Shangri-La Construction Pty Ltd v GVE Hampton Pty Ltd (in liq)
[2021] VSC 161
•1 April 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2020 03789
IN THE MATTER OF GVE HAMPTON PTY LTD (IN LIQUIDATION) (ACN 167 150 521)
| SHANGRI-LA CONSTRUCTION PTY LTD (ACN 130 534 244) | Plaintiff |
| v | |
| GVE HAMPTON PTY LTD (IN LIQUIDATION) (ACN 167 150 521) | First Defendant |
| PETER GOUNTZOS AND MICHAEL CARRAFA AS JOINT AND SEVERAL LIQUIDATORS OF GVE HAMPTON PTY LTD (IN LIQUIDATION) (ACN 167 150 521) | Second Defendants |
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JUDGE: | Connock J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 24 and 25 March 2021 |
DATE OF JUDGMENT: | 1 April 2021 |
CASE MAY BE CITED AS: | Shangri-La Construction Pty Ltd v GVE Hampton Pty Ltd (in liq) & Ors |
MEDIUM NEUTRAL CITATION: | [2021] VSC 161 |
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CORPORATIONS — Corporations Act 2001 (Cth) — Schedule 2, Division 90, ss 90-15, 90-20 — Appointment of special purpose liquidator — General principles — Standing — Creditor status — Funding agreement — Opposed by primary liquidator — Independence of primary liquidator — Recovery proceedings already on foot — Comparison of funding options — Standing as creditor — Standing under ss 90-15 and 90-20 — Alleged loss of creditor status and standing after application commenced.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr M Wolff | Noble Lawyers Pty Ltd |
| For the First and Second Defendants | Ms R McCarthy | Harrick Lawyers |
| For the Opposing Creditors | Mr M Black | Aitken Partners |
TABLE OF CONTENTS
Introduction and summary.............................................................................................................. 1
Evidence and submissions............................................................................................................... 2
Background......................................................................................................................................... 3
Appointment of special purpose liquidators — principles and observations.................... 17
Submissions...................................................................................................................................... 24
........... Plaintiff's primary submissions.......................................................................................... 24
........... Defendants' submissions..................................................................................................... 28
........... Opposing Creditors' submissions...................................................................................... 33
........... Plaintiff's response to Opposing Creditors' submissions............................................... 38
Consideration and disposition..................................................................................................... 40
........... Actual or perceived lack of independence, conflict of interest or bias......................... 40
........... Funding to pursue Recovery Proceeding.......................................................................... 51
........... Just and beneficial to the creditors or justified by utility or other good reason.......... 55
........... Standing................................................................................................................................. 58
Conclusion and proposed orders.................................................................................................. 60
Annexure "A" – Chronology ......................................................................................................... 61
HIS HONOUR:
Introduction and summary
The plaintiff, Shangri-La Construction Pty Ltd (the plaintiff or Shangri-La) is recorded as a creditor of the first defendant, GVE Hampton Pty Ltd (Company), which is in liquidation. One of the named second defendants, Peter Gountzos, is the Company’s liquidator (Liquidator), having been appointed as such when the Company was placed into a creditors’ voluntary liquidation on 4 December 2017.[1]
[1]The Liquidator was initially appointed jointly and severally with the other named second defendant, Michael Carrafa, who resigned in late May 2018 leaving Mr Gountzos as the Company’s sole liquidator.
The Liquidator has commenced proceedings in this court against a number of defendants seeking to recover amounts in excess of $7 million (Recovery Proceeding). The defendants in the Recovery Proceeding include Vladislav Hyatt, the sole director of the Company, and two of its former directors, Eugene Krok and Greg Krok. Another defendant is GVE Small Pty Ltd (GVE Small), which is alleged to be a related entity of the Company and of which Mr Hyatt is said to have been its sole shareholder and director.
The claims against the defendants in the Recovery Proceeding include a claim against GVE Small for repayment of an alleged $5,200,000 loan from the Company, and various other claims regarding alleged preferences and insolvent, uncommercial, and unreasonable director-related transactions.
The central issue for determination in this proceeding is whether Mr Glenn Crisp should be appointed as a special purpose liquidator of the Company (SPL) for the purpose of taking over the conduct of the Recovery Proceeding (and related matters) in place of the Liquidator.[2]
[2]The grant of leave to bring this proceeding pursuant to s 500 of the Corporations Act 2001 (Cth) was not opposed and will be addressed in the final orders.
Ancillary issues relate to the terms upon which any such appointment should be made. At the hearing the plaintiff confirmed that it was not pursuing in this proceeding an application by the SPL (if appointed) for approval to enter into the proposed funding agreement between the plaintiff, the SPL, and the Company pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (Act) and s 90-15 of Schedule 2 – Insolvency Practice Schedule (Corporations) of the Act.
The plaintiff’s application was opposed by the Liquidator.
Mr Hyatt and GVE Corporation Pty Ltd (collectively, Opposing Creditors) are recorded by the Liquidator as being creditors of the Company at least for voting purposes, although their claims have not yet been finally adjudicated on by the Liquidator. In that claimed creditor capacity they sought and were granted leave to make brief submissions in opposition to the application.[3]
[3]Pursuant to the orders made on 12 February 2021 and leave granted during the hearing to make limited oral submissions.
For the reasons that follow the plaintiff’s application should be dismissed.
Evidence and submissions
The plaintiff relied upon the following:[4]
[4]In addition to the documents tendered during the hearing and to which I have had regard.
(a) Affidavits of the plaintiff’s solicitor, Darren Noble, filed on 2 October 2020, 27 October 2020, and 23 November 2020.
(b) Affidavits of Mr Glenn Crisp filed on 11 February and 12 March 2021.
(c) Affidavit of the director of the plaintiff, Mr Obaid Naqebullah, filed on 11 February 2021.
(d) ‘Consent of Liquidator’ form signed by Mr Crisp and filed on 12 October 2020.
The defendants relied upon affidavits of the Liquidator filed on 7 December 2020 and 25 February 2021[5] and an affidavit of the Liquidator’s solicitor, Ms Keoch, sworn 17 March 2021.
[5]A confidential affidavit filed on 9 December 2021 was expressly not relied upon and leave to withdraw it from the court file was granted by order made 12 February 2021.
