided by BYBAPL to the BYBA Partnership. Those terms included that BYBAPL had never been and would not be paid for the provision of services, the arrangement was terminable at any time by the BYBA Partnership giving one month's notice to BYBAPL and amongst various other terms, that the arrangement would be terminated with immediate effect upon, amongst other things, BYBAPL becoming externally administered.
After their appointment, Messrs Woods and White requested each of the defendants to deliver to them the books and records of the partnerships, a request with which the defendants complied. Mr Scott said that, in doing so, they did not distinguish between the books and records of the partnership companies, the partnerships or BYBAPL. He said:
Given BYBAPL's role in the BYBA Partnership and given that it held the facilities, employed the staff and provided other services to the practice, BYBAPL's affairs were so inextricably linked to, and intermingled with, that of the partnerships that it would not have been possible, and indeed, it would have been impractical, to attempt to separate their books and records.
As it did not trade, hold assets or incur liabilities in its own right, and did not lodge tax returns or have financial statements prepared for it, BYBAPL had limited books and records in its own right.
After their appointment, Messrs Woods and White appointed BYBAPL as their agent to continue to operate the practice in accordance with the letter of 23 May 2014, and took steps to preserve the assets of the partnerships pending a sale of the practice. On 27 August 2014, Messrs Woods and White executed an Asset Sale Agreement to sell the assets of the partnerships to Barringtons Accounting Pty Ltd (BAPL), a company of which the three defendants are directors.
On 12 September 2014, the court approved the sale of the assets of BAPL pursuant to the Asset Sale Agreement, ordered that the companies of which Messrs Woods and White were liquidators be wound up in insolvency and appointed Messrs Woods and White as joint and several official liquidators. The assets sold by Messrs Woods and White to BAPL under the Asset Sale Agreement included the exclusive right for BAPL to carry on the practice as successor of the BYBA Partnership, information technology assets and intellectual property rights owned by the partnerships and used in the practice, and the ongoing benefit of the custom of clients of the practice who chose to remain as clients after completion of the Asset Sale Agreement, and client files and all written records, including those in electronic form, held by the partnerships relating to the ownership or use of the assets of the partnerships.
The Asset Sale Agreement was completed on 19 September 2014. BAPL made offers of employment to the staff of the practice and, in accordance with the requirements of the Asset Sale Agreement, notified clients of the change of ownership of the practice.
By letter dated 24 September 2014, Mr Woods terminated the agency arrangement with BYBAPL.
Following completion of the Asset Sale Agreement, BAPL carried on the practice with the use of client files and written records, including in electronic form, that it had purchased, provided accountancy and business advisory services to clients who remained with the practice after the change, and rendered invoices to clients of the practice for services provided by it.
In the meantime, the application to wind up BYBAPL which had been commenced by Mr Napoli on 2 January 2014 had been held in abeyance after the partnership companies went into voluntary liquidation on 29 May 2014. In October 2014, Mr Napoli pursued the application. Mr Scott said that, because BYBAPL no longer served any purpose by October 2014, he, Mr Hopkins and Mr Manolikos consented to the application to wind up BAPL. Accordingly, orders to that effect and appointing Ms Low as BYBAPL's official liquidator were made on 28 October 2014.

Ms Low's requests for documents

Following her appointment, Ms Low caused CBA to freeze all bank accounts operated by BYBAPL. She said that, at that date, she was not aware of the existence of the CBA trust account. She had a meeting with the first, second and third defendants on 5 November 2014 to discuss the affairs of BYBAPL. At that meeting, she asked them to confirm that BYBAPL had one CBA overdraft account and a separate CBA business loan account to which Mr Hopkins responded 'yes'. The following day, Mr Hopkins sent a letter to the CBA, which he copied to Ms Low. That letter referred to the CBA trust account and the fact that it had been frozen. He continued:
This bank (sic) is a Trust Account that holds money on behalf of a wide range of clients. The funds in the bank account are not the property of Barringtons Your Business Advisors Pty Ltd. The money is the property of the relevant clients.
The letter sought to have the account 'unfrozen' on the basis that client settlements were scheduled shortly and significant harm would result if the account remained frozen.
Ms Low said that, up until receipt of that letter, she was unaware of the existence of the CBA trust account. She ascertained that the CBA trust account was operated by BYBAPL at all times as a trust account into which funds that belonged to clients of BYBAPL or the BYBA Partnership were deposited from time to time.
On 7 November 2014, Ms Low wrote to the CBA instructing that the CBA trust account was to remain frozen until otherwise notified by her, and that she was currently investigating the matter. She formed the view that, in order to establish whether there were sufficient funds in the CBA trust account to make any payment as directed by a client, BYBAPL, in its capacity as trustee, was required to reconcile and audit the CBA trust account, and that would require access to all relevant books and records of BYBAPL in relation to the CBA trust account.
Ms Low had already, on 29 October 2014, written to each of the first, second and third defendants concerning her appointment as liquidator of BYBAPL. That letter enclosed a formal notice requiring delivery of the company's books and property to her pursuant to s 530B(4) of the Corporations Act.
Mr Scott said that, in order to comply with the notices issued by Ms Low on 29 October 2014, he, Mr Hopkins and Mr Manolikos searched the practice premises for books and records of BYBAPL, and when they met with Ms Low on 5 November 2014 handed over BYBAPL's corporate records and told her, in effect, that they had delivered up books and records of the partnerships, which included books and records of BYBAPL, to Messrs Woods and White. That proposition is supported by the evidence of Ms Leenore McKinley. Ms McKinley was the Administration Manager of the BYPA Partnership until the practice was sold to BAPL on 19 September 2014. On that day, Ms McKinley received a copy of an email to each of the defendants from KPMG requiring that KPMG take possession of:
1.All records necessary to adjudicate the claims of creditors.
2.All records necessary to confirm the historical transactions of the Partnership, the financial position and performance of the Partnership, including banking records.
3.All records pertaining to the Debtors which have been retained by the Liquidators, subject to your agency under the ASA.
4.Any of records that I am required as Liquidator to retain at law.
There followed a lengthy exchange of emails dealing with the logistics of the provision of the substantial number of documents involved culminating in nine boxes of documents being provided on 26 September 2014 and numerous further boxes of documents being provided to KPMG during October and November 2014.
On 7 November 2014, Mr Manolikos sent an email to Ms Low at 7.45 am. The email attached a letter which referred to the CBA trust account as being an account held on behalf of clients for various reasons and seeking confirmation that Ms Low would immediately contact the CBA to have the account restored to normal trading conditions. It was suggested that once that was done, arrangements would be made to transfer all the trust funds to a new trust account. The letter also enclosed a statement for the period 1 July 2014 to 30 September 2014 showing a closing credit balance of $138,676.86 and an account information sheet showing a balance as at 6 November 2014 of $187,429.55 credit.
On 10 November 2014, Mr Manolikos sent an email to Ms Low attaching a document entitled 'BP Trust March 15 Copy - Annual Trial Balance' for the period from 1 April 2014 to 10 November 2014. Also attached was a 'Reconciliation Report as at 10/11/2014' and a statement of the CBA trust account for the period 31 October 2014 to 10 November 2014. That statement showed a closing balance in the account of $186,929.65. The 'Reconciliation Report' accompanying the Trial Balance read as follows:

Reference

          Date

          Amount

          ($)

          Statement Balance:

          (186,929.65)

          Unpresented Receipts:
          CBAMay
          CRJul2

          22/05/2013
          05/07/2013

          50,000.00
          100,000.00
          150,000.00
          (336,929.65)

          Unpresented Payments:
          000058
          CBDE4

          03/12/2013
          05/12/2013

          1,920.00
          (1,920.00)
          0.00
          (336,929.65)

          Ledger Bank Balance:

