Supreme Court New South Wales Medium Neutral Citation: In the matter of BH Holdings QLD Pty Ltd [2024] NSWSC 132 Hearing dates: 19 February 2024 Date of orders: 19 February 2024 Decision date: 19 February 2024 Jurisdiction: Equity - Corporations List Before: McGrath J Decision: See [24] Catchwords: CORPORATIONS — winding up — just and equitable ground — appointment of liquidators and receivers — where the parties nominate different proposed liquidators and receivers — where considerations as to fitness, qualifications, and cost do not warrant a departure from the Court's regular practice of appointing the plaintiff's nominated liquidator Legislation Cited: Corporations Act 2001 (Cth) Supreme Court Act 1970 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Re Crow Inn Pty Ltd (No 2) [2020] NSWSC 1749 Re El Zorro Transport Pty Ltd [2013] NSWSC 1082 Workers Compensation Nominal Insurer v Denny Earthmoving & Bulk Haulage Pty Ltd [2008] NSWSC 1167 Category: Principal judgment Parties: Beauwave Pty Ltd (First Plaintiff) BH Holdings QLD Pty Ltd (First Defendant) BH Developments QLD Pty Ltd (Second Defendant) Benhollis Pty Ltd (Third Defendant) Representation: Counsel: A Fernon SC and T March (Plaintiff) M Davis (Third Defendant) Solicitors: Swaab (Plaintiff) Bartier Perry (Third Defendant) File Number(s): 2023/00444230 JUDGMENT — EX TEMPORE (REVISED 20 FEBRUARY 2024) 1. This case concerns an application made by the plaintiff, Beauwave Pty Ltd (Beauwave). Beauwave and the third defendant, Benhollis Pty Ltd (Benhollis), are equal shareholders in two companies, being the first defendant, BH Holdings Qld Pty Ltd (BHH), and the second defendant, BH Developments Qld Pty Ltd (BHD). 2. Both of BHH and BHD are trustees of the BH Holdings Queensland Unit Trust (BHH Trust) and the BH Developments Queensland Unit Trust (BHD Trust) respectively. Beauwave and Benhollis are also equal unitholders in each of the BHH Trust and the BHD Trust. Those trustee companies and the trusts were created for the purposes of pursuing a development, namely the Burnett Heads Marina Project (Project). 3. The Project was a DA-approved wet berth marina with a mixed-use waterfront building on leasehold land at Burnett Heads in Queensland. 4. There are two individuals who are centrally involved in the matters that are now before the court. The first is Simon Harvey, who is the sole director/secretary and shareholder of Beauwave. The second is Ian Sroczynski, who is the sole director/secretary and shareholder of Benhollis. Messrs Harvey and Sroczynski are the two directors of each of BHH and BHD. 5. The parties agree that the relationship between Mr Harvey and Mr Sroczynski has broken down. Accordingly, the relationship between each of Beauwave and Benhollis has also broken down. As a result, it is agreed that it is no longer viable for the Project to be continued in accordance with the current structure involving each of the trusts, the unitholders and the two shareholders in the trustee companies. 6. For this reason, Beauwave has applied by originating process filed 7 December 2023 for a set of orders that involve the winding up of each of BHH and BHD; the appointment of liquidators to each of those companies; and the appointment of receivers and managers to the assets and undertakings of each of the BHH Trust and the BHD Trust. 7. Resolutions have already been passed by the unitholders of the BHH Trust and the BHD Trust to terminate those trusts with effect from the date that the court orders the winding up of each of BHH and BHD. Those unanimous resolutions were made by the unitholders on 25 January 2024. EVIDENCE 1. Affidavit material was placed before the court on behalf of Beauwave from each of Mr Harvey, Matthew Curtis (who is the accountant of the Project), and Todd Gammel (who is one of the proposed liquidators nominated by Beauwave). I also have before me the consents of Todd Gammel and Barry Taylor (partners of the firm HLB Mann Judd), who are the proposed liquidators of BHH and BHD put forward by Beauwave. 2. In addition, I have had affidavit material placed before me on behalf of Benhollis from each of Mr Sroczynski and Blair Pleash, as well as consents of Mr Pleash and Marcus Watters (partners of the firm Hall Chadwick), who are the proposed liquidators of BHH and BHD put forward on behalf of Benhollis. RELATIONSHIP BREAKDOWN 1. In the circumstances of the breakdown of the relationship between the respective shareholders and unitholders, it appears to me entirely appropriate that I make the orders that each of BHH and BHD be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) on the just and equitable ground. It also appears to be appropriate that liquidators be appointed to each of BHH and BHD and that receivers be appointed pursuant to s 67 of the Supreme Court Act 1970 (NSW), without security, as receiver and manager over all of the assets and undertaking of the BHH Trust for the purposes of the winding up of the BHH Trust, and that receivers and managers also be appointed to the assets and undertaking of the BHD Trust for the purposes of the winding up of the BHD Trust. 