TM Cladding Pty Ltd v Murfet

[2024] TASSC 15

[2024] TASSC 15

COURT:	SUPREME COURT OF TASMANIA
CITATION:	TM Cladding Pty Ltd v Murfet [2024] TASSC 15
PARTIES:	T M CLADDING PTY LTD (In liquidation) and
HERNYK, Steven (as Liquidator of TM Cladding Pty Ltd)
v
MURFET, Anthony Michael
FILE NO:	3599/2023
DELIVERED ON:	27 March 2024
DELIVERED AT:	Hobart
HEARING DATE:	29 February 2024
JUDGMENT OF:	Brett J
CATCHWORDS:

Corporations – Winding up – Liquidators – Resignation – Exercise of discretion to fill a vacancy in the office of liquidator pursuant to s 473A(1)(a) of the Corporations Act 2001 (Cth) – Leave granted under s

532(2) of the Corporations Act.

Aust Dig Corporations [1686]

Legislation:

Corporations Act 2001 (Cth): ss 473, 473A, 58AA(1), 532(2)

Federal Court (Corporations) Rules 2000: r 2.8(3)

Insolvency Practice Rules (Corporations) 2016 (Cth): ss 90-15, 90-20, 90-35

Cases Cited:

Michael, in the matter of Scenic Hinterland Day Tours Pty Ltd (in liq) [2023] FCA 1277

White, in the matter of Australia Phoenix Pty Ltd [2018] FCA 913

REPRESENTATION:

Counsel:

Applicants:	C Groves
Defendant:	No appearance

Solicitors:

Applicants:  Dobson Mitchell Allport

Judgment Number:	[2024] TASSC 15
Number of paragraphs:	19

Serial No 15/2024 File No 3599/2023

TM CLADDING PTY LTD (IN LIQUIDATION) and STEVEN HERNYK (AS

LIQUIDATOR FOR T M CLADDING PTY LTD) v ANTHONY MICHAEL MURFET

REASONS FOR JUDGMENT BRETT J
27 March 2024

1             These proceedings were commenced by originating application by the first applicant, the company in liquidation, and the second applicant, its liquidator. The respondent is a person whom, it is claimed, is indebted to the company, with the debt being secured by a mortgage over property owned by the respondent. The relief sought in the originating application includes a number of orders concerned with the appointment of receivers to enter into possession of and sell the property under the mortgage in order to recover the debt. The application seeks one further order, seemingly unrelated to the issue concerning the debt. It is the intention of the second applicant to resign as liquidator of the first applicant, and the application seeks an order that the vacancy created by that resignation be filled by another experienced liquidator.

2             At the outset of the hearing, I was informed by the applicants' counsel, that the applicants are not presently seeking the relief relating to the respondent's debt or the sale of the respondent's property. The only orders now sought concern the replacement of the liquidator.

3            The first applicant was wound up by order of the Federal Court made on 17 November 2011. Mr Hernyk was appointed as the liquidator of the company in that order. He has held that office since then. At the time of his appointment, Mr Hernyk was a partner of Deloitte Touche Tohmatsu. On 31 May 2014, he ceased to be a partner but continued with the firm as a consultant. He now wishes to retire, although he has not yet done so. It seems that he has been reducing his workload for some time in order to prepare for retirement and will retire imminently.

4 Section 473 of the Corporations Act 2001 (Cth) ("the Act") provides that a liquidator appointed by the court may resign. Section 473A provides for the filling of a vacancy in the office of a court appointed liquidator. Section 473A(1) makes it clear that the vacancy may be filled by the court or by Australian Securities and Investment Commission (ASIC). I was told that, as a matter of practice, many of these applications are taken to ASIC, but in this case the application has been made to this Court.

Jurisdiction and procedure

5 There are a number of jurisdictional and procedural questions which need to be dealt with before I consider the merits of the application. Firstly, it is clear that this Court has jurisdiction to deal with the application, notwithstanding that the original appointment was made by the Federal Court. Section 58AA(1) of the Act defines "Court" to include the Federal Court and the Supreme Court of a State or Territory. There is no impediment to the "Court" that deals with the matter being different to the court that made the initial appointment. See Michael, in the matter of Scenic Hinterland Day Tours Pty Ltd (in liq) [2023] FCA 1277 at [13], and the cases referred to therein. Further, the authorities are clear that the court's power to fill a vacancy under s 473A(1)(a) can be made in anticipation of retirement: See White, in the matter of Australia Phoenix Pty Ltd [2018] FCA 913 per Steward J; Michael, in the matter of Scenic Hinterland Day Tours Pty Ltd (in liq) at [12]. If there is any doubt about this, and the authorities would suggest there is not, the Court has power in any event

to appoint "another registered liquidator … as the external administrator of the company" pursuant to

ss 90-15 and 90-20 of Schedule 2, Insolvency Practice Schedule (Corporations) ("IPSC"), of the Act. I note that the Court has power to make that order "on its own initiative, during proceedings before the Court". See s 90-15(2)(a).