          336,929.65

When the CBA trust account remained frozen after 7 November 2014, Mr Manolikos began receiving complaints from parties having an entitlement to funds held in the CBA trust account. Included amongst those was a Mr Ryan Low of Artisan Financial Services who appears to have had funds belonging to several clients affected by the freezing of the account. His enquiries were directed to Ms Low. On 13 November 2014, Ms Low wrote to Mr Ryan Low explaining that she had an obligation to ensure that the funds contained in the account are released to the correct parties or paid according to directions provided by the party beneficially entitled to the funds. She said it was necessary to conduct a reconciliation of the trust account and to obtain written instructions from the relevant parties and that that would take a significant amount of time. She continued:
Further, as I am without funds in the liquidation, there is not otherwise any available property, in accordance with section 545(1) of the Corporations Act 2001 ('the Act'), as liquidator I have no obligation to incur any expense in relation to the winding up of a company unless there are sufficient funds to do so.
I therefore advise that for the time being these funds will remain in the company's trust account.
Please note that pursuant to section 545(2) of the Act, on the application of a creditor or contributory, the court or ASIC may direct me to incur an expense on the condition that the creditor or contributory indemnifies me in respect of the recovery of the amount expended, with such security as is directed to secure the amount of the indemnity.
As it appears that your funds have been deposited into the company's trust account as part of your dealings with Barringtons Accounting Pty Ltd, and not this company in liquidation, I suggest that you contact them directly to ascertain how they propose to deal with this matter.

