Supreme Court New South Wales Medium Neutral Citation: SingTel Optus Pty Limited & Ors v Weston [2012] NSWSC 674 Hearing dates: 5, 6, 7, 8, 22 March 2012 and 26 April 2012 Decision date: 19 June 2012 Jurisdiction: Equity Division - Corporations List Before: Bergin CJ in Eq Decision: Order for removal of special purpose liquidator Catchwords: [LIQUIDATORS] - Application to remove special purpose liquidator under s 503 of the Corporations Act 2001 (Cth) Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Aboriginal & Torres Strait Island Commission v Jurnkurakurr Aboriginal Resource Centre Aboriginal Corporation (in liq) (1992) 10 ACSR 121 Adsett v Berlouis and Others (1992) 37 FCR 201; (1992) 109 ALR 100 AMP Music Box Enterprises Ltd v Hoffman and Another [2002] BCC 996 Apple Computer Australia Pty Ltd v Wiley (2003) 46 ACSR 729; [2003] NSWSC 719 Application of Weston [2011] NSWCA 250 ASIC v Rich [2009] NSWSC 1229; (2009) 236 FLR 1 City & Suburban Pty Ltd and Others v Smith (as liquidator of Conpac (Aust) Pty Ltd (in liq)) and Another (1998) 28 ACSR 328 Clutha Ltd (in liq) v Millar and Others (No 5) (2003) 43 ACSR 295; [2002] NSWSC 833 Commissioner for Corporate Affairs v Peter William Harvey [1980] VR 669 Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) (2000) 18 ACLC 13; [1999] NSWSC 1046 Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) (2003) 21 ACLC 1330; [2003] NSWSC 496 Independent Cement and Lime Pty Ltd v Brick and Block Co Ltd (in liq) (recs and mgrs appted) and Others (2010) 267 ALR 613; [2010] FCA 352 In re Adam Eyton Ltd; Ex parte Charlesworth (1887) 36 Ch D 299 In re Contract Corporation (1871-72) LR 7 Ch App 207 ('Gooch's Case') In re George A Bond & Co Ltd (1932) 32 SR (NSW) 301 In re Marseilles Extension Railway and Land Co (1867) LR 4 Eq 692 In the matter of Cobar Mines Pty Ltd (in liquidation); Hall as liquidator of Cobar Mines Pty Ltd (Unreported, Supreme Court of New South Wales, Santow J, 22 June 1998) McGrath & Anor re HIH Insurance Ltd & Ors [2006] NSWSC 385 McAuliffe v Lidia Perin Memorial Hospital Pty Ltd (2006) 58 ACSR 666; [2006] ACTSC 88 Multi-Core Aerators Limited v Dye and Rennie [1999] VSC 205 Northbuild Construction Pty Ltd v ACN 103 753 484 Pty Ltd (2008) 26 ACLC 893; [2008] QSC 182 Onefone Australia Pty Ltd v One.Tel Ltd (2003) 48 ACSR 562; [2003] NSWSC 1228 Onefone Australia Pty Ltd and Another v One.Tel Ltd (in liq) and Others (2006) 57 ACSR 279; [2006] NSWSC 349 Onefone Australia Pty Ltd and Others v One.Tel Ltd (in liq) and Others (2006) 58 ACSR 466; [2006] NSWSC 815 Onefone Australia Pty Ltd v One.Tel Ltd (in liq) and Others (2006) 61 ACSR 236; [2006] NSWSC 1434 Onefone Australia Pty Ltd & Ors v One.Tel Limited (In Liquidation) & Ors [2006] NSWSC 1447 Onefone Australia Pty Ltd and Others v One.Tel Ltd and Others (2008) 69 ACSR 290; [2008] NSWSC 1335 Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 822 Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 865 Onefone Australia Pty Limited and Others v One.Tel Ltd (in liq) and Others; Re Appln Weston (2009) 74 ACSR 716; [2009] NSWSC 1231 Onefone Australia Pty Ltd and Others v One.Tel Limited and Others (2010) 78 ACSR 98; [2010] NSWSC 401 Onefone Australia Pty Ltd and Others v One.Tel Ltd and Others (2010) 80 ACSR 11; [2010] NSWSC 1120 Re Biposo Pty Ltd; Condon v Rodgers (1995) 120 FLR 399 Re Edennote Ltd; Tottenham Hostpur plc and others v Ryman and another [1996] 2 BCLC 389 Re Giant Resources Ltd [1991] 1 Qd R 107 Re Keypak Homecare Ltd [1987] BCLC 409; (1987) 3 BCC 558 Re Obie Pty Ltd (in liq) (No 3) (1984) 8 ACLR 774 Re Walker and Another (in their capacity as joint liquidators of One.Tel Ltd) (2009) 262 ALR 150; [2009] NSWSC 1172 Tracker Software International Inc v Smith (1997) 24 ACSR 644 Weston (in his capacity as special purpose liquidator of One.Tel (in liq) and Another v Publishing and Broadcasting Ltd (now known as Consolidated Media Holdings Ltd) and Others (2011) 83 ACSR 206; [2011] NSWSC 433 Weston in Capacity as Special Purpose Liquidator of One.Tel Ltd (in liquidation) v Publishing and Broadcasting Ltd [2012] NSWCA 79 Texts Cited: BH McPherson and J O'Donovan (ed), McPherson's Law of Company Liquidation (Thomson LawBook Co., 3rd ed, 1987) Category: Principal judgment Parties: SingTel Optus Pty Limited (1st Plaintiff) Optus Networks Pty Limited (2nd Plaintiff) Optus Mobile Pty Limited (3rd Plaintiff) Optus Vision Pty Limited (4th Plaintiff) Optus Insurance Services Pty Limited (5th Plaintiff) Paul Gerard Weston (Defendant) Representation: JC Sheahan SC/ RCA Higgins (Plaintiffs) N Cotman SC/R Glasson (Defendant) Baker & McKenzie (Plaintiffs) O'Neill Partners (Defendant) File Number(s): 2010/71799 Judgment 1SingTel Optus Pty Limited, the first plaintiff, Optus Networks Pty Limited, the second plaintiff, Optus Mobile Pty Limited, the third plaintiff, Optus Vision Pty Limited, the fourth plaintiff, and Optus Insurance Services Pty Limited, the fifth plaintiff, (collectively "Optus") are members of a single corporate group. The first plaintiff is the parent company of each of the second to fifth plaintiffs. The second to fifth plaintiffs are creditors of One.Tel Limited (in liquidation) (One.Tel) and have been admitted to proof in its liquidation. 2On 23 December 2003 the defendant, Paul Gerard Weston, was appointed as the special purpose liquidator (SPL) of One.Tel by order of this Court. The purpose of the appointment as ordered was for the defendant to consider and make recommendations to creditors as to whether any causes of action existed, and whether any action should be commenced against any person, in relation to the cancellation of a renounceable rights issue on 29 May 2001 (the RRI), which had been announced by One.Tel to the market on 17 May 2001. 3By the Further Amended Originating Process filed in Court on 13 February 2012, the plaintiffs seek an order pursuant to s 503 of the Corporations Act 2001 (Cth) (the Act), that the defendant be removed as SPL of One.Tel, and that Stephen James Parbery, official liquidator, be appointed in his place. The plaintiffs also seek an order "further and in the alternative" pursuant to s 536 of the Act that an inquiry be held into the defendant's conduct. 4The proceedings were commenced on 22 March 2010. There were numerous interlocutory applications until 21 September 2011 when the matter was listed for hearing for 5 days commencing on 5 March 2012. The proceedings were in fact heard on 5, 6, 7, 8 and 22 March 2012, and 26 April 2012. Mr JC Sheahan SC leading Ms RCA Higgins, of counsel, appeared for the plaintiffs. Mr N Cotman SC, leading Mr R Glasson, of counsel, appeared for the defendant. GENERAL BACKGROUND 5Much of the general background is not in dispute and it is convenient to outline some of those matters at this stage. It will be necessary to deal later with more specific matters upon which the plaintiffs rely in support of their application for the defendant's removal. One.Tel Liquidation 6One.Tel was established in 1995, following the deregulation of the Australian telecommunications industry. It carried on business providing retail consumers with fixed long distance telephone services, mobile telephone services and internet services. In November 1997, it was listed on the Australian Stock Exchange. 7On 17 May 2001, the Board of One.Tel resolved to offer to its shareholders the RRI on a one for one basis at a subscription price of 5 cents per share in order to raise $132 million. The RRI was to be underwritten by entities associated with Publishing and Broadcasting Limited (PBL) and News Limited (News). 8On 29 May 2001, the Board of One.Tel resolved not to proceed with the RRI. On the same date, the Board of One.Tel resolved that Steven Sherman and Peter Walker of Ferrier Hodgson be appointed as voluntary administrators in accordance with Pt 5.3A of the Act. 9On 24 July 2001, at a meeting convened in accordance with s 439A of the Act, the creditors resolved that One.Tel be wound up and that Messrs Sherman and Walker be appointed as Liquidators (the GPLs). One.Tel accordingly proceeded into a creditors' voluntary liquidation. On the same day a Committee of Inspection of One.Tel (the COI) was constituted. Appointment of the SPL 10After One.Tel went into liquidation, it emerged that a substantial cause of action might exist against a number of parties in relation to the cancellation of the RRI. A small group of One.Tel creditors approached the Court seeking the appointment of a special purpose liquidator to investigate and, if appropriate, prosecute any cause of action relating to the cancellation of the RRI. 11On 23 December 2003, the defendant was appointed as SPL of One.Tel by order of the Court: Onefone Australia Pty Ltd v One.Tel Ltd (2003) 48 ACSR 562; [2003] NSWSC 1228. The appointment was made "because of a well-grounded apprehension" that the GPLs were not, or might not be, in a position "to exercise fully dispassionate decision-making in respect of a particular matter that had arisen in the winding up": Onefone Australia Pty Ltd and Others v One.Tel Ltd (in liq) and Others (2006) 58 ACSR 466; [2006] NSWSC 815 at [13]. 12The orders made by Windeyer J included the following: 1. Order that Paul Weston be appointed a Special Purpose Liquidator of One.Tel Ltd (In Liquidation) (the "Company") for the purposes set out in order 2. 2. On the assumption that the Company became insolvent as a result of the cancellation of the Renounceable Rights Issue, the Special Purpose Liquidator consider and make recommendations to the creditors as to whether: (a) any rights of action exist in respect of which there is a limitation period for the commencement of any such action of less than six years; and if received, (b) any action should be commenced against any person in relation to any such rights of action referred to in (a) above; and (c) the Special Purpose Liquidator should apply to extend the limitation period of any such action. 13From time to time since his appointment on 23 December 2003, the purposes of the defendant's appointment and/or his powers have been varied by Orders of the Court. 14Between 2003 and 2006 the assumption that was built into the orders was that One.Tel became insolvent as a result of the cancellation of the RRI (the Assumption). That Assumption would have saved the creditors the costs of having the defendant investigate the solvency of One.Tel at the time of the RRI. There was a presumption that the question of One.Tel's solvency would be made clear in the civil penalty proceedings brought by the Australian Securities and Investments Commission (ASIC) against Mr Rich, a director of One.Tel (ASIC v Rich) referred to below. The question of solvency was significant because if at 29 May 2001, when the RRI was cancelled, One.Tel was insolvent and would have remained so even with a capital injection of $132 million, the rights issue could not have proceeded and there would be no claim against the directors of One.Tel arising from the cancellation. 