New South Wales Supreme Court CITATION : Modena Imports Pty Ltd (in liq), In the matter of; Leveraged Capital Pty Ltd (R&M app) (in liq) v Modena Imports Pty Ltd (in liq) [2010] NSWSC 739 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 22 June 2010 JUDGMENT DATE : 7 July 2010 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Palmer J DECISION : Application refused. CATCHWORDS : CORPORATIONS – LIQUIDATION – ADMINISTRATION – Whether liquidation should be terminated and DOCA given effect – DOCA part of a dishonest scheme by Mr James Byrnes to take assets which should be available for creditors – termination of liquidation contrary to public interest and commercial morality. LEGISLATION CITED : Corporations Act 2001 (Cth) – s 182(1), s 439A(4), s 482, Pt 5.1 CATEGORY : Principal judgment - Anderson v Palmer [2002] NSWSC 192 - Dubolo Pty Ltd v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723 CASES CITED : - Masri Apartments Pty Ltd (in liq) v Perpetual Nominees Ltd (2004) 209 ALR 86 - Stork ICM Australia Pty Ltd, Re [2006] FCA 1849 - Warbler Pty Ltd, Re (1982) 6 ACLR 526 PARTIES : Leveraged Capital P/L (R&M app) (in liq) (Plaintiff) Modena Imports Pty Ltd (in liq) (Defendant) FILE NUMBER(S) : SC 2009/288064 B. Mackay (Sol) (Liquidator) COUNSEL : P. Beazley (Sol) (Director of Defendant) D.L. Cook (ASIC, amicus curiae) Bartier Perry (Liquidator) SOLICITORS : Beazley Singleton (Director of Defendant) Andrew Tregear (ASIC, amicus curiae) 2009/288064 In the matter of Modena Imports Pty Ltd (in liq): Leveraged Capital P/L (R&M app) (in liq) v Modena Imports Pty Ltd (in liq) JUDGMENT 7 July, 2010 Introduction – the reputation of Mr James Byrnes 1 This is an application under s 482 Corporations Act 2001 (Cth) for the termination of the liquidation of Modena Imports Pty Ltd (in liq), conditional upon the implementation of a Deed of Company Arrangement (DOCA) which has been approved by creditors. The DOCA is funded by a company called Australian Corporate Restructuring Services Pty Ltd (ACRS). 2 ACRS is, in truth, a front for Mr James Warren Byrnes. Mr Byrnes has a notorious reputation as a stand-over man and associate of major criminals. In an inquest in 2008 into the murder of one Max Gibson, the coroner described Mr Byrnes, a named "person of interest" in the inquest, as "untruthful" and "manipulative", who had been "caught lying to the Court on more than one occasion". 3 This is not a trial of Mr Byrnes. I do not have to determine whether or not Mr Byrnes' reputation is deserved. I merely state the fact that Mr Byrnes has a reputation of which no judge in this State could be unaware. 4 Awareness of that reputation led me to enquire more closely into this application. It was, at first, presented to the Court as a bland, run of the mill application, not opposed by the liquidator and having nothing remarkable about it so that it should be granted almost as a matter of course. As soon as I detected the involvement of Mr Byrnes, I determined that I could not treat the application in that way. 5 I was aware of the fact that in 2006 ASIC had banned Mr Byrnes from managing corporations for five years and that that ban is still current. ASIC published the following statement concerning Mr Byrnes: "ASIC has banned Mr James Warren Byrnes, of Bellevue Hill, New South Wales, from managing corporations for five years. Mr Byrnes was banned following an investigation into his involvement in four failed companies, ACN 072 951 823 Pty Ltd; Bauhaus Pyrmont Pty Limited, Curlew Apartments Pty Ltd and Cromwells Auctioneers & Valuers Rozelle Pty Ltd. The companies were involved in a variety of businesses, including auction houses that dealt in antiques and fine art, property development and construction. The four companies were wound up owing substantial debts to creditors, totalling $6,087,019. Unsecured creditors including trade creditors and employees were not paid more than 50 cents in the dollar. Mr Byrnes has been banned by ASIC on a previous occasion. ASIC disqualified Mr Byrnes on 3 November 1998 from managing corporations for five years. The Administrative Appeals Tribunal (AAT) later reduced this to three years. In relation to the latest banning, ASIC was of the view that Mr Byrnes' management of the four failed companies demonstrated incompetence, a lack of commercial morality and a disregard for his statutory duties as a director. Specifically, Mr Byrnes failed to assist the liquidator in the winding up of ACN 072 951 823 Pty Limited. He also continued to act in the management of ACN 072 951 823 without the authority of the liquidator, including the sale of motor vehicles owned by the company. ASIC further found that Mr Byrnes' conduct leading to the liquidation of above named four companies, and his conduct after the companies were placed into liquidation, was very similar to the management style and conduct which resulted in his 1998 banning. ASIC also found that in 1999, 2000 and 2001, Mr Byrnes managed companies while disqualified." 