Written submissions were relied upon by each of the plaintiff, the Liquidator, and the Opposing Creditors, with the plaintiff also relying on a written submission in reply to that of the Opposing Creditors. The written submissions were supplemented with oral submissions from counsel for each of the parties and counsel for the Opposing Creditors.
The only witness to be cross-examined was the Liquidator, who also gave some brief evidence in chief regarding the proposed payment of disbursements in the Recovery Proceeding by his solicitors and his firm.
Background
The background to the application was apparent from the affidavits and submissions,[6] parts of which it is convenient to refer to here so as to put the submissions and that which follows in these reasons in context.
[6]To which I have had regard, and aspects of which were addressed in cross-examination.
The Company was incorporated on 9 December 2013. Mr Hyatt was a director of the Company at the time of its incorporation and remains its sole director. Between 9 December 2013 and 21 August 2017, Eugene Krok and Greg Krok were also recorded as directors of the Company.
The shares in the Company are held in equal shares by three companies which are associated with each of Mr Hyatt, Mr Eugene Krok and Mr Greg Krok, being Hyatt Investments Pty Ltd, E Krok Developments Pty Ltd, and A G Krok Developments Pty Ltd respectively.
The Company appears to have been incorporated for the sole purpose of developing a residential and retail property located at 15 Small Street, Hampton. The plaintiff was involved in the project as the development’s builder.
GVE Small was incorporated on 4 May 2017. Mr Hyatt is the sole director and shareholder of GVE Small.
By 16 May 2017 the development had been completed and the sales of all 22 residential apartments and the single retail premises at the property had proceeded to settlement.
The plaintiff contends that shortly after settlement of the sales and receipt of the sale proceeds Mr Eugene Krok and others caused the Company to make a series of payments which resulted in the sale proceeds being ‘siphoned off’ to related entities and persons and that this resulted in the creditors not being paid. The payments included the $5,200,000 loan to GVE Small referred to below.
It was common ground between the plaintiff and the Liquidator that, on 1 June 2017, the Company entered into a loan agreement with GVE Small to advance it a loan of $5,200,000, with interest to be paid at a rate of 5% interest per annum (GVE Small Loan). It is alleged in the Recovery Proceeding that the loan was unsecured, for a period of three years, due to be repaid on 1 June 2020, and that no principal or interest repayments have been made.
On 18 October 2017 the Company issued proceedings in the County Court against the plaintiff claiming about $259,000, the majority of which related to liquidated damages claims relating to the Hampton development (Shangri-La Claim). Mr Hyatt had been heavily involved with the Hampton development, was the main repository of knowledge about it, and was said by the Liquidator to have been the project ‘Superintendent’.
On 26 October 2017 the plaintiff obtained judgment against the Company in the County Court of Victoria for the amount of $194,266.30 plus costs fixed at $2000 pursuant to s 28R of the Building and Construction Industry Security of Payment Act 2002 (Vic), with that amount being made up of a judgment debt amount of $181,801.13, interest, fees and costs.
On 4 December 2017 the Company was placed into voluntary liquidation.
The statutory report of the Liquidator dated 2 March 2018 (Liquidator’s Report) recorded sundry debtors as follows:
(a) GVE Brighton Pty Ltd, which was described as a ‘related entity’, owing $8,000;
(b) GVE Small, also described as a ‘related entity’ and said to be indebted to the Company for $5,200,000 plus interest; and
(c) the plaintiff, which was described as a debtor in the amount of $95,000.
The Liquidator’s Report also recorded that the Liquidator’s investigations regarding voidable transactions and insolvent trading were ongoing. Putting to one side unknown ‘recoveries/voidable transactions’, assets were said to total only $14,615[7] with an estimated deficiency of $3,689,167. It was apparent from the evidence that in general terms the liquidation was, and remains, essentially unfunded.[8] To date the Liquidator has not been paid any fees and during his cross-examination he estimated that outstanding fees and expenses to date were in the order of $100,000.
[7]Including the $95,000 recorded against the plaintiff, which was not ultimately pursued.
[8]Subject to the proposed funding of the Recovery Proceeding by the Liquidator through the assistance of solicitors, counsel and the Liquidator’s firm, more detail of which is addressed later in these reasons.
When first appointed, and thereafter for a period, there were communications between Mr Hyatt and the Liquidator regarding the Shangri-La Claim, its merits, and the possible funding of security for costs,[9] or the proceeding more generally, by Mr Hyatt or related parties. Other creditors were also invited to provide funding. On 14 May 2018 Mr Hyatt informed the Liquidator that he was not willing to fund the Liquidator or proceed with the Shangri-La Claim. Ultimately neither Mr Hyatt nor any other creditors funded the claim and the Liquidator elected not to proceed with it.
[9]Which had been ordered against the Company.
The plaintiff relied in part on the occurrence and nature of the communications between Mr Hyatt and the Liquidator and his staff regarding the Shangri-La Claim in support of its contention that the Liquidator lacked sufficient independence. The Liquidator said otherwise and this issue is addressed later in these reasons.
During the period between June 2018 and June 2019 there were communications between the solicitors for each of the plaintiff and the defendants regarding the possibility of funding the Liquidator to commence recovery proceedings. This was apparent from the evidence of the Liquidator and the plaintiff as well as the chronology prepared by the plaintiff, which was essentially agreed and not relevantly controversial. It is annexed to these reasons as Annexure A (Annexed Chronology).
During this period the plaintiff was also seeking authorisation from ASIC to become an ‘eligible applicant’ to summon Mr Eugene Krok and others for examination as to the Company’s examinable affairs pursuant to ss 596A and 596B of the Act. The Liquidator said that this was not disclosed to him until 7 May 2019, despite the fact that discussions were taking place with the plaintiff and its solicitors regarding the prospect of the plaintiff providing funds to the Liquidator, and the Liquidator providing documents and information to the plaintiff for that purpose.
In December 2018 the Liquidator also sought funding from the Australian Taxation Office for pursuing recovery claims, which was not forthcoming.
In the Liquidator’s letter to the plaintiff dated 4 April 2019 the Liquidator referred to various recovery claims that it had identified against the Company’s director, its former directors, GVE Small, and others. These included claims against GVE Small in respect of the GVE Small Loan and unreasonable director-related payments in excess of $2 million.
On 11 April 2019 the Liquidator admitted in full the plaintiff’s proof of debt the subject of the plaintiff’s County Court judgment.
On 1 May 2019 the Liquidator instructed solicitors to commence the preparation of recovery proceedings.