15There were delays in the ASIC v Rich proceedings and the defendant made an application to the Court to vary the terms of his original appointment. That variation was to remove the requirement that he make the Assumption and that he be authorised to review the materials prepared or obtained in the ASIC v Rich proceedings with a view to deciding whether any right of action existed in relation to the cancellation. That application was granted: Onefone Australia Pty Ltd and Another v One.Tel Ltd (in liq) and Others (2006) 57 ACSR 279; [2006] NSWSC 349. The Assumption was removed and the defendant was authorised to perform work including liaising with the parties to the ASIC v Rich proceedings and their legal advisers and obtaining access to transcripts, documents, affidavits and written submissions in those proceedings. The defendant was also authorised to make any such application, as he thought necessary, to the trial judge in those proceedings for access to such documents. The Orders also authorised the defendant to review the documents and carry out all work incidental thereto to determining whether he was then in a position, inter alia, to express a concluded view and make appropriate recommendations to the creditors of One.Tel as to whether any rights of action existed surrounding the cancellation of the RRI. Those orders included that the defendant was "justified" in reporting to, and making recommendations to, the members of the COI and, if appropriate, the creditors of One.Tel, in relation to the work referred to above. This would appear to be the first time that there was reference to the COI in the orders of appointment. 16In late 2006 the COI "assumed a consultative role in relation to the legal expenses" of the defendant. The Court indicated that it expected that the COI would be consulted in relation to any application that the defendant may seek to bring to establish a new regime for the funding of his expenses: Onefone Australia Pty Ltd v One.Tel Ltd (in liq) and Others (2006) 61 ACSR 236; [2006] NSWSC 1434. In December 2006 the Court ordered that the GPLs would be justified in paying the defendant from the assets of One.Tel such amounts as the defendant certified: (a) are legal costs and disbursements properly incurred and payable by him in performing the functions required to be performed by him as special purpose liquidator, in conformity with orders of the Court; and (b) has been approved for payment or not objected to by the majority of the Committee of Inspection, after the provision to all members of the Committee of the bills of costs or memoranda of fees for which payment is sought (not including disclosure of information to which client legal privilege or legal professional privilege attaches), and such other information as the Committee required. Onefone Australia Pty Ltd & Ors v One.Tel Limited (In Liquidation) & Ors [2006] NSWSC 1447 at [17]. 17After ex parte orders were made on 22 October 2008 the "purpose of the SPL's appointment" was described in the following terms by Barrett J in Onefone Australia Pty Ltd and Others v One Tel Ltd and Others (2008) 69 ACSR 290; [2008] NSWSC 1335 at [9] as being to: (i) consider and make recommendations to the creditors of One.Tel as to whether: (a) any rights of action exist in relation to the cancellation of the RRI; (b) any rights of action exist in relation to the decision to appoint voluntary administrators to One.Tel on 29 May 2001. (c) any action should be commenced against any persons in relation to any such rights of action referred to in sub-paragraphs (a) and (b) above; and (ii) in the event that the SPL recommends to the COI that an action within Order 3(i)(c) above be commenced and the COI, by majority, accepts or does not oppose that recommendation, to commence any such proceedings in the name and on behalf of One.Tel in the manner in which the SPL thinks fit. (iii) perform such work as the SPL considers necessary to advise the COI concerning such proceedings on or before 28 September 2007 or any adjourned date of the meeting of the COI of 28 September 2007, notwithstanding the filing of proceedings by the SPL on 25 May 2007 in relation to the cancellation of the RRI; (iv) perform such work as the SPL considers necessary to make final recommendations to the COI in accordance with these orders, including but not limited to the following: (a) to apply for a 6 month extension of time from 25 November 2007 to 25 May 2008, or such other extension as the SPL considers necessary, for service of the Statement of Claim in the Proceedings. (b) to amend the Statement of Claim in the proceedings as the SPL considers necessary including by way of application to the Court for leave if required; (c) to take all necessary steps to obtain funding to prosecute the Proceedings; (d) to take all necessary steps to continue with the restored public examinations of Messrs Darren Miller and Martin Green; (e) to make application to a Corporations Judge for the issue of further examination orders to such persons as the SPL considers necessary; (f) to instruct his lawyers to prepare an advice on evidence regarding the Proceedings; (g) to apply for a further 6 month extension of time from 25 May 2008 to 25 November 2008, or such other extension as the SPL considers necessary, for service of the Statement of Claim in the Proceedings. (h) to participate in negotiations to settle the Proceedings; and (j) to apply for a further 6 month extension of time from 25 November 2008 to 25 May 2009, or such other extension as the SPL considers necessary for service of the Statement of Claim in the Proceedings. 18These orders were subsequently further amended to include the purpose and/or power to apply for further extensions of time within which to serve the Statement of Claim. 19The appointment of the defendant by the Court did not change the nature of the winding up. It remained "a creditors voluntary winding up, albeit one in which one of the liquidators has been appointed by a process different from that which caused the other liquidators to be in office": Onefone Australia Pty Ltd v One.Tel Ltd (2008) 69 ACSR 290 at 297; [2008] NSWSC 1335 at [26]. The Committee of Inspection (COI) 20Part 5.6, Division 5 of the Act governs the appointment of a committee of inspection, vacancies in office and the proceedings of a committee of inspection. Relevantly, the Act confers powers and functions upon the committee in a creditors' voluntary winding up, including in respect of fixing a liquidator's remuneration: s 499(3). 21The current members of the One.Tel Committee of Inspection (COI) are Barbara Galloon, Ben Sharma, John Deloughery and Kevin Beck. There have been appointments to and resignations from the COI over the years. Alex Roth was appointed to the COI in August 2007 and resigned on or about 10 November 2009. On 10 November 2009, Ben Sharma and Sue Laver were appointed to the COI. Sue Laver resigned on 11 March 2010. Kevin Beck was appointed to the COI on 26 August 2010. Mr Phillips' office became vacant on or about 14 November 2011. Stuart Salier, general counsel for Optus, was invited to sit on the COI as an observer. ASIC v Rich 22After the collapse of One.Tel the ASIC v Rich proceedings were instituted. Notwithstanding the promptitude with which ASIC commenced the proceedings on 12 December 2001, for various reasons upon which it is not necessary to dwell, the substantive matters were not concluded for eight years. Judgment was delivered in November 2009 dismissing ASIC's claim against Mr Rich: ASIC v Rich [2009] NSWSC 1229; 236 FLR 1. The RRI proceedings 23The RRI proceedings were commenced on 25 May 2007 when the defendant filed a Statement of Claim in this Court. There were amendments to that Statement of Claim and the final pleading was a Further Amended Statement of Claim (the pleading). The defendant sought and was granted six extensions of time within which to serve the pleading on the defendants (the RRI defendants). It was served on 23 August 2010. 24The RRI defendants included PBL, News, associated companies and individuals. The pleading has been described as containing "very serious" claims including that: + PBL and News, on and from 25 May 2001, determined to undertake such steps as might be necessary to procure One.Tel to release them from an agreement which included the terms of the RRI and a commitment by PBL and News to subscribe for their full entitlement in the share offer and to underwrite any shortfall in subscriptions (par 85); + PBL and News, on and from 25 May 2001, determined to undertake a course of conduct designed to convince the directors, officers and advisers of One.Tel that PBL and News had not been fully informed or had been misled when they determined that a capital raising of $132 million was sufficient to keep One.Tel solvent (par 86(ii)); + PBL and News withheld information from the board and independent directors of One.Tel that might have suggested that One.Tel had practical prospects available to it, as an alternative to insolvent administration (par 86(xv)); + PBL and News asserted to the directors and advisors of One.Tel that the underwriting and subscription agreements to which PBL and News were parties were conditional on satisfactory due diligence when, to their knowledge, they were not (par 86(xxiii)); + pursuant to the determination between PBL and News, PBL represented to the solicitors and auditors of One.Tel that the future cash requirements of One.Tel could be assessed by reference to past expenditure when, to their knowledge, the circumstances of the business had materially changed (par 95); and + PBL and Mr Packer "feigned" an interest in securing capital from a third party to maintain One.Tel's solvency, when PBL well knew that the third party would require time to consider and obtain approvals for any such investment (pars 96, 97). Weston in Capacity as Special Purpose Liquidator of One.Tel Ltd (in liquidation) v Publishing and Broadcasting Ltd [2012] NSWCA 79 at [23]. 25The RRI defendants successfully challenged the last two extensions of time for service of the pleading and the RRI proceedings were dismissed on 13 May 2011: Weston (in his capacity as special purpose liquidator of One.Tel (in liq) and Another v Publishing and Broadcasting Ltd (now known as Consolidated Media Holdings) and Others (2011) 83 ACSR 206; [2011] NSWSC 433. The defendant's appeal in respect of that dismissal was dismissed on 12 April 2012: Weston in his capacity as Special Purpose Liquidator of One.Tel Ltd (in liquidation) v Publishing and Broadcasting Ltd [2012] NSWCA 79. 26At the trial it was common ground that I should assume that there will be further costs incurred in the special purpose liquidation in relation to the RRI proceedings, in particular, in considering whether leave should be sought to amend the pleadings and to pursue the RRI defendants for equitable remedies. 27After judgment in this matter was reserved, the defendant (with the plaintiffs' consent) notified the Court on 7 June 2012 that: (a) on 10 May 2012 the defendant filed an application for special leave to appeal to the High Court of Australia from the NSW Court of Appeal judgment dismissing the appeal from the dismissal of the RRI proceedings; and on 6 June 2012 One.Tel Limited (in liquidation) filed fresh proceedings in this Court "against the PBL and News defendants based on equitable causes of action" (the RRI equitable claims). SPECIFIC BACKGROUND 28Having regard to the fact that the defendant chose not to give evidence in these proceedings and relied upon the documentary material in evidence as a chronicle of his administration, it is appropriate to refer to many of the documents in more detail than would have otherwise been necessary. 