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6             I have been asked to deal with this matter on an ex parte basis. I note that the respondent has not been formally served with the originating application but the relief sought in respect of the replacement of the liquidator is not a matter that affects him, or upon which he would be entitled to be heard, in any event. I am informed that this relief was included as part of the originating application as a matter of convenience. Although it was intended to serve the application because the balance of the relief directly affected the respondent, now that that part of the application has fallen away, there is no longer a need for service on the respondent.

7             It is arguable that the creditors of the company would have an interest in the identity of a new court appointed liquidator and, accordingly, may be entitled to be informed of the application and to be heard in respect of it. However, service on the creditors is not a legislative requirement and in the circumstances of this case, I am prepared to determine the application notwithstanding the lack of notification. The orders proposed by the applicant include provision for notification of the replacement, by circular to the creditors. I note that the creditors have power to remove and replace the liquidator at any time. See s 90-35 of the IPSC. I also agree with the view taken by Steward J in White that the power conferred on the court under s 473A "reflects Parliament's intention that this

court be able to appoint replacement liquidators … in addition to and independently of the power

conferred on creditors to make the same appointments".

8             The proposal is that upon Mr Hernyk's retirement, he be replaced by Travis Adrian Anderson, who is currently a partner of Deloitte Financial Advisory Pty Ltd. Clearly, the replacement liquidator must be suitably qualified to fill that position. As Derrington J said in Michael:

"Accordingly, the incoming liquidator must be registered, must be independent (and must be seen to be independent) and must not be disqualified on account of any of the circumstances set out in s 532(2) of the Corporations Act".

9             The final procedural issue concerns notification of ASIC. Rule 2.8(3) of the Federal Court (Corporations) Rules 2000 requires service of originating process on ASIC in respect of certain types of applications. This includes where an order is sought under s 90-15 of the IPSC pursuant to section 90-20, but does not seem to include the exercise by the court of its powers under s 473A. In my view, although s 473A provides the court with power to make the order, the matter comes before the court by virtue of the relevant provisions of the IPSC. It follows that it is necessary to serve ASIC. Whether or not this is the case, there is evidence that ASIC has been served with the relevant documents. I was informed at the commencement of the hearing that it does not intend to intervene in the proceedings.

10           Mr Anderson has filed two affidavits in these proceedings. It is clear from his evidence that he is a registered liquidator. He was a partner of Mr Hernyk between 1 November 1998 and 31 May 2014 and has remained as a partner of the firm, while Mr Hernyk has been a consultant. It is clear from Mr Anderson's evidence that he has considerable experience as a liquidator and has worked with Mr Hernyk on a number of occasions in that role. There is no suggestion that he has any interest in the affairs of the first applicant, apart from the involvement of his firm in the liquidation, or that there is any other circumstance that would impugn his independence.

11           The issue of potential disqualification of Mr Anderson under s 532(2) arises because of Deloitte's role in the liquidation to the present time. The evidence provided by Mr Anderson establishes that Mr Hernyk in his capacity as liquidator holds $23,566.75 in a bank account and there are $12,095.60 in accrued fees plus anticipated legal costs of approximately $4,000 owed by the company to Deloittes. This gives rise to the potential application of s 532(2)(b). Further, as a liquidator is considered to be an officer of the relevant corporation, the respective positions of Mr Anderson and Mr Hernyk in Deloittes give rise to the question of whether disqualification under s 532(2)(c)(v) is applicable. In either case, the relevant circumstance would operate to disqualify Mr Anderson unless the Court grants leave for him to act as liquidator of the company.

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12   In Michael, Derrington J in an extremely detailed analysis considered the relevant provisions

and authorities relating to them. Her Honour reached the following conclusions:



Her Honour found that "where an incoming liquidator is a partner in a partnership to which the company has become indebted in an amount exceeding $5,000, leave must be granted under s 532(2) in order for them to seek to be appointed or to act". Her Honour noted that this requirement is a somewhat arbitrary, and perhaps unintended, result of the text of s 532(2)(b). However, her Honour also noted that where leave is sought in such a scenario "once it is sought, it will readily be granted".