2. The circumstances that have led to the breakdown in the relationship between Mr Harvey and Mr Sroczynski can be dealt with in short order. It had been originally proposed that the Project be equally funded by Mr Harvey and Mr Sroczynski. Unfortunately, that anticipation has not eventuated. The Project has in fact been almost entirely financed through funds that have been provided to BHH from Beauwave or entities associated with Mr Harvey in an amount approximating $7 million. In relation to Benhollis or entities associated with Mr Sroczynski, they have provided an amount just over $200,000. The result of this is that Beauwave or entities associated with Mr Harvey are the substantial creditors of the entities that are proposed to be placed into liquidation. 3. Mr Harvey is located in Sydney, as are key members of the Project team who were provided to the Project by Mr Harvey's personal company, Beau Group Management Pty Ltd. The cost of the work of those individuals on the Project has, moreover, been absorbed by Beau Group Management Pty Ltd. As a result of a breakdown in negotiations as to the mechanism for the making of loans into BHH and BHD, the parties have been unable to reach any such agreement and have agreed that they should wind down their involvements in the Project. 4. Although it was anticipated that there would be a marina development as part of the Project, the marina development has not in fact proceeded very significantly in the timeline of what is required to bring the whole of the Project to fruition. Whilst plans have been prepared for the Project and the marina, only a minimal amount of dredging work has been undertaken, and significant work remains to be done on the Project. No further work has been done since about late November 2022; since then, all Project works, including dredging activity, have been paused. None of the physical development work on the marina has in fact commenced, and the Project is now at a point where it is simply part of a proposed project development as opposed to one that has had any substantial work undertaken with respect to it. PROPOSED LIQUIDATORS 1. The real difference between the parties — which is the reason why they require a decision of this court beyond that which they have already agreed should occur — concerns whether the proposed liquidators of BHH and BHD should be those persons who have been put forward by Beauwave or those persons who have been put forward by Benhollis. Legal Principles 1. The principles on which the court should make a determination in that regard are clear. They are those which have been expressed in Re El Zorro Transport Pty Ltd [2013] NSWSC 1082 in which Brereton J at [5] (citations omitted) made plain that: It is the practice of the Court that, all things being equal, it will appoint the plaintiff's nominee as liquidator where there is a contest to the appropriate identity of the appropriate appointee, and there is nothing to be said between the competing nominees as to their respective fitness, qualifications or cost. 1. It is also worth noting that in Workers Compensation Nominal Insurer v Denny Earthmoving & Bulk Haulage Pty Ltd [2008] NSWSC 1167, Barrett J said (at [10]–[12]) that there are three guiding principles, being, first, that: [L]iquidators must be independent and have the appearance of independence so that the Court must judge, in the words of Santow J in Advance Housing Pty Ltd v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR 230: "...whether there would be a reasonable apprehension by any creditor of lack of impartiality on the liquidator's part in the circumstances, by reason of prior association with the company or those associated with it, including creditors or indeed any other circumstances". 1. It was also emphasised in the Workers Compensation that, all other things being equal, the court will select an option that is likely to involve less cost. 2. I also wish to draw attention to the principles stated in Re Crow Inn Pty Ltd (No 2) [2020] NSWSC 1749, in which Rees J said at [290] (citations omitted): In the ordinary course of events, and all things being equal, the Court's practice in winding up cases is to appoint the plaintiff's nominated liquidator. To depart from this approach, there must be a reason, such that there is something to be said between competing nominees in relation to their fitness, qualifications or costs. It is for the defendants to establish grounds to depart from the usual course. Consideration 1. In the present case, there does not appear to be any difference between the respective fitness or qualifications of the proposed liquidators. There is, however, a difference in the costs that have been put forward by each of the prospective liquidators. There is evidence before me that the hourly rates of the partners, directors, and graduates of HLB Mann Judd are significantly below those of Hall Chadwick. There is also evidence that the quote that has been provided by HLB Mann Judd is also below the quote that has been provided by Hall Chadwick. In my consideration, the differences in hourly rates are ones that may have a significant impact on the overall cost that might be incurred. In those circumstances, it appears to me that the proposed liquidators that have been put forward by Beauwave do have a cost differential compared to those that have been put forward by Benhollis. 