6 The evidence in support of the application was scant. I required much more evidence to explain the circumstances surrounding the liquidation and the proposed DOCA. When more evidence was filed, my concerns deepened. I stood the proceedings over for a short time and requested the Registrar to notify ASIC of my concerns. ASIC then appeared by Mr D.L. Cook of Counsel who was granted leave to appear as amicus curiae. 7 As a result of ASIC's intervention and the cross examination of a director of Modena, Mr Peter Trad, circumstances were revealed concerning the company's history and the involvement of Mr Byrnes in the DOCA which would not otherwise have come to light because the application had no active contradictor. What has been revealed has led me to refuse the application, for reasons to which I will come in a moment. 8 The particular circumstances of this case throw into sharp relief the role of the Court in an application of this kind. It is not the traditional role of umpire in a contest between adversaries, where the Court takes no part in the contest other than to ensure a fair trial and, at the end, to give a decision in favour of one of the contestants. On the contrary, in applications such as this, many of which have no contradictor, the Court is vigilant to protect the public interest. 9 Protecting the public interest is not confined to ensuring that a company, if released from liquidation, will be able to trade solvently. Public interest will also include ensuring that the creditors who are to be bound by a DOCA are treated reasonably and fairly. Further, protecting the public interest includes upholding commercial morality: the Court should not, by granting such an application, ignore and thus be seen to condone, conduct by the company's officers which has breached standards of behaviour required by the law. Those who have already offended against those standards should not lightly be given the opportunity of doing so again. 10 A judge may feel disquiet about a transaction for which the Court's sanction or approval is required, such as termination of a liquidation or approval of an arrangement or reconstruction under Pt 5.1 Corporations Act. The disquiet may arise either from the terms of the transaction or because of the reputations of those involved. In such a case, the judge is entitled to ask for assistance from ASIC or from some other body or person having a legitimate interest in the proper scrutiny of the proposal: see generally Corporations and Markets Advisory Committee Report "Members Schemes of Arrangement" December 2009, paras 2.3.2 and 6.4.2. Such a course of action has been followed in cases such as Re Stork ICM Australia Pty Ltd [2006] FCA 1849 per Lindgren J at [11]-[12]. For the reasons I have given, I took that course of action in this case. Who is the applicant 11 The application for termination of Modena's liquidation formally came before the Court by way of a Notice of Motion filed by the liquidator, Mr Hall. The conduct of the application was in the hands of Mr P. Beazley, solicitor. Mr Beazley, however, did not appear for Mr Hall, who was separately represented by his own solicitor, Mr Mackay. Mr Mackay was present in Court throughout the proceedings but took no active part. The running of the application was left to Mr Beazley. 12 Mr Beazley filed a Notice of Appearance for Mr Carl Trad, who claimed to be a creditor of the company. Despite absence of a Notice of Motion filed on behalf of Mr Carl Trad, I regard it as proper to treat this application as an application by him, and not of the liquidator. This conclusion will probably have no consequences other than for the appropriate costs order. Principles 13 In an application under s 482, the following considerations, derived from the decision of Master Lee QC in Re Warbler Pty Ltd (1982) 6 ACLR 526, at 533, are useful guidelines although they do not constitute an exhaustive check list: – the applicant must make out a positive case for the favourable exercise of the Court's discretion; – the applicant must show the nature and extent of the creditors, and whether all debts have been discharged; – the attitude of