Vink v Tuckwell (No 2)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

CORPORATIONS LIST

No. 6759 of 2007

IN THE MATTER OF CORPORATE
INTERIOR CONSTRUCTIONS PTY LTD (in liquidation)
(ACN 068 492 204)

BETWEEN:

MARTIN VINK	Plaintiff
v
COLIN ROLAND TUCKWELL (AS LIQUIDATOR OF CORPORATE INTERIOR CONSTRUCTIONS PTY LTD) (IN LIQUIDATION) (ACN 068 492 204)	Defendant

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	5 & 6 May 2008
DATE OF JUDGMENT:	17 June 2008
CASE MAY BE CITED AS:	Vink v Tuckwell (No.2)
MEDIUM NEUTRAL CITATION:	[2008] VSC 206	1^st revision 27/6/2008

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CORPORATIONS – Creditors’ voluntary liquidation – Application for an inquiry into the conduct of a liquidation under s 536(1)(b) of the Corporations Act 2001 - Complaints made to the court with respect to the conduct of the liquidator under s 536(1)(b) of the Corporations Act 2001 – Complainant has no interest in the liquidation - Whether complaints warrant an inquiry – Application dismissed – Recommendation that law be amended to limit standing to complain to those with an interest in the liquidation - s 536 Corporations Act 2001 (Cth)

Dallinger v Halcha Holdings Pty Ltd (In Admin) (1996) 14 ACLC 263
Gartside v IRC [1968] AC 553
Linton v Tuckwell [2007] No. 8355 of 2002 (Unreported, Maxwell P & Buchanan JA, 24 April 2007)
Vink v Tuckwell [2007] 6759 of 2007 (Unreported, Maxwell P and Chernov JA, 19 September 2007)
Vink v Tuckwell [2008] VSC 100
Walter v Registrar of Titles [2003] VSCA 122

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr Vink appeared in person	None
For the Defendant	Mr S Marantelli	Wisewoulds

TABLE OF CONTENTS

SUMMARY......................................................................................................................................... 2

SUMMARY OF ISSUES................................................................................................................... 3

The TG & AM Van Oosterom Loan Account............................................................................ 4

HISTORY OF THE APPLICATION............................................................................................. 10

EVIDENCE AND SUBMISSIONS RELIED ON....................................................................... 14

Submissions by Mr Vink............................................................................................................ 14

BACKGROUND FACTS................................................................................................................ 15

THE LEGISLATION AND RULES.............................................................................................. 34

RELEVANT AUTHORITIES......................................................................................................... 36

STANDING....................................................................................................................................... 36

COMPLAINTS OF MR VINK AGAINST MR TUCKWELL.................................................. 37

The administration of CIC by Horwath and arrangements between Mr Tuckwell and Mr Van Oosterom...................................................................................................................................... 39
Arrangement between the defendant and Van Oosterom.................................................... 42
Abortive attempt by Horwath to sell Linton properties....................................................... 45
False allegations in the Supreme Court by Mr Tuckwell...................................................... 46
The Horwath report to creditors............................................................................................... 48
Destruction of business records................................................................................................ 53
Conclusion of Mr Vink’s supporting affidavit....................................................................... 55

OTHER COMPLAINTS.................................................................................................................. 57

Abuse of Part 5.3A...................................................................................................................... 57
Contemporaneous notes............................................................................................................ 59

CONCLUSION................................................................................................................................. 59

AMENDMENT OF THE ACT....................................................................................................... 60

HIS HONOUR:

SUMMARY

Corporate Interior Constructions Pty Ltd (in liquidation) (“CIC”) is being wound up under a creditors’ voluntary winding up. Colin Tuckwell (“Mr Tuckwell”) is the liquidator. CIC had been the corporate vehicle by which Thomas Van Oosterom (“Mr Van Oosterom”) and his wife, Ani Van Oosterom, had conducted a corporate fit-out business. CIC acted as trustee for the Van Oosterom Family Trust. The business was very successful. Unfortunately, Mr and Mrs Van Oosterom’s marriage failed and they separated. They sought to come to an agreement about the division of the family property with Mr Van Oosterom keeping the business. Shortly after the separation, however, the business also failed. CIC called in Mr Tuckwell as an administrator and the creditors resolved to put the company into liquidation.

The liquidator took proceedings against both Mr Van Oosterom and his wife (now known as Ms Linton) (“Ms Linton”) to recover moneys purportedly due under a loan account with CIC.

Shortly after CIC went into liquidation, Mr Vink began to assist Ms Linton in her defence of the liquidator’s claim. He has no other interest in CIC. Currently, Ms Linton has resolved all her issues with the liquidator. Mr Vink, however, has made complaints to the court with respect to the conduct of Mr Tuckwell in connection with the performance of his duties as liquidator of CIC under s 536 of the Corporations Act 2001 (“the Act”) and applies for an inquiry under s 536. The two main complaints relate to the alleged failure of Mr Tuckwell to investigate and pursue Mr Van Oosterom and his alleged improper pursuit of Ms Linton in getting in the assets of CIC.

For the reasons that follow, I have found the complaints do not warrant an inquiry under s 536 and I dismiss the application.

SUMMARY OF ISSUES

It is convenient to briefly summarise the issues involving Ms Linton and the complaints against Mr Tuckwell before I descend into the detail of the application.

In 1995, Mr Van Oosterom and his wife, Ani Van Oosterom, started a corporate fit-out business. They took advice from their accountant, Mr Kevin Moran, as to the most appropriate structure to carry out the business. Mr Moran advised that the most appropriate structure would be to incorporate a company, which they did, CIC, and establish a trading trust, which they did, known as the Van Oosterom Family Trust. The beneficiaries to the trust were to be Mr Van Oosterom, Ms Linton and their children.

The business was very successful and for the financial year ended 30 June 2000 the business made in excess of half a million dollars. Mr Van Oosterom concentrated mainly on the fit-out work and Ms Linton was the financial controller and kept the company’s books of account.

On 31 January 2001, the couple separated, with Mr Van Oosterom leaving the family home. At that stage, the separation was amicable. Ms Linton remained as the bookkeeper of the business until July of 2001. Mr Van Oosterom and Ms Linton sought to divide between themselves the property of the marriage. There is a dispute as to whether they reached a binding agreement as to this. In substance, they agreed (at least in principle) that Ms Linton would take certain real estate that they had acquired and that Mr Van Oosterom would take the business.

In about May 2001, Mr Van Oosterom left the business in the hands of a manager to cope with the breakdown of the marriage. Despite the marriage breakdown, the company made a reasonable profit for the year ending 30 June 2001. After 11 September and the World Trade Centre attacks, the business of the company started to go downhill and in early 2002 Mr Van Oosterom returned to take control of the business.

In early 2002, Mr Van Oosterom sought to refinance the business, but had difficulty doing so, as the real estate which had supported the previous financing of the business from the CBA was now in the control of Ms Linton and she was unwilling to help. He tried to sell the business to its employees without success. By April 2002, he then, on the advice of his accountant, had the company put into administration. Mr Tuckwell was appointed the administrator. Mr Tuckwell subsequently recommended to the creditors that the company be put into liquidation, which was agreed to on 8 May 2002.

Mr Tuckwell set about getting in the assets of the company. According to the books of account, one of the main assets was a loan account in the name of “Loan to TG & AM Van Oosterom” (“the loan account”), being a joint loan to Mr Van Oosterom and Ms Linton. Mr Tuckwell’s actions over this loan account are central to Mr Vink’s complaints about the conduct of Mr Tuckwell.

The TG & AM Van Oosterom Loan Account

Mr Tuckwell took proceedings in the Supreme Court of Victoria against Ms Linton to recover moneys due under the loan account (“the loan proceedings”). Mr Tuckwell filed a witness statement of Mr Kevin Moran in these proceedings.[1] It has been exhibited to Mr Vink’s supporting affidavit[2] in this application and it was also relied upon by the Court of Appeal in its judgment of 24 April 2007 when it considered an application for leave to appeal by Ms Linton against the decision of Dodds-Streeton J to not strike out paragraphs of Mr Tuckwell’s statement of claim against Ms Linton.[3] I rely on the Court of Appeal’s judgment in what follows in my description of the loan account issues. The matters set out, however, may be found in the exhibits to Mr Vink’s supporting affidavit of 4 November 2007 (“Mr Vink’s supporting affidavit”).
[1]Exhibit MBV 48
[2]Affidavit of Mr Vink of 4 November 2007 (unless otherwise indicated, a reference to “Vink affidavit” is a reference to this affidavit)
[3]Linton v Tuckwell [2007] No. 8355 of 2002 (Unreported, Maxwell P & Buchanan JA, 24 April 2007)

At the outset, Ms Linton and Mr Van Oosterom were the sole directors and shareholders of CIC. Ms Linton resigned as a director shortly after the company was established and Mr Van Oosterom continued as the sole director, save for a short period at the end of 2001 and the beginning of 2002 when Mr Di Carlo also acted as a director. As part of the division of assets following the separation of the parties in 2001, Ms Linton transferred her share in the company to Mr Van Oosterom, although the transfer had not been notified to ASIC when CIC went into administration.

The business of the company was to fit-out corporate offices. The trust itself was a discretionary trust of which Ms Linton and Mr Van Oosterom and their children were beneficiaries. According to Mr Moran’s statement, the corporate and trust structure were set up on the basis of his advice. Mr Moran explained to Ms Linton and Mr Van Oosterom that, as beneficiaries, they could become entitled to share (by way of distributions) in the profits earned by the company in its capacity as trustee. Mr Moran says that he explained to Ms Linton and Mr Van Oosterom that, during the year and prior to the trading profit being determined and the trust resolving to distribute the profit to beneficiaries, they could take funds from the Trust by way of a beneficiary loan.

Mr Moran explained to Ms Linton and Mr Van Oosterom that, once the profit was determined and distributed, they could credit their beneficiary loan account with any profit which the Trust had resolved to distribute to them. He says that he specifically pointed out to them that, if they took more by way of beneficiary loans than was distributed as profit in any year, the difference would be a legal liability owed by them to the Trust.

Mr Moran says further that Ms Linton and Mr Van Oosterom decided at the outset that the loan account, which recorded amounts paid to one or other or both of them, was to be joint. He says that this decision was made on the basis that the moneys were to be drawn for joint purposes, such as repayments on the family home, family living expenses and the like.

According to Mr Moran, over the years of the operation of the business, Ms Linton and Mr Van Oosterom withdrew funds from the business. These withdrawals were recorded in the accounting records of the Trust as loans to them in the account styled “Loan to TG & AM Van Oosterom.” He says that these withdrawals were recorded by Ms Linton or under her supervision and were recorded in the general ledger maintained by the Trust. By her own admission, Ms Linton was the (unpaid, part-time) bookkeeper of the company.

The business commenced in about May 1995. In the first year in which he prepared accounts, Mr Moran advised Ms Linton and Mr Van Oosterom that it was usual accounting practice to reduce the loan by taking into account any profit distributed to the beneficiary. Despite that advice, Mr Moran says, Ms Linton specifically instructed him to account for the loan separately and on a cumulative basis in the balance sheet of the Trust, as a current asset. According to Mr Moran, Ms Linton said that she wanted the Trust to account in that way so she could keep track of how much money she and Mr Van Oosterom were drawing from the business.

Mr Moran’s witness statement describes, year by year, the loan drawings and the profit distributions which took place. He points out that the gap between what had been drawn and the amounts of profit distributed to Ms Linton and Mr Van Oosterom had grown to more than $400,000 prior to the break-up of their marriage in early 2001. By June 2001, the gap had grown to over $700,000. According to Mr Moran, he regularly explained to Ms Linton and Mr Van Oosterom that their withdrawals for personal expenditure exceeded the amount of profit distributed to them.

When the matter came before the Court of Appeal on 30 March 2007, the substance of the loan proceedings claim against Ms Linton was as follows:

(1) In each of the seven financial years beginning 1994/1995 and ending 2000/2001, Ms Linton and Mr Van Oosterom took drawings by way of loan from the company totalling $1.37 million (alternatively $1.31 million), in anticipation of distributions of profits being made to them as beneficiaries of the Trust.

