Federal Court Appoints New Liquidators for Seven Companies

OUTCOME: Allowed

Federal Court of Australia

[NAME], in the matter of [COMPANY] (in liq) [2021] FCA 566 File number(s): NSD 466 of 2021

Judgment of: CHEESEMAN J

Date of judgment: 26 May 2021

Date of publication of reasons: 31 May 2021

Catchwords: CORPORATIONS – insolvency - application to appoint joint and several liquidators where existing liquidator's resignation is imminent – uncontested application - replacement of liquidator is appropriate in the circumstances – application granted

Legislation: Corporations Act 2001 (Cth) ss 499(3), 532(2) Corporations Act 2001 (Cth), Schedule 2—Insolvency Practice Schedule (Corporations), ss 90-15(1)

Cases cited: Re [COMPANY] [2019] NSWSC 997 [COMPANY] [2017] FCA 1626 [COMPANY] (in liq) [2017] NSWSC 1456 Re [COMPANY] [2018] NSWSC 1478

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Number of paragraphs: 14

Date of hearing: 26 May 2021

Date of last submissions: 24 May 2021

Counsel for the [COUNSEL]

Solicitor for the [NAME] 466 of 2021 IN THE MATTER OF [COMPANY] (IN LIQUIDATION) [NAME] [NAME], IS HIS CAPACITY AS THE LIQUIDATOR OF [COMPANY] (IN LIQUIDATION) [NAME] [PHONE], [COMPANY] (IN LIQUIDATION) [NAME], [COMPANY] (IN LIQUIDATION) [NAME], [NAME] [PHONE] [COMPANY] (FORMERLY KNOWN AS [COMPANY]) (IN LIQUIDATION) [NAME] [PHONE], [COMPANY] (IN LIQUIDATION) [NAME] [PHONE], A.C.N. [PHONE] [COMPANY]. ([COMPANY]) (IN LIQUIDATION) [NAME] [PHONE] ([COMPANY]), AND [COMPANY] (IN LIQUIDATION) [NAME] (and others named in the schedule) First Plaintiff

order made by: CHEESEMAN J DATE OF ORDER: 26 MAY 2021

THE COURT ORDERS THAT:

1. Order pursuant to section 499(3) of the Corporations Act 2001 (Cth), upon the resignation of the First Plaintiff as liquidator of: (a) [COMPANY]. (in liquidation) [NAME] [PHONE]; (b) [COMPANY] (in liquidation) [NAME]; (c) [COMPANY] (in liquidation) [NAME]; (d) [NAME] [PHONE] [COMPANY] (formerly known as [COMPANY]) (in liquidation) [NAME] [PHONE]; (e) [COMPANY] (in liquidation) [NAME] [PHONE]; (f) A.C.N. [PHONE] [COMPANY]. (formerly known as [COMPANY]) (in liquidation) [NAME] [PHONE]; and (g) [COMPANY] (in liquidation) [NAME], (together, the Companies), the [NAME] be appointed the joint and several liquidators of each of the Companies.

2. Order that, to the extent necessary, leave be granted pursuant to section 532(2) of the Corporations Act 2001 (Cth), for the replacement of the First Plaintiff with the [NAME] as joint and several liquidators of the Companies.