creditors, contributories and the liquidator is a relevant consideration; – the applicant must show the current trading position and general solvency of the company; – the applicant must provide a full explanation of any non-compliance by the directors with their statutory duties; – the applicant must explain the general background and circumstances leading to the winding up order; – the applicant must show the nature of the company's business and whether the conduct of the company was in any way contrary to "commercial morality" or "the public interest". See e.g . Anderson v Palmer [2002] NSWSC 192 at [5] per Barrett J; Masri Apartments Pty Ltd (in liq) v Perpetual Nominees Ltd (2004) 209 ALR 86 at [18]; Dubolo Pty Ltd v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723, at 725 per Santow J. 14 In support of the application, Mr Beazley filed in Court an affidavit of Mr Peter Trad, a director of the company. The affidavit annexed a Report by Mr Hall pursuant to s 439A(4), which contained the following: " Prior to my appointment, Administrators David Hurst and Andrew Wily, two partners at Armstrong Wily were appointed Voluntary Administrators of the Company on 27 March 2009. On 7 May 2009, following a winding up application, I was appointed as Official Liquidator of the Company. Despite numerous requests, I have not been provided with any books and records for the Company and understand that no financial statements have been prepared since Modena commenced trading in March 2005. I am therefore of the view that Modena has not maintained adequate books and records as required by S286 of the Act. In accordance with S286, the Company can therefore be presumed to be insolvent for all periods in which it failed to maintain adequate records, i.e. since it acquired the business in March 2005. My investigations into voidable transactions have also been frustrated by the lack of Company records. However, from the evidence provided I have not identified any transactions that may be considered unfair preferences or uncommercial which could be recovered by a Liquidator. Proposed Deed of Company Arrangement The Directors believe that Modena has a viable ongoing business which they would like to continue as a going concern. A DOCA has been proposed by Australian Corporate Restructuring Services Pty Ltd ('ACRS'). The Deed fund of $50,000 is to be distributed as follows: – Payment of Administrator's and Liquidator's fees; – Payment to any priority creditors; and finally – Payment of any residual balance to unsecured creditors Upon execution of the DOCA, control of the Company will revert back to the Directors. It is not anticipated that the creditors will receive a dividend from the DOCA fund, however I believe that the DOCA will both: – maximise the chances of the Company continuing in existence; and – result in a better outcome for a number of the creditors by allowing them to benefit from ongoing trading with Modena. Five of the twelve Company creditors have already indicated their support for the proposed DOCA. Their claims represent $1.7m out of a total notified claim value of $3m. A sixth creditor with a claim value of $29k has also agreed not to make a claim against Modena for its outstanding debt. Likely outcome in a winding up Based on my investigations to date, I believe that there are no realisable assets of the business in the event of a winding up. Therefore, in the event that the proposed DOCA is not approved by the creditors and the Company is wound up, it is considered highly unlikely that there would be any current or future return to creditors. Recommendation to creditors I believe that the proposed DOCA presents the best option for creditors." 15 It appeared from the Report that the DOCA would provide $50,000 in part payment of Mr Hall's fees and disbursements and nothing at all for creditors, whose claims were said to total $3M. The Report said that Mr Hall did not necessarily accept all of those claims. 16 Reading Mr Hall's Report as a whole, one gets the strong impression that he was unable to find out much of real substance about the company's operation, its assets and liabilities, and that he recommended the DOCA because nothing better was on offer. 17 Minutes of the meetings of creditors held on 23 March 2010 show that present were Mr Hall and two members of his staff, Mr Peter Trad as director of Modena and Mr James Byrnes as a creditor and as proxy for four other creditors, including ACRS. The resolution approving the DOCA was passed unanimously. 