On 7 May 2019 the plaintiff’s solicitors informed the Liquidator regarding their application to ASIC for ‘eligible applicant’ status in connection with the proposed examinations.
The plaintiff was granted ‘eligible applicant’ status by ASIC on 30 May 2019.
On 4 June 2019 the Liquidator’s solicitors informed the plaintiff’s solicitors that letters of demand were to be issued in respect of the recovery claims referred to in their letter of 4 April 2019.
On 7 June 2019 the Liquidator’s solicitors sent letters of demand to various parties against whom it was proposed to bring recovery proceedings. These parties included Mr Hyatt and GVE Small. These demands had also been foreshadowed to Mr Hyatt in a telephone conversation with the Liquidator and his staff member on 30 May 2019, during which the Liquidator suggested Mr Hyatt would be needing and should engage a solicitor.
On 11 June 2019 the plaintiff’s solicitors requested that the Liquidator not issue any recovery proceedings until the examinations had been concluded, stating that they were concerned that the issue of proceedings may prejudice the ability to proceed with the examinations and that if the proceedings were issued the examinees might argue that the plaintiff was ‘fishing for evidence’.
By application filed 25 July 2019 the plaintiff applied to the Federal Court for the issue of examination summonses pursuant to ss 596A and 596B of the Act against Mr Hyatt, Mr Eugene Krok, Mr Greg Krok, and Ms Ada Khait (Examinees).
On 14 August 2019 the plaintiff was informed by the Liquidator’s solicitors that the Liquidator had been about to issue recovery proceedings and that he would do so if they did not hear from the plaintiff within seven days. A response was sent to the Liquidator’s solicitors updating the position regarding the examinees and awaiting the issue of the summonses for examination. Consequently, the Liquidator did not commence the Recovery Proceeding at that time.
From about September 2019 the Liquidator approached four third party funders seeking funding for the recovery proceedings. By May 2020 three funders had declined funding. Some property related searches had been carried out by the Liquidator and information was provided to the third party funders. In this proceeding the plaintiff contended that additional searches should have been carried out and that caveats should have been lodged — which the Liquidator disputed.
On 19 December 2019 the Federal Court issued summonses for examination against the Examinees. Numerous unsuccessful attempts at service were made and substituted service orders were made on 20 July 2020.
Clause 1 of the loan agreement for the GVE Small Loan recorded that it was due for repayment on 1 June 2020. It was not repaid then or subsequently. The plaintiff contended that the failure to issue a statutory demand in respect of the GVE Small Loan reflected a lack of diligence and independence, which the Liquidator denied. In the Recovery Proceeding the defendants allege the loan agreement was varied. That is not a matter for determination or further consideration in this proceeding.
In early August 2020 the Examinees filed applications to set aside the examination summonses.
In late August 2020 the fourth third party funder (CFA) indicated that it was considering funding but remained undecided. Shortly after, CFA offered to provide some funding in the short term to obtain counsel’s advice on litigation strategy with what the Liquidator’s solicitors described as ‘… a view to providing long term funding …’.
By letter dated 2 September 2020 the plaintiff’s solicitors requested that the Liquidator consent to the appointment of Mr Crisp as an SPL to investigate the Company’s affairs and to commence recovery proceedings following the examinations of the Examinees. The Liquidator’s solicitors responded and expressed confusion as to why an SPL would be appointed and challenged any suggestion of efficiency, lack of independence, conflict and related matters. It was stated that any application would be opposed. Further correspondence passed between the parties on the topic at that time and thereafter.
Having been informed of the likely application by the plaintiff to appoint an SPL, CFA informed the Liquidator that it was no longer able to offer any funding due to the uncertainty, including that raised by the proposed application to appoint Mr Crisp as an SPL.
In mid-September 2020, and cognisant of the time limits, the Liquidator arranged for counsel to be briefed on a speculative basis to draw proceedings in respect of the claims the subject of the Recovery Proceeding.
The originating process in this proceeding was filed on 2 October 2020 and served on the Liquidator on 7 October 2020. Counsel was instructed to stop working on drawing the claims for the Recovery Proceeding pending the outcome of the application.
On 30 October 2020 Beach J in the Federal Court dismissed the Examinees’ applications to set aside the examination summonses.[10]
[10]Shangri-La Construction Pty Ltd v Hyatt, in the matter of GVE Hampton Pty Ltd (in liquidation) [2020] FCA 1577.
On 4 November 2020 there was a directions hearing in this proceeding and concern was expressed by the parties about the potential expiry of the limitation period for any recovery claims later in December 2020. Procedural directions were made.
Later that day the Liquidator instructed counsel to recommence drawing the proceeding in respect of the claims the subject of the Recovery Proceeding.
The Recovery Proceeding was commenced by originating process filed on 1 December 2020.[11] Appearances were filed and consent orders were made at the first directions hearing on 4 February 2021 for the service of pleadings and mediation. A detailed statement of claim was filed on 8 February 2021 and the defendants filed their defence on 12 March 2021. The mediation was due to take place by 26 April 2021 and the next directions hearing is scheduled for 30 April 2021. The mediation orders were vacated by consent on 30 March 2021 pending the outcome of this proceeding.
[11]Supported by an affidavit of the Liquidator filed that day that also said that a statement of claim would be filed.
There are no secured creditors and the unsecured creditors were said to total $3,950,049.30, with that amount being made up as follows:[12]
[12]As mentioned, the Liquidator has not yet finally adjudicated on the proofs of debt of Mr Hyatt or GVE Corporation Pty Ltd.
Creditor Value % of total unsecured creditor pool Deputy Commissioner of Taxation (DCT)
$2,700,000.00
68.35%
GVE Corporation Pty Ltd
$964,617.00
24.42%
Shangri-La Construction Pty Ltd
$196,266.30
4.96%
Hassall’s Litigation Services
$10,000.00
0.25%
Vladislav Hyatt (formerly trading as Hyatt’s Solicitors)
$76,000.00
1.92%
Stanwycks Accountants
$3,165.00
0.08%
Since being appointed, the Liquidator has undertaken various steps and investigations into the affairs of the Company. Briefly, the tasks and activities he said had been undertaken included:[13]
[13]Discussed further later in these reasons in connection with the plaintiff’s submissions regarding property searches and related matters.
(a) Obtaining and considering the Company’s books and records.
(b) Reviewing the financial position of the Company.