29It appears that in the early years after the defendant was appointed, his relationship with the COI and the defendant was reasonably harmonious. However things became more complex over the years. The COI members complained that, amongst other things, they were not kept "fully informed". By late 2007 members of the COI claimed that they had "lost confidence" in the defendant and his lawyers "and their ability to handle" the "very complex matter" of the RRI proceedings. The members of the COI expressed concern about "constant delays, excessive fees" and "lack of accountability". 30One matter that was causing frustration not only to the COI but also to the defendant was the delay in obtaining funding for the litigation. The defendant had decided not to serve the pleading on the RRI defendants until he had funding in place to conduct the RRI proceedings together with insurance cover to protect him against any adverse costs orders. The frustration in respect of delay in obtaining the funding and the insurance, and the consequent delay in service of the pleading, was exacerbated by the different approaches between the defendant and the COI as to whether (and when) settlement negotiations should occur. The COI was keen for settlement negotiations to occur as soon as possible. The defendant was reticent to commence settlement negotiations until he had funding and insurance in place. Late 2007 31At a meeting of the COI on 2 October 2007 the COI requested that the defendant provide an estimate of future costs including the provision of a budget for preparing an advice on evidence in respect of the RRI proceedings. The COI also requested that the defendant obtain further expressions of interest or proposals from litigation funders by 18 October 2007. 32The defendant produced a "Remuneration Budget" dated 19 October 2007 in which he provided "an estimate of the likely fees" to be incurred by him and his staff in "supervising and providing the necessary assistance to the lawyers acting" on his behalf in the RRI proceedings. In summary, the defendant estimated the lower range of $2.275 million increasing to a maximum amount of $4.8 million. However he expressed the view that it was "unlikely" that the higher range of $4.8 million would be incurred. That document referred to liaising with litigation funders but made no mention of any steps relating to proposals to settle the proceedings. 33On 25 October 2007 Mr Rich approached the defendant's solicitor, Mr O'Neill, and suggested there was a "window of opportunity" to settle the RRI proceedings before Christmas 2007. It is apparent that Mr Rich offered to act as an intermediary in any settlement discussions. On 1 November 2007, Mr Lindholm, a principal of one of the prospective litigation funders, Phoenix Capital Partners Pty Ltd, approached Mr O'Neill with a proposal that he, Mr Lindholm, act as an intermediary. 34A further meeting of the COI was held on 21 November 2007, the agenda of which included "settlement discussions". At this meeting the COI requested that by 12 December 2007 the defendant provide the advice on evidence, any amendments to the pleading and firm offers from litigation funders. On 29 November 2007 the defendant advised the COI that the advice on evidence could not be completed in that timeframe but that the amendments to the pleading would be completed by 12 December 2007. The defendant also advised of the recent communications with a number of prospective funders. A further meeting of the COI was to occur on 14 December 2007. 35On 7 December 2007 the defendant's lawyers wrote to Mr Rich and Mr Lindholm declining their invitations to act as intermediaries to settle the proceedings and advising that he would personally conduct any settlement discussions. 36On 12 December 2007 Ms Galloon, who was employed by Optus Administration Pty Ltd, wrote to Paul O'Sullivan, the Chief Executive Officer of Optus, referring to Mr Salier's discussion with him the previous week "re proposing a person to potentially negotiate a settlement" with PBL in the new year. That communication included the following: Without any prior discussions with the committee members, Paul Weston, the SPL, contacted PBL today to organise a meeting with them early next week to discuss a potential settlement and has requested that a committee member attend with him as an observer. He has requested that I attend with him as the committee representative. I have spoken to Stuart and he supports my attendance and thinks that if any committee member does attend it should be me firstly because of the size of Optus's debt and secondly because the other committee members have been quite emotional and recently a little irrational about what has been transpiring with the pending proceedings. Given Optus's relationship with PBL, I wanted to know whether you had any issues with me attending the meeting next week in representing the committee? 37It is apparent that the defendant telephoned executives of PBL and was informed that there was no imperative to settle the RRI proceedings before Christmas. 38The COI meeting of 14 December 2007 included on its agenda the item "Settlement proposal". It is apparent that at this meeting there was discussion about a possible "window of opportunity" of settlement of the RRI proceedings prior to Christmas. At this meeting the COI were apparently informed of the approaches by Messrs Rich and Lindholm in relation to settlement of the RRI proceedings. It is also apparent that at this meeting the COI directed the defendant to retain Mr Lindholm to pursue settlement discussions. 39In a letter to the COI dated 18 December 2007 the defendant advised that following the meeting on 14 December 2007, he had met with his legal team in relation to matters including the "direction" given to him by the COI at the meeting "concerning the nature and proposed terms of a retainer of Mr Lindholm to conduct settlement discussions". The defendant advised that, "having regard to legal advice" that he had received he was convening an urgent meeting of the COI on 21 December 2007 and urged all members of the COI to attend. That letter included the following: The Rich/Lindholm involvement On 25 October 2007, Mr Rich met with Michael O'Neill, as all COI members are aware, advising of the opportunity to settle the litigation before service, emphasising the opportunity to settle may only exist prior to Christmas. A week or so later, Mr Lindholm made a similar approach to Mr O'Neill, followed shortly thereafter by Mr Phillips, a COI member, also urging settlement discussions to take place. I know that I informed all Committee members present at last Friday's meeting that I have spoken over the telephone with, firstly, Mr Ashok Jacob of Consolidated Press Holdings and, subsequently, Mr Guy Jalland, legal counsel for PBL (now called CMH), both senior executives of those companies. My discussions with those persons indicate to me that PBL was approached by an "honest broker" regarding a potential settlement, rather than the other way round. Further, I was told that there was no urgency on the part of PBL to engage in settlement discussions prior to the Christmas break. The events of recent months have led to much discussion at COI level as to how to expedite the future work to be performed so as to best be in a position to conduct settlement discussions. ... Timing of settlement discussions At the outset, I note my view has always been that it is in the best interests of creditors that the litigation be resolved by way of an early settlement. Having said that, the issue was all about timing. When is the best time to approach PBL to discuss settlement? At Monday's meeting with my legal team, I was reminded by my Counsel that it is likely I will only "get one shot at it". Counsel's comments are consistent with those of COI members at recent COI meetings. It is simply not the case that I can keep coming back to PBL suggesting settlement. It is the firm view of Counsel that the best time to approach PBL for settlement is when PBL is "at risk", and not before. PBL will only be "at risk" after conduct of the Miller and Green further examinations and when I am in a position to tell PBL that I am ready to serve the Statement of Claim, that funding is in place and that the litigation has the full support of the COI. ... The proposed retainer of Mr Lindholm I have discussed the COI's preferred course of retaining Mr Lindholm at length with my legal advisers, and my concerns about entering into such an arrangement with Mr Lindholm. Firstly, I am advised that I do not presently have the power to enter into an arrangement as proposed by the COI at last Friday's meeting, meaning that I would need to make an application to the Corporations Judge to extend my powers before I am in a position to enter into such an agreement. This application would need to be made in the first week of the 2008 Court year, namely, in the week commencing 29 January 2008. Further, this application would need to be supported by an affidavit sworn by me disclosing all relevant facts and circumstances, including: + Mr Lindholm has executed a confidentiality agreement as a prospective funder, and thereafter been provided with a large amount of confidential material including a series of legal opinions of Counsel; + I strongly suspect Mr Lindholm has thereafter, without notice to me, improperly and in my view in breach of his confidentiality agreements, approached PBL to propose settlement and offered to act as my intermediary; + Mr Lindholm is in discussion with Mr Rich, who has put forward Mr Lindholm as the proposed negotiator of the settlement with PBL; + Mr Lindholm has made it clear to Mr O'Neill that, whilst he remains an interested funder, he does not presently have in place the necessary funds (ie. any funding agreement to be signed by Mr Lindholm is "subject to finance"); + Mr Lindholm's draft funding agreement contains a clause entitling him to terminate the funding agreement at his election - Mr Lindholm has indicated he will so elect to terminate if the matter is not settled prior to service of the Statement of Claim; + Mr Lindholm intends to approach PBL on the basis that he is the "funder" of the litigation, when he is not; + The proposed retainer of Mr Lindholm will involve me authorising Mr Lindholm to represent to PBL that he is funding the litigation, when he is not; + As an officer of the Supreme Court of New South Wales, I am being asked to authorise Mr Lindholm to conduct settlement negotiations on my behalf and to misrepresent to PBL that he is funding the litigation; + The terms of Mr Lindholm's retainer are uncommercial - he is to be offered a significant percentage of any settlement fees for performing a relatively small amount of work, without contributing any funding and totally without risk, in circumstances where I am personally able to conduct such negotiations at my usual charge out rate and in circumstances where I have recommended to the COI that I personally conduct any settlement negotiations with PBL; + I am concerned that Mr Lindholm is, at the same