18 I was concerned at the lack of any meaningful information about Modena, particularly as to why claims apparently totalling $3M would be extinguished by the DOCA for no dividend at all. I was further concerned at the obvious close involvement of Mr Byrnes in promoting the DOCA and, possibly, in the management of Modena if its liquidation should be terminated. I expressed these concerns to Mr Beazley, who sought an adjournment in order to provide further information. 19 The application was listed before me on 25 May 2010. Mr Beazley filed in Court a further affidavit of Mr Trad. That affidavit gave rise to even deeper concerns. I stood the application over to 22 June 2010, informing Mr Beazley that I would request the Registrar to write to ASIC, drawing this application to its attention and inviting its participation. 20 On 22 June 2010, Mr D.L. Cook of Counsel sought and was given leave to appear for ASIC as amicus curiae. ASIC did not provide a report to the Court under s 482(2A)(a)(iii), but Mr Cook said that ASIC's purposes would be served by his cross examination of Mr Peter Trad. 21 By the time Mr Cook had concluded his cross examination of Mr Trad I was left in no doubt that it would be contrary to public interest and contrary to commercial morality to permit Modena to resume trading by terminating its liquidation. The company's background 22 Modena was incorporated in 2002. It carried on the business of producing and holding what are called "compliance packs", which are sets of the necessary specifications for modifications which must be made to imported vehicles at the top end of the market, such as Maseratis and Lamborghinis, to ensure that such vehicles meet the Australian Design Rules. Modena also imported specific motor vehicles at the request of customers and provided them with the relevant compliance packs for their vehicles. 23 The company structure is in itself valuable because the company is the holder of certain import approvals and also holds a delegated authority issued by the Department of Infrastructure, Transport, Regional Development and Local Government to provide secondary compliance to approved makes and models of cars. The approvals and the delegated authority are not transferable. 24 Mr Peter Trad and his brother, Phillip, acquired the company in or around March 2005, becoming its sole directors and shareholders. 25 Only Mr Peter Trad has given evidence in this application. He was a most unsatisfactory witness, as will appear. I do not accept him as a witness of credit. The company's improper assumption of debt 26 Mr Trad endeavoured to explain how certain persons claiming substantial debts were shown as creditors of Modena. He said in his affidavit of 24 May 2010 that Modena had obtained approval to import certain expensive cars, which were owned by members of his family and friends. The cars were then consigned to a company called Galleria Veloce for sale. Galleria Veloce received a commission on the sale. The principal of Galleria Veloce was Mr Papas. 27 Mr Trad said in his affidavit Mr Papas later suggested that Galleria Veloce be registered as the owner of the cars and that the company would hold those cars on trust for the relevant owners. Mr Trad said that, unknown to him, Galleria Veloce had given a fixed and floating charge over its assets to a lender. The lender subsequently seized and sold the cars, causing substantial loss to the beneficial owners. 28 Mr Trad's affidavit was extremely vague about this transaction. In cross examination, Mr Trad said that he did not know much about it because it was arranged by his brother, Carl. When he professed almost total ignorance of the transaction, he was asked about the details of the transaction set out in his affidavit. He said that he "must have" given those instructions to his solicitors and must have recounted what Carl had told him about the agreement with Mr Papas. 29 Mr Trad said that he agreed to Mr Papas' request, recounted to him by his brother Carl, that cars owned by members of his family and his friends be registered in the name of Galleria Veloce upon a trust. He said that he did not know why Mr Papas wanted this arrangement and he did not ask. He said that he did not even suspect that Mr Papas would claim that the cars were stock of Galleria Veloce in order to obtain money on a floor plan financing scheme. 