(c) Meeting with the sole director of the Company.
(d) Conducting various searches in relation to the Company.
(e) Investigating voidable transactions and potential claims against directors and related entities.
(f) Unsuccessfully seeking to obtain funding for recovery actions against directors, GVE Small and others from the Australian Taxation Office, four third party funders, and the plaintiff.
(g) Communicating with the plaintiff regarding possible recovery actions, funding by the plaintiff, and the examination proceedings commenced by the plaintiff in the Federal Court seeking to examine the director, former directors, and others.
(h) Reaching agreement with solicitors and counsel to act in the Recovery Proceeding on a ‘speculative’ no win no fee basis.
(i) Corresponding with the plaintiff’s solicitors regarding various matters including: recovery actions; the provision of information requested; funding; the plaintiff’s request to postpone commencing the recovery proceeding until after examinations had occurred in the Federal Court; the plaintiff’s foreshadowed application to appoint an SPL; postponing the commencement of the Recovery Proceeding given the foreshadowed application; allegations made by the plaintiff regarding the Liquidator’s conduct; concern regarding the delay with the plaintiff’s examination proceeding in the Federal Court and the potential expiry of the limitation periods for the recovery claims; the application the subject of this proceeding; and other related matters.[14]
[14]Further detail of which is apparent from the Annexed Chronology.
The Liquidator has now arranged for representation by counsel and solicitors on an ongoing basis until the Recovery Proceeding is settled or heard and determined on what is described as a ‘speculative basis’, meaning that the fees will not be paid unless there is a return on the proceeding from which they can be paid. The legal costs are only payable in the event a return is generated from the claims and are otherwise costs in the liquidation. A counsel fee uplift of 20% is proposed if the claims are successful. If there is any issue about the fees payable, it is proposed to have them assessed by an independent costs consultant or have them assessed by the Costs Court. The Liquidator said that disbursements will be paid by his lawyers or his firm. This is discussed in more detail later in these reasons.
As to security for costs in the Recovery Proceeding, the Liquidator said that no application had been made or threatened. If such an application is made and is successful the Liquidator said he proposes to do all that he can to fund it, including by approaching his fellow directors in his firm, and if that is not successful, approaching funders who provide such security.
The Liquidator stated that if a settlement proposal is received he will not accept it without the approval of the creditors or a court order.
The Liquidator considers that proceeding by appointing an SPL in the way proposed by the plaintiff cannot and will not provide a greater return to the creditors as a whole.
So far as funding the proposed SPL is concerned, Mr Noble initially deposed that the plaintiff was willing to fund the proposed SPL’s fees ‘up to $25,000 plus GST’ and that Mr Crisp had informed him that two different third party funders, being Pretium and Ironbark, were willing to fund him on the terms of certain funding agreements, each of which provided for the payment to the funders of substantial percentages of amounts recovered.
This position was later revised and in an affidavit filed on 11 February 2021 the proposed SPL, Mr Crisp, said that he has agreed with the plaintiff’s director, Mr Naqebullah, that if he is appointed as the SPL:
(a) The prosecution of the claims in the Recovery Proceeding will be funded by the plaintiff ‘jointly and severally with Mr Naqebullah’ and that each of them will jointly and severally enter into a funding agreement with him in the form exhibited to his affidavit (Proposed Funding Agreement).[15]
(b) He undertakes not to seek recovery of fees and expenses ‘out of the funds or the Property of the Company’, and that fees and expenses will only be recovered from amounts received in the Recovery Proceeding and not from other funds or property of the Company.
(c) He will undertake to pay the costs and disbursements of solicitors and counsel involved to date, with such costs to be taxed in default of agreement and to be payable out of any proceeds recovered from the claims made in the Recovery Proceeding.
[15]Some features of which are addressed later in these reasons.
Mr Crisp also said that if appointed he will retain new solicitors and counsel with appropriate experience to prosecute the claims and instruct them to review all the materials and advise as to what else should be done. He said he will conduct further investigations into the books and records and affairs of the Company to determine if there are further claims to be prosecuted, and that he will report to ASIC, if necessary, on the conduct of the Company’s directors.
In an affidavit filed on 12 March 2021 Mr Crisp further explained that he proposed to retain the solicitors and counsel that have been retained in this proceeding at rates which he specified and that no uplift would be charged by solicitors or counsel. He said that he did not anticipate duplication because such advisers were familiar with the position given this litigation and the examination proceedings in the Federal Court.
Mr Crisp said he proposed to seek to recover at least $7,704,017 plus interest which he said would give a total of $13,027,766. He said that he expected the litigation to be hard fought and lengthy given what had occurred with the examinations. He believed that the matter would not be determined or resolved before the end of 2022 given, among other things, the amounts involved, the number of parties, and the general history of the liquidation and the examination proceedings. As to disbursements and expenses on top of legal fees, Mr Crisp said he expects them to be material and his best estimate was ‘… between $20,000 to $80,000 …’ including matters such as: filing fees; printing; mediator’s fees; transcript; hearing fees; experts; and related matters. To this was also to be added his firm’s fees for conducting the litigation.
Mr Crisp said that the Proposed Funding Agreement would entitle him to seek payment of all of the expenses from Shangri–La or Mr Naqebullah and that the amounts would not therefore affect the amounts available to creditors if the claims were not successful. He also said that he considered it ‘… very difficult, if not impossible, to run major litigation without funds at [his] disposal …’ and that this supported his appointment as SPL being in the interests of creditors. Mr Crisp said further that the Proposed Funding Agreement was such that he will be able to satisfy any security for costs order that might be made which would mean that the litigation would not be stopped by such an order.
With respect to delay Mr Crisp said he disputed that the Liquidator had ‘diligently exercise[d] his duties’, expressing a view that the only reason the Recovery Proceeding was ‘finally filed’ was because of the pressure brought to bear on the Liquidator, including by the threat of and commencement of this proceeding.
Mr Naqebullah said that he will not fund the Recovery Proceeding at all unless Mr Crisp is appointed SPL. He also deposed that ‘Disharmony’ existed between the plaintiff and the Liquidator that ‘… may give rise to a difficult working relationship …’, referring in this context to Mr Noble’s first affidavit and stating that he ‘… lacked confidence in …’ the Liquidator. He also asserted that he gained the impression in January 2019, when he met with the Liquidator, that the Liquidator ‘… was not then interested in pursuing any recovery actions’ and that his ‘impression had not changed’.