2. It has also been suggested by Benhollis that the prior experience of Mr Watters in relation to the sale of two other marinas means that he is better qualified to deal with the sale of the Project. The evidence in relation to that matter, however, is, to put it politely, very thin. There is no direct evidence from Mr Watters of what involvement he had in each of those developments and how it would provide any benefit compared to the generalised experience of both Messrs Taylor and Gammel as liquidators of BHH and BHD. In addition, Mr Watters' CV does not identify any particular experience in relation to marinas and he has not drawn that directly to the attention of the court other than by assertions. In circumstances where this Project has not proceeded to the development of the marina, it is by no means clear to me what difference any experience of Mr Watters in relation to any prior marina developments would have in the present case. 3. The suggestion was also made that the location of Mr Watters in Brisbane would result in him having advantages that he could bring to the Project as a liquidator that are not held by Messrs Gammel and Taylor, who are both based in Sydney. However, I do not consider that to be a significant factor in the circumstances. It has been made clear that HLB Mann Judd would be utilising staff in their Brisbane office for the purpose of the Project. It also does not appear to me to be a very significant cost differential between flights that are taken by any of the HLB Mann Judd staff from Sydney to Bundaberg compared to what would be involved in having Mr Watters travel from Brisbane to Bundaberg. I give the respective travel costs little weight in any decision that has to be made by me to differentiate between the parties' proposed liquidators. The cost difference of each of the flights is of minor weight and is a minor consideration in the present case. 4. I am, however, prepared to give significant weight to any perceptions of conflict that might exist in the present case. It is clear that in the present case, without making any aspersions or drawing any negative inferences at all, there are perceptions of conflict having to do with the relationship that exists between Bartier Perry (the solicitors for Benhollis) and Hall Chadwick, who have been proposed as liquidators by Benhollis. There is absolutely no suggestion — nor do I accept — that Bartier Perry would do anything other than act in accordance with their professional obligations. However, perceptions can be important, particularly in the circumstances of this case, where there is a significant amount of money that is owing to the substantial creditor, Beauwave. I am also troubled (albeit only for the purposes of perception, rather than reality) that it is proposed in the present case that Hall Chadwick would be utilising the advisory services of Balmain. There is evidence before me that Balmain is a major shareholder in d'Albora Marinas, which could cause a perception of a potential conflict in the event that d'Albora were to be a proposed purchaser of the Project. 5. Whilst I accept that Mr Pleash has been very open and transparent in relation to each of the matters of conflict, and I am grateful for that openness and transparency, the perception is important in the present case and as such has played a part in my consideration. CONCLUSION 1. In all the circumstances, in the present case I consider that I should follow the court's normal practice, which is to appoint the plaintiff's nominated liquidators. I propose to make orders in accordance with that finding. ORDERS 1. For the reasons set out above, I make the following orders: 1. An order pursuant to section 461(1)(k) of the Corporations Act 2001 (Cth) that the First Defendant be wound up. 2. An order that Todd Andrew Gammel and Barry Anthony Taylor of HLB Mann Judd, jointly and severally, be appointed as liquidators of the First Defendant. 3. An order pursuant to section 461(1)(k) of the Corporations Act 2001 (Cth) that the Second Defendant be wound up. 4. An order that Todd Andrew Gammel and Barry Anthony Taylor of HLB Mann Judd, jointly and severally, be appointed as liquidators of the Second Defendant. 5. An order that pursuant to section 67 of the Supreme Court Act 1970 (NSW) and the inherent jurisdiction of the Supreme Court of New South Wales, Todd Andrew Gammel and Barry Anthony Taylor of HLB Mann Judd (the Receivers) be appointed without security as receiver and manager over the assets and undertaking of the BH Holdings QLD Trust (BHH Trust) including but not limited to: 1. the whole of the land in folio 11/SP327583 known as Harbour Esplanade, Burnett Heads, Bundaberg Queensland; 2. shares in TPK Investments Pty Ltd (ACN 103 822 500); 3. shares in Gateway Marina Pty Ltd (ACN 631 640 830), (BHH Trust Property) for the purpose of winding up the BHH Trust after the orderly realisation of the BHH Trust Property in accordance with the requirements of section 420A(1) of the Corporations Act 2001 (Cth), namely for not less than market value, or if the assets do not have a market value, the best price that is reasonably obtainable, having regard to the circumstances existing when the assets are sold. 1. An order that pursuant to section 67 of the Supreme Court Act 1970 (NSW) and the inherent jurisdiction of the Supreme Court of New South Wales, the Receivers be appointed without security as receiver and manager over the assets and undertaking of the BH Developments QLD Trust (BHD Trust) including but not limited to: 1. Development Application 522.2018.89.1 over lots 11 and 12 in SP 327583 lodged with Bundaberg Regional Council on 26 October 2018 and approved on 30 November 2020 and Preliminary Application 522.2018.90.1 over lot 13 in SP 327583 approved in 2020; 2. licence agreement with Scanlan Engineering & Fabrication Pty Ltd commencing 27 September 2021. for the purpose of winding up the BHD Trust after the orderly realisation of the BHD Trust