30 I do not accept Mr Trad's evidence. By the time of the transaction with Mr Papas, Mr Trad had been in the motor vehicle industry for some time. He did not strike me as naïve – indeed, Mr Trad appears highly knowledgeable about the car industry. There was no apparent benefit to the owners of the cars in having them registered in the name of Galleria Veloce rather than simply consigning them to that company for sale. Indeed, there was an obvious risk in doing so. It is grossly improbable, in my opinion, that Mr Trad did not know that the reason for this scheme was to enable Galleria Veloce to include the cars in its floor plan financing, falsely representing to the financier that they were beneficially owned by Galleria Veloce. I conclude that Mr Trad was willing to be a party, in whatever way was necessary, to such a dishonest scheme. 31 Mr Trad said that when the scheme with Mr Papas resulted in a loss to the family members and friends who were the true owners of the cars, he decided that they would be shown as creditors of Modena, although the losses had occurred before Mr Trad and his brother had acquired control of Modena and Modena itself had played no part in the transactions with Galleria Veloce. Mr Trad said that he caused Modena to assume this liability out of considerations of commercial morality, as he wished by some means or other to repay his family and friends for the losses they had suffered at the hands of Mr Papas. 32 Mr Trad did not seem to appreciate that there was no proper basis upon which Modena could gratuitously assume liability for these losses and that it was contrary to Modena's interests – or at least the interests of its trade creditors – for it to accept such liability. Mr Trad's position was that if family and friends had lost money through the activities of Carl or his brothers, then they should be repaid out of the profits of Modena. It is clear that Mr Trad has no notion that the interests of Modena as a corporate entity are separate from the interest of his brothers and friends. Prima facie, at least, his actions were in breach of his duties as a director under s 182(1) Corporations Act. Ability to resume trading 33 Mr Trad said that his brother Carl "helps out a lot" in Modena's business and that discussions about the business are made in consultation with all five brothers, although he and Philip are the only directors of Modena. His cousin, also called Carl, provided some $550,000 to acquire Modena's business in 2005. Mr Trad said that he and his brother Philip had no funds to invest in Modena and, if its liquidation were terminated, they would still have no funds to provide it with working capital. He said that all working capital would have to come from his cousin, Carl. 34 There is no information as to whether Carl has sufficient cash to inject into Modena to enable it to resume trading or, if he does, whether he has committed in a legally binding way to make that cash available as working capital. The benefits to be derived by Mr Byrnes 35 The previous administrators of Modena, Messrs Andrew Wily and David Hirst, as well as the present liquidator and administrator, Mr Hall, have made it clear in their Reports to creditors that, in negotiating a DOCA, they have dealt exclusively with Mr Byrnes. As I have noted, at the creditors meeting of Modena which approved the DOCA, the only creditor present, in person and as proxy representing four other creditors, was Mr Byrnes. 36 Mr Byrnes is supposedly acting in some way on behalf of ACRS. In all the dealings between Modena's administrators and Mr Byrnes, there has been no participation of, or reference to, any officer, director or representative of ACRS other than Mr Byrnes – if, indeed, there is any other person who actually fulfils such a role. There is every reason to believe that Mr Byrnes is managing the affairs of ACRS in breach of ASIC's banning order, as he has done with other companies in the past. 37 In his affidavit of 24 May 2010, Mr Trad says that his brother Carl had met Mr Byrnes in 2007. He said that Mr Byrnes had assisted with negotiations in the dispute Galleria Veloce and in other disputes. He continued: "29. He also referred us to our current solicitor. He also assisted us with understanding insolvency matters and introduced us to Administrators. 30. In consideration for services provided to the Company by J.W. Byrnes & Associates and Australian Corporate Restructuring Services, it was agreed they would receive evidence packs from the Company. The evidence packs are valued at $500,000.00. J.W. Byrnes & Associates and Australian Corporate Restructuring Services assisted in recovering assets from finance companies which had been wrongly encumbered. 31. Jim Byrnes has no financial interest in Modena or any of our family businesses. His only association with the company was we thought he could assist as stated above." 