FEDERAL COURT OF AUSTRALIA Carter, in the matter of Bramac Investments Pty Limited [2010] FCA 317 Citation: Carter, in the matter of Bramac Investments Pty Limited [2010] FCA 317 Parties: PHILIP PATRICK CARTER, STEPHEN GRAHAM LONGLEY, GREGORY WINFIELD HALL and IAN ROBERT ENGLAND File number: VID 169 of 2010 Judge: GOLDBERG J Date of judgment: 23 March 2010 Legislation: Corporations Act 2001 (Cth): 436, 473(7), 502 & 503 Cases cited: Re Application of Vouris (2004) 49 ACSR 543, considered Re Wily (2003) 49 ACSR 94, cited Condon v Watson (2009) 174 FCR 314, considered Emerton Pty Ltd v Referral Marketing Services Pty Ltd (2009) NSWSC 738, followed City & Suburban Pty Ltd v Smith (as Liquidator of Conpac (Aust) Pty Ltd (in Liq)) (1998) 28 ACSR 328, followed Date of hearing: 23 March 2010 Place: Melbourne Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 21 Counsel for the Plaintiffs: S Rubenstein Solicitor for the Plaintiffs: Blake Dawson IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 169 of 2010 IN THE MATTER OF: BRAMAC INVESTMENTS PTY LIMITED (ACN 121 420 193) BRIDGECORP AUSTRALIA PTY LIMITED (ACN 075 579 716) BRIDGECORP FINANCE LIMITED (RECEIVERS AND MANAGERS APPOINTED) (ACN 095 328 948) BRIDGECORP FINANCE (AUSTRALIA) PTY LIMITED (ACN 096 090 130) BRIDGECORP HOLDINGS LIMITED (ACN 101 148 743) BRIDGECORP HOLDINGS (AUSTRALIA) PTY LIMITED (ACN 095 402 270) BRIDGECORP PROPERTIES PTY LIMITED (ACN 095 349 554) BRIDGEFIRST FINANCE LIMITED (ACN 108 223 561) BRIDGEFIRST PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 108 223 589) (All in Liquidation) (together the "Entities") BETWEEN: PHILIP PATRICK CARTER First Plaintiff STEPHEN GRAHAM LONGLEY Second Plaintiff GREGORY WINFIELD HALL Third Plaintiff IAN ROBERT ENGLAND Fourth Plaintiff JUDGE: GOLDBERG J DATE OF ORDER: 23 MARCH 2010 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Pursuant to s 503 of the Corporations Act 2001 (Cth) Philip Patrick Carter and Stephen Graham Longley the liquidators of each of the companies listed in Schedule A to this order ("the companies"), be removed as liquidators of the companies and Gregory Winfield Hall and Ian Robert England be appointed as liquidators of the companies, such removal and appointment to be effective on and from the date of this order. 2. The costs of and incidental to this application be borne by Gregory Winfield Hall and Ian Robert England. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. SCHEDULE A BRAMAC INVESTMENTS PTY LIMITED (ACN 121 420 193) BRIDGECORP AUSTRALIA PTY LIMITED (ACN 075 579 716) BRIDGECORP FINANCE LIMITED (RECEIVERS AND MANAGERS APPOINTED) (ACN 095 328 948) BRIDGECORP FINANCE (AUSTRALIA) PTY LIMITED (ACN 096 090 130) BRIDGECORP HOLDINGS LIMITED (ACN 101 148 743) BRIDGECORP HOLDINGS (AUSTRALIA) PTY LIMITED (ACN 095 402 270) BRIDGECORP PROPERTIES PTY LIMITED (ACN 095 349 554) BRIDGEFIRST FINANCE LIMITED (ACN 108 223 561) BRIDGEFIRST PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 108 223 589) IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 169 of 2010 IN THE MATTER OF: BRAMAC INVESTMENTS PTY LIMITED (ACN 121 420 193) BRIDGECORP AUSTRALIA PTY LIMITED (ACN 075 579 716) BRIDGECORP FINANCE LIMITED (RECEIVERS AND MANAGERS APPOINTED) (ACN 095 328 948) BRIDGECORP FINANCE (AUSTRALIA) PTY LIMITED (ACN 096 090 130) BRIDGECORP HOLDINGS LIMITED (ACN 101 148 743) BRIDGECORP HOLDINGS (AUSTRALIA) PTY LIMITED (ACN 095 402 270) BRIDGECORP PROPERTIES PTY LIMITED (ACN 095 349 554) BRIDGEFIRST FINANCE LIMITED (ACN 108 223 561) BRIDGEFIRST PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 108 223 589) (All in Liquidation) (together the "Entities") BETWEEN: PHILIP PATRICK CARTER First Plaintiff STEPHEN GRAHAM LONGLEY Second Plaintiff GREGORY WINFIELD HALL Third Plaintiff IAN ROBERT ENGLAND Fourth Plaintiff JUDGE: GOLDBERG J DATE: 23 MARCH 2010 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The application before the court today is an application made under s 502 of the Corporations Act 2001 (Cth) ("the Act"). Section 502 provides that: "If from any cause there is no liquidator acting, the court may appoint a liquidator." 2 The application arises in these circumstances. On 4 July 2007, Mr Philip Patrick Carter and Mr Stephen Graham Longley were appointed voluntary administrators of a number of companies: Bramac Investments Pty Limited, Bridgecorp Australia Pty Limited, Bridgecorp Finance Limited (Receivers and Managers Appointed), Bridgecorp Finance (Australia) Pty Limited, Bridgecorp Holdings Limited, Bridgecorp Holdings (Australia) Pty Limited, Bridgecorp Properties Pty Limited, Bridgefirst Finance Limited and Bridgefirst Pty Limited (Receivers and Managers Appointed) ("the companies"). They were appointed pursuant to s 436A of the Act. 3 On 27 November 2007 Mr Carter and Mr Longely became liquidators of the companies, pursuant to s 446A of the Act. On 10 November 2009, Mr Carter and Mr Longley tendered their resignations from the PricewaterhouseCoopers partnership and those resignations will become effective on 30 June 2010. Notwithstanding that, it is expected that at a meeting of the PricewaterhouseCoopers board of partners, to be held on 29 March 2010, the partners will agree to Mr Longley and Mr Carter leaving the firm effectively on or about 15 April 2010. 