The plaintiff alleged that the Liquidator had been dilatory and non-effective in taking recovery action and levied criticism at the Liquidator for meeting with Mr Hyatt in January 2020 and other times, aspects of which were addressed in the correspondence before the court and the affidavits of Mr Noble. Such criticisms were not accepted by the Liquidator, who addressed them in the correspondence and in his affidavit. Insight into the exchange of communications between the parties is also apparent from the Annexed Chronology, which refers to some of the correspondence in evidence.[16]
[16]And to which I have had regard.
It was common ground that on about 2 February 2021 Ms Ada Khait, who was said to be related to Mr Eugene Krok, made a payment of $238,437.27 (First Khait Payment) to the plaintiff which was said by Mr Hyatt’s solicitors to comprise the County Court judgment debt of $194,266.30 plus interest on that amount of $44,170.97. In correspondence this was said to be in complete satisfaction of the amount owed to the plaintiff by the Company and therefore the plaintiff was no longer a creditor of the Company and did not have standing to pursue this application.[17]
[17]Or the examination proceedings.
The plaintiff disputed that the payment was an effective discharge of any part of the debt and also alleged that, in any event, by the date of the Khait Payment the interest due on the judgment debt was $64,203.28 and therefore $22,032.31 interest remained outstanding. The plaintiff also alleged that Ms Khait was jointly and severally liable to it in respect of a costs order made by Beach J in the Federal Court in the examination proceedings and that the plaintiff was entitled to satisfy that costs debt out of the payment made by her.[18]
[18]The order required Ms Khait and others to pay 80% of the plaintiff’s costs of a failed interlocutory application to set aside the examination summonses.
The First Khait Payment was the subject of correspondence between the solicitors for various parties earlier this year, both before and after it was made. Among other things that correspondence recorded statements by the Liquidator’s solicitors in response to letters from Ms Khait’s solicitors that:
(a) They could not state with any certainty that the proposed payment may not be shown to be a preference in a hypothetical situation. However if, as was understood to be proposed:
(i) the payment was made from Ms Khait’s own funds or assets and not funds or assets of the Company or to which the Company may be entitled; and
(ii) Ms Khait proposed to relinquish any ‘right of subrogation or similar’ against the Company and will make no claim against the Company–
then where the payment was genuinely made by and funds sourced from a third party and the Company is not a party, they could not see that the payment would be preferential in nature. But if it was later shown that the payment was made from assets to which the Company was entitled then this would ‘of course change the position’.[19]
(b) The Liquidator could not at this stage confirm that he is no longer in a position to treat Shangri-La as a creditor in the liquidation given that it had not confirmed that it had ‘received and accepted the payment in full and final settlement of its claim against the Company’.[20]
[19]Letter of 28 January 2021.
[20]Letter of 4 February 2021.
The court was informed at the hearing by a statement of agreed facts as between the plaintiff and the Opposing Creditors that Ms Khait paid the sum of $238,437.27 into the plaintiff’s bank account on 1 February 2021[21] and that she paid the further sum of $19,431.28 (Second Khait Payment) into the plaintiff’s bank account on 15 March 2021.
[21]Being the First Khait Payment.
It became common ground during the hearing that the total of the payments made into the accounts of the plaintiff fell short of the amount owing (including costs and interest) by $2,601.03. It appeared that this was due to an interest calculation error associated with a failure to recognise and calculate interest on the $2,000 costs order that formed part of the County Court judgment obtained by the plaintiff. On the morning of the last day of the hearing the court was informed by counsel for the Opposing Creditors that a further amount had been paid into the plaintiff’s bank account that morning by Ms Khait. At the end of the closing submissions counsel for the plaintiff confirmed that a payment had been made that morning, and by email sent to the court later that day after the end of the hearing it was stated that the additional amount received in the plaintiff’s bank account was $2,605.00 (Third Khait Payment).
The examinations have not yet occurred and it appears that they may be further delayed pending the hearing and determination of further foreshadowed applications by the Examinees, namely: a strike out application said to be based on a lack of standing as a creditor as a result of the First, Second and Third Khait Payments (collectively, Khait Payments); an application seeking to limit the scope of the examinations pursuant to s 596F(1)(a) of the Act; and an application that Mr Greg Krok and Ms Ada Khait be excused from attending pursuant to s 597(6A) by reason of their respective ages and ill health.
Appointment of special purpose liquidators — principles and observations
I recently addressed some general principles and observations regarding the appointment of special purpose liquidators In the matter of Aus Streaming (In Liq),[22] which it is convenient largely to repeat in the paragraphs that follow. I refer also to the recent decision of Markovic J in Commonwealth of Australia (Department of Education, Skills and Employment) v Phoenix Institute of Australia Pty Ltd (in liq)[23] (Phoenix).
[22][2020] VSC 313.
[23][2020] FCA 937, [52]–[55].
In a court-ordered winding up where several liquidators have been appointed, one or more of them might be designated to attend to a particular matter. An additional liquidator may also be appointed by the court to attend to particular tasks in an existing court-ordered liquidation. As Barrett J observed in Lo v Nielsen & Moller (Autoglass) (NSW) Pty Ltd,[24] in Re Obie Pty Ltd (No 4),[25] Thomas J stated:
It has long been held that the court has jurisdiction to give the conduct of any particular matter arising in the course of the liquidation to one of several liquidators: Re Midland Land and Investment Corporation [1887] WN 58. In my own experience courts have made such orders when there is a matter to be dealt with in a liquidation which it would be embarrassing for the liquidators to handle. In such circumstances an additional liquidator is appointed to handle that matter, and the great expense and loss of efficiency involved in resignation and replacement in a partially completed administration is avoided.
[24][2008] NSWSC 407, [26]–[28].
[25](1984) 8 ACLR 967, 971.
It is now also well established that in the case of a voluntary winding up the court has power to appoint an additional or special purpose liquidator.[26] Prior to the introduction of sch 2, that power arose under s 511 of the Act which relevantly provided that, in a voluntary winding up, the court may exercise all or any of the powers that the court might exercise if the company were being wound up by the court, if satisfied that the exercise of the power would be just and beneficial.