time, seeking to act on behalf of Mr Rich (in respect of his claim against PBL and others) and he may seek a fee from PBL itself, a possibility raised by Mr Lindholm to Mr O'Neill at their last meeting; + My view, and those of my legal advisers, is that any settlement approach to PBL is best made when PBL is "at risk", and that PBL is simply not "at risk" in early February 2008; + For all the reasons outlined above, I do not recommend to the creditors of One.Tel that I proceed down the path suggested by the COI. 40There was then reference to the COI's refusal to approve the defendant's fees and those of his lawyers for work performed in November 2007. It included the expression of the defendant's opinion that the refusal was not on a "proper or reasonable basis". It also included a request to the COI to reconsider approving the fees and expenses and the indication that failing such approval, the defendant would have to approach the Court for appropriate orders. The letter included reference to the "practical consequences" of the "current impasse", including instructing counsel to perform no further work until the fee position was clarified and the possible "disastrous" consequence for "potential settlement discussions" if the examinations under the Act of Messrs Miller and Green (officers of One.Tel) were unable to proceed. The defendant noted that it would also be "disastrous" if there were a need to make a further application to extend the time within which to serve the pleading beyond 25 May 2008. It concluded as follows: Confidentiality Issues All members of the COI are requested to treat this communication in the strictest confidence, as it is clearly "Confidential Information", as defined in the Confidentiality Undertakings signed by all COI members. I am concerned to ensure that the PBL interests or any other defendant do not learn of the issues the subject of this letter. Should PBL learn of the fact that there is tension existing between the SPL and the COI, of the nature described in this letter, PBL will undoubtedly use this to their advantage. I am equally concerned to ensure the contents of this privileged communication are not communicated to Mr Rich or his advisers including Mr Star or Star Corporate nor to Mr Lindholm. January to July 2008 41The defendant met with Mr Lindholm on 17 January 2008. It is apparent that the defendant formed the view during that meeting that the substance of his letter of 18 December 2007 to the COI concerning Mr Lindholm had been disclosed to him Mr Lindholm. It is also apparent that during the course of that meeting Mr Lindholm advised the defendant that the COI was "leaking like a sieve". 42In March 2008 Mr Lindholm contacted Alex Roth of the COI and requested a meeting as he was concerned that matters that he had previously put to the defendant were not being communicated to the COI. The members of the COI agreed to meet with Mr Lindholm to be held "strictly on the basis" that Mr Lindholm did not expect to receive any information from any member of the COI about any aspect of the special purpose liquidation. 43On 13 March 2008 a meeting was held between Mr Lindholm and the COI. On the same day Mr Lindholm's solicitors, Piper Alderman, emailed a proposal for settlement to the members of the COI. That proposal included a payment of $14.25 million to One.Tel subject to the entry into a Deed of Company Arrangement with various releases. The COI then met with Mr Bruce Hambrett, a partner of the law firm of Baker & McKenzie, to discuss the proposal that had been forwarded by Mr Lindholm. 44It is apparent that Mr Lindholm wanted some form of documentation that he could provide to the RRI defendants in any meetings in relation to possible settlement of the RRI proceedings. A draft document was negotiated by Baker & McKenzie and Mr Lindholm's solicitor in the form of a letter from Baker & McKenzie to Mr Lindholm. Mr Lindholm's solicitor was concerned to impose a restriction on the COI members from reporting the arrangements to the defendant or his solicitor without notice to Mr Lindholm, through his solicitors. 45On 24 April 2008 Mr Hambrett wrote to Mr Lindholm advising that Baker & McKenzie acted for the COI and that they had been consulted in relation to the RRI proceedings. It was noted that the RRI proceedings had been commenced but not served and that the defendant had until 25 May 2008 to serve the RRI defendants unless the deadline for that service was extended. The letter also referred to s 479(1) of the Act pursuant to which the COI could give directions to a liquidator including in relation to settlement. That letter continued: Against the above background, we are instructed to confirm the following:- (a) The Committee of Inspection supports your seeking to elicit an offer of settlement from the defendants in the Proceedings on the basis that any discussions giving rise to an offer occur before 15 May 2008. (b) If an offer acceptable to the Committee of Inspection is received, the Committee of Inspection will recommend that to the Special Purpose Liquidator and invite him to seek directions to the effect that he would be justified in accepting that offer. (c) If the Special Purpose Liquidator refuses to follow the direction from the Committee of Inspection to settle the proceedings then, as presently instructed, we understand that the Committee of Inspection will request the Special Purpose Liquidator to seek appropriate directions failing which the Committee of Inspection members themselves would bring an appropriate application. (d) The discussions between you and the defendants are to be kept confidential and are not to be disclosed to the SPL without the Committee of Inspection first giving you, through your solicitors, 48 hours prior notice. 46At the COI meeting on 5 May 2008 the defendant reported that there were a number of parties with whom he was having discussions in respect of litigation funding. In that regard it was noted that Mr Lindholm was "still interested". It is not in issue that at this meeting there was no disclosure to the defendant that the COI, through its solicitors Baker & McKenzie, had supported Mr Lindholm seeking to elicit an offer of settlement from at least one or some of the defendants in the RRI proceedings. 47In a letter to the COI of 9 May 2008 the defendant confirmed the following: At the meeting of 5 May 2008, I reported to COI members as to the current status of my negotiations with the potential local and overseas litigation funders. I advised that there were a number of interested funders and the prospects of obtaining funding were good. I advised that it was possible, but unlikely, that I would have a firm proposal of funding, capable of acceptance, prior to the expiry date of the time to serve the statement of claim (25 May 2008) and therefore it would be necessary to make a court application to extend the time for service. Following discussion of the proposed extension application, it was the unanimous view of the COI that, contrary to my stated position, I should forthwith proceed to serve the statement of claim, without agreement having been reached with the litigation funder to fund the proceedings or other adequate sources of funding having been secured. COI members were of the view that I should proceed to serve the statement of claim on the Packer and Murdoch interests, together with Freehills and the independent directors, all of whom were found by counsel to have reasonable prospects on various causes of action (despite commercial and strategic reasons for not proceeding against the latter two groups of defendants). John Deloughery was of the view that the independent directors should not be served as they are "men of straw". During the course of discussion, COI members noted that there were unallocated funds held by the general purpose liquidators ("GPL's"), and available to fund the first stage of the litigation and that in these circumstances I should serve the statement of claim, monitor the costs and my exposure to any adverse costs order, whilst I continue with my negotiations with the litigation funders. In the event that I fail to secure litigation funding, I would discontinue the proceedings and use the remaining unallocated GPL funds to pay the adverse costs orders (of at least four law firms) as well as my own fees and costs. 48The defendant then set out his position as to the service of the pleading and advised that he could not be certain as to the delay in obtaining funding. He also advised that the "Packer and Murdoch interests" were closely monitoring his administration and would quickly learn of the fact that he did not have litigation funding. He suggested that they would inevitably seek security for costs. He expressed concern that he was a plaintiff in his "personal capacity" and that he had legal advice of strong prospects of obtaining an order extending the time for service. He also suggested that if he were to accede to the course suggested by the COI he would begin to incur very significant legal costs and expenses in circumstances "where the COI had withheld approval of significant amounts" of remuneration and legal expenses for reasons that he considered "unsatisfactory". He advised that in those circumstances he was not prepared to take the course of serving the pleading suggested by the COI. 49On 13 May 2008 Mr Hambrett wrote to Mr Lindholm's solicitor advising that he had been instructed to give the 48 hours notice referred to in his letter of 24 April 2008. That communication included the following: The COI has not yet decided what it will do, but would like to be free to have a frank discussion with the SPL in the near future, should the need arise, hence the reason for the notice. 50On 30 May 2008 Ms Galloon on behalf of the COI wrote to the defendant to "raise an issue" for the defendant's attention in advance of the COI meeting planned for 4 June 2008. Ms Galloon confirmed that the COI had been "enormously concerned by the ever-increasing amount of fees incurred in the special purpose liquidation". It was suggested that, to resolve the "impasse" over the outstanding fees and to attempt to save the cost of an application to the Court, the invoices and associated materials for March and April 2008 be provided to Mr Hambrett and that his firm would conduct a review and advise the COI if the amounts of the invoices were reasonable. It was also proposed that if Baker & McKenzie advised that the invoices were reasonable the COI would approve payment of those invoices forthwith. However if Baker & McKenzie did not regard the invoices as reasonable they would give their reasons to the COI, the defendant and his advisers and the parties would agree to have further "good faith discussions" to try to resolve the issue before any application to the Court was made. 51On 2 June 2008 the defendant responded to the proposal for the review with a number of concerns and suggesting that there needed to be an understanding as to the parameters of any review to be undertaken by Mr Hambrett. 