On 12 November 2014, Ms Low wrote to the defendants. The letter expressed the need for reconciliation of the CBA trust account and made the same observations as to lack of funds as were contained in the letter to Mr Ryan Low. She suggested that to obviate the need for any creditor or contributory to rely on s 545(2) of the Corporations Act, she would undertake the work on the basis that she received funds in advance towards her fees and disbursements in the sum of $50,000.
On 14 November 2014, BAPL's solicitors, Tottle Partners, wrote to Ms Low in response to her letter of 12 November 2014. The letter suggested that the provision of $50,000 to enable Ms Low to reconcile the trust account was both unnecessary and failed to address the urgency attended by the situation. It noted that the request contemplated, in effect, a senior manager taking 134 hours over three weeks to complete the suggested task with the consequence that the clients would be deprived of their funds and suffer losses over that period. It proposed that BYBAPL retire as trustee of the funds held in the CBA trust account and appoint BAPL in its place. A deed of retirement of trustee and appointment of new trustee was attached for Ms Low's consideration. The letter foreshadowed that if the matter could not be dealt with urgently, BAPL would make an application pursuant to s 77 of the Trustees Act 1962 (WA) for the appointment of a new trustee.
On 17 November 2014, Tottle Partners wrote to Ms Low referring to a telephone conversation that morning and advising that an additional package of materials was being prepared to be sent to Ms Low to establish that the trust account is in good order.
The following day, Ms Low wrote to Tottle Partners advising that if its clients wished her to proceed to consider whether it was appropriate to retire as trustee and the terms of any such retirement, and any request in relation to funds paid into other CBA accounts, she required that they immediately place her in funds to the extent of $15,000 to do so.
On 19 November 2014, Tottle Partners replied to Ms Low. The letter asserted that the requests of clients of the practice whose funds were frozen in the trust account were not requests to take steps in the winding up of the company. Rather they were requests to deal with the funds in accordance with instructions from those who are lawfully entitled to them. Tottle Partners suggested a two‑fold approach. The first was the immediate release of funds in respect of three clients who had an urgent need for those funds. Evidence of the entitlement of each of those three clients to funds was attached to the letter. The second stage of the proposal was for Ms Low's retirement as trustee which, Tottle Partners asserted, was not a matter of any complexity. The letter proposed that both BAPL and its directors were prepared to indemnify Ms Low in respect of any claims that might be made by beneficial owners of the funds in the CBA trust account.
On 20 November 2014, Ms Low wrote to Tottle Partners advising that she was prepared to resign as trustee and for Tottle Partners to be appointed as trustee on certain conditions, all of which were said not to be negotiable. That letter included conditions requiring books and records relating to the CBA trust account for the period prior to 27 July 2014 being released to her within seven days, and copies of books and records relating to the CBA trust account for the period 27 July 2014 to the date of the letter being released within the same period.
On 21 November 2014, Tottle Partners wrote to Ms Low enclosing for her consideration a deed of retirement and appointment addressing the matters raised in her letter of 20 November 2014. The new trustee proposed in the deed was Mr Tottle personally. It provided that all funds held in the CBA trust account be transferred to Tottle Partners' solicitors' trust account.
On 25 November 2014, Ms Low wrote to Tottle Partners referring to Tottle Partners' letter of 21 November 2014. It continued:
Given the currently known circumstances, I consider that the issue of the retirement of the Company as Trustee and the appointment of a new Trustee is a complex matter and requires the appropriate consideration.
Despite having already spent considerable time on this issue to date, given my lack of funds in the liquidation I am not willing to incur further expenses, including legal fees, in considering this matter further until I have been provided with sufficient funds.
I therefore seek to secure my position in relation to my fees and expenses of considering this matter further by requesting that the sum of $10,000.00 be paid into my lawyer's trust account.
On 26 November 2014, Tottle Partners replied to Ms Low advising that notwithstanding the position adopted by her, their client remained willing to consider any sensible counter‑proposal to resolve the impasse which had arisen. The letter advised, however, that because of the involvement of interests of third party clients, an application to the court was to be made to have BYBAPL removed as trustee of the CBA trust account. Proceedings were subsequently commenced. Those proceedings related both to the CBA trust account and to a different dispute concerning a claim by BAPL for return of payments made by clients mistakenly into other BYBAPL bank accounts (mistaken payments action).
On 6 February 2015, BAPL's application for leave to institute proceedings in relation to the CBA trust account and the mistaken payments action was dismissed by Mitchell J.[1] In relation to the CBA trust account claim, leave was refused on several grounds. Those grounds included that BAPL had no standing to assert the private rights of the beneficiaries of the CBA trust account, BAPL was not an appropriate representative to commence an action, and that litigation was not the most efficient way or least expensive way of determining the amounts owed to beneficiaries. Mitchell J noted that if BYBAPL failed to fulfil its obligations as trustee, the more appropriate remedy would be for the court to appoint a new trustee who was willing to undertake the obligations of trustee in substitution for BYBAPL.[2]
[1] Barringtons Accounting Pty Ltd v Barringtons Your Business Advisers Pty Ltd (in liq) [2015] WASC 56.
[2] Barringtons Accounting Pty Ltd v Barringtons Your Business Advisers Pty Ltd (in liq) [59].
On 1 December 2014, KPMG wrote to Ms Low. The letter outlined KPMG's understanding of the agency arrangement between BYBAPL and the BYBA Partnership. KPMG said that it was never intended that BYBAPL would hold any assets or incur liabilities in its own right and that BYBAPL therefore never maintained any financial accounts. They recognised the limitations on Ms Low's investigations without access to records (which they understood BYBAPL did not maintain) and advised that where they considered mutual rights existed in relation to specific records of the BYBA Partnership that were in KPMG's possession, they would allow Ms Low access to those records. They attached a copy of the list of books and records then in KPMG's possession.
On 11 December 2014, Ms Low wrote to the defendants requesting 'a backup of the company's electronic financial records' by 15 December 2014.
As noted above, the mistaken payments action, being matter CIV 2646 of 2014, was commenced on 28 November 2014. It is apparent that Mr Manolikos filed an affidavit in support of that application. In it, he referred to a CBA trust account bank reconciliation by Mr R B Sharpe as at 14 November 2014 (Sharpe reconciliation).
On 15 January 2015, Roe Legal Services, on behalf of Ms Low, wrote to Tottle Partners asking for a copy of the Sharpe reconciliation and the books and records which Mr Sharpe had considered in providing his opinion. The Sharpe reconciliation comprised a list of those said to be entitled to specified amounts totalling $191,152.50 in the CBA trust account as at 14 November 2014. It did not purport to be a full audit of the CBA trust account.
On 30 January 2015, Roe Legal Services again wrote to Tottle Partners complaining that its client had failed to produce the CBA trust account bank reconciliation as at 14 November 2014 and had not delivered up books and records as previously requested.
On 4 February 2015, Ms Low wrote to the defendants making demands that, in relation to the CBA trust account, they provide all bank statements for the previous three years, all cheque and deposit books for the previous three years, all correspondence with CBA, the trust account reconciliation at 14 November 2014, a copy of the monthly bank reconciliations for the period 28 October 2012 to 28 October 2014 and a copy of the audit reports for 2012, 2013 and 2014.
By letter dated 5 February 2015, Tottle Partners sent to Roe Legal Services a bundle of documents said to comprise copies of a trust account bank reconciliation as at 14 November 2014 and the books and records of BYBAPL that were said to be provided to Mr Sharpe for the purposes of the Sharpe reconciliation.
On 26 February 2015, Roe Legal Services wrote to Tottle Partners saying that Ms Low 'cannot commit to the retirement of [BYBAPL] and the appointment of a new trustee until the audit process is completed'. The letter referred to a requirement for the provision by the defendants of all previous audit reports, printouts of the general ledger, all bank statements, all cheque books and cheque butts, and any prior reconciliations of the trust account and any other supporting documentation for the operation of the CBA trust account including receipt documentation, authorities, correspondence and emails relevant to enquiries for the purpose of the audit. Ms Low said that on or about 26 February 2015, she received a bundle of documents comprising the following:
31.4.1a reconciliation as at 14 November 2014;
31.4.2accounting and other records that were provided to Mr Sharpe;
31.4.3listing of clients and monies in the Trust Account totalling $191,152.15;
31.4.4a bank statement as at 14 November 2014;
31.4.5a copy of the first cheque in what appears to be an unused cheque book for the Trust Account;
31.4.6a section for each client including some or all of:
31.4.6.1Trust Account summary;
31.4.6.2authority to deposit and withdraw;
31.4.6.3internal cheque requisitions;
31.4.6.4extracts from Trust Account bank statements;
31.4.6.5income tax assessments from the ATO;
31.4.6.6ATO tax portal statements;
31.4.6.7Barringtons Pay Way Payment Receipt;
31.4.6.8CommBiz Transaction listing;
31.4.6.9Barringtons internal emails;
31.4.6.10 CBA record slip;
31.4.6.11 Barringtons correspondence; and
31.4.6.12 other sundry correspondence.
Ms Low said that those documents comprised between 300 and 500 pages.
In addition to the documents provided by the defendants, Ms Low was also provided with various bank statements for the CBA trust account which were provided to her by the liquidators of BYBA partners, and copies of bank statements for the CBA trust account relating to the post‑appointment period from CBA.
Ms Low also corresponded with Mr Woods of KPMG and it is apparent that substantial amounts of information were provided by KPMG.
On 11 March 2015, Tottle Partners wrote by email to Roe Legal Services, putting forward a proposal as to the terms of engagement of auditors to audit the CBA trust account. The terms included obtaining a fixed fee quote, the defendants guaranteeing payment of the auditors fees and indemnifying Ms Low in relation to the same, Ms Low retiring as trustee if the audit report is 'clear, but not otherwise' and the defendants meeting Ms Low's costs to a limit of $3,500. By letter dated 18 March 2015, Roe Legal Services responded, rejecting any limit on Ms Low's fees, refusing to agree on a fixed fee quote by an auditor and specifying various other conditions required in relation to any audit.
On 7 April 2015, Mr Hopkins wrote on behalf of himself and the other defendants to Ms Low. He reiterated that they had provided the records of BYBAPL they had located and referred to what had been said by KPMG in its letter of 1 December 2014, being that to the extent that there were any records of BYBAPL in addition to those already provided to her, they are in the possession of KPMG. Mr Hopkins asserted that the defendants had complied with their obligation to provide property, books or records of BYBAPL in their possession.
The parties continued to correspond sporadically through and until September 2015, with no apparent substantial progress being made in relation to resolving the issue of the CBA trust account. During that period, Ms Low wrote to those who had been identified as having claims against the CBA trust account foreshadowing her intention to make the present application, including seeking an order that, if the assets of the company were insufficient for the purpose, she deduct her just and reasonable remuneration, and all of the expenses of obtaining an audit from 1 April 2012 from the funds held in the CBA trust account.
That led to a letter from Tottle Partners to Roe Legal Services dated 7 September 2015 which asserted inaccuracies in the notice that had been given to the beneficiaries of the CBA trust account, and then continued:
Moore Stephens Audit Report
I am instructed that:
1.the Trust Account has now also been independently audited by Mr Neil Pace of Moore Stephens for BYBAPL's compliance with the requirements of APES 310 for the years ended 31 March 2013 and 2014 and for the period 1 April 2014 to 31 December 2014 (collectively Relevant Years and Period). You will recall that your client had previously advised that she had no issue with Mr Pace as the proposed auditor;
2.no constraints were placed on Moore Stephens as to the manner in which the audit was to be conducted, or the costs to be incurred in relation to the audit;
3.Moore Stephens' fees were based on the time required by the individuals assigned to the engagement, charged on an hourly basis with the rates varying according to the degree of responsibility involved and the experience and skill required, plus out of pocket expenses;
4.Mr Pace has provided audit reports to the effect that, other than:
(a)the Trust Account records were not reconciled to the Trust Account liabilities on a monthly basis during the year as required by section 7.6 of APES 310, but the reconciliation was otherwise properly completed as at year end; and
(b)not completing its annual report of the Trust Account within 3 months of year end as required by section 8.1 of APES 310,
BYBAPL has complied, in all material respects, with the requirements of APES 310 for the Relevant Years and Period (Moore Stephens Audit Reports);
5.the Moore Stephens Audit Reports have not identified any anomalies in the Trust Account. Copies of the letter of engagement and Moore Stephens Audit Reports are enclosed; and
6.my client has paid Moore Stephens' fees and out of pocket expense for the audit.
No basis for application
In light of the above, there is simply no basis for your client to make any application to the Court, either of the nature she has foreshadowed with Beneficiaries, or any application at all pertaining to the Trust Account.
Given that the Trust Account has not been independently audited and reconciled on two separate occasions by both Mr Sharpe and Moore Stephens, with no anomalies identified at all, there is no reason why payments should not be made forthwith to the Beneficiaries and in accordance with their entitlements.
Offer
To bring finality to this matter, to avoid incurring further unnecessary costs and recognising that your client accepts that funds held in the Trust Account are held on trust and do not form part of the assets available for distribution in the liquidation of BYBAPL, by client has instructed me to put the following offer to your client:
1.BYBAPL retires immediately as the trustee of the Trust Account;
2.an independent solicitor, Mr David Lewis of Lew Blyth & Hooper, be appointed in BYBAPL's place as trustee of the Trust Account;
3.Mr Lewis, as the new trustee of the Trust Account, will attend to, and make, the payments due to the Beneficiaries from the Trust Account as audited by Moore Stephens;
4.my client will pay Mr Lewis' costs and disbursements of acting as the new trustee of the Trust Account and the Beneficiaries will not have to bear any such costs;
5.my client will keep your client indemnified against all claims, other than claims by your client, arising out of or in any way connected with the Trust Account; and
6.my client will pay the sum of $3,500 as a contribution towards your client's reasonable fees and disbursements incurred in dealing with the Trust Account issues.
Please let me know as soon as possible whether the Trust Account matter can be resolved on the basis outlined above and, if so, I will prepare the necessary deed of retirement and appointment of trustee to give effect to the arrangements.
My client will tender and rely on this letter in any application to the Court that your client may make in relation to the Trust Account.
On 16 October 2015, Roe Legal Services responded. The letter raised certain issues of apparent inconsistencies in some of the documentation that had been previously provided to Ms Low. It asserted that Mr Napoli had raised a question as to the independence of Mr Pace, the auditor at Moore Stephens who had undertaken the audit of the CBA trust account, and indicated that Ms Low considered that that query required her to make independent enquiries before she could properly consider the proposal to cause BYBAPL to retire as trustee. Various documents in relation to the engagement of Moore Stephens were sought. Tottle Partners responded on 27 October 2015 taking (not surprisingly) serious exception to any suggestion that Mr Pace lacked independence and explaining at length why that allegation was baseless. The offer to resolve the matter set out in the letter of 7 September 2015 was repeated. Notwithstanding that response, Ms Low wrote directly to Mr Pace on 13 November 2015 making enquiries as to the manner in which she had gone about the audit and the documentation that he had inspected in relation to it. Mr Pace responded on 10 December 2015 advising that he had undertaken the audits in order to satisfy professional obligations pursuant to APES 310 and that he was otherwise not authorised to provide details of the audits to her.
There followed a long period of inaction in relation to the CBA trust account issues. On 21 June 2017, Roe Legal Services wrote to Tottle Partners saying:
The last correspondence in this matter were communications between my client and Mr Pace in November and December 2015 in which my client sought details of the audits undertaken by Mr Pace and he declined to provide that detail.
My client being without funds has not taken any steps in relation to this outstanding issue for a considerable period. She must however address the issue and finalise the liquidation. In that regard she must deal with the [CBA trust account]. She is not prepared to do so on the basis of the uncertain indemnity offered by your clients and costs contribution proposed in your letter of 27 October 2015. Further, she does not believe it would be appropriate for her to retire as trustee not having completed a satisfactory audit in compliance with the relevant accounting standards. She also has taken the view that further exhaustive conferral on the issue will not resolve the impasse. Nor does your client's proposal address in any sensible form their repeated failures to deliver up books and records of the company.
She now intends to proceed with an application to address the above issues. My client is in a position to proceed in this regard. Please advise whether you have instructions to accept service.