4 Throughout their appointment as liquidators of the companies, Mr Carter and Mr Longley have had a team of staff from PricewaterhouseCoopers to assist them in the day‑to‑day management of the liquidation of the companies, and that team of staff members has had a substantial role in the day‑to‑day administration of the liquidation. After Mr Carter and Mr Longley leave the PricewaterhouseCoopers partnership, those staff members who have been involved in the day‑to‑day administration of the liquidation will continue to be employed by PricewaterhouseCoopers. 5 The liquidation of the companies has not yet been completed to the stage of finality, and the proposal has been made that Mr Hall and Mr England, who are both partners in PricewaterhouseCoopers and both registered liquidators, take over the liquidation of the companies. In particular, Mr Hall has up to the present time carried out a significant amount of work in relation to the liquidation of the companies. What is proposed is that the current liquidators be replaced as liquidators by Mr Hall and Mr England. 6 The liquidation of the companies has involved a substantial amount of litigation involving what is called loosely, the Bridgecorp Group of Companies which was based in New Zealand and the parent company of the entities of the companies was previously listed on the New Zealand stock exchange. Major litigation either has been or will be issued in New Zealand, where the majority of the creditors of the group reside, and it is expected that there will be further litigation and further Court processes that may result in there being further distributions available for creditors. 7 Mr Longley has sworn an affidavit in which he says that the major task yet to be completed in the liquidation of the companies in Australia is the distribution of moneys recovered from New Zealand litigation, which he considers is best undertaken by staff who have an intimate and an intricate knowledge of the creditors of the companies, and the circumstances surrounding the proposed distribution. 8 On 2 March 2010, there was a meeting of creditors of the companies convened at the offices of PricewaterhouseCoopers in respect of each of the Australian Bridgecorp Group companies. 9 In respect of Bridgecorp Holdings Limited, a resolution approving the appointment of Messrs Hall and England as replacement liquidators was carried unanimously. Such resolution was not able to be voted in respect of the other entities as there was no quorum present at the meeting, but the same resolution was proposed and seconded but not passed, due to that lack of quorum. No creditors opposed the resolution, and notices were sent to all the creditors before those meetings were held. As I understand the position, approximately 60.3% of the creditors of the companies by value were represented at the meeting. 10 Mr Hall and Mr England have provided to the Court consents to act as liquidators required by the regulations in relation to their appointment as liquidators of the companies. 11 The application that is before the Court is that Messrs Hall and England be appointed liquidators pursuant to s 502 of the Act. When the matter came on for hearing before me I expressed some concern as to whether in the circumstances s 502 – which gives the Court jurisdiction to appoint a liquidator where no liquidator is acting – was activated at the present time. The current liquidators, Mr Carter and Mr Longley, have not as yet resigned as liquidators. Mr Longley has simply said, quite properly, that he and Mr Carter intend to resign as liquidators and what they propose is that they seek the orders to effect a smooth handover of the liquidations to Mr Hall and Mr England. Counsel for the applicant drew my attention to cases in which the power of the Court under s 502 had been activated. 12 In particular he referred to Re Application of Vouris (2004) 49 ACSR 543 and Re Wily (2003) 49 ACSR 94. In Re Wily, Palmer J made an order accepting the resignation of the liquidator and appointing another insolvency practitioner as liquidator. In that situation the former liquidator had been suspended from acting as an official liquidator for four months, and he applied to the Court for an order replacing him as liquidator in each of the companies. At 95 Palmer J expressed a view that as the former liquidator intended to resign, although he had not done so, it was appropriate to exercise the power under s 502 to appoint the new liquidator effective on and from a date four days hence. His Honour did not directly address the issue whether the jurisdiction of the Court was confined under s 502 to a situation where, at the point of time of the application to the Court, there was no liquidator then acting. 