52At the COI meeting on 4 June 2008, 50% of the defendant's fees and expenses, including legal expenses, for March and April 2008 were approved on the basis that the defendant would use his "best endeavours" not to exceed a monthly budget of $50,000 for his fees and expenses for the months of June and July 2008. It was also agreed that Mr Hambrett would conduct a "high-level review" of the defendant's March and April 2008 fees and expenses. The defendant advised the COI that he and his solicitor, Mr O'Neill, were prepared to meet with Mr Hambrett to give him a background briefing to assist his review although the COI members did not think that would be necessary. The defendant advised the COI that he had serious reservations about being able to stay within the budget of $50,000 per month but would endeavour to do so. 53In confirming these arrangements that were reached at the meeting on 4 June 2008 the defendant noted in a letter to the Committee on 6 June 2008: I also bear in mind the very significant funds which have already been expended in my administration and I will use my best endeavours to obtain litigation funding on the best terms available and in the most cost effective way, bearing in mind my overriding duty to all creditors and the Court pursuant to my appointment. If this requires me to go beyond the suggested budget, I will do so. I am happy to inform Committee members if the $50,000 mark for each of June and July is to be exceeded. I note that the Committee wishes me to set a deadline of 25 June for interested funders to provide term sheets and for me to report to the Committee on 25 July. I will also use my best endeavours to meet this timetable, applying my discretion as I see fit if I consider a funder to be a good prospect but requiring further time for good reason. 54On 25 June 2008 Mr Lindholm wrote to Mr Salier in terms that included the following: Given the recent meetings between PBL and the SPL, PBL withdrew their original offer. I now have them back on track and they are still prepared to contribute $15M with releases from ALL other defendant parties including J Rich. News feel the most aggrieved of the parties but are willing to contribute $2M with the same releases as PBL. They were initially unwilling to contribute anything so I have made some headway in procuring an offer from them. J Rich originally wanted $5M out of the above to give his release. I have been able to negotiate this figure down to $2M. After my facilitation fee of 5% or $850,000 on $17M and the Rich fee this leaves $14.15m for distribution to creditors. I am advised by the parties that this offer is valid until next Friday 7 July and that they have expressed the view that all bets are off thereafter with regard to any subsequent approach, ie - they are calling the committee and SPL's bluff. 55On 27 June 2008 Mr Hambrett and Mr Salier met with the defendant and Mr O'Neill. The defendant was advised of the "settlement offer". Mr Hambrett suggested that Mr Lindholm had set about to "divide and conquer" the COI and the defendant. Mr O'Neill suggested that Mr Lindholm was a commission agent of Mr Rich and that he could not be trusted to act as an intermediary for the defendant representing creditors. Mr Hambrett suggested that the offer was insufficient and that the creditors would not agree with Mr Rich getting $2 million out of the funds. Mr O'Neill and the defendant advised that they had "no knowledge at all" of the dealings with Mr Lindholm and expressed their "grave concern" in relation to the developments. Mr Hambrett gave the defendant a letter from the COI to him dated 27 June 2008 that was in the following terms: The Committee of Inspection needs to raise several issues with you for your attention. The COI has received an offer from two of the prospective defendants (PBL and News) to settle the proceedings which are filed with the Supreme Court, but not yet served. The details of the offer will be outlined in a meeting that Messrs Hambrett and Salier have with you and your legal advisers today, but they include a term that the offer will lapse on 7 July 2008. The offer was received via a third party, Mr Paul Lindholm. Mr Lindholm has assured the COI that he has been to the highest levels within each of PBL, News, Freehills and Ernst & Young in order to secure the offer. Three issues are of immediate concern to the COI. First, the COI understands that Mr Lindholm has been involved in discussions with your office and/or the office of your lawyers, in connection with the funding of the proposed litigation. It is the view of the COI that in view of the settlement offer having been received by Mr Lindholm, he (Mr Lindholm) is in a position of conflict and neither your office nor your lawyer's office should have any further dealings with Mr Lindholm in connection with any aspect of the funding negotiations. The COI does not believe that Mr Lindholm can constructively add anything to what you have already achieved: in fact he could be a hindrance to the overall strategy. Second, from the COI's perspective, one of the troubling aspects of the offer is that it provides insufficient time to the COI to give proper consideration. One of the critical factors influencing the COI's consideration of the offer is the extent to which funding might be available, an issue which we know you are focused on as a priority. The COI therefore proposes to ask Mr Lindholm to try to secure from PBL and News additional time to the offer to remain open for acceptance. Thirdly, based on comments made to us by Mr Lindholm, the COI has serious concerns that, were you or your legal representatives to become involved in the current settlement negotiations, they may be jeopardised. The COI would go as far as to say that it is concerned that if you or your legal advisers do attempt to make contact with any of the proposed defendants over the next few weeks, there is a serious likelihood that the offer currently on the table would be withdrawn. We would therefore appreciate your undertaking that you will not get involved in the settlement negotiations unless and until the COI has been consulted first. Of course, the COI will keep you abreast of the negotiations and, in any event, cannot commit One.Tel's creditors to a settlement, as you cannot, without Court approval. We understand that you and your legal team are making good progress with the various potential litigation funders that you have identified and whose terms sheets are in the process of being received and considered. Consequently, and as discussed at the most recent COI meeting, we expect you will be in a position shortly to make a firm recommendation to the COI on your preferred funder. The COI is therefore strongly of the view that a two-pronged short-term strategy is in the best interests of all One.Tel creditors. The strategy involves you and your legal team concentrating exclusively on finalising litigation funding in the order of $20 million. The second leg of the strategy is to have the COI try to finalise the settlement figure (via Mr Lindholm) which maximises the return to all One.Tel creditors. It is in this area of settlement negotiation that the COI must insist that Mr Lindholm utilises his high level contacts and network to extract the maximum possible offer, which will be further enhanced by you and your legal team having secured litigation funding. The Committee requests that if you do not agree to provide an undertaking as outlined above and instead decide that you must get directly involved in the settlement negotiations, that you and/or your advisers will give the Committee advance notice of that decision. Given the delicacy of the negotiations, we trust that the undertaking is forthcoming. In the meantime, we assume that you will redouble your efforts to secure funding so that all available options are open to the creditors. 56On 30 June 2008 Mr O'Neill, on behalf of the defendant, wrote to Mr Hambrett referring to the meeting on 27 June 2008 at which Mr Hambrett "first advised" of the "COI's direct dealings with Lindholm (without the knowledge or authority of the SPL)". That communication called for the provision of information and material by no later than 6pm the following day, 1 July 2008, as follows: 1. copies of all written communications between the COI (or any representative) and Lindholm regarding any matter concerning One.Tel at any time; 2. file notes or other records of any telephone or other oral communications between the COI (or any representative) and Lindholm regarding any matter concerning One.Tel at any time; 3. if no record was kept of oral communications, a summary of the nature and substance of such communication, including the date and participants; 4. copies of any written material received by the COI (or any representative) from any of the defendants to the SPL's Proceedings; 5. details of the PBL "original offer" referred to in the e-mail from Lindholm to Stuart Salier above, including when the COI (or any representatives) first became aware of it. Upon receipt and consideration of the requested information, the SPL will promptly provide the COI with his views as to recent events and a response to the COI's letter dated 27 June 2008. We are instructed, however, to remind the COI that the SPL is at a critical stage of negotiations with a number of funders, working to the COI's timetable proposed at the last meeting. The fact that settlement negotiations have apparently been taking place, without the knowledge or authority the SPL, is a matter that may need to be disclosed to potential funders to avoid any suggestion of misleading conduct by the SPL. It is therefore absolutely critical that the SPL urgently be apprised of all relevant facts and matters relating to such apparent settlement negotiations. Further, for the same reason, we are instructed to request that the COI and any representatives not give any further directions or instructions to Lindholm before the SPL has received the above information and given his response. We expect our response to be within 24 hours of receiving information. Finally, we are instructed to make it absolutely clear to the COI that Lindholm does not act with the authority of the SPL or One.Tel, and that the SPL's position in relation to Lindholm as an intermediary remains as advised to the COI in the SPL's letter of 18 December 2007, a copy of which is attached. 57Mr Hambrett responded on 1 July 2008 advising, amongst other things, that he would seek instructions and get back to Mr O'Neill as soon as he could. That communication included the following: Generally speaking, in the context of a matter in which close to $7.0M of creditors' funds, including almost $5.0M on legal fees, have already been on spent on proceedings which are yet to be served, the COI will understandably be concerned that further costs and expenses are not incurred unnecessarily. Further, it is not correct to say that "settlement negotiations have apparently been taking place", as you suggest. Stuart Salier and I were at pains at our meeting on Friday last to stress that, in fact, no negotiations have taken place between the (sic) anyone on behalf of OneTel and any of the defendants, apart from the SPL's unsuccessful negotiations a few months ago. Rather, an offer has been made to the COI, which the COI has quickly passed on to the SPL, and which the SPL must now consider. You must rest assured, as we explained to you on Friday, that the COI will not be giving directions to Mr Lindholm, without discussing them with the SPL first, although we have told you the view, which is held very strongly by the COI, as to how those negotiations should proceed, bearing in mind the unsuccessful discussions to-date between the SPL and the defendants, and the risk that the offer may be jeopardised if not responded to correctly. Of vital importance is the need to seek an extension of time, for reasons discussed last Friday. It seems to us that the offer may lapse this Friday, unless extended. 