A further letter was sent by Roe Legal Services on 27 June 2017 foreshadowing the present application. Tottle Partners replied on 28 June 2017 as follows:
I refer to your letters dated 21 and 27 June 2017.
You have advised that your client, as the Court appointed liquidator of BYBAPL, intends to 'proceed with an application to address the issues identified being the production of books and records and dealing with the [CBA trust account] by way of completion of a proper audit and distribution of the funds following the completion of the audit' (Intended Application).
Dealing with each aspect of the Intended Application, my clients' position is as set out below.
Production of books and records
Your client had been advised that:
1.Copies of the accounting, and other, records provided to, and relied on by, Mr R B Sharpe for his auditor's opinion on the [CBA trust account] dated 9 December 2014 (Sharpe's Report) had been provided to her;
2.KPMG held some books and records of BYBAPL and KPMG was prepared to allow your client access to those books and records; and
3.My clients did not hold any other BYBAPL books and records.
In light of this, I cannot see what other 'books and records' your client seeks to have produced by my clients, or what purpose is to be achieved by the Intended Application, particularly given the further matters referred to below.
Audit of the [CBA trust account]
I also fail to see why any further audit of the [CBA trust account] is required, or necessary, when:
1.your client already has the benefit of:
(a)the Sharpe Report in respect of the closing balance of the [CBA trust account] at 14 November 2014; and
(b)the independent audit of the [CBA trust account] conducted by Moore Stephens (Auditor) for the years ended 31 March 2013 and 31 March 2014 and the period between 1 April 2014 and 31 December 2014 (Moore Stephens Reports). The terms under which the Auditor had been engaged and had conducted the audit are set out in detail in our letters to you dated 7 September 2015 and 27 October 2015 and it is unnecessary to repeat them here.
All the costs associated with the Sharpe Report and the Moore Stephens Reports have been borne by my clients;
2.both the Sharpe Report and the Moore Stephens Reports have not identified any deficiencies or anomalies in, or any corrective action required to be taken in relation to, the [CBA trust account];
3.in compliance with the requirements of APES 310, the Auditor has advised your client that the Moore Stephens Reports have duly been lodged with Chartered Accountants Australia and New Zealand; and
4.to the best of my clients' knowledge, in the 2 years 8 months since your client was appointed BYBAPL's liquidator, no person has made, or agitated, any claim at all about any misappropriation or unauthorised use of any funds in the [CBA trust account]. My clients have never been informed to the contrary.
The reference in your letter of 27 June 2017 to a 'proper audit' suggests that your client does not accept the Sharpe Report and/or the Moore Stephens Reports as prima facie evidence that the [CBA trust account] had been properly audited but your client has not proffered any evidence as to why that is the case.
Distribution of funds in [CBA trust account]
From the outset, my clients offered to have BYBAPL retire as trustee of the [CBA trust account] and for an independent solicitor to be appointed in its place as trustee (New Trustee) to distribute funds to beneficiaries of the [CBA trust account] (Beneficiaries).
My clients also offered to pay the costs and disbursements of the New Trustee, make a contribution towards your client's reasonable fees and disbursements incurred in dealing with the [CBA trust account] and to indemnify your client against all claims existing or arising out of or in any way connected with the [CBA trust account], other than claims by your client.
My clients first made their offer to your client on 24 February 2015 and repeated them on 11 March 2015, 7 September 2015 and 27 October 2015.
In making the offers, my clients wanted to ensure that the funds in the [CBA trust account] were not unnecessarily depleted by fees and costs, and Beneficiaries would receive their full entitlements from the [CBA trust account].
In the circumstances, it is unnecessary for your client to incur costs in applying to the Court to deal with the distribution of the funds in the [CBA trust account].
Costs
Based on the history of the matter as set out above, the Court may consider that it is your client, rather than my clients, who, by her conduct, is causing 'unnecessary applications to be made to the court' and 'litigation through unreasonable conduct' or has 'failed in the proceedings before the court to prevent unnecessary expense' and consequently, be ordered to pay my clients' costs of the Intended Application.
Proposal for resolution
Be that as it may, to finalise issues involving funds which your client has already accepted do not form part of any of the assets available for distribution in the liquidation process, my clients have instructed me to make the following proposal to your client.
1.BYBAPL to retire as the trustee of the [CBA trust account];
2.An independent solicitor, Mr David Lewis of Lewis Blyth & Hooper, be appointed in BYBAPL's place as trustee of the [CBA trust account];
3.Mr Lewis, as the new trustee of the [CBA trust account], will attend to, and make, the payments due to the Beneficiaries from the fund standing to the credit of the [CBA trust account] as at the date of his appointment (Trust Account Balance);
4.My clients will pay Mr Lewis' costs and disbursements to act as the new trustee of the [CBA trust account] so that Beneficiaries will not have to bear any such costs;
5.To indemnify your client against any successful claim that may be made against her as liquidator of BYBAPL arising out of or in any way connected with the [CBA trust account] (Successful Claim), other than a claim by your client, my clients will provide your client with a bank guarantee in the amount of the Trust Account Balance (Bank Guarantee). A Successful Claim is one where my clients, at their option, have:
(a)defended the claim at their own costs but have been unsuccessful; or
(b)decided not to defend the claim at all.
6.The Bank Guarantee:
(a)will have an expiry date of 27 October 2020 (Expiry Date) being 6 years from your client's appointment as liquidator;
(b)can only be called upon by your client in the event of, and in order to meet, a Successful Claim; and
(c)must be returned to my clients if it has not been called upon by the Expiry Date.
7.My clients will pay the sum of $10,000 as a contribution towards your client's reasonable fees and disbursements incurred in dealing with the [CBA trust account] issues.
This letter will be tendered and relied on in response to the Intended Application and in opposition to any costs that your client may seek against my clients under section 97 of the Trustees Act 1962.
I hope that the matter can be resolved on the basis of set out above.
I look forward to hearing from you.
These proceedings were commenced on 21 July 2017.

