Re Gregory Paul Quin as liquidator of Flexi Staff Pty Ltd (in Liquidation)
[2023] WASC 362
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE GREGORY PAUL QUIN as liquidator of FLEXI STAFF PTY LTD (IN LIQUIDATION); EX PARTE GREGORY PAUL QUIN as liquidator of FLEXI STAFF PTY LTD (IN LIQUIDATION) [2023] WASC 362
CORAM: HILL J
HEARD: 8 SEPTEMBER 2023
DELIVERED : 14 SEPTEMBER 2023
PUBLISHED : 21 SEPTEMBER 2023
FILE NO/S: COR 131 of 2023
MATTER: IN THE MATTER OF GREGORY PAUL QUIN as liquidator of FLEXI STAFF PTY LTD (IN LIQUIDATION)
EX PARTE
GREGORY PAUL QUIN as liquidator of FLEXI STAFF PTY LTD (IN LIQUIDATION)
Plaintiff
Catchwords:
Corporations - Winding up - Application by liquidator for directions that liquidator is justified and would be acting properly in admitting proof of debt in liquidation - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), sch 2, s 90-15
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | N F Malone & B Powell |
Solicitors:
| Plaintiff | : | Pragma Lawyers |
Case(s) referred to in decision(s):
Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409
Re Daily Planet Pty Ltd (in liq) [2019] VSC 265
Re GB Nathan & Co Pty Ltd (In Liq) (1991) 24 NSWLR 674
Re GGA Lifestyle Pty Ltd (Administrators Appointed); ex parte Woodhouse [2019] WASC 167
Re Go Energy Group Ltd (in liq) [2019] NSWSC 558
Re Masonry Works Pty Ltd (in liq) [2020] FCA 575
Re McGrath [2010] NSWSC 404; (2010) 266 ALR 642
Re Richstar Enterprises Pty Ltd; ASIC v Carey (No 20) [2008] FCA 45
Re Sakr Bros Pty Ltd (in liq) [2019] FCA 547
Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332
Westpac Banking Corporation v Totterdell (1998) 20 WAR 150
HILL J:
The plaintiff is the liquidator of Flexi Staff Pty Ltd (Flexi Staff), as well as the liquidator of its related entity, Texpoint Pty Ltd (Texpoint).
By originating process dated 28 August 2023, the plaintiff applied for directions that he would be justified in admitting the proof of debt of Texpoint dated 2 November 2022 in the sum of $1,472,158 in the liquidation of Flexi Staff (Proof of Debt). In support of his application, the plaintiff relied on four affidavits: his confidential affidavit filed 28 August 2023, an affidavit of Tayla Louise Woolley filed 6 September 2023, an affidavit of Brenda Powell filed 7 September 2023, and an affidavit of Nicholas Francis Malone filed 13 September 2023.
I was and am satisfied that it was appropriate for confidentiality orders to be made which preserved the confidentiality of the information contained in the plaintiff's affidavit. This was because it contained information which was known only to the plaintiff in respect of his assessment of the Proof of Debt, as well as personal and payroll details of Texpoint's employees.
At the conclusion of the hearing on 8 September 2023, I adjourned the matter for seven days to allow the Australian Securities and Investments Commission (ASIC) to consider and respond to the application, given ASIC had only been served on 7 September 2023. Prior to the relisting of the hearing, the plaintiff confirmed that ASIC did not oppose to the orders being sought in the application.[1] After receipt of this confirmation, I made the orders and directions sought by the plaintiff. These are my reasons for making those orders.
[1] Affidavit of Nicholas Francis Malone filed 13 September 2023 'NFM-1'.
Background Facts
On 2 August 2022, the plaintiff was appointed liquidator of Flexi Staff.[2] Flexi Staff traded as a labour hire services provider for various industries.
[2] Affidavit of Gregory Paul Quin filed 28 August 2023 [4].
Flexi Staff has two ordinary shares on issue: one was issued to Mr Peter McIean and the other to Primeace Pty Ltd ATF McIean Family Trust (Primeace).[3] Mr McIean was the sole director and company secretary of Flexi Staff.
[3] Affidavit of Gregory Paul Quin filed 28 August 2023 [6].
Mr McIean was also the sole director and shareholder of Texpoint. Texpoint had the same capital structure as Flexi Staff, namely two issued shares which are owned by Mr McIean and Primeace.[4]
[4] Affidavit of Gregory Paul Quin filed 28 August 2023 [15(a)].