58On 2 July 2008 Mr Hambrett wrote to Mr O'Neill observing that his request for information from the COI members had not identified any proper basis upon which the demand could be made for the materials and therefore the materials would not be provided. Mr Hambrett suggested that the defendant's focus on "historical matters" caused the COI to have "great concern" because it was time wasting and would inevitably lead to the defendant incurring totally unnecessary expense on matters that were both irrelevant to the key issues and likely to be outside the scope of his powers. 59Mr Hambrett complained about the "adversarial" and "counterproductive" tone of Mr O'Neill's communications and suggested it was "most unfortunate" and "that it hardly augurs well for the upcoming weeks and months which could be pivotal to a possible resolution of this matter". Mr Hambrett advised that some members of the COI had lost confidence in the defendant and others were increasingly losing confidence in the defendant to represent the best interests of creditors. The matters referred to for this loss of confidence included the defendant's and his legal advisers' "extraordinarily high fees" and the defendant's refusal to engage with Mr Lindholm. Mr Hambrett suggested that the defendant and his team were being distracted by false issues and requested Mr O'Neill to approve the "two-pronged" strategy raised in the COI's letter of 27 June 2008 or alternatively to arrange a further meeting. 60On 3 July 2008 Mr Hambrett wrote to Mr O'Neill advising that he had concluded his "high-level" review of the costs and expenses incurred by the defendant for March and April 2008. He advised that in carrying out this review he had the "benefit" of the meeting packs prepared by the defendant for the meetings of the COI on 8 April 2008 and 4 June 2008; two white folders of materials entitled "SPL Advices"; a discussion with Mr O'Neill and his colleague Mr Popper; discussions with the members of the COI; and the judgments which had been delivered following various applications to the Court by the defendant. Mr Hambrett advised: Overall, I have very serious concern at the high level of fees and expenses (more than $7.2M) which have been incurred by the SPL when the proceedings, which are at the heart of the "special purpose", while having been filed, have not even been served. To my way of thinking, this is an extraordinary sum. Turning to the March and April 2008 invoices, on the material which I have seen to date, I am not persuaded that they are reasonable for the following reasons:- 1. While the SPL may have indicated the range of work which was to have been undertaken in those months, I understand that the precise amount to be spent was not indicated to the COI and to the extent that amounts were mentioned, those amounts have been exceeded by a wide margin. 2. Directions from the COI seemed to have been ignored. For example, on my instructions, the SPL was directed to seek from counsel summary opinions only, yet that direction seems to have been ignored with the result that fees totalling $324,125.00 were incurred with counsel in March and April, for the provision of very long and detailed advices. 3. Some work e.g. the preparation of a position paper in March for discussion with the defendants, is probably outside the terms of the orders which govern the special-purpose liquidation. 4. Looking back past March and April 2008 and the $7.2M which has been incurred to date, those fees will be wasted if funding is not secured. In his judgement delivered on 21 November 2007, Barrett J said as follows:- "Another important matter referred to in the affidavit is funding of the litigation. A large amount of money has been spent already. That of itself indicates that there is a substantial financial investment which, one would say, should not be allowed to be lost without good reason. If it can be preserved towards some future benefit by an extension of time rather than evaporating merely by the effluxion of time, that is a relevant consideration. The special purpose liquidator makes it clear in his affidavit that funding sources are not, to his mind, limited to the resources available within the confines of the winding up of One.Tel. He says that a number of commercial litigation funders have expressed a firm interest in funding the proceedings but that, given the volume of material involved, it is unlikely that any of them would be in a position to put forward a formal proposal for funding until about February 2008. At this stage, of course, the quantum of funding required could not be reliably predicted. That will depend upon completion of the further investigations to which reference has already been made." It is surprising, given what the Court was apparently told in November, therefore, that a further $1M was spent in March and April 2008 and, as of last week or so, no proposals have been received. 5. I am not persuaded that the trip to London was a reasonable expense. I would be surprised if the SPL's London office could not have been asked to make enquiries and any negotiations could have been carried out by e-mail and telephone. Accordingly, I am not prepared to recommend to the COI that it approve the March and April 2008 invoices for payment. Consistent with Barbara Galloon's letter of 30 May 2008, I think further discussions are required. You may be able to persuade me that these invoices are, in fact, reasonable. I remain open to be persuaded. On the other hand, if the SPL is minded to file an application, as he foreshadowed directly to me in his e-mail of 1 July 2008, then I ask that you put before the Court not only this letter, but all other correspondence between the SPL and the COI relating to his fees and expenses. I also ask that the COI be given notice of any such application. 61The letter included an exhortation for the defendant to work more co-operatively with the COI. 62On 4 July 2008 Mr Hambrett wrote to Mr O'Neill noting that he had not received a reply to his communication of 2 July 2008. Mr Hambrett advised that the COI had met on 4 July 2008 and that: The COI agreed unanimously to direct the SPL to authorise Stuart Salier to explore the possibility of settlement of the proceedings against PBL and others with Mr Paul Lindholm, on behalf of the defendants, including if necessary, the seeking of an extension of the offer which has been made, and reporting back to the COI and SPL. I draw your attention to section 479(1) of the Corporations Act in this regard. The COI's concerns have now been set out in some detail both in my e-mail of 2 July 2008 and my letter to you of 3 July 2008. The COI is very concerned not only about the considerable fees and expenses which have been incurred in special-purpose liquidation to date, but the possibility that an offer to settle the litigation may evaporate if the discussions are not pursued in the most appropriate manner. I look forward to hearing from you as a matter of urgency. 63On 4 July 2008 Mr O'Neill wrote a lengthy letter to Mr Hambrett that included the following: 5.2 Mr Lindholm arranged to meet with Mr O'Neill on 1 November 2007 and offered to act as the SPL's intermediary to settle the SPL Proceedings. As Mr Rich had done, Mr Lindholm asserted that he had contacts at the highest level within PBL and that there was a "window of opportunity" to settle the SPL Proceedings prior to Christmas 2007. Based on subsequent discussions between the SPL and Mr Guy Jalland of PBL, the SPL was informed that there was no desire on the part of PBL to settle the Proceedings prior to Christmas 2007. We do not know which version is true. However, the conflict is both disturbing and significant to an assessment of subsequent matters. ... 15 Conclusion 15.1 The SPL continues to be of the view (expressed to the COI many times) that the interests of creditors of One.Tel would be best served by an early settlement on favourable terms to the creditors. The SPL remains of the view that this can only be achieved when PBL and the other defendants are at immediate risk, namely, when the SPL has secured funding and is in a position to serve the Statement of Claim. 15.2 Regrettably, the precipitous actions of the COI and Mr Lindholm have made that task much more difficult. The SPL will do his best to restore good order in his administration. 15.3 The SPL has seriously considered approaching the Court for directions arising from recent events, however, is seriously concerned that the very approach to the Court will achieve the outcome sought by those who promote the "divide and conquer" strategy. 15.4 With a view to restoring good order in the SPL's administration, the SPL will be convening a meeting at short notice to be held at the offices of Deloittes at 11.00 am on Thursday, 10 July 2008 which hopefully will allow sufficient time for all COI members (except John Deloughery whom we understand is overseas) to attend. We also invite you and Mr Salier to attend and advise that Mr Cotman SC will also attend and will be available to discuss all issues with the COI, Mr Salier and you. 15.5 Finally, this letter deals with matters of a highly confidential and privileged nature, which must not be disclosed to third parties. Bearing in mind previous leaks, we can only stress that you must impress upon the COI members the need to treat this letter in confidence. ... PS. During the course of finalising this letter this afternoon, we are instructed that the Chief Financial Officer (CFO) of Optus has today contacted (from overseas) the Deloitte partner responsible for the Optus audit, stating words to the effect "Weston has gone ballistic as SPL and has rejected the settlement offer in the One.Tel case made directly to the COI". Firstly, we note that Barbara Galloon represents Optus and Mr Salier is the in-house Counsel of Optus, and each of them have (sic) signed Confidentiality Undertakings. We would be most surprised to learn that Ms Galloon and/or Mr Salier would disclose Confidential Information (as defined in the Confidentiality Undertaking) to the Optus CFO in breach of that Confidentiality Undertaking. It is therefore more likely that the Optus CFO was contacted by persons in whose interest the "divide and conquer" strategy are best served and who have knowledge of recent events. Kindly obtain instructions on this matter to identify who informed the Optus CFO. Secondly, we are instructed to inform you that the SPL is disappointed at what he considers to be an improper approach by the Optus CFO, designed to exert pressure on the SPL in the performance of his duties as SPL. 64On 8 July 2008 Mr O'Neill wrote to the solicitors for PBL and News advising them that Mr Lindholm had no authority to act on behalf of the defendant and that Mr Lindholm's dealings "whatever they may have been" had taken place without the defendant's knowledge. Mr O'Neill also advised that if the defendants wished to make an offer to settle the RRI proceedings, such offer should be directed to the defendant, care of Mr O'Neill's firm. 65Further correspondence ensued between Mr Hambrett and Mr O'Neill and on 14 July 2008 Mr O'Neill alleged that the COI "had deliberately kept secret" Mr Lindholm's offer from the defendant. It was also alleged that the COI was continuing its "evasive approach and failure to give full and frank disclosure". 