38 There is no explanation in the evidence as to who or what "J.W. Byrnes & Associates" is. The "evidence packs" are compliance packs which Mr Trad said, in his cross examination, were assets of Modena and could readily be sold by the liquidator. However, it appears from Mr Hall's s 439A Report that he is not aware that Modena has these assets and that they are saleable: see [15] under the heading "likely outcome in a winding up". 39 I cannot see why assets of Modena, said to be worth $500,000, should be appropriated in paying Mr Byrnes for his "services" when Mr Hall, as administrator and liquidator, and the other creditors of Modena must be content with satisfying their claims from a fund of $50,000, leaving a shortfall for Mr Hall and nothing at all for the creditors. It seems to me that if, indeed, Modena has assets worth $500,000, it would be grossly improper and commercially immoral for those assets to be applied for the benefit of Mr Byrnes, leaving the administrator/liquidator and the company's creditors out of pocket. 40 It is of particular concern that the arrangement for the remuneration of Mr Byrnes was made by Carl, who was not a director of Modena, but was readily assented to by Mr Trad. It appears that Mr Trad is content to acquiesce in decisions made by his brother Carl, affecting prejudicially the interests of Modena, although Carl is not a director of the company. 41 Mr Trad gave this evidence: "Q. Again you saw nothing wrong with offering Mr Byrnes assets of the company worth 500,000 to provide services? A. Well, if his services were going to help me, my company, okay, clear my brother's car and invest another million dollars on top when I didn't have to fork out money, if the evidence packs were going to do that, why not? That was just going to help me make money. Q. In making that decision, did it ever enter your mind that the creditors of this company might not want you to give $500,000 of assets away to Mr Byrnes? A. I'm not sure. Q. It didn't, did it? A. Well, when you say give away $500,000 in assets, okay, yeah, I … Q. It didn't cross your mind, did it, Mr Trad? A. No, no, it didn't cross my mind because it wasn't $500,000 in front of me, I suppose. Q. Was there anything else offered to Mr Byrnes in exchange for his services? A. No, not that I can recall. Q. When you say 'not that I can recall', is it possible that more was offered and you simply don't recall? A. Yeah, maybe. Q. Didn't you also give him two Maseratis? A. I didn't give him two Maseratis. When it came to the Maseratis they were dealing with my brother as well." 42 Mr Trad was shown two invoices, both appearing to be invoices of Modena dated 7 February 2008 and evidencing the sale of a Maserati 4200 convertible and a Maserati 4200 coupé to ACRS on 7 February 2008. Both invoices appear to be signed by Mr Trad as director. The price of the Maserati 4200 convertible was said to be $100,000 and the price of the Maserati 4200 coupé was said to be $80,000. 43 Mr Trad was asked: "Q. Did you sign these documents? A. It looks like it. Q. Do you have any recollection of doing so? A. I can't remember what my brother put in front of me and I signed it, I must have. Q. You must have signed it? A. Yes – well, that is my signature so, yes, I must have. Q. Did you prepare these invoices? A. (No verbal response). Q. By 'prepared' I mean did you ask somebody to prepare them for you? A. Yeah, maybe my brother presented them and I signed, I just can't remember. Q. Now do you accept that these purport to be invoices for the sale … A. Yes, yes, yes, that's what its like. Q. Let me finish, Mr Trad. Do you accept that these two documents purport to be invoices in respect of two different Maserati motor vehicles … A. Yes. Q. … being sold by your company to Australian Corporate Restructuring Services Pty Limited? A. Yes. Q. And that is a company which Mr Byrnes represents, correct? A. Yes." 44 Mr Trad said that this transaction with Mr Byrnes was arranged by his brother Carl and that he himself did not really understand or recollect the transaction. He then agreed that the invoices were prepared no earlier than November 2009 and were intended to show the liquidator that Modena had sold the two vehicles to ACRS in February 2008, before Modena went into liquidation or administration, and that ACRS was now going to sell the vehicles to raise the money to pay into the fund under the DOCA. When he was asked why, in November 2009, he had signed invoices back-dated to February 2008 evidencing a sale of the cars to ACRS, Mr Trad said that he could not remember. 