(2) The liability of Ms Linton and Mr Van Oosterom to repay the loan is joint and several.

(3) During that period, CIC made profits totalling $1,169,377.

(4) During that period, Ms Linton received beneficiary distributions of profit totalling $223,280.

(5) Ms Linton is indebted to the company in a nett sum calculated by subtracting from the balance in the loan account two amounts, namely:

· $254,448.95, which was incorrectly debited against the loan account when it was in fact a payment of the company’s tax liability; and

· $223,280, being the distributions of profit to Ms Linton as beneficiary of the Trust.

On the hearing before the Court of Appeal on 30 March 2007, counsel for the liquidator conceded that credit also should be given for the profit distributions to Mr Van Oosterom and that, as a result, the amount claimed from Ms Linton would be reduced by $413,595 (being the amount of profit distributed to Mr Van Oosterom but not set off against the loan account).

Initially, the liquidator claimed approximate $1.8 million from both Ms Linton and Mr Van Oosterom on the basis of the loan account.

Ms Linton denied any liability and without seeing her defence in the loan proceedings, as best as I can ascertain, she raised the following matters.[4] First, she denied any liability on the basis that her husband had agreed, in the division of the family’s assets, to assume responsibility for the loan account. As indicated above, there was some doubt as to whether in fact the agreement made was binding and, in any event, there were issues about whether or not such an agreement would have bound the company.
[4]The pleadings in the loan proceedings were not tendered in evidence

Secondly, if she was liable on the loan account, she says that she was only liable on the loan account as it stood as at the end of January 2001 when Mr Van Oosterom agreed to take over the business. After that date, she said that any further borrowings from the company were, pursuant to the agreement she had made with Mr Van Oosterom, the sole responsibility of Mr Van Oosterom.

Thirdly, she claimed that the amounts standing to the credit of the beneficiary loans in favour of her and Mr Van Oosterom and her children should be set off against the loan account. As indicated above, this was subsequently conceded by Mr Tuckwell.

Finally, there was a defence arising out of the large amount of profits which were earned in the 1999/2000 year. As indicated above, they were in excess of $500,000. Mr Moran advised that if this profit was distributed to Ms Linton and Mr Van Oosterom, as it had been in the past, they would both face a very heavy provisional taxation bill and the cash flow effect would be that virtually the whole of the profit would be paid in tax. He suggested that, rather than distribute the whole of the profit to Ms Linton and Mr Van Oosterom and a minor amount to their two children, approximately $500,000 should not be distributed to them but rather the trustee should pay tax on the retained profit at the maximum marginal rate. He suggested only a small proportion of the profit should be distributed to Ms Linton and Mr Van Oosterom. He says they both agreed to this proposal. This had two consequences. First, as indicated above, the tax that the company paid was wrongly debited to the loan account. However, that wrongful debiting was acknowledged by Mr Tuckwell in the loan proceedings. Secondly, as the moneys were not distributed to the beneficiaries, they were not available to offset the loan account. This issue was addressed by the Court of Appeal where they said the contention was made that there was no cause of action because the profits generated by the company exceeded the drawings. The Court of Appeal said that that conclusion did not follow. By itself, they said, the aggregate amount of profit of the company was irrelevant. The Court of Appeal said that what matters was the amount of profit distributed by the company to the beneficiaries, which must be offset against the amount repayable on the loan.[5]
[5]Linton v Tuckwell [2007] No. 8355 of 2002 (Unreported, Maxwell P & Buchanan JA, 24 April 2007) [21]

Be that as it may, these were, in substance, the defences and answers that Ms Linton had to Mr Tuckwell’s claim. Mr Tuckwell commenced proceedings on the loan account in 2002. In addition to defending the claim, Ms Linton took other steps to ward off the loan proceeding. At the stage the proceedings were issued against her, Mr Vink, who was neither a creditor or debtor, director or shareholder in the company, nor a beneficiary in the discretionary trust, was assisting Ms Linton with her dispute with the liquidator.[6] With Mr Vink’s assistance, Ms Linton took proceedings in VCAT against Mr Moran’s accounting firm, alleging that the accounts prepared by Mr Moran and advice that Mr Moran had given in relation to those accounts was misleading and deceptive. Member Vassey of VCAT gave a detailed judgment on those matters and, in passing, opined on the strength of the claim of the liquidator against Ms Linton, expressing the opinion that it was bound to succeed.[7]
[6]Vink affidavit of 4 November 2007 [4]
[7]Exhibit MBV 30

In early 2002, Ms Linton and Mr Van Oosterom went to the Family Court to litigate the division of property under the Family Law Act1975 (Cth). In those proceedings, the liquidator was drawn in on applications by Ms Linton, in particular seeking production of documents by him and also alleging contempt of court in his dealing with CIC’s documents.

Further, as will be indicated below, the loan proceedings in the Supreme Court were fought at each step by Ms Linton, including Ms Linton obtaining an order that CIC and the liquidator put up security for costs for their proceedings. Finally, as we shall see, Ms Linton herself took proceedings against Mr Tuckwell to have him removed as liquidator and also seeking an order for an inquiry into his activities as liquidator under s 536 of the Corporations Act 2001 (Cth) (“the Act”). Details of those proceedings were not in evidence before me. I am only able to infer what took place from the selective exhibits tendered by Mr Vink.

In November of 2007, Mr Tuckwell and Ms Linton came to an agreement whereby the loan proceedings against Ms Linton would be dismissed and Ms Linton’s applications to remove Mr Tuckwell as liquidator and seek an inquiry into his activities as liquidator were also dismissed in a settlement under which both parties walked away.

Generally speaking, Mr Vink’s complaints about Mr Tuckwell’s conduct as liquidator of CIC referred to in his supporting affidavit in support of the application are as follows:

(1) Mr Tuckwell failed to properly investigate or pursue Mr Van Oosterom for claims that Mr Van Oosterom permitted the company to trade whilst insolvent and making drawings from the company whilst insolvent;

(2) Mr Tuckwell failed to properly investigate and improperly made claims against Ms Linton in relation to two properties which CIC had previously held as trustee;

(3) Mr Tuckwell misled creditors in his report to creditors as administrator;

(4) Mr Tuckwell improperly permitted Mr Van Oosterom to destroy books and records at CIC;

(5) Mr Tuckwell failed to properly investigate or prosecute Mr Van Oosterom for possible defalcation of the trust’s moneys and for dereliction of his duties as a director in absenting himself from the business in 2001; and

(6) Mr Tuckwell made false allegations against Ms Linton in the loan proceedings.

In addition, Mr Vink made other allegations against Mr Tuckwell from the Bar table and in his written submissions.

HISTORY OF THE APPLICATION

On 18 June 2007, Mr Vink issued an originating motion that stated this application is made under s 536 of the Act. Mr Vink claims under s 536 of the Act that Mr Tuckwell has inadequately and/or improperly conducted the liquidation of CIC. The motion states that on the facts stated in the “supporting affidavit” Mr Vink claims an order pursuant to s 536 of the Act that an inquiry be conducted into the liquidation of CIC. As referred to in the origination motion and as required by r 2.4 of the Supreme Court (Corporations) Rules2003 (Vic) (“the Corporations Rules”), Mr Vink’s filed a “supporting affidavit” of 18 June 2007 that purportedly deposed to the facts in support of the originating process.

On 31 July 2007, Mr Tuckwell issued an interlocutory process in the proceeding commenced by the origination motion seeking an order dismissing Mr Vink’s application. Mr Tuckwell relied on the court’s inherent jurisdiction to summarily dismiss claims without any prospect of success.[8]
[8]See also Rule 23.01 Supreme Court Rules 2005 (Vic)

On 2 August 2007, Mr Tuckwell filed an outline of submissions in support of his application to have Mr Vink’s application summarily dismissed. The outline of submissions contended that Mr Vink’s affidavit of 18 June 2007 was objectionable and did not depose to the facts necessary to support the originating process.

On 3 August 2007, Dodds-Streeton J granted Mr Tuckwell’s application and dismissed Mr Vink’s application. On 17 August 2007, Mr Vink sought leave to appeal from the decision of Dodds-Streeton J dismissing his application. On 19 September 2007, Mr Vink’s application for leave to appeal was heard. Leave was granted and the appeal allowed on the grounds that Mr Vink had been denied natural justice in not being given an adjournment to consider Mr Tuckwell’s written submissions, which Mr Vink had not received until the morning of 3 August 2007. The Court of Appeal remitted Mr Tuckwell’s application to dismiss Mr Vink’s application to the commercial list for hearing and determination according to law.[9]
[9]Vink v Tuckwell [2007] 6759 of 2007 (Unreported, Maxwell P and Chernov JA, 19 September 2007).

On 1 October 2007, the matter came on before me and was adjourned to 12 October 2007. On 5 October 2007, Mr Tuckwell filed a further outline of submissions, and on 9 October 2007, the solicitors for Mr Tuckwell provided Mr Vink with a list of objections to his affidavit. On 10 October 2007, an affidavit by Paul Wayne Marsh was filed on behalf of Mr Tuckwell verifying service of the list of objections. On 11 October 2007, Mr Vink filed an outline of submissions. On 12 October 2007, I adjourned the further hearing of Mr Tuckwell’s application and Mr Vink’s application to 2 November 2007.

On 1 November 2007, in a letter from ASIC to my associate, ASIC referred to the proceeding, saying that it had been served with copies of Mr Vink’s originating process filed 19 June 2007 and Mr Vink’s affidavit of 18 June 2007. ASIC said it neither supported nor opposed Mr Vink’s application in the subject proceedings. ASIC said that it had, for some considerable time, been aware of the certain related “proceedings” referred to in Mr Vink’s affidavit and, in particular, Tuckwell v Linton & Ors (Supreme Court of Victoria proceeding number 8355 of 2002) and Linton v Tuckwell (Supreme Court of Victoria proceeding number 6575 of 2006). ASIC said that if, following conclusion of the proceedings referred to, it would be demonstrated to ASIC that an adverse finding had been made by the Court against Mr Tuckwell with respect to his conduct as administrator or liquidator, ASIC would in that event review its consideration of the question whether or not to inquire further into the matter. ASIC concluded its letter by saying it was not ASIC’s current intention to intervene in the subject proceeding.

On 2 November 2007, both Mr Tuckwell’s application and Mr Vink’s application were set down for hearing on 25 February 2008 with an estimated hearing time of two days.

On 8 November 2007, Mr Vink filed a further supporting affidavit sworn 4 November 2007 that sought to overcome criticisms that Dodds-Streeton J had made in her reasons for summarily dismissing Mr Vink’s application on 3 August 2007. This affidavit replaced the original supporting affidavit of 18 June 2007 as the supporting affidavit that sought to state the necessary facts to support the originating process as required under r 2.4 of the Corporations Rules (“the supporting affidavit”). On 20 December 2007, Mr Tuckwell filed an affidavit responding to Mr Vink’s supporting affidavit. This affidavit was not relied upon by Mr Tuckwell in his application to have Mr Vink’s application summarily dismissed, but has been relied on in the hearing of Mr Vink’s application.

On 11 February 2008, Mr Vink swore, filed and served an affidavit in response to the affidavit of Mr Tuckwell of 20 December 2007. Mr Vink also sought to rely upon affidavits of Lorenz Turko sworn 14 February 2008 and Basil Richard Le Riche sworn 14 February 2008. On 18 February 2008, Mr Marsh from Wisewoulds, solicitors for Mr Tuckwell, filed a further short affidavit. On 19 February 2008, further submissions were filed on behalf of Mr Tuckwell which included his submissions on his application of 31 July 2007 to dismiss Mr Vink’s application. On 20 February 2008, Mr Vink swore a further affidavit replying to the short affidavit of Mr Marsh of 18 February 2008.