Her Honour did not resolve inconsistency in the authorities concerning the application of the disqualifying factor in s 532(2)(c)(v) in circumstances such as this. However, it was noted, that once again, the application of that provision may be the somewhat arbitrary result of the text of the provision. I do not think it is possible to escape that conclusion and, accordingly, as a matter of caution, leave should be sought in that circumstance. In this case, there would seem to be little doubt that Mr Anderson is, through his role as a partner in Deloittes, an employer of Mr Hernyk, who was an officer of the company. However, Derrington J again noted that leave "under s 532(2) when sought in such circumstances, will readily be granted".

13 It follows that I am satisfied that leave is necessary in order for Mr Anderson to avoid disqualification under s 532(2). In a case such as this, the considerations relevant to the grant of leave will necessarily merge into those informing the exercise of discretion as to appointment of the proposed replacement liquidator under s 473A(1)(a).

Determination

14           In Michael, Derrington J summarised considerations "that may, in a particular case, be relevant to the exercise of the power in s 473A(1)(a)". The summary was derived from comments made by Steward J in White:

"(a)	whether the incoming liquidator is a member of the same firm as the resigning liquidator;
(b)	whether the incoming liquidator has agreed to be remunerated on the same terms and conditions as the resigning liquidator;
(c)	whether the incoming liquidator's firm is willing to pay the legal costs of the application;
(d)	whether the resignation that necessitated the application is the product of any professional irregularity; and
(e)	whether the appointment of the incoming liquidator would otherwise cause any prejudice."

15           Her Honour explained that there are obvious advantages in a vacancy being filled by a member of the same firm, particularly if that person has some "measure of association or familiarity with the matters on which that liquidator worked which suffices to ensure a degree of continuity in the liquidation". I agree with these comments.

16           In this case, consideration of the listed matters supports the conclusion that the orders sought are in the interest of the creditors. I am satisfied that Mr Anderson is clearly qualified and with sufficient experience to properly fulfil the role of liquidator. His close work with Mr Hernyk will ensure continuity and, hence, efficiency. I note also that Mr Hernyk's resignation is not "a product of any professional irregularity". Further, the appointment of Mr Anderson will not cause prejudice to

4   No 15/2024

the company or the creditors. Mr Anderson has attested that his rates and charges will be the same as
those charged by Mr Hernyk and that Deloitte will pay the costs of the application

17           I am satisfied, therefore, that leave should be granted to Mr Anderson to seek to be appointed as, and act as, liquidator of the company, and further that I should order that upon Mr Hernyk's resignation, Mr Anderson be appointed to that office.

18           The applicants seek an order that dispenses with the need for Mr Anderson to comply with rules 70-30 and 70-40 of the Insolvency Practice Rules (Corporations) 2016 (Cth), upon his appointment taking effect. These rules in essence require the liquidator to provide certain detailed information to creditors at the commencement of the liquidation. In Michael, Derrington J noted that it had been held in a number of cases that the obligation is triggered upon the appointment of a replacement liquidator pursuant to s 473A(1)(a). The Court has power under s 90-15(1) of the IPSC to dispense with the need for compliance with these rules. It is clearly appropriate to exercise that discretion and provide that dispensation. Mr Anderson's affidavits explain that the information had already been provided by Mr Hernyk to the creditors and that for him to do it again simply to comply with the regulations would involve significant and unnecessary expense. In the circumstances, it is appropriate that this expense be avoided.

19   Accordingly, I make the following orders:

1 That Travis Adrian Anderson have leave pursuant to s 532(2) of the Corporations Act 2001 (Cth) to be the liquidator of the first applicant.

2      That upon the resignation of the second applicant as liquidator of the first applicant, Travis Adrian Anderson be appointed to fill the vacancy in the office of liquidator of the first applicant.

3      Travis Adrian Anderson is not required to perform tasks required by clauses 70-30 and 70‑40 of

the Insolvency Practice Rules (Corporations) 2016 (Cth) that have already been performed by
Steven Allan Hernyk in the liquidation of the first applicant.

4      Creditors of the first applicant must be notified by circular to their last known email address, or address, as to the resignation of Steven Allan Hernyk and the appointment of Travis Adrian Anderson.

5      Costs of the application for liquidator appointment are to be borne by Deloitte Touche Tohmatsu or Deloitte Financial Advisory Pty Ltd.

6      That the balance of the originating application be adjourned sine die.