The orders sought by the plaintiffs

The orders sought by the plaintiffs are somewhat lengthy and involve various alternative relief and statutory bases for relief. They are as follows:
1.An order, pursuant to section 97 of the Trustees Act and Order 66 Rule 1 of the Rules of the Supreme Court 1971 (WA), that the first, second and third defendants pay the first plaintiff's deferred expenses incurred in relation to the administration of the Trust Account including, but not limited to the first plaintiff's deferred expenses directly incurred in relation to this application and any deferred expenses incurred in inspecting the books and records held by the liquidators of [Little Tiger], [Gwyngalchu] and [Nereus].
2.Alternatively, a direction pursuant to section 479(3) of the Act, further or alternatively an order pursuant to item 90‑20 of the Schedule to the Act that the first plaintiff in her capacity as liquidator of the second plaintiff, may if the assets of the second plaintiff (BYBAPL) are insufficient for the purpose, deduct moneys from the trust moneys held by the second plaintiff at the Commonwealth Bank of Australia in the [CBA trust account] to pay the first plaintiff's deferred expenses incurred in relation to the administration of the [CBA trust account] including, but not limited to the first plaintiff's deferred expenses directly incurred in relation to this application and any deferred expenses incurred in inspecting the books and records held by the liquidators of [Little Tiger], [Gwyngalchu] and [Nereus].
And the first and second plaintiffs seek:
3.An order pursuant to section 530B(3) of the Act, further or alternatively an order pursuant to section 1324(2) of the Act that each of the first, second and third defendants deliver up to the first and second plaintiffs all property and books of BYBAPL, coming within the definition of those words in section 9 of the Corporations Act, which are in the possession, custody or power of the first, second and third defendants that have not already been delivered up.
4.Further or alternatively, an order pursuant to the inherent jurisdiction of the Court that each of the first, second and third defendants deliver up to the first and second plaintiff herein all property and books of BYBAPL, coming within the definition of those words in section 9 of the Corporations Act, which are in the possession, custody or power of the first, second and third defendants that have not already been delivered up.
Alternative to orders 2 and 3 above, the second plaintiff seeks:
5.An order pursuant to section 92 of the Trustees Act, for a direction that each of the first, second and third defendants deliver up to the first and second plaintiffs all property and books of BYBAPL, coming within the definition of those words in section 9 of the Corporations Act, which are in the possession, custody or power of the first, second and third defendants that have not already been delivered up;
Alternative to orders 1, 2, 3 and 4 above the first plaintiff seeks:
6.A direction pursuant to section 479(3) of the Act, further or alternatively an order pursuant to item 90-20 of the Schedule to the Act that the first plaintiff in her capacity as liquidator of the second plaintiff would be acting properly in making a proposal to the First, Second and Third Defendants in the terms set out in the attached Schedule marked 'A'.
And the first and second plaintiffs seek further orders that:
7.The first and second plaintiff's costs of these proceedings be costs and expenses in the winding up of the second plaintiff and pursuant to section 97 of the Trustees Act and Order 66 Rule 1 of the Rules of the Supreme Court 1971 (WA), be paid by the first, second and third defendants alternatively, if the assets of BYBAPL are insufficient for the purpose, be recoverable from the assets of the Trust Account.
8.The parties or any beneficial owner of the funds be held in the Trust Account have liberty to apply to the Court to vary or discharge these orders or other directions.
It is necessary to consider the various statutory provisions or other jurisdiction sought to be invoked by the plaintiffs to support the orders which they seek.
The first order is sought either pursuant to s 97 of the Trustees Act 1962 (WA) or O 66 r 1 of the Rules of the Supreme Court 1971 (WA) (the Rules). It relates to payment of 'deferred expenses'. That is an expression defined in s 556(2) of the Corporations Act as meaning, relevantly for present purposes, expenses properly incurred by a liquidator so far as they consist of remuneration to the liquidator or expenses incurred by a liquidator in respect of the supply of services by employees. Section 97 of the Trustees Act provides:
The Court may order the costs and expenses of and incidental to any application for any order under this Act, or of and incidental to the order, or any conveyance or assignment in pursuance thereof, to be raised and paid out of the property in respect of which any of them is made, or out of the income of the property, or to be borne and paid in such manner and by such persons as the Court thinks fit.
It can be seen that that section permits the court to make orders for payment out of property in respect of which an application for an order is made to the court. It does not, in my view, extend to the jurisdiction to make an order for deferred expenses incurred in inspecting the books and records held by the liquidators of the former partners of the BP partnership. Those expenses are not, in my view, properly described as incidental to any application under that Act. Presumably, the order is sought on the basis that the deferred expenses referred to are incidental to the application under s 530B(3) of the Corporations Act for delivery up of the property and books of BYBAPL. It is by no means clear that the books and records which were provided to Ms Low by the liquidators of the BYBA partners can be said to be books of BYBAPL. In any event, the costs are sought in relation to inspection of books and records which have been produced by those liquidators, and that cost cannot be said to be incidental to an application for the production of further books by the defendants. The application for relief based on s 97 of the Trustees Act is misconceived.
The alternative basis for the first order sought is O 66 r 1 of the Rules. That order provides that the costs of and incidental to the proceedings are at the discretion of the court but will generally follow the event. The order does not provide any basis for an order for payment by the third defendants of the first plaintiff's deferred expenses in relation to the administration of the CBA trust account or in relation to inspecting the books and records held by the liquidators of the partners of the BYBA partnership. Reliance on that provision of the Rules for an order for payment of the expenses referred to is also misconceived.
The second order, claimed as an alternative to the first order, is for a direction pursuant to s 479(3) of the Corporations Act, or alternatively pursuant to cl 45‑1 of the Schedule (previously defined [6]). Section 479 of the Corporations Act was repealed by the Insolvency Law Reform Act2016 (Cth), most provisions of which had effect from 1 March 2017, almost five months before this application was made. Prior to its repeal, s 479(3) provided that a liquidator may apply to the court for directions in relation to any particular matter arising under the winding up. The Insolvency Law Reform Act which repeals s 479 inserted s 600K, which gave effect to the Schedule. The Schedule incorporates the alternative basis for relief claimed in the second order sought, namely cl 90‑20. Clause 90‑20 identifies who may apply for an order under cl 90‑15. It is not correct, therefore, to say that directions are made pursuant to that clause. Rather, what the plaintiffs seek are directions pursuant to cl 90‑15 of the Schedule, which provides that the court may make such orders as it thinks fit in relation to the external administration of a company.
However, as Robb J explained in detail in Re Glengrant Civil Pty Ltd (in liq),[3] by reason of reg 10.25.02 of the Corporations Regulations 2001 (Cth) made pursuant to s 1634 of the Corporations Act, the repeal of s 479 did not come into effect until 1 September 2017, after these proceedings were commenced. By reason of s 1617 of the Corporations Act, these proceedings having been commenced under the Corporations Act as it stood before 1 September 2017, the former provisions continue to apply after 1 September 2017 in relation to the proceedings and nothing in the Schedule affects the proceedings or the powers of the court to make orders.[4] Therefore, the power to make the second order sought arises in this case under s 479 of the Corporations Act as it stood prior to its repeal, and not under the Schedule. Section 479 provides the power for the court to make an order of the nature of the second order sought.
[3] Re Glengrant Civil Pty Ltd (in liq) [2017] NSWSC 843 [11] ‑ [30]
[4] Re Mackie Group Pty Ltd (in liq) [2017] VSC 477 [8] ‑ [9].
The third order sought relies on s 530B(3), or alternatively s 1324(2), of the Corporations Act. Section 530B deals with a liquidator's rights to the books of the company. It provides that a person is not entitled, as against the liquidator of a company, to retain possession of the books of the company. Section 530B(3) provides that a person must not engage in conduct that results in the hindering or obstruction of the liquidator in obtaining possession of books of the company. It is not the source of a power to make the third order sought. It is, however, relevant to the power of the court found in s 1324(1) of the Corporations Act to grant an injunction in order to prevent conduct that constitutes a contravention of the Corporations Act. That is not, however, the provision relied upon by the plaintiffs who seek an order pursuant to s 1324(2) which empowers the court to grant an injunction requiring a person to do an act which they are required to do by the Act. Pursuant to s 530B(4), a liquidator may give a person written notice requiring the person to deliver to the liquidator books that are in the person's possession, and by s 530B(6) a person must comply with such a notice. It is thus open to make an order under s 1324(2) to require compliance with a notice to produce books of the company issued by the liquidator.
It is unnecessary, having regard to my conclusion that the court has power pursuant to s 1324(2) of the Corporations Act, to make the third order sought, to consider the question of power pursuant to the inherent jurisdiction of the court to make the same order.
The fifth order sought is expressed to be an alternative to orders 2 and 3, but that would appear to be a typographical error. The fifth order sought can only sensibly be considered as an alternative to orders 3 and 4. In my view, s 92 of the Trustees Act, upon which the fifth order sought relies, does not provide a source of power to make a mandatory injunction against third parties of the type sought in order 5. Section 92 of the Trustees Act enables a trustee to apply to the court for directions concerning any property the subject of the trust or respecting the management or administration of that property or respecting the exercise of any power or discretion vested in the trustee. It concerns directions to the trustee, and not coercive orders against third parties.
The sixth order sought relies on s 479(3) of the Corporations Act. I accept that that provision enables the court to make directions as to the propriety of action by a liquidator and would empower the court to make an order in the terms, or of the nature, of the sixth order sought.
I also accept that s 97 of the Trustees Act and O 66 r 1 of the Rules provide power to make the seventh order sought.