3. No order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

CHEESEMAN J: 1 These proceedings concern the replacement of the First Plaintiff, Mr [NAME], as the court appointed liquidator to seven companies, each the subject of a creditors' voluntary liquidation, in circumstances where Mr [NAME] retirement is imminent and the application is for the Court to appoint the [NAME], [NAME] and [NAME], as joint and several liquidators upon Mr [NAME] resignation taking effect. The application is made pursuant to s. 499(3) of the Corporations Act 2001 (Cth) (Corporations Act), or alternatively section 90-15(1) of the Insolvency Practice Schedule (Corporations). 2 Each of the plaintiffs is a partner of [NAME]. [NAME] have outstanding claims for remuneration and disbursements against each of the relevant companies in respect of the conduct of the various liquidations to date. [NAME] and [NAME] seek leave, so far as it is necessary, pursuant to s. 532(2) of the Corporations Act, to act as joint and several liquidators in these circumstances. 3 For the reasons which follow, I make orders substantially in accordance the plaintiffs' proposed short minutes of order. 4 The application is supported by four affidavits, namely that of Mr [NAME] of 21 May 2021, Mr [NAME] of 21 May 2021, Mr [COUNSEL] of 21 May 2021 and Ms [COUNSEL], solicitor, of 25 May 2021, which demonstrate the following matters. 5 The Australian Securities and Investments Commission (ASIC) has been informed of the present application. By email dated 24 May 2021, ASIC informed the plaintiffs' solicitors that it does not propose to intervene and expressed the view that the matter is one properly left for the determination by the Court. 6 The seven companies that will be impacted by the resignation of Mr [NAME] are identified in the opening paragraph of the Originating Process dated 21 May 2021 and filed 24 May 2021. I will refer to them collectively as the Companies. 7 The winding up of each of the Companies is at an advanced stage. All realisations have been completed and final dividends to creditors have been made or will be made shortly. Mr [NAME], an experienced liquidator, whose curriculum vitae is in evidence, estimates that the further time required to complete the winding up of each of the Companies, is between one to nine months. 8 In November 2020, Mr [NAME] tendered his resignation from [NAME], however, the effective date of his departure of 31 May 2021 was only agreed on 28 April 2021. It is a contractual condition of Mr [NAME] departure from [NAME] that he resign as a liquidator of each of the Companies by no later than 31 May 2021. As a registered liquidator, Mr [NAME] is required to maintain adequate professional indemnity and fidelity insurance, which he has held through [NAME]. After 31 May 2021, Mr [NAME] will not be covered by [NAME]'s insurance. Thus the need to replace Mr [NAME] as liquidator of the Companies prior to that date. 9 Mr [NAME] and Mr [NAME], each a chartered accountant and registered liquidator, have consented to their proposed appointment as joint and several liquidators of the Companies upon Mr [NAME] resignation. Their written consents to act and declarations of independence, relevant relationships and indemnities are in evidence. Those confirmations indicate that no independence issues prevent Mr [NAME] and Mr [NAME] acceptance of the proposed appointments. 10 The [NAME] employees with the day-to-day conduct of the relevant liquidations will continue to work on the liquidations under the supervision of Mr [NAME] or Mr [NAME], thereby achieving a cost-effective transition of liquidators. 11 Since tendering his resignation, significant steps have been taken by Mr [NAME] staff to minimise the number of companies affected by the present application for replacement of liquidators. As a result of that work, this proceeding concerns only seven companies, rather than a larger number of insolvency appointments involving Mr [NAME]. 12 In the event that the orders appointing [NAME] and [NAME] are not made, the alternative course would require each of the Companies to convene a meeting of creditors at an estimated cost of between $7,500 to $10,000 for each of the Companies in circumstances where three of the Companies have limited funds to meet such costs. By way of contrast, [NAME] agree to bear the costs and expenses associated with the present proceeding. 13 I am satisfied that it is appropriate and in the interests of the creditors of each company to make the order sought under s. 499(3) of the Corporations Act having regard to the following: (1) the desirability, for reasons of continuity and efficiency, of retaining the appointments within the same firm, upon the resignation of Mr [NAME], particularly when Mr [NAME] has had some previous involvement in the winding up of the Companies, and there will be some overlap between the staff working on the individual liquidations and Mr [NAME] will facilitate an efficient transfer: [COMPANY] [2017] FCA 1626 at [7] ([NAME]). (2) the advantage going forward of a joint and several appointment in terms of logistics and continuity: [COMPANY] (in liq) [2017] NSWSC 1456 at [6] ([NAME] J); (3) the convenience and cost-effectiveness of the Court making the order to obviate the time and costs associated with arranging for and convening creditors' meetings, particularly when [NAME] will bear the costs of the present application: Re [COMPANY] [2018] NSWSC 1478 at [10] ([NAME]); and (4) the Companies' liquidations are at an advanced stage and the remaining tasks are generally of an administrative nature. 14 I am also satisfied that it is appropriate, if required, to grant Mr [NAME] and Mr [NAME] leave, pursuant to s. 532(2) of the Corporations Act, to be appointed as liquidators. Notwithstanding that [NAME] have outstanding claims for remuneration and disbursements exceeding $5,000 against the relevant Companies those claims are due to [NAME] in respect of work done in the various liquidations. Such leave is commonly granted in applications for replacement of liquidators for the reasons cogently expressed by [NAME] in [COMPANY] [2019] NSWSC 997 at [6]-[11]. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman .

Associate: Dated: 31 May 2021

SCHEDULE OF PARTIES NSD 466 of 2021 [NAME] [NAME] Plaintiff [NAME]