On 25 February 2008, the hearing commenced of Mr Tuckwell’s application to summarily dismiss Mr Vink’s application of 19 July 2007. On 25 February 2008, Mr Vink tendered written submissions. Further written submissions were tendered on 26 February 2008. The hearing of Mr Tuckwell’s application concluded on 26 February 2008 and I reserved my decision (“the first hearing”). On 1 April 2008 I dismissed Mr Tuckwell’s application and published written reasons thereafter.[10]
[10]Vink v Tuckwell [2008] VSC 100

On 5 May 2008, Mr Vink’s application came on for hearing before me. The hearing lasted two days (“the second hearing”). Mr Vink relied on further written submissions. All up, Mr Vink has filed some seventy pages of submissions. On 5 May 2008, at the commencement of the second hearing, Mr Vink sought to rely on a further affidavit by himself and an affidavit sworn by Ms Linton. The liquidator objected that he had only just been served. In view of the time Mr Vink had had to file material and the prejudice to Mr Tuckwell in further adjourning the hearing to give him time to respond to the affidavits, I refused to admit them into evidence.

EVIDENCE AND SUBMISSIONS RELIED ON

Mr Vink relied on the following exhibit, affidavits and the exhibits thereto:

(a) Affidavit of Martin Bernard Vink sworn 4 November 2007 (the supporting affidavit).

(b) Affidavit of Martin Bernard Vink sworn 11 February 2008.

(c) Affidavit of Basil Richard Le Rich sworn 16 February 2008.

(d) Affidavit of Martin Bernard Vink sworn 20 February 2008.

(e) Affidavit of Robert John Semple sworn 20 February 2008.

(f) Affidavit of Lorenz Turko sworn 20 February 2008.

(g) Affidavit of Robert John Semple sworn 23 April 2008.

(h) Affidavit of Ani Linton sworn 30 April 2008 (disallowed).

(i) Affidavit of Martin Bernard Vink sworn 1 May 2008 (disallowed).

(j) Exhibit P1, photograph of CIC records kept at Garfield property.

Mr Tuckwell relied on the following affidavits and the exhibits thereto:

(a) Affidavit of Colin Roland Tuckwell sworn 20 December 2007.

(b) Affidavit of Paul Wayne Marsh sworn 15 February 2008.

Submissions by Mr Vink

Mr Vink made four written submissions:

(i) 10 October 2007;

(ii) 25 February 2007;

(iii) 26 February 2007;

(iv) 5 May 2008.

Mr Vink also made oral submissions on:

(i) 25 February 2008;

(ii) 26 February 2008;

(iii) 5 May 2008;

(iv) 6 May 2008.

BACKGROUND FACTS

To understand Mr Vink’s complaints, it is useful to set out the events that preceded and surrounded the liquidation of CIC. Much of the evidence that I have relied on has not been tested in court. The evidence has been tendered by Mr Vink unless I indicate otherwise. I should not be taken to making a finding of fact on the evidence unless I expressly say so. In many instances, I have drawn an inference where there was no direct evidence of a relevant matter.

As indicated above, CIC was established by Mr Van Oosterom and his wife, Ms Ani Linton. Mr Van Oosterom was a director and secretary of CIC since its incorporation. Ms Linton resigned her directorship on 6 December 1996. Mr Roland Di Carlo was a director of CIC from 17 August 2001 to 23 January 2002. In May of 2001, after Mr Van Oosterom and Ms Linton had separated, Mr Van Oosterom moved to his farm at Guilford. In about June of 2001, Ms Linton ceased her duties as accountant for CIC. By a share transfer dated 1 July 2001, Ms Linton transferred her share to Mr Van Oosterom. The transfer had not been recorded with ASIC when Mr Tuckwell was appointed administrator.

Mr Van Oosterom says that he found it very difficult to cope after the separation and that he felt guilt and remorse over the marriage break-up.[11] On Mr Van Oosterom’s separation from Ms Linton he went to live on his yacht for about four months.[12] In the middle of 2001, he purchased a farm at Guildford for $195,000.[13] During much of 2001, Mr Van Oosterom left the running of the business to Craig Johnson as general manager[14] and it was operating relatively profitably up until 11 September 2001. By December 2001, Mr Van Oosterom realised that the work available to the company had reduced dramatically.
[11]Van Oosterom affidavit dated 18 April 2002 – Exhibit MBV33 (Unless otherwise indicated all exhibits are exhibits to Mr Vink’s supporting affidavit)
[12]Ibid 7(a)
[13]Ibid 12(a)
[14]Ibid 6(d)

In January 2002, Mr Van Oosterom sought an overdraft on the Commonwealth Bank of Australia (“CBA”) for $250,000.[15] Mr Van Oosterom believed that it had been approved by the CBA subject to his wife signing various documents. At that stage, his wife held the properties which previously had been used as security for the bank loan. As it eventuated, she declined to assist to secure the overdraft and the offer of finance fell through.
[15]Ibid 14(d)

By 2 April 2002, Mr Van Oosterom was becoming anxious about the overdraft position of CIC. He says there were creditors at that stage claiming in excess of $250,000. On 2 April 2002, he contacted the CBA again to ask about the loan extension and it was suggested that he speak to his wife. As I mentioned previously, his wife refused to provide the security.

As early as 27 March 2002, Mr Van Oosterom had been attempting to sell the company to various employees of CIC. It was on 2 April 2002, the day on which Mr Van Oosterom contacted the bank, that his offer to the employees was rejected.[16] Mr Van Oosterom says he continued to negotiate with the employees on 3 and 4 April, and the employees again, on 5 April, declined to proceed with the purchase of the business.
[16]Ibid 14(n)

Mr Van Oosterom says he then made the decision to close the business to avoid trading whilst insolvent.[17] He says he contacted the bank to arrange for direct debits to be cancelled. He says that the bank froze the account at 6.00 p.m. that night on 5 April. Mr Van Oosterom says that on 11 April 2002, acting under the belief that the company was insolvent or would likely become insolvent, he called in Mr Tuckwell as an administrator.[18]
[17]Ibid 14(p)
[18]Ibid 4(a)

On 17 April 2002, Mr Tuckwell held the first meeting of creditors under his administration.[19] At that meeting, Mr Van Oosterom gave an account of the circumstances leading up to the company being placed into formal administration. He advised the meeting of creditors that the precursor to all these events was his separation from his wife in February 2001, from which time on he provided very little involvement in the company until returning in January 2002. He told the creditors that the company had remained profitable up until September 2001; however, between that time and up until his return, the business had taken a downturn. He informed the creditors in January 2002 he applied for an overdraft from the Commonwealth Bank of Australia (“CBA”) and until approximately 3 or 4 April he was under the impression from the bank that the approval was forthcoming. He said that due to a problem with some security issues on the overdraft, he sought legal advice. He told the meeting that the advice was that he may end up trading whilst insolvent and it was decided that the company be placed into formal administration. Mr Van Oosterom added that, if he could, he intended to repay CIC’s debts himself, however he could not guarantee that as any funds that would become available would have to come out of the settlement from the Family Court between himself and his wife. At that meeting, Mr Van Oosterom was appointed to the committee of creditors.
[19]Exhibit MBV 15

Although evidence of the proceedings instituted in the Family Court was not tendered, it appears that at this time Ms Linton and Mr Van Oosterom were in dispute in the Family Court. I assume the dispute was over a division of property between the husband and wife. On 18 April 2002, Mr Van Oosterom swore the affidavit filed in the Family Court which contains the information about Mr Van Oosterom’s activities after the separation from his wife in February 2001.[20] On 19 April 2002, the Family Court made orders against Mr Van Oosterom restraining him from dealing with his property and requiring him to serve and file a financial statement by Friday 26 April 2002.[21]
[20]Exhibit MBV 33
[21]Exhibit MBV 29

On 23 April 2002, Sally Nicholes, a partner of Middletons Solicitors, wrote to Mr Tuckwell concerning a Family Court order made on 17 April 2002 and confirmed that the order allowed Mr Tuckwell to provide Ms Linton with financial material, including the report that was due from the bank in relation to their status as a creditor. The order of 17 April 2002 was not tendered, but I believe it was in the same or similar terms to that of 19 April 2002. Ms Nicholes’ letter went on to ask Mr Tuckwell whether or not the lease of Ms Linton’s premises would be honoured by Mr Tuckwell in the administration. Apparently CIC leased office space from Ms Linton at her Queensbridge property.

On 29 April 2002, Mr Tuckwell produced his report to creditors. This report is the subject of much criticism by Mr Vink, which I will refer to later. Under the heading of “Reasons for Financial Difficulties”, Mr Tuckwell reported that the director (referring to Mr Van Oosterom) advises that the company failed due to its inability to secure contracts of a profitable nature post-September 2001. He said plans were made to obtain a bank overdraft to pay creditors, however the facility was not able to be formalised. He said the director also stated that matrimonial issues were significant and affected his ability to properly run the company. In passing I should note that those statements are consistent with what Mr Van Oosterom informed the first meeting of creditors. Mr Tuckwell said that attempted matrimonial settlements also reduced the company’s financial strength. This was plainly the case, as the securities which had been used to support bank finance were no longer available to the company. He says his own investigations to the date of his report confirmed as correct the advice of the director.

Under the heading of “Financial Position”, shareholders loans were stated to be $1,184,266 (nett). Mr Tuckwell said as follows:

Thomas and Ann Van Oosterom are currently the shareholders of the trustee company and are having their matrimonial affairs adjudicated in the Family Court. The court hearing is due on 6 May 2002 and may assist in the direction of my recovery procedures relating to these assets.

(I interpolate here to add that Mr Tuckwell was advised of the 6 May hearing date by Ms Nicholes).

As a result of recently endeavouring to settle their matrimonial affairs “out of court”, a number of transactions involving CBA loans, cash, shareholder loans and properties were set in motion. These transactions, it appears, were not finalised as a result of a mixture of non-lodgement of documents, failure to properly execute agreements, non-compliance with required notices to parties and in the end general disagreement. At date of drafting this report, Thomas and Ann are in the process of forming their respective legal positions and commercial decisions. Accordingly, at 8 May 2002 creditors’ meeting I can provide an update as to each party’s stance and whether there are any orders from the Family Court that affect this administration.
Whilst the books do not disclose any freehold properties (due to the planned “out-of-court” matrimonial settlement transferring these assets to An Van Oosterom), searches indicate two properties are still registered in the name of Corporate Interior Constructions Pty Ltd – being 2/111 Queensbridge Street, Southbank and 502/258 Flinders Lane, Melbourne. These properties are mortgaged to the CBA, who want the properties sold as soon as possible.
The CBA loans of $353,213 are secured against these properties and will be paid in full from settlement proceeds. Valuations have been obtained from Marshall White Real Estate, who indicate total sales from these properties in the range of $550,000 worst case to $700,000 best case. The company’s books indicate a cost base of $428,778 for capital gains tax purposes in relation to these properties purchased in 1997.

Recovery of amounts due from shareholders is dependent upon Family Court rulings, stances of each matrimonial party and equities and assets. Apart from the above properties, there are known to be three other properties that may be pursued if necessary. For the purposes of this report, shareholder loans have been treated as fully recoverable. It may be necessary to reverse certain book entries to reflect recognition of property ownership and a reduction to shareholders loans due. Overall recoverability, however would not be expected to be reduced as a result of such adjustment.