[26]See, eg, Lo v Nielsen & Moller (Autoglass) (NSW) Pty Ltd [2008] NSWSC 407, [26]–[30]; Re Spedley Securities Ltd (in liq) (1991) 4 ACSR 555 (Young J); Advance Housing Pty Ltd v Newcastle Classic Development Pty Ltd (1994) 14 ACSR 230 (Santow J); McGrath Re HIH Insurance Ltd [2006] NSWSC 385 (Barrett J); Honest Remark Pty Ltd v Allstate Explorations NL and Others (2006) 234 ALR 765, [50]–[63] (Brereton J); Victoriav Goulburn Administration Services Ltd (in liquidation) and Others [2016] VSC 654, [18]–[25] (Sifris J); Deputy Commissioner of Taxation, in the mater of ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520 199 Pty Ltd (in liq) [2017] FCA 444, [60]–[85] (Gleeson J); State of Victoria v CTM Training Solutions Pty Ltd (In liq) [2017] VSC 47, [32]–[37] (Sifris J); Commonwealth of Australia, in the matter of ACN 093 117 232 Pty Ltd (in liquidation) [2018] FCA 1922 (Derrington J); In the matter of ACN 152 546 453 Pty Ltd (formerly Hemisphere Technologies Pty Ltd) (in liq) [2018] NSWSC 1002, [15]–[20] (Gleeson JA); Melhelm Pty Ltd v Boka Beverages Pty Ltd (in liq)[2019] FCA 1184, [43]–[58] (Gleeson J); Williams & Kersten Pty Ltd v Walton Construction (Qld) Pty Ltd (in liq) [2019] FCA 1201, [14]–[20] (Reeves J); Glenfyne International Holding Limited v Glenfyne Farms International Au Pty Ltd (in liq) [2019] NSWCA 304, [59]–[61] (Bathurst CJ, Bell P and Macfarlan JA); Reidy as Trustee for the PR Mining superannuation Fund v Contained Gold Pty Ltd (in liq) [2020] FCA 268, [28]–[33] (Jackson J).
Since 1 September 2017, the power for the court to appoint an SPL arises under s 90-15(1) of sch 2, which provides that ‘[t]he court may make such orders as it thinks fit in relation to the external administration of a company.’ Under s 5-15(c) of sch 2, a company is taken to be in external administration if (relevantly) a liquidator has been appointed in relation to the company.
The court may make orders under s 90-15(1) on its own initiative or on an application under s 90-20 of sch 2. Section 90-20(1)(a) allows for such an application to be made by a person with a financial interest in the external administration of the company. Under s 5-30(a)(ii), a creditor of a company is a person with a financial interest in the external administration of a company. The term ‘creditor’ when used in relation to a company under external administration means a creditor of the company.[27]
[27]See s 5-5 of sch 2.
Section 90-15(3)(c) of sch 2 provides that the orders which can be made under s 90-15(1)include ‘an order that another registered liquidator be appointed as the external administrator of the company’.[28]
[28]Emphasis added.
Although the language of s 90-15(1) of sch 2 is unconstrained, s 90-15(3) provides non-exhaustive examples of the kinds of orders that can be made, and s 90-15(4) sets out a non-exhaustive list of the matters the court may take into account, as follows:
Without limiting the matters which the Court may take into account when making orders, the Court may take into account:
(a)whether the liquidator has faithfully performed, or is faithfully performing, the liquidator’s duties; and
(b)whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and
(c)whether an action or failure to act by the liquidator is in compliance with an order of the Court; and
(d)whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and
(e)the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act on public confidence in registered liquidators as a group.
In GDK Projects Pty Ltd v Umberto Pty Ltd (in liq) (GDK Projects),[29] Farrell J said:
The power to make orders conferred by s 90-15(1) contains no equivalent of s 511(2) which permitted the Court to accede to an application “if satisfied that … the exercise of power will be just and beneficial” The power is, in its terms, unconstrained. Section 90-15(4) lists some matters the Court is entitled to take into account but that list is expressed to be “[w]ithout limiting the matters which the Court may take into account when making orders”. In Re Walley (as administrators of Poles & Underground Pty Ltd (admins apptd) and Icon Plant Pty Ltd (admins apptd)) [2017] FCA 486, Gleeson J observed at [41] that the question of whether to exercise the power under s 90-15 of Sch 2 can be answered by reference to principles that applied to the exercise of the discretion under the provisions previously contained in ss 479(3) and 511. I agree that those cases can be a useful guide. Despite the breadth of the power conferred by s 90-15(1), it is difficult to envisage circumstances where the power would be exercised if the Court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration.
[29][2018] FCA 541, [33].
In Melhelm Pty Ltd v Boka Beverages Pty Ltd (in liq) (Melhelm),[30] Gleeson J observed that
[30](2019) 135 ACSR 95, 104–5 [57]–[59] (footnotes omitted).
It is appropriate to appoint [a special purpose liquidator (‘SPL’)] if:
(1)there are matters that require investigation by a liquidator with a view to possible recovery for creditors;
(2)the current liquidators have insufficient funds and insufficient prospects of obtaining funding to pursue an investigation;
(3)a creditor is prepared to fund investigations and recovery actions but only on the condition that another liquidator be appointed; and
(4)such an appointment would be beneficial to the winding up and the creditors as a whole: Deputy Commissioner of Taxation v Italian Prestige Jewellery Pty Ltd (in liq) (2018) 129 ACSR 115; [2018] FCA 983 (Italian Prestige Jewellery) at [34].
As to the first matter, it is necessary to identify with specificity the “special purposes” (or powers) for which the appointment of the special purpose liquidator is sought: Fitz v Fraser at [90] citing, inter alia, GDK Projects at [2] and Hemisphere Technologies at [22]. Examples of purposes that have been identified as matters for investigation by an SPL include whether any of the directors or officers of a company breached their statutory and or fiduciary duties to the company; whether transactions between the company and a specified third party were voidable transactions within the meaning of s 588FE of the Act; any dealing with an asset owned legally or beneficially by the company to a specified third party; and any claim that the company may have or may have had against a specified third party.
It is not necessary or appropriate to make findings on the potential claims in determining the application for the appointment of the SPLs: GDK Projects at [36]; Italian Prestige Jewellery at [37].