45 In re-examination, Mr Trad said that the signatures on the invoices now did not appear to him to resemble his own signature. 46 The evidence of Mr Trad was entirely unsatisfactory. I do not accept that he has no recollection of the arrangement with Mr Byrnes which is reflected in these obviously false invoices. I do not accept that he has genuine doubts about the authenticity of his signature on the invoices. In my opinion, the evidence strongly suggests that Mr Trad was willing to be a party to a scheme, probably devised by his brother Carl and Mr Byrnes in about November 2009, whereby the two Maseratis, which were assets of Modena, would be realised without the prior knowledge and approval of the administrator, and part of the proceeds would be made to appear as if they were funds contributed to the DOCA by ACRS, the rest being retained for the benefit of Mr Byrnes. Failure to keep proper records 47 The s 439A Reports of Messrs Wily and Hirst and of Mr Hall make it clear that it is impossible to ascertain the true state of Modena's financial position – its assets, its liabilities and its trading results – because no proper accounting records have been kept since Mr Trad and his brother acquired the company in 2005. 48 Mr Trad gave no adequate explanation for this failure. He seemed to regard the keeping of proper accounts as just "paperwork" the responsibility for which rested with someone else. He suggested that if the liquidation of Modena were terminated, he would ensure that a new accountant would be engaged to make sure that the company complied with its obligations to keep proper accounts. 49 In the light of Modena's history since it was acquired by Mr Trad and his brother, and in the light of the transactions of which Mr Trad has given evidence, I have no confidence whatever that the company's financial affairs would be recorded in the future any better than they have been in the past. Conclusions 50 There are several other concerns which Mr Cook raised in the course of cross examining Mr Trad and to which he referred in his final submissions. However, I have already said enough to show why this application fails by a very wide margin to make out a positive case for the exercise of the Court's discretion in favour of terminating Modena's liquidation. 51 In short, Mr Trad has failed to persuade me that the true nature and extent of Modena's creditors have been fully disclosed. He has failed to show how the company can trade solvently. He has failed to provide any adequate explanation for the failure by the company's directors to ensure that the company's financial records were properly maintained. He has failed to explain how Modena could lawfully and properly assume liability for debts which had nothing to do with its own trading activities. He has failed to explain why those debts should now be extinguished by the DOCA, for no consideration or dividend. 52 Finally, I am satisfied that it would be contrary to the interests of creditors and an affront to commercial morality for Modena's liquidation to be terminated and a DOCA given effect in accordance with a scheme devised by Mr Byrnes whereby he is to receive the benefit of assets of Modena to the value of $500,000, if not more, while Mr Hall is out of pocket for his remuneration and expenses, and the creditors of Modena receive nothing. If Modena has assets worth $500,000, they should be realised for the benefit of the company's creditors and to enable Mr Hall to investigate fully the company's affairs. I place no weight on the fact that those creditors who attended the creditors' meeting on 23 March 2010 voted in favour of the DOCA. Those creditors comprised Mr Byrnes himself and four others for whom he was proxy, including ACRS. 53 I conclude that it would be contrary to the public interest to enable Modena to be released into the marketplace to conduct its affairs under the control of Mr Trad and, probably, under the control of his brother Carl, both of whom are prepared to engage in dishonest practices such as the transaction with Mr Papas and the falsifying of evidence of sale of Modena's assets to Mr Byrnes. 54 The application is dismissed. I will hear the parties as to any costs order which may be sought by ASIC and Mr Hall. – oOo – 14/07/2010 - Paragraph 4: delete the words "or ASIC".Substitute amended paragraph 12 in lieu of former paragraphs 12 and 13 and re-number accordingly. - Paragraph(s) 4, 12 and former 13. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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