13 In Re Application of Vouris, Barrett J took a similar view and he also took the view that the reasoning in Re Wily applied in the circumstances which faced him. In Condon v Watson (2009) 174 FCR 314 Lindgren J was faced with a number of circumstances arising in the course of liquidation of companies which included the appointment of a liquidator to fill a vacancy in the liquidation. At 324 Lindgren J cited ss 502 and 503 of the Act and said: "Section 502 did not apply in Vouris … because there was still a liquidator acting and Barrett J considered that s 503 gave only a composite power to remove and appoint, not simply a power to appoint." 14 His Honour noted the question of whether the expression "another liquidator" means a liquidator other than the one removed, but concluded that it did not mean this. It is not easy to reconcile Lindgren J's observation with the reasoning of Barrett J in Re Application of Vouris. Counsel for the applicants quite properly drew my attention to a recent decision of the New South Wales Supreme Court, a judgment of Brereton J in Emerton Pty Ltd v Referral Marketing Services Pty Ltd [2009] NSWSC 738. His Honour there was considering an application made pursuant to s 502 of the Act appointing a liquidator to Referral Marketing Services Pty Ltd in place of two persons who had been appointed liquidators who had indicated an intention to resign upon the appointment of a replacement liquidator or liquidators. 15 Brereton J referred to Re Application of Vouris and noted that Barrett J had observed that the power under s 502 to appoint a liquidator should be regarded as in the nature of an overarching power exercisable by the Court in any circumstance of vacancy in the office of liquidator in any voluntary winding up, even though a power leading to the same result might also be exercisable by a general meeting or a meeting of creditors. Brereton J directly addressed the question which I raised with counsel. That is whether s 502 applied where there was still a liquidator acting but there was an expectation or an anticipation or an intention that the liquidator resign, and not continue to act in the future. Brereton J referred to Re Application of Vouris in pars [10] and [11] of his reasons for judgment as follows: "In Re Vouris Barrett J (at [10]), observed that this power should be regarded as in the nature of an overarching power exercisable by the Court in any circumstance of vacancy in the office of liquidator in any voluntary winding up – even though a power leading to the same result might also be exercisable by a general meeting or a meeting of creditors. His Honour considered the overarching power to be exercisable by the Court in both types of voluntary winding up, despite the existence of a concurrent or separate power in each of Divisions 2 and 3. In the same case (at [5]), his Honour dealt with the relevant provision in the context of a court‑ordered winding up, namely s 473(7), which is in the following terms: A vacancy in the office of a liquidator appointed by the Court must be filled by the Court. His Honour said (emphasis added): On one reading, it might be thought that the Court should not make an order under s 473(7) until the vacancy has actually arisen by the resignation taking effect. For my own part, I am satisfied that the Court may make an order under s 437(7) by reference to a vacancy that will arise at a particular future time by force of a resignation that has already been signed and is before the Court as Mr Vouris' several resignations are in this case." (citations omitted) 16 Brereton J pointed out that in the case before him there was no resignation that had already been signed or delivered or was before the Court, and that there was no specific date upon which any such resignation would, as a matter of certainty, take effect. That is akin to the present circumstances before me. It is apparent that Mr Longley and Mr Carter intend to resign. Mr Longley said so much in his affidavit, namely, that both men intend to resign from their appointments as liquidators presumably in the near future. Brereton J took the view that in circumstances akin to that of Barrett J's, a practical construction of s 473(7) of the Act could not be extended to be an application of s 502 to a situation in which liquidators remained acting and who had merely expressed a wish to retire in the future. 