Production of books and records

The plaintiffs' primary position is that liability for deferred expenses in relation to the administration of the CBA trust account should fall upon the defendants. The other relief sought directly against the defendants is for orders for delivery up of such books and property of BYBAPL as have not already been delivered up. The basis upon which the payment of deferred expenses is sought against the defendants is that they have failed to deliver up all books and property of BYBAPL, and to the extent that they have delivered up books, they have not done so in a timely manner with consequent additional expenses incurred by the plaintiffs. It is necessary therefore to turn first to the question of delivery of property and books of BYBAPL.

Each of the defendants swore an affidavit which was read in these proceedings. As noted above, Mr Scott said that BYBAPL's role was so inextricably linked to the partnership that identifying separate books and records of BYBAPL would not have been possible. In his affidavit sworn on 12 October 2017, Mr Scott deposed that he did not have in his possession, custody or power any property or books of BYBAPL coming within the definition of those words in s 9 of the Corporations Act. That is because books and records of the practice were delivered to KPMG both before and after completion of the Asset Sale Agreement and those books and records did not distinguish between the records of the partnership companies, the partnerships or BYBAPL. He said that upon receiving the notices to produce documents issued by Ms Low on 29 October 2017, he, Mr Hopkins and Mr Manolikos searched the partnership premises for books and records of BYBAPL and handed over to her such records as they located when they met with her on 5 November 2014.
Mr Hopkins also deposed that he does not have in his possession, custody or power property or books of BYBAPL because he has either delivered them up to KPMG or to Ms Low as liquidator of BYBAPL. He said that after he saw a copy of the letter from Roe Legal Services to Tottle Partners dated 21 June 2017 he carried out a further search of the premises for books or records of BYBAPL and did not find any such books or records. Mr Manolikos gave evidence to the same effect as that of Mr Scott and Mr Hopkins.
The terms of the order sought in relation to the production of further books and records do not identify with any precision the particular property or books of BYBAPL delivery of which is required. In the face of the denial by each of the defendants that they have any property or books of BYBAPL in their possession, custody or power that have not already been delivered up, an order in the terms sought is obviously inappropriate because of its generality.
In her affidavits in support of the application, Ms Low identified what she said were documents which she contended had been implicitly admitted as being in the possession, custody or power of the defendants or which she submitted were likely to exist, and which had been the subject of demands on her behalf to the defendants.
The implicitly admitted documents comprised four categories. The first of those documents are referred to in Roe Legal Services' letter to Tottle Partners of 26 February 2015, which are referred to above at par 53. There are several things which can be said about an order for production of those documents. The first is that it is not possible to identify the extent to which those documents were in fact provided by delivery of the bundle of between 300 and 500 pages on the same day that Roe Legal Services' letter was written. It is quite clear that there is a substantial overlap between the documents referred to in Roe Legal Services' letter of 26 February 2015 and the documents actually delivered to Ms Low that day. The second thing that can be said is that it is not possible to determine the extent to which the documents referred to in Roe Legal Services' letter were documents in the possession of KPMG in respect of which Ms Low had access. Third, Ms Low's entitlement under s 530B of the Corporations Act is to 'books of the company'. It is not an entitlement to books of other entities. As had been made abundantly clear by KPMG in its letter of 1 December 2014,[5] BYBAPL operated as agent for the BYBAPL partnership and did not maintain its own financial records. Finally, each of the defendants has deposed to not having any records of BYBAPL which have not already been provided.
[5] See [46] above.
The second category of the implicitly admitted documents are the BYBAPL client files. BYBAPL did not have client files and are self‑evidently the property of the practise which, as a result of the Asset Sale Agreement, are the property BAPL, not books of BYBAPL.
The third category are what are described as missing electronic records. These are identified as having been referred to in the affidavit of Ms McKinley who deposed to KPMG having taken copies of the servers maintained by the partnership. Two things can be said about that category. The first is that the assumption is made that whatever KPMG took copies of were books of BYBAPL. KPMG would have had no entitlement to the books of BYBAPL in the capacity of liquidators of the partnership companies. That they took documents is consistent with their assertion in their letter of 1 December 2014 that BYBAPL did not maintain its own accounting records. The second is that KPMG offered to make available books and records in its possession to the extent that they were necessary for the administration of the liquidation of BYBAPL. There does not appear to be a basis to call for further production of those documents in those circumstances.
The fourth category of impliedly admitted documents are what are described as the 'missing Pace files'. They are the files which contain documents which were utilised by Mr Pace in conducting the audit of the CBA trust account in September 2015. Those files were the subject of a request pursuant to O 26 r 8(2) of the Rules on the basis that the documents were referred to in Mr Hopkins' affidavit sworn 5 February 2018. That request was made on 6 February 2018. In response to that request inspection of the files was provided to a solicitor employed by Roe Legal Services on 14 February 2018. On 15 February 2018, Roe Legal Services wrote to Tottle Partners seeking production of the files pursuant to s 530B(4) of the Corporations Act. On 16 February 2018, Tottle Partners responded to Roe Legal Services by email rejecting the contention that the files that had been inspected on 14 February 2018 are the books of BYBAPL or that Ms Low had any entitlement to require the delivery of the files to her pursuant to s 530B(4). The email confirmed that the files would, if required, be made available to the plaintiffs under O 26 r 8(5) of the Rules.
As with the other categories of documents referred to as impliedly admitted documents, I am not satisfied that the files utilised in the Pace audit are the books of BYBAPL.
The balance of the documents identified in the plaintiffs' submissions as coming within the proposed order are documents which are described as documents 'likely to exist'. In her affidavit sworn 27 October 2017, Ms Low referred to those documents saying that 'whilst I cannot be certain that the defendants have these records, I consider that it is likely that they may have' them. That suspicion is insufficient to establish the existence of undisclosed books of BYBAPL in the face of the assertions by each of the defendants, unchallenged by cross‑examination, that no such records exist beyond those already provided, and in the context of the part in which BYBAPL played in the operations of the partnership generally.
For those reasons, I am not satisfied that the plaintiffs have established that there has been any relevant failure on the part of the defendants to produce the books of BYBAPL. There is no basis upon which any of Orders 3, 4 or 5 should be made.