Texpoint provided administrative and support services to Flexi Staff, because Flexi Staff did not have any permanent management or administrative employees. On 1 September 2022, the plaintiff was also appointed liquidator of Texpoint. The plaintiff identified that Texpoint's primary business was providing administrative and support services to Flexi Staff.[5]
[5] Affidavit of Gregory Paul Quin filed 28 August 2023 [16].
On 9 August 2022, Mr McIean provided the plaintiff with a Company Report on Company Activities and Property (ROCAP) in relation to Flexi Staff.
The plaintiff is of the opinion that the reasons for Flexi Staff's failure include its undercapitalisation, continued trading losses and the poor strategic management of its affairs.[6]
[6] Affidavit of Gregory Paul Quin filed 28 August 2023 [8].
The plaintiff conducted investigations into the money owed by Flexi Staff to Texpoint for services that had been rendered from 1 July 2020 to the date of his appointment.[7] Following completion of these investigations, the plaintiff formed the view that the total sum owed by Flexi Staff to Texpoint was $1,472,158 (Outstanding Sum).[8]
[7] Affidavit of Gregory Paul Quin filed 28 August 2023 [18].
[8] Affidavit of Gregory Paul Quin filed 28 August 2023 [24] ‑ [25].
On 2 November 2022, the plaintiff caused Texpoint to lodge the Proof of Debt in the liquidation of Flexi Staff.[9] On 9 November 2022, the plaintiff sought Mr McIean's views on the Proof of Debt.[10] Following this, Mr McIean informed the plaintiff that its omission from the original ROCAP was an oversight,[11] and amended the ROCAP of Flexi Staff to include the Outstanding Sum.[12]
Communications with creditors
[9] Affidavit of Gregory Paul Quin filed 28 August 2023 'GPQ-6'.
[10] Affidavit of Gregory Paul Quin filed 28 August 2023 'GPQ-15'.
[11] Affidavit of Gregory Paul Quin filed 28 August 2023 'GPQ-16'.
[12] Affidavit of Gregory Paul Quin filed 28 August 2023 'GPQ-17'.
On 16 August 2022, the plaintiff issued an initial report to creditors which included notice of his appointment and his Declaration of Independence, Relevant Relationships and Indemnities (DIRRI).[13]
[13] Affidavit of Gregory Paul Quin filed 28 August 2023 'GPQ-19'.
An updated DIRRI was provided to creditors on about 2 September 2022, following his appointment as liquidator of Texpoint.[14]
[14] Affidavit of Gregory Paul Quin filed 28 August 2023 'GPQ-19'.
The plaintiff issued his statutory report to creditors on 28 October 2022, which included disclosure of his appointment as liquidator of Texpoint and provided a supplementary report to creditors on 8 December 2022.[15]
[15] Affidavit of Gregory Paul Quin filed 28 August 2023 'GPQ-19'.
Legal principles
The plaintiff's application for directions is made pursuant to s 90‑15 of the Insolvency Practice Schedule (Corporations) (Schedule 2 of the Corporations Act 2001 (Cth)). Section 90-15(1) is in wide terms and allows the court to make such orders as it thinks fit in relation to the external administration of a company.
The approach of the court on an application for directions by an external administrator is well-established. As Goldberg J stated in Re Ansett Australia Ltd (No 3):[16]
There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, that decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised.
[16] Re Ansett Australia Ltd (No 3)[2002] FCA 90; (2002) 115 FCR 409 [65].
Subject to the liquidator making full and fair disclosure of the material facts, the effect of a direction is to protect the liquidator from claims that they have acted unreasonably, inappropriately, or in breach of their duties; it does not determine rights and liabilities that arise out of the proposed transaction.[17] Put another way, the order of the court sanctions a proposed course of conduct by the liquidator.[18]
[17] Re GB Nathan & Co Pty Ltd (In Liq) (1991) 24 NSWLR 674, 679 - 680.
[18] Re GB Nathan & Co Pty Ltd (In Liq) (679 ‑ 680).
In this case, an order or direction is sought in terms that the plaintiff would be acting properly and is justified in accepting a proof of debt from Texpoint of which he is also liquidator.