Although it may be appropriate to appoint an SPL in the circumstances helpfully described by Gleeson J in Melhelm, it is to be remembered that, as the New South Wales Court of Appeal recently observed in Glenfyne International Holding Limited v Glenfyne Farms International AU Pty Ltd (in liq); Glenfyne International Limited v GI Commercial Pty Ltd (in liq) (Glenfyne International),[31] the language of the section is not so constrained,[32] and regard is to be had to the broad terms of the section and the particular circumstances before the court. In the case of In the matter of ACN 152 546 453 Pty Ltd (formerly Hemisphere Technologies Pty Ltd) (in liq) (Hemisphere),[33] Gleeson JA made similar observations,[34] but noting as Farrell J did in GDK Projects,[35] that it is difficult to envisage in the abstract, circumstances in which the power would be exercised if the court could not be satisfied that it would be just and of sufficient utility to the external administration to make the appointment.
[31][2019] NSWCA 304.
[32]See also, for example, Manband Pty Ltd (In Liq) (subject to Deed of Company Arrangement) [54]–[56]; and In the matter of ACN 152 546 453 Pty Ltd (formerly Hemisphere Technologies Pty Ltd) (in liq) [2018] NSWSC 1002, [20].
[33][2018] NSWSC 1002, [15]–[20] (Gleeson JA).
[34]As have others. See, eg, Williams & Kersten Pty Ltd v Walton Construction (Qld) Pty Ltd (in liq) [2019] FCA 1201, [14]–[20] (Reeves J); Melhelm (2019) 135 ACSR 95, 104 [52] (Gleeson J); Weston (Liquidator), in the matter of Leetong Pty Limited (in liquidation) [2020] FCA 372, [62] (Gleeson J).
[35][2018] FCA 541, [33].
Whilst the circumstances in which an SPL will be appointed will vary from case to case, a review of the authorities reveals that two common examples are where the liquidator is prevented from investigating or pursuing causes of action which will benefit creditors because of an actual or perceived conflict of interest,[36] or where it has been demonstrated that there are matters that require investigation with a view to possible recovery for creditors in circumstances where it is of utility and just for such matters to be investigated by a different liquidator. The desirability of investigations being pursued by liquidators who are independent and seen to be so was also recently referred to by Markovic J in Phoenix.[37]
[36]Commonwealth of Australia, in the matter of ACN 093 117 232 Pty Ltd (in liq) v ACN 093 117 232 (in liq) [2018] FCA 1922, [3] (Derrington J) (Commonwealth of Australia); Honest Remark Pty Ltd v Allstate Explorations NL (2006) 234 ALR 765, 779 [58] (Brereton J).
[37][2020] FCA 937, [62].
In such cases it has been said that ‘[i]t should be stated in the strongest terms that applications of this nature occur very quickly with very limited time for any affected parties to respond. The Court is not called upon to make any final determination about the rights and wrongs of the matter or the allegations made.’[38] Instead, what needs to be demonstrated is ‘that there is a good reason for the appointment of a special purpose liquidator … [which] usually involves the assertion of some suspicion as to the inability of the general purpose liquidator to fully administer the winding up.’[39] In Commonwealth of Australia, the plaintiff had established, at least in a prima facie sense, substantive grounds for supporting its concerns that the primary liquidator would not pursue the investigations or causes of action because of an actual or perceived conflict of interest, noting also that the primary liquidator did not oppose the applications in that case.[40]
[38]Commonwealth of Australia [2018] FCA 1922, [4] (Derrington J).
[39]Ibid.
[40]Ibid [3]–[4], [32].
Matters to be taken into account in relation to whether an SPL should be appointed typically include how the SPL will be funded, whether the appointment of an SPL will burden the Company with added costs,[41] and how else the appointment might impact upon the liquidation and potential return to creditors.
[41]See, eg, Commonwealth of Australia [2018] FCA 1922, [27] (Derrington J); Onefone Australia Pty Ltd v One.Tel Ltd (in liq) (2003) 48 ACSR 562, 566 [13] (Windeyer J).
For example, in Reidy as Trustee for the PR Mining Superannuation Fund v Contained Gold Pty Ltd,[42] Jackson J stated:[43]
It is fair to say that the matters to be investigated do not yet raise any compelling case of misconduct or strong prospect of recovery. So the Court would be reluctant to authorise that expenditure if there was any prospect that the costs of the investigations and any proceedings would diminish the return to unsecured creditors.
But here, there is no realistic chance of that. Under the proposed deed of indemnity, Mr Reidy will be liable to pay the special purpose liquidators' fees and disbursements. It is true that the deed does not contain any limitation on the ability of the special purpose liquidators to claim their fees and disbursements from the company. But in circumstances where the company has no assets, that is not going to leave unsecured creditors worse off. There is no evidence of any creditor responding to [the present liquidator’s] call for expressions of interest in funding him to investigate. So there will only be any recoveries at all if the special purpose liquidators are appointed. And if the investigations do not result in any recoveries, then the special purpose liquidators will recover their fees from Mr Reidy, or not at all. I have already mentioned how the deed does not disturb the statutory order of priorities or seek to give Mr Reidy any advantage.
So the reality is that there will be no dividend to creditors if the special purpose liquidators are not appointed, and at least the possibility of a dividend if they are appointed. I also take into account that the Court ordered all unsecured creditors to be notified of the application and hearing date, and that has been done. No creditor has come forward to oppose (or support) the application.
The investigation of transactions warranting investigation, and the recovery of funds for the benefit of creditors, are important aims of the statutory winding up regime: see New Cap Reinsurance Holdings Ltd (ARBN 076 137 249) [2001] NSWSC 835 at [15] (Santow J). I am satisfied that the appointment of the special purpose liquidators will help achieve the first of those aims and holds out at least some prospect of achieving the second. Neither aim will be achieved if they are not appointed. The appointment will not expose unsecured creditors to any additional risk or liability. I am satisfied that it is just, and that Mr Reidy has demonstrated sufficient utility to the winding up, so that it will be beneficial to the winding up and to the creditors as a whole.
[42][2020] FCA 268.
[43]Ibid, [43]–[46].
In Re Glenfyne Farms International AU Pty Ltd (in liquidation); Re GI Commercial Pty Ltd (Glenfyne),[44] Rees J observed in reference to the considerations set out in s 90-15(4) of sch 2 that ‘[t]hese considerations, albeit not exclusive, suggest that there should be some failure on the part of the liquidator to attend to their duties before an order is made under s 90-15’.[45] However, on one view this, with respect, sits in tension with the unconstrained language of s 90-15(1) and the non-exhaustive and permissive terms of s 90-15(4), which was a point made in Glenfyne International by Bell P.[46] It should in my view be taken as being accepted that a failure on the part of the liquidators is not a pre-requisite for the making of an order under s 90-15(1) of sch 2, whether in connection with appointing an SPL or otherwise.[47] This also sits comfortably with the approach that was taken prior to the introduction of sch 2 to the question of whether an SPL should be appointed.[48]
[44][2019] NSWSC 161.