After this report, an exchange of correspondence with Ms Nicholes took place which established that CIC did not have any claim to the Queensbridge property or the Flinders Lane property. By letter dated 1 May 2002, Ms Nicholes wrote to Mr Tuckwell referring to a letter from the CBA which had been sent to Mr Tuckwell dated 22 April 2002. That letter was not in evidence. Ms Nicholes said there were a number of inaccuracies that arose from the CBA’s letter to Mr Tuckwell, including the assumption that CIC owns the Queensbridge Street property and the Flinders Lane property. Ms Nicholes said that although CIC was the registered proprietor of the Queensbridge property, it held the property as trustee for the Van Oosterom Family Trust (now the Linton Property Trust). She said that as of 30 June 2001, CIC resigned as trustee and was replaced by Ms Linton as the new trustee. She said that she understood that transfer documents were executed and presented to the CBA, but had not been registered due to differences which arose between Ms Linton and Mr Van Oosterom regarding repayment of the mortgage. She enclosed with the letter a transfer of shares dated 1 July 2001 plus other documents, including a change of trustee document dated 1 July 2001 and a deed of amendment of the Van Oosterom/Linton Property Trust. The letter said that the Flinders Lane property was owned by Ms Linton and Mr Van Oosterom as joint proprietors. Ms Nicholes asserted that in view of the above, she was sure that Mr Tuckwell would agree with her opinion that as an administrator he did not have the right to deal with the Queensbridge property or the Flinders Lane property. Ms Nicholes noted Mr Tuckwell’s comments that he would be calling upon the loan accounts of CIC. Ms Nicholes said that Ms Linton’s accountants had reviewed the accounts at the year ending June 2000 and advised that there was a nett credit to Ms Linton which remained the case in the accounts as of 4 February 2001, being the date of separation. She said that she noted that in Mr Van Oosterom’s affidavit dated 18 April 2002, Mr Van Oosterom admits that he assumed liability for the accounts. Ms Nicholes asked Mr Tuckwell to ensure that the details of the letter were accurately recorded in his report to creditors and that Ms Linton be provided with the minutes of creditors’ meetings and the report in her capacity as a creditor in Mr Tuckwell’s administration. Finally, she said that her letter would be produced on account of costs if any proceedings were commenced in this matter.[22]
[22]Exhibit MBV 21

By letter dated 1 May 2002, Mr Tuckwell replied to her letter of 1 May 2002. Mr Tuckwell said he had discussed the issues raised in Ms Nicholes’ letter with Ms Linton and Murray Bottrell of the CBA. Mr Tuckwell said that whilst the intention of the planned matrimonial settlement had not been disputed by either party, there still remained the legal question as to whether or not the transactions were brought to a conclusion and in this regard Mr Tuckwell was seeking further advice. Mr Tuckwell said that it appeared that they had common ground for a commercial sale of the Queensbridge property. He said that as already advised, the CBA had instructed him to sell this property (along with the Flinders Lane property) and he had already made inquiry with estate agents regarding a proposed sale by way of auction. He said this course of action was approved by the CBA. He said it was not his intention to formalise property sale proceedings until further discussions with Ms Nicholes and the outcome of the Family Court hearing due on Monday 6 May 2002. He said that, due to legal considerations as to ownership, he would support Ms Linton taking an active part in the sale of the Queensbridge property on a certain basis, including that upon settlement of the property, after paying the mortgage, the nett moneys be held in trust until both parties, that is, Ms Linton and Mr Tuckwell, are in agreement as to legal ownership of the property. Mr Tuckwell referred to the request in Ms Nicholes’ letter and indicated that Ms Linton’s stance would be reported to creditors at the second meeting to be held on 8 May 2002, and that Ms Linton would be provided with copies of minutes of that meeting. In the final paragraph, Mr Tuckwell said that he requested that Ms Linton respect the legal positions and responsibilities of himself and the bank, and that she understand that time was of the essence in disposing of the properties in a commercial manner to protect the interests of all parties concerned.

By letter dated 6 May 2002, Ms Nicholes replied to Mr Tuckwell’s letter of 1 May 2002 and took issue with Mr Tuckwell’s statement that the CBA had instructed him as administrator in relation to the properties. Ms Nicholes said that the CBA objected to any reference to the bank “instructing” Mr Tuckwell as administrator and advised Mr Tuckwell that in relation to the issue of ownership, that was not an issue for the bank but an issue to resolve with Mr Tuckwell directly. Ms Nicholes said that Mr Tuckwell had made reference to dealing with and obtaining instructions from Ms Linton. Ms Nicholes advised Mr Tuckwell to not deal with her client directly on any of these matters. He was advised that Middletons were her solicitors on the record and that Ms Linton was not in a position to respond to those matters without legal assistance. Ms Nicholes confirmed that she had forwarded all relevant documentation to Mr Tuckwell showing the change of trustee of the Van Oosterom Family Trust (now the Linton Property Trust), from CIC to Ms Linton as of 30 June 2001. She said that accordingly Mr Tuckwell had no legal right to be dealing with the Queensbridge or Flinders Lane properties as they are assets of the Trust. She required his immediate written confirmation that he would forthwith cease in any way dealing with the properties and that he would deliver up possession of the same and the key. She said that if Middletons did not receive such written confirmation by close of business that day, Middletons had Ms Linton’s instructions to commence Supreme Court legal proceedings against Mr Tuckwell seeking orders and injunctions requiring him to deliver up possession of the properties and deliver the keys. Again she asked Mr Tuckwell to ensure the details of her letter and her previous correspondence are accurately recorded in his report to creditors.

By letter dated 7 May 2007, Mr Woods, the manager of the credit department at the CBA, informed Mr Tuckwell that the bank had received various documents provided by Middletons Lawyers advising that the Queensbridge property and the Flinders Lane property were assets of the Linton Property Trust. The bank confirmed receipt of two transfer of land documents executed by CIC transferring ownership of both properties from the Van Oosterom Property Trust. The letter said that this would affect Mr Tuckwell’s position as administrator with the proposed sale of the property. The CBA sought confirmation in due course that Mr Tuckwell had ceased action in respect to the sale of both properties.[23] Mr Tuckwell says that as a result of this correspondence he informed Ms Linton that he would cease to take steps to realise the properties and hand over control of the properties to her.[24]
[23]Exhibit MBV 22
[24]Tuckwell affidavit [40.5]

On 8 May 2002, the second meeting of creditors was held. The minutes record that Mr Tuckwell referred to the creditors’ report of 29 April 2002 and, in particular, to his comments regarding the shareholders’ loans. The minutes record that the creditors were informed as to the positions and stances taken by shareholders and advised that steps had been taken to recover moneys owed by Mr Van Oosterom and Ms Linton. Creditors were also informed that the loan account position was still in the process of analysis and investigation, although Mr Tuckwell said it was clear that significant amounts had been extracted by the shareholders prior to 11 April 2002. Creditors were advised that representations had been received from Ms Linton and her lawyers (by way of telephone and written advices) disputing any amounts owed to the company. A resolution was passed unanimously that the administrator take all legal steps necessary to recover amounts owed by the “shareholders”.[25] The meeting resolved that CIC be put into liquidation and that Mr Tuckwell be appointed liquidator.
[25]Exhibit MBV 15. I disallowed this exhibit at the first hearing but have allowed it at the second hearing

By a memorandum dated 9 May 2002, Mr Tuckwell asked Ms Nicholes of Middletons to provide a tax invoice for his occupation of the Queensbridge property and sought the return of CIC’s laptop in the possession of Ms Linton, as well as the return of the company’s VW Golf motor vehicle. This request confirms Mr Tuckwell was no longer pursuing the Queensbridge property.

In or about April 2002, Mr Tuckwell says that Mr Van Oosterom advised him that he was in possession of a number of old job files, which he stored at his farm. Mr Tuckwell says he formed the view that they were not relevant to the affairs of CIC at the time of the winding up and so he told Mr Van Oosterom that he did not want to retain them in his possession. Mr Tuckwell says: “The reason for this view is because I had already retained such books and records that I required for my purposes”.[26] It is probable this conversation actually took place after April as Mr Van Oosterom says he did not acquire his farm until May 2002.
[26]Exhibit MBV 35 para 29

Mr Tuckwell said that his loan account investigations indicated transactions post-June 2000 that suggested to him that Ms Linton owed money to CIC. He went on to say that as requested he had contacted Ms Linton’s accountant at Ernst & Young to discuss his analysis and he was meeting him at his premises on Wednesday 15 May 2002. Mr Tuckwell confirmed that a copy of the facsimile had been forwarded to Ms Linton.[27]
[27]Exhibit MBV 24

By a “with compliments” slip dated 27 May 2002, Mr Tuckwell confirmed to Ms Linton his calculations of the rent for his occupation to 7 May 2002.[28]
[28]Exhibit MBV 24

On 29 May 2002, Mr Tuckwell sent letters of demand in relation to the loan account to Van Oosterom and to Ms Linton.[29]
[29]Exhibit MBV 46 para 13

A meeting of the committee of inspection of CIC was held on 11 September 2002. Mr Tuckwell advised the meeting that counsel’s advice had been received in relation to the success or otherwise of an action to recover loan accounts owing by related parties. Mr Tuckwell confirmed that counsel’s advice indicated there was a strong case for recovery and proceedings should be issued accordingly. The minutes record that all members agreed that legal action should commence as soon as possible with a view to the recovery of sufficient dollars to enable repayment of creditors. The minutes noted that only a partial loan recovery would be required to repay trade creditors of CIC in its capacity as trustee of the Van Oosterom Family Trust to enable those creditors to be paid in full.[30] The evidence did not include counsel’s advice referred to by Mr Tuckwell.
[30]Exhibit MBV 15

On 28 November 2002, in the Supreme Court of Victoria Mr Tuckwell issued proceedings against Ms Linton and Mr Van Oosterom in proceeding number 8355 of 2002 seeking recovery under the loan account. Neither the writ nor statement of claim were in evidence before me.

One of Mr Vink’s complaints relates to the support Mr Tuckwell gave Mr Van Oosterom in the Family Court to restrain Ms Linton from disposing of her assets. The evidence relating to those events follows.

Mr Tuckwell says in his affidavit filed in the Family Court dated 21 August 2003 that his solicitors, Wisewoulds, advised him that Ms Linton had sold some of the assets which Mr Van Oosterom had transferred into her name after the separation and that this could constitute grounds to apply for a Mareva injunction in the Supreme Court, as Ms Linton appeared to be divesting herself of assets which would be used to satisfy any judgment obtained by CIC in the Supreme Court. Wisewoulds estimated the costs associated with this procedure as $15,000.

Mr Tuckwell says that he was informed by his solicitor, Mr Paul Marsh, that Mr Van Oosterom was also interested in preserving the assets held by Ms Linton pending conclusion of the Family Court proceeding. The cost estimates provided by Mr Van Oosterom’s solicitor was $3,000 to $5,000. Mr Tuckwell says that Mr Marsh relayed to him that the husband did not have the funds to make such an application.

Mr Tuckwell says he put the issue of asset preservation to the committee of inspection at its meeting on 4 December 2002. He says the decision made by the committee regarding the asset preservation application was solely to advance the cause of the creditors of CIC to maximise the ability to secure funds in the event of a successful outcome in the Supreme Court. Mr Tuckwell rejected any allegation that he colluded with Mr Van Oosterom to deprive Ms Linton of assets which belonged to her.[31]
[31]Exhibit MBV 35 paras 19 - 25

On 4 December 2002, a meeting of the committee of inspection was held. The minutes record, that Mr Tuckwell advised those present of the current status of the legal action to recover loan moneys due to CIC. The meeting discussed the placing of legal restrictions on the ability of Ms Linton to dispose of properties under her control. The minutes noted that legal advice had been received that Mr Tuckwell did not have the ability to successfully obtain such restrictions, however, it appeared that Mr Van Oosterom, via the Family Court, was now in a position to impose such restrictions. The meeting was advised that Mr Van Oosterom was not currently in a position to fund his lawyer for this purpose and it was resolved, due to the risks faced by CIC in its recovery action against Ms Linton, that Mr Tuckwell be authorised to assist in the funding of Mr Van Oosterom’s attempt to impose legal restrictions on Ms Linton dealing with properties under her control. Between $3,000 and $5,000 was expected to be the cost in this regard. The minutes record that Mr Tuckwell’s lawyer was to advise Dianna Duck, lawyer for Mr Van Oosterom, of the committee’s decision. Mr Van Oosterom advised the meeting on his personal financial status. He indicated that he proposed entering into a Part X arrangement with his creditors.[32] After hearing the features of Mr Van Oosterom’s intended proposal, the meeting resolved to agree in principle that Mr Van Oosterom should proceed with his Part X proposal and have his trustee provide a finalised version of his offer for the committee’s consideration.[33]
[32]Bankruptcy Act 1966 (Cth)
[33]Exhibit MBV 15

By letter dated 20 December 2002, Dianna Duck advised Wisewoulds Lawyers that orders were made in the Family Court on 18 December 2002 restraining the wife from selling, disposing of or further encumbering certain assets, including the Flinders Lane property. Ms Duck said she would provide Mr Tuckwell with an account for the successful application for the injunctions in the new year.[34]
[34]Exhibit MBV 39