66In late July 2008 the defendant and Mr O'Neill instructed Neil Cussen of Deloitte Touche Tohmatsu (Deloitte) to assist in "ascertaining the bona-fides of the Paul Lindholm offer". Mr Cussen met with Mr Lindholm and Mr Jalland from PBL and reported to the defendant. 67On 28 July 2008 the defendant wrote to Mr Hambrett in terms that included the following: We also discussed, and agreed, that components of the "offer" were unacceptable to both the COI and me including but not limited to the amount and proposed distribution of the "offer". I refer, in particular, to the proposed payment of $17 million offered jointly by PBL and News of which Mr Rich is to receive $2 million. Whilst the COI and I agree that the "offer" should neither be accepted nor rejected, there is the obvious risk that the "offer" may not be extended by PBL and News beyond their 1 August deadline. I also explained that I have grave concerns that, as SPL, I am not aware of all relevant facts and matters surrounding the making of the "offer". In this regard, I confirm my request that the COI forthwith provide me with a copy of the letter dated 24 April 2008 from Baker & McKenzie, on behalf of the COI, to Mr Lindholm, which Mr Lindholm, and his lawyer, described as a "retainer letter". I require a copy of this letter on an urgent basis, which I maintain is consistent with the COI's fiduciary obligations owed to One.Tel and to me as SPL to make full and frank disclosure. Please obtain urgent instructions. 68On 4 August 2008 the defendant issued a Report to Creditors for the AGM on 22 August 2008. That Report disclosed total fees of $7,552,277 inclusive of legal costs of $5,188,785. The Report recorded that the defendant had convened regular meetings with the COI "to keep them abreast of matters occurring in the" RRI proceedings and to make recommendations and consult with the COI on the various decisions that the defendant had been required to make. There was no mention of any negotiations to settle the RRI proceedings. 69On 5 August 2008 Mr O'Neill wrote to Mr Hambrett reporting on the meeting between the defendant, Mr Cussen, Mr Lindholm and his lawyer on 31 July 2008. Mr O'Neill reported that Mr Lindholm had advised that the letter from Mr Hambrett dated 24 April 2008 had arisen as a result of the COI approaching him and "not the other way around". Mr O'Neill claimed that Mr Lindholm had advised that the "original offer" referred to in his letter of 25 June 2008 to Mr Salier had been $15 million and that it had been "on the table all along". Mr O'Neill then referred to the apparent inconsistencies between the information that had been provided to the defendant by the COI and that which had been provided to the defendant by Mr Lindholm. The letter concluded: The SPL needs to know the true and complete detail of the COI's dealings with Mr Lindholm to ascertain if and how they may have adversely affected the SPL's administration. This is especially so in circumstances where an "offer" appears to have been solicited on behalf of the COI which is undeniably low bearing in mind the quantum of the SPL's claim and its merits, apart from the timing of the solicitation. The SPL requires the COI to immediately comply with its fiduciary obligations owed to One.Tel and the SPL, including full and frank disclosure. 70The correspondence continued between Mr O'Neill and Mr Hambrett. On the one hand Mr O'Neill was alleging breaches of fiduciary duty by the members of the COI and on the other Mr Hambrett was seeking to defend the members of the COI. Mr O'Neill also made allegations against Mr Hambrett. It is unnecessary to detail this correspondence other than to observe that its adversarial nature did nothing to assist the working relationship between the defendant and the COI. Indeed it appears to have hindered it. 71Over the next two months the members of the COI sought information from the defendant in relation to the status of any litigation funding and any settlement negotiations. That information was not forthcoming. Mr Hambrett wrote a letter to Mr O'Neill on 30 September 2008 seeking the information on behalf of the COI. It was not until 23 October 2008 that Mr O'Neill wrote to Baker & McKenzie advising that the defendant had made an ex parte application to Barrett J on 22 October 2008 in closed Court and that the defendant's powers had been extended to allow him to participate in negotiations to settle the RRI proceedings and to apply for a further extension of time within which to serve the pleading until 25 May 2009. The letter also included advice that the defendant had been given approval to enter into a due diligence agreement and was justified in entering it without the prior approval of the COI or the creditors of One.Tel. It also included advice that the defendant was justified in not providing the COI with details of the identity of the parties to the agreement or the terms and conditions of the proposed funding agreement. The letter also included details of the agreement that had been approved by the Court and advice that the defendant had entered into a due diligence agreement with the potential funder. 72In October 2008 the COI and the defendant made various applications to the Court. The COI was concerned to have access to the due diligence agreement but did not proceed with its application because there was an arrangement reached whereby the COI's legal representatives were given access to it on a confidential basis. The only interlocutory process that required determination was the defendant's applications to have his remuneration for the period March 2008 to June 2008 conclusively determined and his legal fees and disbursements approved by the Court. These applications were granted by Barrett J on 12 December 2008: Onefone Australia Pty Ltd and Others v One Tel Ltd and Others (2008) 69 ACSR 290; [2008] NSWSC 1335. His Honour observed that in a creditors voluntary winding up, a liquidator is not bound to have regard to any directions the committee of inspection may give and that the committee had no formal power to direct the liquidator (at [45]). His Honour also made the order sought by the defendant in respect of his remuneration and said that the "quantum has been satisfactorily explained" (at [55]). 2009 73In late December 2008 the defendant sought approval from the COI for his fees and expenses to the period July to December 2008. They were not approved by the COI. The defendant then made ex parte application to Barrett J in March 2009 for what the COI understood was the approval of his expenses. However it also included an application for a further extension of time within which to serve the pleading. The fact that the defendant did not advise the COI that this was part of the application caused further tension in the relationship and, at a COI meeting on 28 April 2009 (that the defendant and his legal advisers declined to attend), the COI's concerns in this regard were noted. At this meeting it was noted that the Court had extended the time for service of the pleading until 25 November 2009. The minutes of the meeting included notation of the "strong concerns" of the members of the COI and a claim that the defendant had been "dismissive" of requests for meetings. It was also noted that there had been no COI meeting with the defendant since January 2009. 74The minutes of the meeting on 28 April 2009 were provided to the defendant who advised that he preferred to treat them as a "letter of concern". On 15 May 2009 the defendant wrote to the COI, with reference to the upcoming meeting on 18 May 2008, for the approval of his fees from January 2009. The defendant dealt with the complaints made in the minutes and advised that he would be tabling a "Gantt chart" setting out his remuneration and legal expenses for the calendar year 2008. The defendant suggested that the COI was causing additional and unnecessary distraction and cost and that he did not see any need to call a meeting prior to the one that had been called to approve his fees on 18 May 2009. The defendant suggested that it was not necessary to call a meeting to advise the COI that he intended to make the application for the extension of time within which to serve the pleading. In this regard the letter included the following: I do not understand how it is that the COI can describe my seeking the extension (which the COI considered to be a "good development") on an ex-parte basis without notice to COI members as "most disturbing". Firstly, all such applications have been made on an ex-parte basis, subject only to an unsuccessful attempt by certain defendants to intervene in the first such application. The Court specifically held that the defendants have no right to be heard on such an application. As to COI members not being given notice, no such notice was given of the last application and I did not see any need to give notice of the latest application on the basis that the extension was necessary as funding negotiations were continuing and would not be completed before expiry of the current period for service. Additionally, I continue to have strong concerns that a member or members of the COI may again leak confidential information as has happened in the past. In particular, I did not wish any of the defendants to receive prior notice of my intended application, so as to avoid incurring unnecessary cost to creditors of a further intervention application. Finally, there was nothing that the COI could have counselled, warned or advised me which would have made me act differently, nor would I have expected the COI to have expressed any opposition to seeking an extension. 75The COI meeting on 18 May 2009 was reconvened on 25 May 2009. As a result of that meeting the COI wrote to the defendant on 10 June 2009 suggesting that the defendant's "update" on the litigation funding process at the meeting on 25 May 2009 was "virtually meaningless in that it provided no substantive new information on this issue". The letter also responded to the defendant's letter of 15 May 2009 and included the following: Indeed, our sense of frustration has only heightened when we received your request for approval of invoices (for which the amounts have shocked and disturbed us for some time, particularly those of your legal advisers) in the context of very limited information (the bill narratives give limited assistance when trying to assess whether the work was necessary and proper) and yet there seems to be an expectation on your part, and on the part of your legal adviser, that we would more or less "rubber stamp" approval of those accounts. 