[45]Ibid, [52].
[46][2019] NSWCA 304, (Bathurst CJ and Macfarlan JA agreeing). This aspect is elaborated on later in these reasons when addressing one aspect of the plaintiff’s submissions.
[47]See Melhelm (2019) 135 ACSR 95, 112 [105]–[106] (Gleeson J).
[48]See, eg, Re Obie Pty Ltd (in liq) (no 4) (1984) 8 ACLR 967 (Thomas J); Re Spedley Securities Ltd (in liq) (1991) 4 ACSR 555 (Young J); State of Victoria v CTM Training Solutions Pty Ltd (in liq) [2017] VSC 47 [43] (Sifris J).
There is also authority suggesting that an SPL cannot be appointed for the purpose of investigating the conduct of a primary liquidator acting in that capacity.[49] Brereton J addressed the topic at some length in Honest Remark Pty Ltd v Allstate Explorations NL and Others (Honest Remark),[50] referring as follows to ‘… the very good reasons why this is so …’:
The investigation of the conduct of a liquidator qua liquidator is not part of the matters entrusted to a liquidator; it is a supervisory function of the court. The court does not readily embark on or permit inquiries into the conduct of liquidators, in the absence of conduct liable to attract sanctions or control for my broadly be described as disciplinary reasons: … As the cases referred to by Mullins J in McDonald show, courts protecting liquidators by refusing to allow them to be the subject of proceedings without leave….
A special purpose liquidator is appointed to coexist with the existing liquidators to fulfil a specific purpose which would otherwise form part of the responsibilities of the original liquidator, but which is carved out from those usual responsibilities because of difficulties in the original liquidator performing it. Because the investigation of the conduct of a liquidator is not part of the matters entrusted to a liquidator, but a supervisory function of the court, an investigation by one of several liquidators into the conduct of another in the liquidation does not involve coming out of the liquidation of part of the ordinary responsibilities of the liquidator. To the contrary, it involves circumventing the ordinary improper procedures for supervision of liquidators, and the protections that attend them.
In my opinion there is no power to appoint a special purpose liquidator for the purpose of investigating the conduct of the original liquidator as such. As has been seen, it is not the duty of the liquidator (or one of several liquidators) to investigate allegations against themselves or some of them… Such an investigation is not part of the administration, and it cannot therefore be carved out of the administration and given to a special purpose liquidator. In the terms used by Chitty J, it is not a matter arising in the course of the liquidation, conduct of which can be allocated to one of several liquidators. In the terms of section 473 (8) of the Corporations Act, it is not a thing required or authorised by the act to be done by liquidator.
[49]See Honest Remark Pty Ltd v Allstate Explorations NL (2006) 234 ALR 765, 777–81 [53]–[68] (Brereton J). See also Commonwealth of Australia, in the matter of ACN 093 117 232 Pty Ltd (in liquidation) [2018] FCA 1922, [33] (Derrington J).
[50](2006) 234 ALR 765, 779–781, [59]–[63].
Although these observations were made prior to the introduction of sch 2 and s 90-15, their underlying force appears to continue to resonate in the context of applications for the appointment of SPLs made pursuant to s 90-15 — at least so far as the exercise of discretion is concerned. Whether or not the same force remains in relation to the question of the court’s power under s 90-15 to make such an order need not be explored given the facts of the present application and the confined nature of the SPL’s purposes. If the occasion arises for this issue to be considered in the future, no doubt one of the relevant matters will be the extent to which, if any, the specific review powers set out in sub-d C of div 90 of sch 2 impact upon the proper construction of s 90-15(1) in this regard.
Submissions
There was no material difference between the parties about the law relating to the appointment of special purpose liquidators, and the parties each referred to many of the principles, observations, and authorities earlier referred to.
Plaintiff’s primary submissions
After addressing aspects of the background and evidence, the plaintiff submitted that it was apparent: that there are matters that require investigation by the Liquidator with a view to possible recovery to creditors; that the Liquidator has insufficient funds and insufficient prospects of obtaining funding properly to pursue recovery proceedings; that the plaintiff is a creditor and is prepared to fund investigations and recovery action but only on the condition that Mr Crisp is appointed as the SPL; and that such an appointment would be just and beneficial to the winding up and the creditors as a whole.
As to the matters warranting investigation and recovery proceedings, emphasis was placed upon the Liquidator’s investigations, relevant correspondence, and the claims made in the Recovery Proceeding (Recovery Claims).
With respect to funding for the Liquidator it was submitted that the evidence regarding funding was somewhat unclear and that it was not apparent whether counsel and solicitors agreed to act for the entirety of the matter, including possible appeals, on a speculative basis. It was further submitted that there was no evidence that the Liquidator can instruct the solicitors without getting payment and that there was no evidence of any funds being available from the Company.[51]
[51]Other than the $20,000 creditors’ voluntary liquidation indemnity from Mr Hyatt.
The plaintiff submitted it was undisputed that there was a creditor prepared to fund investigations and recovery actions, namely the plaintiff.
It was further submitted that because the Proposed Funding Agreement means that the SPL can be funded to $500,000 and effectively assures the Liquidator that ‘no funds whatsoever’ will be taken from the Company, except as received from the Recovery Proceeding, it was evident that it will be beneficial to the creditors if a motivated and funded SPL pursues the Recovery Proceeding and any related matters. This was said to be preferable to the Liquidator pursuing the Recovery Proceeding with the support of his solicitors and counsel, which was submitted to be more risky and likely to ‘fall over’ than the SPL proposal.
In the context of the contention that the appointment of the SPL would be just and beneficial, the plaintiff emphasised the desirability of the Liquidator being independent and being seen to be so. Attention was drawn to matters it contended were suggestive of an actual or perceived lack of independence, bias or conflict of interest. During the hearing this contention was refined to some extent with counsel for the plaintiff clarifying that, although language was used somewhat interchangeably, the focus of the submission was that the circumstances were such that there was a lack of sufficient independence, or at least a perceived lack of it.
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