By a letter dated 12 January 2003, Ms Linton informed Mr Tuckwell that Mr Van Oosterom appeared to have encumbered his farm in Daylesford with a second mortgage to his parents. Ms Linton asked whether Mr Van Oosterom might be transferring funds to his parents for no good reason or was placing them ahead of other creditors of CIC. In the letter she asserted that Mr Van Oosterom may be in contempt of the Family Court.[35] Mr Vink complains that Mr Tuckwell took no action in response to this letter.
[35]Exhibit MBV 43

On 30 January 2003, the Family Court made an order for the husband to provide Ms Linton with, inter alia, job files of his business in liquidation (not provided to the liquidator) to better ascertain the company receipts.[36]
[36]Exhibit MBV 34

On 10 February 2003, Ernst & Young prepared a report on the liability of Ms Linton to CIC. The report purported to show that as at 31 January 2001 if one allocated profits and prior unallocated (undistributed) profits to the loan account, then the loan account would have been in credit to the sum of $246,901 as at 31 January 2001 and as at 30 June 2000 would have been in credit to the sum of $106,310.[37]
[37]Exhibit MBV 14

On 21 February 2003, Ms Linton served Mr Tuckwell with a subpoena to produce to the Family Court certain CIC documents relating to bank guarantees issued by the CBA at the request of CIC. At that stage, Mr Tuckwell had not been a party to the Family Court proceedings.[38] On 6 March 2003, the subpoena was set aside by order of Kaye J in the Family Court.[39]
[38]Exhibit MBV 35 para 8
[39]Exhibit MBV 35 para 9

On 25 March 2003, Mr Tuckwell obtained in the Supreme Court a default judgment against Mr Van Oosterom for $1,678,670 plus $53,349.51 interest and costs of $1,670.[40] On 1 April 2003, Ms Linton made application to the Family Court to stay Mr Tuckwell’s Supreme Court proceedings against her pending the determination of Ms Linton’s property proceedings against Mr Van Oosterom in the Family Court.[41]
[40]Exhibit MBV 35 para 5; MBV 37
[41]Exhibit MBV 35 para 12

On 11 April 2003, Mr Van Oosterom entered into a deed of arrangement.[42] On 1 May 2003, the application by Ms Linton in the Family Court to stay the Supreme Court proceedings was dismissed by order of Registrar Fitzgibbon.[43] On 15 May 2003, Registrar Fitzgibbon dismissed an application of Ms Linton to join Mr Tuckwell to the Family Court proceedings and costs were ordered against Ms Linton in favour of Mr Tuckwell.[44] On 19 May 2003, Ms Linton made application in the Supreme Court of Victoria to have the loan proceedings stayed pending the determination of the Family Court proceedings.[45] On 17 June 2003, Kaye J ordered in the Family Court Mr Van Oosterom to pay Ms Linton maintenance of $400 per week and also ordered that the Part X arrangement be set aside.[46]
[42]Exhibit MBV 23A para 9
[43]Exhibit MBV 35 para 11
[44]Exhibit MBV 28, Tuckwell affidavit para 13 and MBV 35 para 13
[45]Exhibit MBV 35 para 14
[46]Exhibit MBV 23A

Mr Vink complains that Mr Tuckwell allowed Mr Van Oosterom to destroy CIC records. On 30 June 2003, Ms Linton applied in the Family Court of Australia that Mr Tuckwell release certain books and records of CIC to her that were located at Mr Van Oosterom’s former farm.[47] On 1 July 2003, Ms Linton instituted contempt proceedings against Mr Van Oosterom in the Family Court of Australia. In response to the application for contempt filed by Ms Linton on 1 July 2003, Mr Van Oosterom admitted in an affidavit dated 2 July 2003 that he had not earlier provided Ms Linton with purchase order books and job files. He said that it was his belief that they had been taken to the tip in mid-January 2003. He said he personally loaded the ute for the first trip and saw it drive off. He said that on 1 July 2003 Ms Linton advised him there were some files and documents still remaining on the farm. He said he responded he had no objection to her collecting the files and that he sent a copy of his fax to Mr Tuckwell.[48]
[47]Exhibit MBV 35 para 27
[48]Exhibit MBV 35

On 1 July 2003, Mr Tuckwell received Ms Linton’s Family Court application for the release of certain books and records.[49] On 2 July 2003, Mr Tuckwell attended Mr Van Oosterom’s farm to list the books and records of CIC at the property. Mr Tuckwell said of the records on the property:

They constituted old records that had been stored at the farm prior to my appointment … My inspection confirmed my initial opinion that they were not relevant to my winding up the affairs of CIC.[50]

[49]Exhibit MBV 35 para 29

[50]Exhibit MBV 35 para 29

On 3 July 2003, the Family Court dismissed Ms Linton’s application for release of documents that were found on Mr Van Oosterom’s farm.[51] On 5 July 2003, Ms Linton inspected the documents at the farm. Subsequently, on 6 July 2003, Ms Linton wrote to Wisewoulds, the solicitors for Mr Tuckwell, requesting copies of certain purchase orders located at the farm.[52] On 30 July 2003, Mr Tuckwell attended Mr Van Oosterom’s farm and took possession of purchase orders for the year 2001, which contained purchase orders requested by Ms Linton.[53] On 12 August 2003, Ms Linton was sent copies of the requested documents by Mr Tuckwell’s solicitors.[54] On 14 August 2003, Ms Linton issued contempt proceedings against Mr Tuckwell in relation to, amongst other things, his failure to produce certain documents. Although the application was not tendered in evidence by Mr Vink, Mr Tuckwell said that one of the allegations against him was headed “Criminal Activities”.[55] On 19 August 2003, Mr Vink attended at Mr Tuckwell’s office and served him with an application in the Family Court seeking an order, inter alia, that the Office of Public Prosecutions charge Mr Tuckwell with obstruction of evidence.[56] Again, Mr Vink did not tender the application. Mr Tuckwell confirms in his affidavit of 21 August 2003 filed in the Family Court that on or about 14 January 2003 Mr Van Oosterom had advised him that he intended to destroy a load of documents of CIC which Mr Van Oosterom described as the old records of CIC previously stored at the farm. Mr Tuckwell says that as he had already obtained the documents he required for the liquidation of CIC this did not concern him.[57]
[51]Exhibit MBV 35 para 28
[52]Exhibit MBV 35 para 29
[53]Exhibit MBV 35 para 29
[54]Exhibit MBV 35 para 29
[55]Exhibit MBV 35 para 16 and MBV 28 ct 2
[56]Exhibit MBV 35 para 44
[57]Exhibit MBV 35 para 30

On 20 August 2003, a meeting of the committee of his inspection of CIC was held at which Mr Tuckwell advised the meeting that Mr Van Oosterom’s Part X arrangement had been overturned by the Family Court pursuant to an application by Ms Linton and, as a result, Mr Van Oosterom had gone into bankruptcy on 17 July 2003.[58] Mr Tuckwell also advised on the action in the Supreme Court.[59]
[58]Tuckwell affidavit [35]
[59]Exhibit MBV 15

On 15 September 2003, Ms Linton instituted proceedings in VCAT against Creighton-Brown & Co Pty Ltd (“Creighton-Brown”) alleging misleading or deceptive conduct by Creighton-Brown (Mr Moran of Creighton-Brown had prepared CIC’s accounts) and providing information to Mr Tuckwell as administrator and as liquidator.[60] At the hearing, which lasted several days, Mr Moran and Mr Tuckwell gave evidence. On 20 April 2005, Member Vassey gave his decision in the matter and dismissed the claims of Ms Linton against Creighton-Brown. In his lengthy written decision, Member Vassey commented upon the Supreme Court loan proceedings and opined that Mr Tuckwell was bound to succeed against Ms Linton.[61]
[60]Exhibit MBV 30
[61]Exhibit MBV 30

Whilst the proceedings in VCAT were continuing, proceedings in the Family Court were also continuing and, on 24 November 2003 and 9 December 2003, costs orders were made against Ms Linton in favour of Mr Tuckwell in the Family Court.[62]
[62]Exhibit MBV 28, Tuckwell affidavit para 13

On 11 December 2003 in the Supreme Court of Victoria, Mr Tuckwell sought continuation of a Mareva injunction order that had been previously made against Ms Linton restraining her from dealing with her properties. Mandie J declined to extend the injunction.[63] The material in support of the injunction was not before me.
[63]Exhibit MBV 26

On 24 February 2004, a meeting of the committee of inspection of CIC was held at which Mr Tuckwell reported on the loan proceedings and on the numerous court activities being pursued by Ms Linton which had delayed the hearing of the loan proceeding.[64] On 24 May 2004, the statement of claim in the loan proceedings was amended by deletion of certain claims against Ms Linton relating to a proposed loan to discharge a mortgage over properties she owned.[65]
[64]Exhibit MBV 15
[65]Exhibit MBV 46

On 3 August 2004, in the Family Court, Ms Linton was ordered to pay costs in favour of Mr Tuckwell.[66] On 3 November 2004, in the Family Court, Dessau J dismissed the contempt application made against Mr Tuckwell by Ms Linton and ordered that Ms Linton pay Mr Tuckwell’s costs.[67] On 12 November 2004, Mr Vink wrote on behalf of Ms Linton to Wisewoulds seeking inspection of records purportedly held by Mr Tuckwell so she could defend the loan claim.[68] On 18 February 2005, Mr Tuckwell prepared and presented his bill of costs to be paid by Ms Linton on the contempt proceedings for $6,804.89.[69] On 13 May 2005, the Family Court taxed the costs on the contempt proceedings in favour of Mr Tuckwell at $8,709.89.[70]
[66]Exhibit MBV 28, Tuckwell affidavit para 13
[67]Exhibit MBV 28, Tuckwell affidavit para 13; MBV 28, ct 2 and ct 3
[68]Exhibit MBV 36
[69]Exhibit MBV 28, ct 2
[70]Exhibit MBV 28, ct 4

On 20 June 2005, Mr Vink, on behalf of Ms Linton, wrote to Mr Tuckwell enclosing an application to set aside the contempt costs assessment, saying: “We’re still open to a negotiated settlement …”.[71] On 20 June 2005, Ms Linton applied to the Family Court to set aside the costs assessment of 13 May 2005.[72] On 18 July 2005, Kaye J of the Family Court set aside the costs assessment order of 13 May 2005 on the basis that Ms Linton was ordered to pay Mr Tuckwell’s costs.[73] On 19 December 2005, the costs in favour of Mr Tuckwell were re-assessed in the Family Court at $5,232.76.[74]
[71]Exhibit MBV 28, CT-7
[72]Exhibit MBV 28, CT-5
[73]Exhibit MBV 28, CT-6
[74]Exhibit MBV 28, Tuckwell affidavit para 19; MBV 28 ct 8

As mentioned previously, on 28 April 2005, Member Vassey delivered his decision rejecting all of Ms Linton’s claims against Creighton-Brown.[75] Shortly thereafter, on 5 May 2005, Ms Linton made an application for security for costs against Mr Tuckwell in the Supreme Court loan proceedings.[76] On 11 May 2005, Master Evans of the Supreme Court stayed the loan proceedings pending payment by Mr Tuckwell and CIC of $30,000 by way of security for Ms Linton’s costs.[77]
[75]Exhibit MBV 30
[76]Exhibit MBV 27
[77]Exhibit MBV 28, Tuckwell affidavit para 5; MBV 45

On 16 May 2006, Mr Tuckwell filed a notice of appeal against the order of Master Evans.[78] On 6 June 2005, Smith J dismissed the appeal of Mr Tuckwell from the order of Master Evans.[79] On 8 June 2005, Mr Tuckwell sent a circular to creditors of CIC requesting contribution towards the $30,000 security. Mr Tuckwell said in his circular that the proceedings had high prospects of success. He quoted Member Vassey in the VCAT proceedings where Member Vassey had said the Supreme Court proceeding against Ms Linton “is bound to succeed.” In his circular, Mr Tuckwell said that if he and CIC succeeded against Ms Linton, then they should recover $350,000 plus costs.[80]
[78]Exhibit MBV 28, Tuckwell affidavit para 9
[79]Exhibit MBV 28, Tuckwell affidavit para 6
[80]Exhibit MBV 28, CT-1