Payment of deferred expenses and costs

Order 1 seeks payment of the first plaintiff's deferred expenses in relation to administration of the trust account and these proceedings, by the defendants. The underlying basis for that claim is the contention that the defendants have failed to provide books of BYBAPL to Ms Low. Having concluded that the plaintiffs have not established that failure, there is no basis to order that the defendants be liable to meet the costs incurred in relation to the administration of the trust account or in relation to this application.
The alternative orders sought is that those expenses be met from the CBA trust account.
It was not in issue in these proceedings that a liquidator is entitled to access trust assets for expenses reasonably incurred in the care, preservation and realisation of trust property.[6]
[6] Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171, 174 (Dixon J).
In Re Mamounia Pty Ltd (in liq),[7] Robson J said:
The authorities, however, distinguish between circumstances where a liquidator has an entitlement as of right under the scope of Re Universal, to access trust assets to meet the liquidator's costs and expenses in winding up a company that holds assets on trust, and, circumstances where the court in its equitable jurisdiction, will allow a trustee remuneration and costs out of trust assets held by the company in liquidation for general liquidation work and work that may fall outside the scope of Re Universal.
The rights of a liquidator under the principles identified in Re Universal may be exercised as of right. On the other hand, where the company has trust assets and assets of its own, the situation is not one where the liquidator has clear rights and obligations. As was held in Re North Food and Re MF Global, the court has an inherent jurisdiction to allow a trustee remuneration, costs and expenses out of trust assets, and this extends to a liquidator of the trust. Such a discretion may enable the court, in its discretion, to permit the liquidator to use the company's own assets, or trust assets, to meet liquidation expenses that may fall outside expenses covered by the scope of Re Universal.
The court may decline to exercise that jurisdiction where the company does not act solely as trustee and has sufficient beneficial assets to meet the liquidator’s remuneration, costs and expenses, and where the work done by the liquidator in relation to trust assets may properly be treated as done for the purposes of the winding up of the company's affairs. Thus, generally where a company has assets which are not held on trust, the liquidator's costs should usually fall on its non-trust assets [165] ‑ [167].
[7] Re Mamounia Pty Ltd (in liq) [2017] VSC 230.
In AAA Financial Intelligence Ltd (in liq),[8] Brereton J summarised the applicable principles as follows:
(1)Where the company is trustee of a trading trust and has no other activities, the liquidators are entitled to be paid their costs and expenses, whether for administering the trust assets or for 'general liquidation work', out of the trust assets [Re Suco Gold Pty Ltd (1993) 33 SASR 99; 7 ACLR 873; Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158; Re Sutherland; Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361; 48 ACSR 97, [201]; Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466 at 480 [70]; In the matter of North Food Catering Pty Ltd [2014] NSWSC 77].
(2)Where the company does not act solely as trustee, costs and expenses referable to work done in relation to trust assets which may nonetheless be considered as having been done for the purpose of winding up the company ought ordinarily be borne primarily by the (non-trust) property of the company, to the extent that the assets permit [Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 685 ‑ 689; Re Greater West Insurance Brokers Pty Ltd [2001] NSWSC 825; (2001) 39 ACSR 301; French Caledonia, [209]].
(3)At least where the non-trust assets do not permit that course, and perhaps even when they do, a liquidator is entitled to be indemnified out of trust assets for his costs and expenses, but only to the extent that they are referable to administering the trust assets [13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 at 385; French Caledonia, [211], [213]. This is pursuant to the court’s equitable jurisdiction to allow a trustee remuneration costs and expenses out of trust assets, which extends to a person such as a liquidator who is, for practical purposes, controlling a trustee [Berkeley Applegate (Investment Consultants) Ltd; Harris v Conway [1989] Ch 32 at 50 ‑ 51; Re Application of Sutherland [2004] NSWSC 798; (2004) 50 ACSR 297; Trio Capital Ltd (Admin App) v ACT Superannuation Management Pty Ltd [2010] NSWSC 941; (2010) 79 ACSR 425; In re MF Global Australia Ltd (in liq) (No 2) [2012] NSWSC 1426, [55]; Alphena Pty Ltd (in liq) v PS Securities Pty Ltd atf Joseph Family Trust [2013] NSWSC 447; (2013) 94 ACSR 160].
(4)In principle, where the liquidator does work which would entitle him both to remuneration as liquidator by the company, and recovery from the trust assets, there are two funds liable and there should be contribution between them. However, where there are no assets of the company available, it is unnecessary to consider the question of contribution. If a liquidator has done work which is attributable equally to the winding up of the company and the administration of trust assets, and there are no assets of the company at all to meet his expenses in doing so, the expenses are payable solely from the trust assets [French Caledonia, [212]].
[8] AAA Financial Intelligence Ltd (in liq) [2014] NSWSC 1004
In this case, Ms Low was provided with a limited indemnity from Mr Napoli for her reasonable fees up to $10,000 and reasonable disbursements. That indemnity was provided by letter dated 27 October 2014. In her affidavit of 22 June 2017, Ms Low said that she had already undertaken initial inquiries and investigations and that had already incurred remuneration, costs, charges and expenses in the liquidation and the administration of the trust account on behalf of BYBAPL that greatly exceeded the limit of the indemnity provided by Mr Napoli.
Ms Low said that she has determined that BYBAPL's only assets comprise a right of indemnity as an unsecured non‑priority creditor for the BYBA Partnership for expenses that BYBAPL incurred on behalf of the BYBA Partnership and a right of indemnity from the CBA trust account in respect of any expenses incurred in relation to the operation of the trust account. In respect of the latter right of indemnity, Ms Low believed it would only be exercisable with notification to those who have settled funds in the trust account and only pursuant to a direction of the court. She considers that the right of indemnity from the BYBA Partnership may be of little worth given that the entities which were members of that partnership are each in liquidation.
A schedule of creditors annexed to Ms Low's affidavit of 22 June 2017 suggests that the creditors of BYBAPL which existed before the BYBA Partnership liquidation had been substantially paid out by the time of the sale of the partnership assets to BAPL and consisted of a single debt to the Australian Taxation Office of $667 by 28 October 2014 when BYBAPL was placed in liquidation.
Ms Low said that between 28 October 2014 and 31 August 2016, the fees and disbursements in relation to work done by her and six employees of her practice in relation to the CBA trust account amounted to $52,241.40. Up until June 2017, Ms Low said that Roe Legal Services work in progress amounted to $17,349.00 (excluding GST) or $19,083 including GST. As at 22 June 2017, Ms Low estimated that her future remuneration, costs, charges and expenses, not including legal fees, relating to the administration of the trust account, assessments of the books and record and audit of the trust account by an external auditor would amount to $20,000. She estimated that engagement of counsel to argue this matter would incur a cost of between $20,000 to $30,000, and Roe Legal Services anticipated that their further fees would be in the order of $10,000 to $15,000. Her estimate of future fees was therefore between $50,000 and $65,000. It could be seen therefore that, when these proceedings were commenced, the plaintiffs contemplated that the total costs directed to achieving an audit of the trust account would be somewhere in the range of $130,000 to $145,000. Given that the balance of the trust account as at 10 November 2014 was $186,929.65, the effect of the second order sought would be to effectively deprive those entitled to the money held in the CBA trust account of around three quarters of their funds. On its face, that expenditure is wildly disproportionate to any benefit to those with an entitlement to the trust funds. It is necessary to consider whether, despite that disproportionate costs, it was reasonable for Ms Low to follow the course which she did, with the resultant expense that that course involved. In my view, it was not reasonable for the following reasons.
While it may be accepted that the information obtained by Ms Low in November 2014 such as the reconciliation report and account statement provided to her by Mr Manolikos on 10 November 2014[9] gave rise to legitimate queries, the immediate decision to undertake the full audit at an anticipated cost of $50,000 was not a reasonable response to the existence of those queries.
[9] See [34] above.
Ms Low was aware from 7 November 2014, when Mr Manolikos explained the nature and purpose of the CBA trust account, that it comprised the funds of clients of the practice which had been purchased by BAPL and continuously conducted by the defendants both before (on behalf of the partnership companies' liquidators) and after the purchase by BAPL of the assets of the partnership by the defendants. Mr Manolikos suggested in his letter of 7 November 2014 that the funds be transferred to a new trust account, implicitly on the basis that BAPL had purchased the assets of the practice and would be responsible for distributing the funds held in the account to those entitled to them, and taking responsibility for attending to any necessary reconciliations or audits.
Ms Low was aware by at least 13 November 2014 that clients of the practice were being held out of funds to which they were entitled by reason of Ms Low having frozen the CBA trust account. The interests of those clients was deferred to Ms Low's view that an audit, requiring a significant amount of time and expense, was necessary before any funds were distributed. As early as 14 November 2014, Tottle Partners proposed that BYBAPL retire as trustee and appoint BAPL in its place. An interim solution suggested by Tottle Partners in its letter of 19 November 2014 which would enable funds to be distributed to those lawfully entitled to them, although initially considered by Ms Low, was, when a deed of retirement and appointment was presented to her, described as a complex matter requiring further work by her for which she required $10,000 to be paid into her lawyer's trust account. Why the relatively simple solution, which involved her replacement as trustee by a reputable firm of lawyers and subject to regulatory obligations attendant upon solicitors trust accounts, was seen as a complex matter is not apparent. There is no evidence that, apart from some questions that arose from the records reviewed by Ms Low, there was any basis for Ms Low to believe there were any significant breaches of trust that warranted an expensive audit process.
The history of correspondence which then followed through 2015, occurring in a context where it was clear that BYBAPL did not maintain its own books and accounts, had little more effect than to generate disproportionate fees and expenses. In that context, it is relevant to note that, apart from some inconsistencies in the documents available to her, there does not appear to be any suggestion that the identity of those beneficially entitled to the funds held was in issue. The most that might be said is that there were some discrepancies in the records that Ms Low received and that entitlement to a very small proportion of the funds held was attended by uncertainty. That is a matter which any new trustee would necessarily have had to deal with, but Ms Low's position was entirely protected by the indemnities offered in Tottle Partners letter of 19 November 2014 and in the proposal for resolution in Tottle Partners letter dated 28 June 2017. Amounts in respect of which there may have been uncertainty as to beneficial entitlement were, if they existed at all, very small in relation to the expenditure which Ms Low wished to undertake.