As was noted by Vaughan J in Re GGA Lifestyle Pty Ltd (Administrators Appointed); ex parte Woodhouse:[19]
A direction that an external administrator may properly and justifiably carry out a proposed course of conduct is used to signify that it is appropriate that he or she do so. It is a conventional form of direction in common use. It is implicit in such an order that the court is approving the proposed conduct. Often a proposed direction in this form will raise an issue of propriety or reasonableness. Directions are available and appropriate on that basis. [citations omitted]
[19] Re GGA Lifestyle Pty Ltd (Administrators Appointed); ex parte Woodhouse [2019] WASC 167 [23].
In general, a liquidator of one company must not exercise his or her powers for the benefit or gain of another company of which they are liquidator.[20] A liquidator has a conflict of duties in exercising any power to adjudicate upon and admit a proof of debt in the liquidation of a company which is submitted by another company of which they are also the liquidator. Where this occurs, an issue of propriety or reasonableness will tend to exist.[21]
[20] Re McGrath [2010] NSWSC 404; (2010) 266 ALR 642, Appendix 1 [29] ‑ [30].
[21] Re Richstar Enterprises Pty Ltd; ASIC v Carey (No 20) [2008] FCA 45 [20].
As was noted by Black J in Re Go Energy Group Ltd (in liq),[22] the court has an inherent power to authorise a liquidator to perform an act that would otherwise involve conflict, although that power will only be exercised rarely. In seeking to be excused from their fiduciary responsibility, the liquidator has an 'onerous and exacting' task.[23]
[22] Re Go Energy Group Ltd (in liq) [2019] NSWSC 558 [15].
[23] Re Go Energy Group Ltd (in liq) [15] citing with approval Re McGrath [37].
Section 90-15 of Schedule 2 of the Corporations Act 2001 (Cth) may be used to provide advice that a liquidator is justified in accepting a proof of debt.[24]
[24] Re Daily Planet Pty Ltd (in liq) [2019] VSC 265; Re Masonry Works Pty Ltd (in liq) [2020] FCA 575 [22].
In considering an application for directions in the context of the adjudication of proofs of debt where the liquidator is in a situation of conflict, the court may be assisted by an independent expert report,[25] although this is not an essential requirement.[26] Given the quasi-judicial nature of the function performed by liquidators in adjudicating upon proofs of debt, the court will often be well-equipped to form a view about whether a proposed adjudication is appropriate without the need for expert assistance.[27]
[25] Re Go Energy Group Ltd (in liq) [15], [22].
[26] Re Sakr Bros Pty Ltd (in liq) [2019] FCA 547; Re Masonry Works Pty Ltd (in liq).
[27] Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332, 338 - 339; Westpac Banking Corporation v Totterdell (1998) 20 WAR 150, 156 - 157.
Disposition
For the following reasons, I am satisfied the plaintiff would be acting properly and was justified in admitting the Proof of Debt in the liquidation of Flexi Staff.
First, I was and am satisfied that there is an actual or potential conflict of the duties the plaintiff owes as liquidator of Flexi Staff and those owed as liquidator of Texpoint in adjudicating upon the Proof of Debt. I am satisfied on the evidence before the court that the plaintiff has no personal interest in whether or not the Proof of Debt is admitted or rejected in the winding up of Flexi Staff. That is, the potential conflict is one of duty-duty rather than duty-interest.
Second, I was and am satisfied that in forming the view that the underlying claim can be made and that the Proof of Debt should be admitted in the winding up of Flexi Staff, the plaintiff has investigated and evaluated the merits of the claims set out in the Proof of Debt. I find that the plaintiff has discharged his obligation to put all relevant information before the court in relation to this issue. I find that the plaintiff's investigation and evaluation of the merit of the Proof of Debt has been both careful and reasonable. The plaintiff has taken all necessary and proper steps in forming the view that the Proof of Debt is a proper claim that can be made against Flexi Staff and should be admitted. He has disclosed the basis for his judgment, which is in accordance with accepted legal principles.
Third, I accept that the creditors of Flexi Staff have been given notice of the application and the relief sought. No creditor has sought to be heard or raised any objection.[28]
[28] Affidavit of Tayla Louise Woolley filed 6 September 2023.
Fourth, although the application is not supported by an independent expert report, this should not prevent the directions being made. Given the nature of the claims set out in the Proof of Debt, I do not consider I would be assisted by an independent expert report.
Conclusion and Orders
For these reasons, I considered that it was appropriate to make the orders and directions sought by the plaintiff in the form annexed as 'Annexure A'.
Annexure A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
21 SEPTEMBER 2023
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