Mr Vink has tendered in evidence an affidavit sworn by Mr Tuckwell in the Supreme Court loan proceedings dated 19 April 2006 in which Mr Tuckwell seeks an extension of time to lodge the $30,000 security for costs. In that affidavit he deposes to the fact that his initial attempts to raise $30,000 from creditors fell some $6,000 short and therefore he was unable to comply with the order of Smith J ordering security for costs to be lodged. He sets out in detail the costs orders that had been made in his favour in the Family Court and indicated that he expected to be able to use those moneys to make up the shortfall. He says, however, that by 23 February 2006 he had formed the view that Ms Linton had no intention of paying any of the costs that she was ordered by the Family Court to pay to him. He says that he, therefore, at that time, decided to make up the $6,000 shortfall on the security out of his own funds. He said: “I have taken this step because I believe that the plaintiffs have a strong claim against [Ms Linton] and because I do not believe that the type of conduct in which she and her former husband engaged can be let pass without being brought before a court for examination.”[81]
[81]Exhibit MBV 28, Tuckwell affidavit para 21

On 16 March 2006, Mr Tuckwell wrote to Kerr Thomas, the then solicitors for Ms Linton, seeking her consent to a variation of the order for security allowing him to pay the security for costs.[82]
[82]Exhibit MBV 28, CT-9

On 4 April 2006, Mr Van Oosterom gave a written statement that Ms Linton was not, as at 1 February 2001 or at any time thereafter, indebted to CIC either jointly or severally. Subsequently, Mr Tuckwell claims that Mr Van Oosterom told him that Ms Linton pursued Mr Van Oosterom for five years and he signed the statement so that Ms Linton would then leave him be. Mr Tuckwell says that Mr Van Oosterom confirmed his previous statements to Mr Tuckwell as to the liability of Ms Linton and he to CIC under the loan account. Mr Tuckwell says that on that basis he continued the loan proceedings at the time. He says Mr Van Oosterom provided a witness statement in those proceedings.[83] The statement was not in evidence before me.
[83]Tuckwell affidavit [78]

On 26 May 2006, Ms Linton took proceedings in the Supreme Court of Victoria in matter number 6575 of 2006 to have Mr Tuckwell removed as liquidator and to seek an inquiry into the liquidation under s 536. On 2 June 2006, the new matter of 6575 of 2006 came on for directions before Whelan J, along with the loan proceedings. Whelan J indicated that he thought the appropriate course was to do the loan proceeding first. None of the court papers in 6575 of 2006 were tendered in evidence.

In June 2006, Mr Vink obtained authorities from several creditors of CIC, and in particular Aus-Sprinkler Co Pty Ltd which was owed $14,534.30, Gordon Healed of Fabmetal Specialists Pty Ltd which was owed $1,430, Crown Hospitality Services which was owed $66 and Martin Galvin of Atlas Steel Fabrication which was owed $3,782, that he could appear on their behalf at meetings of creditors.[84] On 11 July 2006, Mr Tuckwell wrote to Mr Vink acknowledging that Mr Vink was entitled to attend meetings of creditors on behalf of those four creditors.[85]
[84]Exhibit MBV 1
[85]Exhibit MBV 2

On 6 November 2006, Mr Moran gave his witness statement which was to be used in the Supreme Court loan proceedings, which was subsequently referred to and relied upon by the Court of Appeal as I stated earlier in this judgment.[86]
[86]Exhibit MBV 48, Vink affidavit 26

On 8 December 2006, Mr Vink complained to ASIC that he was not told of the annual meeting of creditors on 26 July 2006 and complained the report was misleading because of its omissions. He sent a copy of his complaint to Mr Jason Wood, the member for Latrobe, and Mr Sullivan, Parliamentary Joint Committee on Corporations and Financial Services.[87]
[87]Exhibit MBV 3

On 11 December 2006, a directions hearing was heard before Dodds-Streeton J in 8355 of 2002, Tuckwell v Linton, and in 6575 of 2006, Linton v Tuckwell. On 24 January 2007, Mr Tuckwell sent a letter to ASIC enclosing the notice sent to creditors. On 16 February 2007, a further directions hearing was held in matters number 8355 of 2002 and 6575 of 2006 before Dodds-Streeton J in which she said, as Whelan J had previously, that she would deal with the loan claim first. On 30 March 2007, application was made to the Court of Appeal of the Supreme Court against the refusal by Dodds-Streeton J to strike out certain paragraphs of the loan statement of claim which I have referred to at the beginning of this judgment.[88] On 2 May 2007, the loan statement of claim was amended. The amended statement of claim was not tendered by Mr Vink.[89]
[88]Vink affidavit 123. I have also obtained information on this Court of Appeal hearing from the record of the hearing. This was not tendered in evidence by either party.
[89]Vink affidavit 124

On 18 June 2007, Mr Vink issued his own application against Mr Tuckwell in this current proceedings seeking an inquiry under s 536 of the Act. The rest of the history of the matter I have set out in the history of the proceedings above. As mentioned, on 2 November 2007 the proceedings by Ms Linton against Mr Tuckwell in the Supreme Court of Victoria were dismissed by consent of both parties.

THE LEGISLATION AND RULES

Corporations Act 2001 (Cth) – s 536

SUPERVISION OF LIQUIDATORS

(1) [Inquiry] Where:
(a) it appears to the Court or to ASIC that a liquidator has not faithfully performed or is not faithfully performing his or her duties or has not observed or is not observing:
(i) a requirement of the Court; or
(ii) a requirement of this Act, of the Regulations or the Rules; or
(b) a complaint is made to the Court or to ASIC by any person with respect to the conduct of a liquidator in connection with the performance of his or her duties;

the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit.”
(2) [Misfeasance, neglect or omission]
ASIC may report to the Court any matter that, in its opinion, is a misfeasance, neglect or omission on the part of the liquidator and the Court may order the liquidator to make good any loss that the estate of the company has sustained thereby and may make such other order or orders as it thinks fit.
(3) [Court’s general powers]
The Court may at any time require a liquidator to answer any inquiry in relation to the winding up and may examine the liquidator or any other person on oath concerning the winding up and may direct an investigation to be made of the books of the liquidator.

Rule 7.11 of the Supreme Court (Corporations) Rules2003 (Vic) states:

(1) A complaint to the Court under paragraph 536(1)(b) of the Corporations Act must be made –
(a)in the case of a winding up by the Court – by filing an interlocutory process seeking an inquiry; and
(b)in the case of a voluntary winding up – by filing an originating process seeking an inquiry.

(2) A report to the Court by the Commission under sub-s 536(2) of the Corporations Act must be made –
(a)in the case of a winding up by the Court – by filing –

(i) an interlocutory process seeking orders under the sub-section; and
(ii) a written report in a sealed envelope that is marked with the title and number of the proceeding; and
(b) in the case of a voluntary winding up – by filing –

(i) an originating process seeking orders under the sub-section; and
(ii) a written report in a sealed envelope that is marked with the title of the proceeding and provision for its number.

(3) The contents of a report filed under sub-rule (2) need not, at the time of filing, be verified by an affidavit.
(4) Except with the leave of the Court, a report made under sub-section 536(2) of the Corporations Act is not available for inspection by any person except the liquidator or the Commission.”

Rule 2.4 states:

“(1) Unless the Court otherwise directs, an originating process, or interlocutory process, must be supported by an affidavit stating the facts in support of the process.”

CIC (in liquidation) is being wound up under a creditors’ voluntary winding up which commenced on 8 May 2002. In such a case, r 7.11(1)(b) applies and under s 536(1)(b) the complaint is required to be made by filing an originating process, which Mr Vink has done, supported by an affidavit stating the facts in support of the process.

RELEVANT AUTHORITIES

In Vink v Tuckwell[90], I examined the relevant authorities on s 536 and its predecessors. My conclusions were as follows:

In my opinion, the authorities establish that where a complaint is made as the basis for holding an inquiry under s 536 the complainant bears an initial onus of establishing a prima facie case that there is something which requires enquiry. If the complainant does establish as a first step such an initial case then the court has a discretion whether or not to order an inquiry as indicated by the Full Court of the Federal Court of Australia in Leslie v Hennessy.[91]
The complainant does not need to put sufficient evidence before the court to enable the court to make a prima facie finding that the liquidator has not faithfully performed his or her duties or has not observed the matters he is obliged to as referred to in para 536(1)(a). It is sufficient if the material merely establishes that there is something that should be investigated.
A complaint under para 536(1)(b) with respect to the conduct of the liquidator in connection with the performance of his or her duties should be confined to the liquidator’s failure to observe the matters referred to in para 536(1)(a) and normally should be concerned with aspects of the conduct of liquidators which are liable to attract sanctions or control for what might be broadly described as disciplinary reasons. Normally, the court should be satisfied that there is a public interest being served in holding the inquiry.
[90][2008] VSC 100
[91][2001] FCA 371

STANDING

In Vink v Tuckwell[92] I dealt at length with the issue of Mr Vink’s standing in view of the fact that he was neither a debtor nor creditor of CIC, nor had he been a shareholder or director of CIC, nor had he been a beneficiary of any of the trusts of which CIC was trustee. So far as the evidence was concerned, the first association that Mr Vink had with CIC was in about July 2002 after it had gone into liquidation when he began to assist Ms Linton in her dealings with the liquidator. Since then, Mr Vink appears to have played an active role in the VCAT proceedings. He tendered the transcript of his cross-examination of witnesses in those proceedings. He was apparently given permission to appear on behalf of Ms Linton in those proceedings. Mr Vink also appears to have taken an active part in the Family Court proceedings. There is reference in the evidence to Mr Vink attending the hearings, serving documents and writing letters to Mr Tuckwell about those proceedings. Mr Vink took an active part in the Supreme Court loan proceedings, and I assume also in the proceedings by Ms Linton against the liquidator. He appeared in court and sought to appear on her behalf before me in the loan proceedings and in the application by Ms Linton to have Mr Tuckwell dismissed as liquidator. I should add that the latter proceedings have not been tendered in evidence before me. I understood, however, by observations made in court that Mr Vink has made similar, if not the same, allegations against Mr Tuckwell that Ms Linton made in the proceedings that she commenced and which were dismissed in November 2007.
[92][2008] VSC 100

I accept, however, that Mr Vink has put a lot of time and effort into his examination of the conduct of the liquidation of CIC and into helping Ms Linton. My ruling in accepting his standing, however, did not turn on any of those matters but on my holding that the reference to “any person” in paragraph 536 meant just that. I refer in particular to my ruling on that matter in paragraphs 90-97 of my judgment in Vink v Tuckwell.[93]
[93][2008] VSC 100

Evidence before Mr Tuckwell suggested that the loan account had been a joint loan account in favour of Mr Van Oosterom and Ms Linton. There was evidence that, insofar as the loan account had been altered to refer to Mr Van Oosterom only, the alteration was performed by Ms Linton. There was evidence available to Mr Tuckwell that, even after 1 February 2001, significant sums of moneys were withdrawn on the loan account for the benefit of Ms Linton. Member Vassey in VCAT had looked into the loan account in great detail and found that Mr Tuckwell “is bound to succeed” in his action on the loan account.[113] As Mr Tuckwell informed the creditors, even taking into account all the matters raised by Ms Linton, she was liable for at least $400,000.
[113]Exhibit MBV 30 [140]

Mr Tuckwell responds to the allegation that he acted improperly in the loan proceedings by not initially allowing a set-off against the loan account for amounts standing to the credit of the beneficiary accounts.[114] Mr Tuckwell said that in his view both Mr Van Oosterom and Ms Linton were liable to CIC. He said that given the limited time of the voluntary administration, he reported on what the financial records reflected. He said that he subsequently obtained the advice of counsel, which in part advised him not to set-off the loan accounts and beneficiary accounts because of the potential inability to allow set-off when insolvency intervenes. I infer from that response that Mr Tuckwell took and acted on counsel’s advice in framing his claim on the loan account against Ms Linton.
[114]Tuckwell affidavit [29]

As indicated at the beginning of this judgment, two of the main issues over the joint loan account were whether in fact the company had released Ms Linton from liability, even if Mr Van Oosterom and Ms Linton had made a matrimonial agreement to that effect, and secondly, the fact that a significant amount of profits were not allocated to the beneficiary accounts for the purposes of saving the parties’ income tax payments and therefore were not able to be set off against the loan account. The rights and wrongs of the matter were never resolved in court.