Property in accordance with the requirements of section 420A(1) of the Corporations Act 2001 (Cth), namely for not less than market value, or if the assets do not have a market value, the best price that is reasonably obtainable, having regard to the circumstances existing when the assets are sold. 1. An order that the requirement for the Receivers to file a security under rule 26.3 of the Uniform Civil Procedure Rules 2005 (NSW) be dispensed with. 2. An order that the Receivers have all the powers that a receiver has in respect of the business and property of a corporation under section 420 of the Corporations Act 2001 (Cth) (other than in section 420(2)(s), (t), (u) and (w)), as if the reference in that section to "the corporation" were a reference to the BHH Trust and the BHD Trust including, without limitation, the power to do all things reasonably necessary or convenient to: 1. sell or otherwise dispose of, in any manner, all or any part of the trust property, including to any unit holder of the BHH Trust and/or the BHD Trust; 2. investigate transactions made using funds derived from the assets of the BHH Trust and the BHD Trust; 3. demand the books and records of the BHH Trust and the BHD Trust from any person; 4. determine and make payment of any claims against the assets of the BHH Trust and the BHD Trust; 5. distribute the proceeds of sale of the assets of the BHH Trust and the BHD Trust in the following order (as agreed by Special Resolution of the Unit Holders of the BHH Trust and the BHD Trust): 1. first, in payment of realisation expenses (i.e. agent's commission and marketing expenses) and any outstanding council, water and land tax; 2. second, in payment of the Liquidators and the Receivers' remuneration expenses and costs in full; 3. third, payment to all unrelated creditors in full, or, if the proceeds of sale after payment of the amounts referred to in sub-paragraphs (i) and (ii) above are insufficient to meet the claims of those creditors in full, to pay them proportionately; 4. fourth, payment to the Harvey Entities of such amount so that its loan account with the BHH Trust and the BHD Trust equals the balance of the Sroczynski Entities' loan account with the BHH Trust and the BHD Trust; 5. fifth, pari passu on a dollar for dollar basis to the Harvey Entities and the Sroczynski Entities for the balance of their loan accounts with the BHH Trust and the BHD Trust; 6. sixth, pari passu to the plaintiff and the third defendant by way of trust distribution. 1. An order that the Liquidators and the Receivers of the BHH Trust and the BHD Trust, are entitled to be paid from the proceeds of the sale of the trust property: 1. their costs, expenses and remuneration to the extent to which they relate to work undertaken in relation to the winding up of the first and second defendants and the administration of the BHH Trust and the BHD Trust including the work undertaken to render the defendants' right of exoneration available to meet the claims of the defendant's creditors whose debts were incurred in the administration of the BHH Trust and the BHD Trust respectively; 2. the costs of and incidental to this Originating Process, calculated in accordance with the time actually spent and the rates set out at annexure A of the consents of Todd Andrew Gammel and Barry Anthony Taylor dated 6 December 2023. 1. Subject to order 17, the plaintiff's and third defendant's costs of these proceedings be paid from the assets of the receivership. 2. An order that if the trust property be insufficient to meet the costs, expenses and remuneration of the Liquidators and the Receivers of the BHH Trust Property and the BHD Trust Property, including the costs of this Originating Process, then such costs, expenses and remuneration be paid from the assets of the plaintiff. 3. An order granting liberty to any person affected by the orders made on this application, including any creditor of the defendants or the BHH Trust and the BHD Trust or any beneficiary of the Trust, to apply to vary or set aside these orders on 7 business days' notice to the plaintiff and to the Court. 4. An order that by 30 June 2024, the Receivers file: 1. a report with the Court; and 2. their accounts pursuant to rule 26.5 of the Uniform Civil Procedure Rules 2005 (NSW). 1. An order granting liberty to the Receivers to apply to the Court for orders discharging and releasing the Receivers on 7 business days' notice. 2. An order granting liberty to the Receivers to apply for the approval of their remuneration. 3. An order granting liberty to apply on 2 business days' notice concerning the operation of these orders. 4. The third defendant is to pay the plaintiff's costs of and incidental to the hearing on 19 February 2024, insofar as it related to the identity of the liquidators and receivers appointed pursuant to orders 2, 4, 5 and 6, such costs to be payable forthwith. 1. For the purposes of these orders: 1. Harvey Entities means Simon Thomas Harvey, Beauwave Pty Ltd (ACN 080 152 236), Beauwave Superannuation Pty Ltd (ACN 129 350 367), Capri on via Roma Pty Ltd (ACN 122 553 066) and Thomas Harvey Holdings Pty Ltd (ACN 081 893 727). 2. Sroczynski Entities means Ian Perry Sroczynski and Benhollis Pty Ltd (ACN 614 010 329) ********** Amendments 23 February 2024 - Request from the parties that certain words be removed from from order 6 that had been included in the short minutes of order by mistake. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 February 2024