17 Brereton J said at pars [12] and [13]: "In the present case, there is no resignation that has already been signed, or delivered, or before the Court; and there is no specific date upon which any such resignation will, as a matter of certainty, take effect. Indeed, there is no certainty that there will be a resignation, only that there may be a resignation, if the Court appoints a replacement liquidator. There is no more than an expression of a wish to resign, if a future event happens. In those circumstances, I do not think that Barrett J's practical construction of s 473(7) can be extended to permit the application of s 502 to a situation in which, far from there being no liquidator acting, there are and remain liquidators acting, who have merely expressed a wish to retire in certain events in the future. In this respect, there is at least some significance in the different wording of s 473(7) – which speaks of "a vacancy in the office of a liquidator", and at least arguably admits of a prospective appointment to fill a vacancy which the Court is satisfied will occur – whereas s 502 conditions the power of appointment on the circumstance that there "is no liquidator acting". 18 Brereton J concluded at par [16] that the condition for exercise of power under s 502 was not satisfied because there was a liquidator still acting at the date of the application so that the Court did not have the power, given by s 502 of the Act, to appoint a liquidator. I agree with respect with his Honour's conclusion and have formed the same conclusion in relation to the circumstances before the Court today. However, I do take the view that it is an appropriate exercise of jurisdiction under s 503 to make an order that the current liquidators be removed as liquidators and the substitute liquidators be appointed effectively from this day. I adopt, with respect, the reasoning of Merkel J in City & Suburban Pty Ltd v Smith (as Liquidator of Conpac (Aust) Pty Ltd (in Liq)) (1998) 28 ACSR 328. 19 At 336, Merkel J set out the principles which he considered applied to circumstances where a liquidator could be removed. In short, his Honour took the view that the words in s 503 "cause shown" are not limited to situations where there has been some inappropriate conduct by the current liquidators or any breach of the duties they owe to the Court, to the creditors or to the companies in their capacities as liquidators. Merkel J said at 336 extracted in par [17] of Brereton J's judgment in Emerton that: "Section 503 of the Law provides that the court may "on cause shown" remove a liquidator and appoint another liquidator. It has long been accepted that the section and its predecessors were not confined to situations where it is established that there is personal unfitness, impropriety or breach of duty on the part of the liquidator. Cause is shown for removal whenever the court is satisfied that it is for the better conduct of the liquidation or, put another way, it is for the general advantage of those interested in the assets of the company that a liquidator be removed: see Re Adam Eyton Ltd; Ex parte Charlesworth (1887) 36 Ch D 299 at 306; Re Mutual Live Stock Financial and Agency Co Ltd (1886) 12 VLR 777; Re George A Bond and Co Ltd (1932) 32 SR (NSW) 301 at 310; Re Giant Resources Ltd [1991] 1 Qd R 107 at 115 per Ryan J; Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544 at 550 per Hayne J; Re Biposa Pty Ltd; Condon v Rogers (1995) 17 ACSR 730 at 734 per Young J and Dallinger v Halcha Holdings Pty Ltd (in admin) (1995) 134 ALR 178 at 183‑4; 18 ACSR 835 per Sundberg J. As was said by Bowen LJ in Re Adam Eyton at 306: Of course, fair play to the liquidator himself is not to be left out of sight, but the measure of due cause is the substantial and real interest of the liquidation." I take a similar view that in the present circumstances of this case. 20 The circumstances giving rise to this application require, in my view, a common sense and practical approach to the interpretation of the legislation although I do not consider that I have jurisdiction to make the orders sought under s 502. I do, however, have no doubt that I should make them under s 503. I want to emphasise that, although the precondition to the exercise of the jurisdiction is for cause shown, that expression is not set out in the statute in a pejorative manner. The conduct of the liquidators has been such that the liquidations have been administered in a proper and efficient manner. What they desire to have happen is that the liquidations continue seamlessly notwithstanding their resignation from the PricewaterhouseCoopers' partnership. 21 It would not be sensible or efficient or cost effective in my view to have the liquidations transferred to such entity or organisation or partnership which Mr Carter and Mr Longley may join after their resignation from PricewaterhouseCoopers. Efficiency, common sense and cost effectiveness requires, in my view, that the liquidations remain within the purview and supervision of those partners and PricewaterhouseCoopers, who are appropriate and available to be appointed as liquidators of the companies. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. Associate: Dated: 31 March 2010