In my opinion, the matters raised by Mr Vink under this heading do not establish a prima facie case that there is something that warrants inquiry under s 536. In my view, there is no evidence that Mr Tuckwell acted other than in accordance with his duty as liquidator.

The Horwath report to creditors

Mr Vink complains about Mr Tuckwell’s report as administrator to creditors of 29 April 2002. Mr Tuckwell’s report was produced by him as administrator of CIC. It begins by referring to his appointment as administrator of CIC on 11 April 2002 pursuant to s 436A of the Act. Section 536 does not apply to the conduct of an administrator. The liquidation did not commence until 8 May 2002. In my opinion, Mr Tuckwell’s conduct in preparing and presenting the report is not a matter that should be the subject of an investigation under s 563. It might be argued that the report was considered by creditors at the meeting of 8 May 2002 when Mr Tuckwell was appointed liquidator and to that extent relates to his conduct as liquidator. Accordingly, I will consider the complaints Mr Vink makes as if they might disclose matters that warrant an inquiry under s 536.

Mr Vink asserts that the report falsely alleges that Ms Linton was a current shareholder. In fact, the report said that the ASIC search showed that she was a shareholder and this was correct. As indicated above, there was a purported transfer of Ms Linton’s shares to Mr Van Oosterom in July 2001. A transfer was signed. There is no evidence it was approved by the board. There is no evidence of whether the register of members was changed. Mr Moran was sent the transfer. It was the subject of investigation at the VCAT proceeding. Criticism was made of Mr Moran for not drawing to Mr Tuckwell’s attention the existence of the transfer. There is no suggestion that Mr Tuckwell was aware of the transfer.

Mr Vink asserts that the report falsely alleges that there were “shareholder” loans owed to the business of $1,184,266. The report alleged shareholder loans (nett) of $1,184,266. The balance sheet produced by Mr Vink as exhibit MBV 12 indicates the loan account stood at $1,827,670.31. Mr Vink does not say why this was false.

Mr Vink alleges that paragraph six of the report (which is headed “Financial position”) misled creditors that CIC held properties registered in its name and that these properties were available to satisfy the debts of creditors. The statement of assets and liabilities in paragraph six makes no reference to any properties, save as follows:

Whilst the books do not disclose the freehold properties (due to the planned ‘out-of-court’ matrimonial settlement transferring these assets to Ann Van Oosterom), searches indicate two properties are still registered in the name of Corporate Interior Constructions Pty Ltd being 2/111 Queensbridge Street, Southbank and 502/258 Flinders Lane, Melbourne. These properties are mortgaged to the CBA who want the properties sold as soon as possible.
The CBA loans of $353,213 (which are referred to as a liability earlier) are secured against these properties and will be paid in full from settlement proceeds. Valuations have been obtained from Marshall White Real Estate who indicate total sales from these properties in the range of $550,000 worst case to $700,000 best case. Companies books indicate a cost base of $428,778 for capital gains tax purposes in relation to these properties purchased in 1997.
Recovery of amounts due from shareholders is dependent upon Family Court rulings, stances of each matrimonial party and equities and assets. Apart from the above properties there are only three other properties that may be pursued if necessary.
For the purpose of this report, the loans have been treated as fully recoverable. It may be necessary to reverse certain book entries to reflect recondition of property ownership and a reduction to shareholder loans due. Overall recoverability, however, would not be expected to be reduced as a result of such adjustments.

Mr Vink alleges that the report misled creditors that CIC held properties registered in its name and that these properties were available to satisfy the debts of creditors. In my opinion, the evidence available to Mr Tuckwell at the time, as referred to earlier in my recitation of the background facts, indicates that he was entitled to make the statements that he did. In my view, his observations were cautious, referring to the Family Court proceedings and the uncertainty in relation to the assets. In my opinion, there is no suggestion that Mr Tuckwell believed otherwise than he put in his report. From the Bar table at the earlier hearing on Mr Tuckwell’s application, Mr Vink said his complaint was that Mr Tuckwell may have been negligent in not making proper inquiries to ascertain what Mr Vink asserts was the true state of affairs. If that be the complaint, there is evidence that Mr Tuckwell made inquiries of CIC’s director, Mr Van Oosterom, and CIC’s accountant, Mr Moran. He also relied on the accounts of CIC and its books and records. There is no evidence to support an allegation of negligence on the part of Mr Tuckwell.

Mr Vink asserts that the report falsely alleges there was misconduct on the part of Ms Linton in that the report said “attempted matrimonial settlements also reduced the company’s financial strengths.” In my opinion, the report does not allege misconduct. The evidence before me refers to an attempted matrimonial settlement between Mr Van Oosterom and Ms Linton. There was no direct evidence of it. The purported documents signed between them was not tendered in evidence. There was reference in the evidence to doubts by Mr Moran and by Mr Tuckwell about whether there was a binding agreement. Mr Tuckwell says that the Family Court did not rule upon any such agreement. There is evidence, however, that the transfer of the Queensbridge property to Ms Linton may have been the reason why CIC was unable to obtain the finance it needed in April of 2002. The whole of paragraph five of the report bears repeating as follows:

The director advised that the company failed due to it inability to secure contracts of a profitable nature post-September 2001. Plans were made to obtain a bank overdraft to pay creditors, however the facility was not able to be formalised. The director also stated that matrimonial issues were significant and affected his ability to properly run the company.
Attempted matrimonial settlements also reduced the company’s financial strengths.
My investigations to the date of this report confirms correct the above advices of the director.

In my view, Mr Tuckwell’s statement was consistent with the evidence that was before him at the time. Mr Van Oosterom had in fact said those things to the meeting of creditors. It appears that the bank did refuse to advance credit to the company because of the transfer of the properties to Ms Linton. The evidence suggests that Mr Van Oosterom had lost interest in running the company because of the matrimonial breakdown and, despite it being a most profitable company, it had gone into liquidation. Mr Tuckwell was entitled to report that Mr Van Oosterom had stated that matrimonial issues were significant and affected his ability to properly run the company and to report that attempted matrimonial settlements reduced the company’s financial strengths.

Mr Vink alleges that Mr Tuckwell’s report made no reference to the Guildford farm of Mr Van Oosterom as a potential asset that may be available to creditors of CIC for compensation or any other assets of Mr Van Oosterom.[115] If that be the case, I do not consider that there is any ground for suggesting any impropriety on the part of Mr Tuckwell. In my opinion, the matters raised by Mr Vink do not establish a prima facie case that there is something that warrants inquiry under s 536.
[115]Vink affidavit [81]

Mr Vink asserts in his supporting affidavit that the main function served by the appointment of Mr Tuckwell as voluntary administrator of CIC by Mr Van Oosterom was the avoidance of the potential prosecution of Mr Van Oosterom and Mr Di Carlo for the mismanagement of CIC.[116] Mr Vink clarified this allegation during the first hearing on Mr Tuckwell’s application to summarily dismiss Mr Vink’s application. Mr Vink submitted that an inquiry might establish that Mr Tuckwell did not properly pursue Mr Moran, Mr Van Oosterom and Mr Di Carlo as he accepted the post of administrator as part of a plan to protect Mr Van Oosterom and Mr Di Carlo from such actions. I dealt with this allegation in my reasons on the first hearing as follows. [117]

[Mr Vink] also alleged that Mr Tuckwell was appointed for an improper purpose.[118] Mr Vink said Mr Tuckwell might have accepted the position to assist Mr Moran, the company accountant, who Mr Tuckwell previously knew, to avoid Mr Moran being sued for being involved some how in insolvent trading. Mr Vink conceded that he did not have evidence that suggested that was in fact the case but if he was permitted to cross examine Mr Tuckwell he might be able to establish a prima facie case that this was so.[119]
He said that Mr Tuckwell may have been party to a conspiracy with Mr Moran to accept the position to avoid Mr Moran and the directors from being sued. His position appeared to change during the submissions. At one stage, he said that there was prima facie evidence that Mr Tuckwell was appointed for the improper purpose of protecting Mr Moran and the directors and that Mr Tuckwell was privy to what those appointing him were up to.[120]
Finally, Mr Vink agreed to my summary of his allegation. The transcript reads as follows: Robson J summarising Mr Vink’s position “If I am permitted to cross-examine Mr Tuckwell I believe a prima facie case my be made out that Mr Tuckwell improperly accepted the position of administrator to assist Mr Moran, the accountant, and two other directors to avoid being sued for trading whilst insolvent. Now, have I got the point exactly?” Mr Vink “Yes sir, that is .. one of…”[121]
This complaint was not raised in his affidavit in support of the application save he did depose that by reason of the matters raised in paragraphs previous to 82, the main function served by the appointment of Mr Tuckwell as voluntary administrator of CIC by Van Oosterom was the avoidance of the potential prosecution of Van Oosterom and Di Carlo for the mismanagement of CIC. This elliptical accusation falls well short of the allegations he made from the bar table against Mr Tuckwell.

[116]Vink affidavit [82]

[117]Vink v Tuckwell [2008] VSC 100 [178]-[181]

[118]Transcript 25 February 2008 p 92

[119]Ibid 93 line 22

[120]Ibid 95-96

[121]Ibid 96 lines 15-22

Despite Mr Vink’s attention being drawn to these earlier submissions, he did not repeat this submission at the second hearing on his application for an inquiry.

If there was evidence to suggest that Mr Tuckwell had accepted the position of administrator as part of a plan to protect Mr Moran, Mr Van Oosterom or Mr Di Carlo, then that may well warrant inquiry under s 536. It is a most serious allegation and goes right to the heart of Mr Tuckwell’s suitability to act as a liquidator. Mr Tuckwell sued Mr Van Oosterom and eventually Mr Van Oosterom became bankrupt. His explanation for not pursuing Mr Van Oosterom and Mr Di Carlo for insolvent trading or misuse of the company’s moneys appears reasonable. Mr Vink submitted that Mr Moran knew of the insolvent trading of CIC and was thereby implicated. Mr Vink did not elaborate on how Mr Moran may be implicated.[122]
[122]Vink submissions 25 February [21]

There is no evidence to suggest any form of improper collusion between Mr Moran, Mr Van Oosterom, Mr Di Carlo and Mr Tuckwell or any of them. In my opinion, no evidence has been put forward to support the allegation that the main function served by Mr Tuckwell’s appointment was the avoidance of the potential prosecution of Mr Van Oosterom and Mr Di Carlo for the mismanagement of CIC and the allegation does not warrant an investigation.

Destruction of business records

In substance, Mr Vink’s complaint is as follows. In section four of Mr Tuckwell’s report to creditors of 29 April 2002, he says that the available business records were sufficient to audit the financial statements of CIC to comply with s 286 of the Act. Mr Vink says that, despite saying so, Mr Tuckwell testified in VCAT in October and December of 2004 that he had not seen many of the documents relating to CIC. Mr Vink submits that on 17 April 2002, one week after the start of the administration of CIC by Mr Tuckwell, Ms Linton obtained orders in the Family Court for access to the business records of CIC and that Mr Tuckwell was advised of these orders on 23 April 2002. Mr Vink submits that he believes it was vital for Ms Linton to audit the business records to ascertain the quantum of the personal expenses of Mr Van Oosterom for any potential Family Court applications by Mr Van Oosterom. Mr Vink alleged that Mr Van Oosterom had been allocating expenses incurred in relation to his farm to CIC business projects and that purchase orders of the company would establish that. He submits that in Mr Van Oosterom’s affidavit of 18 April 2002 in the Family Court, he admitted that in excess of $100,000 in improvements to his Guildford farm may have been billed to his business since his separation. Mr Vink says that in January 2003 Ms Linton made a further application in the Family Court to inspect the business records. Mr Vink says that, despite the orders of the Family Court made 17 April 2002 and 30 January 2003, and the notification of the first order to Mr Tuckwell, Mr Tuckwell admitted that he allowed or authorised the destruction of business records of CIC towards the end of January 2003 without first obtaining the consent of ASIC or the leave of the Family Court. He says that Mr Tuckwell conceded to the Family Court in August 2003 that he had consented to the destruction of business records. He quotes paragraph thirty of Mr Tuckwell’s affidavit sworn on 21 August 2003 where Mr Tuckwell states:

[Van Oosterom], on or about 14 January 2003, advised me that he intended to destroy a load of documents of CIC, which he described as the old records of CIC previously stored at the farm. As I had already obtained the documents I required to fulfil my duties, this did not concern me.”