Unlike many, if not all, of the cases referred to by Brereton J in AAA Financial Intelligence Ltd (in liq), this case does not concern question of debts incurred by a liquidator carrying on or winding up a trust business with the trustee entitled to indemnity under a trust deed for liabilities incurred in the course of carrying on the trust business. Rather, this case concerns simply the holding of money on trust for clients of the accounting practice. There is no trust deed. There is no history of BYBAPL recovering any expenses of the administration of the CBA trust account out of the trust property. No expense was incurred in getting in or preserving the trust property, but expense was wholly incurred for the purpose of undertaking an audit of the trust accounts in circumstances where the amount of funds in respect of which there may have been any doubt as to beneficial entitlement was quite small. Before incurring expenses which she did, and undertaking the present proceedings, the appropriate course for Ms Low to have taken would have been to seek directions from the court as to whether, in light of the proposal put by Tottle Partners in November 2014, she should retire as trustee or alternatively incur the expense of pursuing a course which she did.
In those circumstances, I do not consider that Ms Low's conduct, and the expense incurred, was reasonable. That finding takes the expenses which are sought to be paid from the trust funds outside expenses covered by the scope of Re Universal Glass Distributing Co Ltd (in liq). The finding is also a basis upon which the discretion to permit recovery of costs and expenses from trust assets identified by Brereton J in AAA Financial Intelligence Ltd (in liq) should not be exercised in favour of Ms Low, at least from the time that it became apparent the reasonable course to be taken was retirement of BYBAPL as trustee.
Had Ms Low taken the appropriate course of retiring as trustee when that proposal was put to her, she would have incurred expenses to that point. To the extent that there are no other assets, or the expenses are not covered by the indemnity provided by Mr Napoli (which they may well have been), it is appropriate that she should recover her reasonable costs in relation to the CBA trust account up until that point in time from the trust assets. I am therefore prepared to make an order that the first plaintiff's reasonable costs and expenses in relation to the CBA trust account up until 26 November 2014 be paid from the CBA trust account to the extent that they were not, or are not otherwise capable of being, met either from the indemnity provided by Mr Napoli dated 27 October 2014 or otherwise from the assets of BYBAPL.

Order 6

The sixth order sought is for a direction that the plaintiff would be acting properly in making a proposal to the first, second and third defendants in the terms set out in the schedule to the originating process. As originally drawn, the originating process sought a direction that Ms Low would be acting properly in accepting a proposal in the terms set out in schedule A. The problem with that order is that no proposal in the terms of schedule A had ever been made to her, and it was unlikely that any proposal in those terms would ever be made. On that basis, counsel for Ms Low moved to amend the proposed order to say that it referred to making a proposal rather than accepting a proposal. The proposal in schedule A is similar to the proposal put by Tottle Partners in its letter of 28 June 2017.[10] The first four paragraphs of schedule A are substantially the same as the first four paragraphs of Tottle Partners proposal. The provisions in relation to an indemnity by the defendants differ. There are differences in the duration and terms of the bank guarantee proposed by Tottle Partners. Paragraph 8 of schedule A proposes that the defendants pay the first plaintiff's deferred expenses in relation to the administration of the trust account including the costs of these proceedings. That is clearly not a provision which, in the light of the outcome of these proceedings, is likely to be accepted by the defendants.
[10] See [62] above.
It follows that there is no utility in making order 6. What is clear from the foregoing reasons is that I am of the view that it would have been reasonable for the first plaintiff to have accepted the proposal made by the defendants through their solicitors on 28 June 2017. It is not apparent whether, that proposal having been rejected, the defendants would be prepared to remake that proposal, or would accept the proposal in those terms made by the first plaintiff. What can be said is that if the defendants were prepared to propose a resolution in the terms of paragraphs 1 to 6 of their proposal of 28 June 2017, acceptance of that proposal by the first plaintiff would be reasonable. What, if any provision, might be made in relation to contributions to costs, is provided in paragraph 7 of the defendant's proposal of 28 June 2017 as a matter for the parties and would no doubt significantly be influenced by the outcome of these proceedings.
The parties should bring in a minute to reflect the orders that should be made to give effect to these reasons and if agreement as to the appropriate orders cannot be reached, each party should file a minute of the orders for which they would move.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TS
ASSOCIATE TO THE HONOURABLE JUSTICE CHANEY
13 JUNE 2018

Reference	Date	Amount ($)
Statement Balance:	(186,929.65)
Unpresented Receipts: CBAMay CRJul2	22/05/2013 05/07/2013	50,000.00 100,000.00 150,000.00 (336,929.65)
Unpresented Payments: 000058 CBDE4	03/12/2013 05/12/2013	1,920.00 (1,920.00) 0.00 (336,929.65)
Ledger Bank Balance:	336,929.65