Mr Vink asserts that Mr Tuckwell never had sufficient records to be able to imply in paragraph four of his report that he could audit the business. He says that in November 2002 Mr Tuckwell said to him words to the effect: “I do not have all of the invoices, I could not find the purchase order books and no job files were left at the premises of CIC when I was appointed liquidator.”

Mr Vink says that, after inspecting some of the business records at Mr Tuckwell’s office on 12 November 2004, Mr Tuckwell said to him words to the effect: “I still have five archive boxes containing business records of CIC that do not fit the description of invoices, purchase orders and job files.”

Mr Vink says that when he asked to see those business records, Mr Tuckwell refused to let him see those records. Mr Vink says that by letter dated 12 November 2004 to Mr Tuckwell’s solicitors he requested that access be provided to Ms Linton to the five archive boxes of business records that he refers to. He says he has not received a response to date.

So far as the Family Court orders are concerned, although I do not have in evidence the full extent of the proceedings between Mr Van Oosterom and Ms Linton in the Family Court, the evidence does establish that the complaints made against Mr Tuckwell in relation to the refusal to produce documents or the destruction of documents were all dismissed. The contempt proceedings were dismissed with costs.

Mr Tuckwell has opined that he had sufficient documents to fulfil his duties. He has further deposed as to the circumstances surrounding the discovery or identification of documents at Mr Van Oosterom’s farm and deposes that he was able to discover particular purchase orders required by Ms Linton and provide them to her. In my opinion, there is no matter here that exhibits a prima facie case that there is something which requires inquiry under s 536.

Conclusion of Mr Vink’s supporting affidavit

Mr Vink’s supporting affidavit concludes, in paras 128-132, as follows:

128. The Defendant has not investigated Van Oosterom’s possible misconduct and has given him preferential treatment in that he has not pursued Van Oosterom’s assets as payment for a debt that was not at all times acknowledged by Van Oosterom.

I take this to summarise the complaint under the heading “The Administration of CIC by Howarth” referred to in paras 42-64 of his supporting affidavit.

129. I submit that an inquiry should be conducted into the liquidation of CIC as the alleged damages that flow from that liquidation far exceed the funds that were available to creditors, making it in the interests of the public. These damages flow from claims by the defendant against Linton, the quantum that still has not been determined by the defendant after five years in an action that has been stayed for over a year for non payment of security of costs by the defendant.

This is a summary of the complaint made under the heading “False Allegations in the Supreme Court by Mr Tuckwell” referred to in paras 120-127 and the complaint made under the heading “Abortive Attempt by Howarth to Sell Linton Properties” referred to in paras 65-71.

130. I submit that there is a prima facie case of misfeasance on the part of the defendant in relation to the lack of disclosure of information to creditors and in the misrepresentation of facts to creditors.

This is a summary of the complaint made under the heading of the “Howarth Report to Creditors” referred to in paras 72-83 of the supporting affidavit.

131. I apply for the Court to order the investigation of the defendant on the basis that he has been negligent in:
(a) Not safeguarding the business records of CIC.
(b) Not obtaining a true picture of the structure of CIC and its principles.
(c) Failing to pursue the ramifications of the possible misconduct of the directors.
(d) His investigations as to the cause of the insolvency of CIC.
(e) Not safeguarding the assets that were potentially available to creditors, namely the Guildford farm and the assets of Di Carlo.
(f) Not correctly identifying the assets and liabilities of CIC.
(g) Not truthfully disclosing to creditors the risks of the recommended recovery actions on their behalf.

Mr Vink elaborated upon these allegations of negligence in his submissions. In my opinion, for the reasons already given, these complaints of negligence do not establish a prima facie case that the matters require inquiry.

Finally, Mr Vink submitted:

I submit that an inquiry should be conducted into the liquidation of CIC on the basis the defendant has not faithfully and honestly performed his duties as an administrator and subsequently as liquidator of CIC.

There is no evidence to suggest that Mr Tuckwell has not honestly performed his duties. The complaint is without foundation. There is no evidence to suggest Mr Tuckwell has not faithfully carried out his duties as liquidator of CIC.

OTHER COMPLAINTS

Mr Vink has made a range of complaints in his affidavits, oral and written submissions referred to above. Some of these go beyond those based on or referred to in his supporting affidavit. I have found that none of the matters based on or referred to in his supporting affidavit establish a prima facie case that there is something which requires inquiry. I canvassed many of these other complaints in my earlier judgment Vink v Tuckwell.[123]
[123][2001] VSC 100 [169]-[188]

Insofar as these further complaints constitute complaints to the court by Mr Vink for the purposes of s 536(1)(b), I find that the complaints do not establish a prima facie case that there is something which requires inquiry. I consider below two of the further complaints raised in the 5 May written submissions which arguably might arise from the facts deposed to in the supporting affidavit.

Abuse of Part 5.3A

In his submissions of 5 May 2008, Mr Vink makes a complaint about the appointment of Mr Tuckwell as administrator. In particular, Mr Vink asserts Mr Tuckwell’s appointment was in contravention of the Act on the basis that the objects of Part 5.3A could not be served and on the basis that Mr Tuckwell could be expected to know that Part 5.3A could not be served without a viable proposal for a Deed of Company Arrangement and the will of CIC (meaning Mr Van Oosterom) to implement that Deed.[124] Mr Vink alleges Mr Tuckwell should have refused the appointment as administrator because the business had already ceased.[125]
[124]Vink submission 5 May [22]
[125]Vink submission 25 February 2008 [11]

Mr Vink referred to s 435A of the Act:

The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in existence – results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.

Part 5.3A is headed “Administration of a company’s affairs with a view to executing a deed of company arrangement.

Mr Vink asserted s 435A(a) was not open at the time of the appointment as CIC had ceased carrying on business. He also asserted there was no realistic prospect of a Deed of Company Arrangement being entered into. He submits that in those circumstances Mr Tuckwell should not have accepted the appointment. He argues the appointment denied the creditors their right to pursue their own remedies under s 462(2) (winding up on application of a creditor), in which case the court would have appointed an independent and unbiased liquidator of their own.

This complaint appears to replace Mr Vink’s earlier complaint that Mr Tuckwell’s appointment was improper as it was done to protect Mr Van Oosterom, Mr Di Carlo and Mr Moran from legal actions over their administration of CIC. I have already dealt with this complaint.

Mr Tuckwell submits that an inquiry may clarify the interrelationship between s 435A(a) and (b) of the Act in a way that discourages insolvency practitioners to effectively appoint themselves through an interpretation of s 435A(b) that is self-serving and against the interest of creditors or without the creditors’ consent.

Such an inquiry would not involve an inquiry into the conduct of Mr Tuckwell in connection with the performance of his duties as liquidator. In any event, I do not accept Mr Vink’s submissions. The mere fact that the business had ceased did not mean the administrator or the company could continue the business. Also it is not necessary that there be a realistic prospect of a deed of company arrangement before an administrator may be appointed.[126]
[126]Dallinger v Halcha Holdings Pty Ltd (In Admin) (1996) 14 ACLC 263

Contemporaneous notes

In Mr Vink’s submissions of 5 May 2008, he alleges that Mr Tuckwell stated at the VCAT that he keeps no contemporaneous notes of his meetings.[127] Mr Vink says this may be construed as a breach of s 531 of the Act. He says this is prima facie negligence and the absence of contemporaneous notes allows the court to infer the object of Part 5.3A of the Act was not made clear to Mr Van Oosterom by Mr Tuckwell. Mr Vink refers to s 89B of the Evidence Act 1958 (Cth). He says the absence of the contemporaneous notes becomes prima facie evidence of not acting with due care and diligence. He alleges Mr Tuckwell probably has a requirement to keep such notes.[128] In my opinion, this complaint does not warrant inquiry.
[127]Exhibit 31, transcript 14 December 2004 at 33.18
[128][16]

CONCLUSION

After some four days of hearing and examining voluminous amounts of documents, I am satisfied that none of the actions that Mr Tuckwell took in the liquidation warrant an inquiry. Mr Tuckwell was faced with a very difficult liquidation which followed the collapse of the marriage between Mr Van Oosterom and Ms Linton. The consequences for both parties to the marriage have been terrible indeed. At one stage they were the owners of a very prosperous business with investment properties and appeared to have a wonderful future before them. The collapse of the marriage indirectly led to the destruction of the business. Mr Tuckwell has found himself to be the meat in the sandwich between Ms Linton and Mr Van Oosterom and, in carrying out his duties, has been the unfortunate victim of many of the disputes between Mr Van Oosterom and Ms Linton.

If I am wrong in my assessment of the complaints and the complaints made by Mr Vink to establish a prima facie case that there is something which requires inquiry, then in my discretion I would not order an inquiry for the following reasons. The matters to be inquired into are unlikely to attract any sanctions for disciplinary reasons. ASIC, who are responsible for the supervision and control of liquidators, have been informed by Mr Vink of his complaints and have not seen fit to hold an inquiry under s 536 or otherwise under its internal powers. The terms of the inquiry would not be in the public interest. The main matters to be investigated would be the strengths and weaknesses of the possible claims against Mr Van Oosterom and Ms Linton. Ms Linton has settled the matters concerning her. It would not be fair on her to re-open the matters. Mr Van Oosterom went bankrupt. It would not be in the public interest to second guess the decisions of the liquidator.

Mr Tuckwell deposes that none of the creditors of CIC support the proceedings brought by Mr Vink against him. He says he wrote to nine of the largest or most interested creditors of CIC (including four members of the committee of inspection) on 23 October 2007 to advise them of these proceedings and seek their confirmation of whether they supported Mr Vink’s application that an inquiry be conducted into the liquidation of CIC. He says each of the nine responded with a letter signed either personally or by a director of the creditor confirming that they do not support the proceedings brought by Mr Vink against him on the basis they are satisfied with the way in which Mr Tuckwell has conducted the liquidation of CIC. The letters were exhibited.[129]
[129]Exhibit LCJ-4

All these matters lead me to the conclusion I should not order any inquiry, even if I was satisfied the matters complained of warranted inquiry (which I am not).

Accordingly, I dismiss Mr Vink’s application. I will hear the parties on costs.

AMENDMENT OF THE ACT

In my view, the legislature should consider amending s 536 of the Act to limit the persons who may complain to the court to those who have an interest in the liquidation.[130] Mr Vink conducted these proceedings personally as he is entitled to as a litigant in person. This has led to a great injustice against Mr Tuckwell. The liquidator was exposed to serious allegations of misconduct which I have found do not warrant inquiry. He was wrongly accused of dishonesty. He was accused of accepting the position of administrator to protect Mr Van Oosterom and Mr Di Carlo from proceedings in the liquidation. There was no evidence even to suggest this. The allegation was not pursued.
[130]Section 1321 of the Act gives standing to “a person aggrieved” for appeals against decisions of liquidators

There seems little public utility in allowing a person with no interest in the liquidation to make serious and unfounded allegations against a liquidator. In my view, it is unjust that a professional man or woman can be accused of misconduct under the protection of legal privilege where the complainant is not subject to the ethical rules that lawyers are subject to. A lawyer is not permitted to make allegations of fraud or dishonesty unless he or she is satisfied reasonable grounds exist to make such an allegation. Mr Vink was not bound by such rules of professional conduct. In my opinion, this was unfair to Mr Tuckwell and should not be permitted. If the complainant had an interest in the liquidation the risk of this happening would be significantly reduced.

In any event, I see little public benefit in permitting a person who has no interest in the liquidation making complaints about it. One need not go pass this case to demonstrate the point. I would have thought that ASIC is ideally placed to vet complaints made by persons not interested in the liquidation. If ASIC considers that matters complained of have merit it has more than enough powers to deal with them.

[2008] VSC 206

17 June 2008