76There was a meeting of the COI on 31 July 2009 at which the defendant proposed a resolution approving his remuneration for the period 1 May to 30 June 2009. Gary Phillips and Stuart Salier sought additional information from the defendant in relation to this remuneration. The defendant acknowledged that the fact that he would not provide further information was a "difficulty" for the members of the COI. However the defendant was resolute in his view that although he had some "sympathy" to their "difficulties", the members of the COI had placed themselves in that position by their activities and actions over the previous 18 months. That was a reference to the defendant's view that members of the COI were "leaking" information to third parties, in particular to Mr Lindholm. The defendant justified this view by repeating that Mr Lindholm had been able to repeat to him "verbatim" the contents of his 18 December 2007 letter to the COI. 77After the resolution in relation to the defendant's remuneration was put and not carried, Mr O'Neill, who was present at the meeting, urged the members of the COI to read what Barrett J had to say in paragraph [46] and following of his judgment in Onefone Australia Pty Ltd and Others v One.Tel Ltd and Others (2008) 69 ACSR 290; [2008] NSWSC 1335. Mr O'Neill described his Honour as "urging committee members...to carry out their responsibilities" and that his Honour was making clear that he understood their "difficulties" but that it was not open to them to "simply vacate the field". Mr O'Neill also referred to his Honour's observations that the COI members were bound in the future to consider certain matters and make a "conscientious attempt to reach a decision". 78In that judgment Barrett J observed that the function of fixing the defendant's remuneration was exercisable by "the committee alone" and the Court would only act if that process was shown to be "unworkable" (at [34]-[36]). The passages of the judgment that Mr O'Neill probably had in mind when he was speaking at the meeting were as follows: [53] ... First, it must be recognized that such a committee is given, in this case, a clear and positive role to play in the matter of fixing the liquidator's remuneration. The power to act must be considered to co-exist with a responsibility to act. Only if the court sees clearly that the committee will not act and that the system provided for by the legislation has become unworkable will it be open to the court to conclude that there is, as to the quantum of remuneration, a question in relation to the winding up that stands in need of an answer, so that the court may proceed under s 511(2) to determine the question. [54] Second, it must also be recognized that the committee of inspection in a creditors voluntary winding up has no power to direct the liquidator, no power to decide what the liquidator should or should not do and no power to control or monitor expenditure by the liquidator. In the present case, the committee has been willing to take on the task of checking legal costs and disbursements incurred by the special purpose liquidator. ... In undertaking that task, the committee of inspection has not been performing any function specifically conferred by the legislation. Rather, it has been exercising general oversight of the kind referred to at paragraphs [41]-[45] above. ... [58] While this is, in the light of recent history, the appropriate outcome in relation to the particular remuneration items dealt with by that order, it must be remembered that the committee of inspection must, of necessity, involve itself in future decisions about remuneration. The committee has a specific statutory function in relation to the matter. As a corollary, it has a specific statutory responsibility. It is not open to the committee to decide to vacate the field. It will be bound, for the future, to consider such matters as need to be considered in relation to liquidators' remuneration and to make a conscientious attempt to reach a decision on each such matter. That responsibility is a statutory responsibility. It will continue while a committee of inspection remains in office. Report to Creditors - 3 August 2009 79The defendant prepared a Report to Creditors dated 3 August 2009 in preparation for the Annual General Meeting of Creditors on 26 August 2009 (AGM). 80The Report contained a "Chronology of Significant Events" that included reference to: the COI meeting with Mr Lindholm on 11 March 2008 without informing the defendant; Mr Hambrett's letter to Mr Lindholm of 24 April 2008; and the meeting of 27 June 2008 at which the "offer" was disclosed to the defendant. The Report referred to the due diligence agreement and the formal agreement with the funder in October 2008 with a claim that the defendant did not disclose to the COI his confidential dealings with the funder because of his "strongly held views as to breaches of confidentiality by the COI". Section 5 of the Report headed "Committee of Inspection Issues" included the following: I have grave concerns regarding the conduct of COI members which I consider involves serious breaches of their fiduciary duties and their written confidentiality undertakings to me. The COI members take a contrary view. The conduct includes serious leaks of confidential information, covert dealings with an unauthorised intermediary and meeting with a senior PBL executive to discuss settlement of the SPL Proceedings, all without my knowledge at that time. COI members have failed to comply with their fiduciary duty to fully disclose to me details of these dealings until the November 2008 hearing. In light of my concerns, I have reached the view that the COI cannot be entrusted with further confidential information and to do so may prejudice my administration. The issues with the COI have resulted in substantial fees and expenses being incurred, on both sides, substantially paid out of One.Tel's assets. COI Media Release - 6 August 2009 81On 6 August 2009 a press release was published on behalf of the COI in the following terms: The Committee of Inspection of One.Tel Ltd (in liquidation) (special purpose liquidator appointed) (COI) has seen the report of the Special Purpose Liquidator (SPL) dated 3 August 2009. The COI was not invited to comment, or respond to, the matters raised in the report prior to its completion, which it regards as regrettable. In his report, the SPL expresses concerns about certain actions taken by the COI during 2008. There are many factual assertions in the report with which the COI takes serious issue. The COI also has been concerned for some time, and continues to be concerned, at the level of the SPL's remuneration and legal expenses. The COI rejects any suggestion that it has acted inappropriately, or otherwise than in the best interests of One.Tel's creditors, at any time. Beyond that, the COI does not believe that it is in the interests of One.Tel's creditors to debate these issues in public but will do so at the appropriate time and place. Media Release - 7 August 2009 82On 7 August 2009 the defendant published a "Media Release" in the following terms: CONDUCT OF ONE.TEL CREDITORS COMMMITTEE HAS COST CREDITORS $1.5 MILLION IN 12 MONTHS, SAYS PAUL WESTON Special Purpose Liquidator Paul Weston of Pitcher Partners said today that the conduct of One.Tel's Committee of Inspection has cost creditors in the order of $1.5 million in the last 12-month period. Mr Weston said this amount includes about $260,000 of the COI's own legal costs paid out of the assets of OneTel. "The COI has attempted to derail my efforts as Special Purpose Liquidator resulting in substantial costs to One.Tel creditors. I am concerned about the damage to my work by leaks of confidential information given to the COI, and the COI's involvement in covert meetings with representatives of the defendants to my proceedings. "The COI has on numerous occasions tried to interfere with my work, which leads me to question the motives of the COI members, especially the three who do not have a direct relationship with a One.Tel creditor in that they are not officers or employees of any One.Tel creditor". Mr Weston said the COI members have, in his view, breached their fiduciary duties, citing an article by Lindsay Powers referred to in the 12 December 2008 judgment of Justice Barrett [Onefone Australia Pty Limited v One.Tel Limited [2008] NSW SC 1335]. It refers to COI members being fiduciaries who must not act under another's instructions, must not take advantage of confidential information and must avoid conflicts of duty and interest. He said that as the Court-appointed Special Purpose Liquidator his role is to act in the best interests of One.Tel creditors and that all work conducted by him has been at the direction of the Court. His statements follow the release of his Report to Creditors of 3 August 2009. Mr Weston said the SPL proceedings, if successful, may result in recovery of $132 million together with statutory interest on that amount from May 2001, currently a total in excess of $230 million. "Following my comprehensive investigations I believe that my claim has good prospects of success, and that it is in the best interests of creditors that I pursue the claim. I wish to put all my efforts towards achieving this aim and not to be distracted from this important task". 83Baker & McKenzie wrote to the defendant on 17 August 2009 claiming that the Media Release conveyed seriously defamatory and false imputations concerning the members of the COI. The letter also included claims that there could be no proper purpose for the publication and that the defendant did not honestly hold the views expressed in the Media Release. It was suggested that these matters were sufficient to establish malice. An apology was sought from the defendant and a request was made for the defendant to remove the Media Release from his firm's webpage. 84On 20 August 2009 Mr O'Neill responded to Baker & McKenzie's letter advising that the defendant did not accept that the imputations were necessarily conveyed or that they were false. He took issue with the suggestion of malice and advised that the defendant did not propose to provide an apology nor remove the Media Release from his firm's webpage except in the usual way, that is, fourteen days after it had been posted on the webpage. Annual General Meeting - 26 August 2009 85At the AGM of Creditors on 26 August 2009 Stuart Salier read a statement on behalf of the COI setting out the COI's reasons for its loss of confidence in the defendant's ability as SPL and its belief that he should be removed (the Statement). It was suggested that from a reading of the defendant's Report to Creditors and the Media Release, creditors may have concluded that the COI members had secretly tried to settle the RRI proceedings without informing the defendant; that they had little or no regard for their promise to the defendant to keep certain information confidential; that they were motivated by duties to persons other than creditors; and that they had caused the defendant to waste about $1.5 million in costs. These claims were rejected with an assurance to creditors that the COI members had done their best to act in the best interests of creditors and wished to ensure that creditors understood what the COI believed had occurred during the defendant's investigations. 86It was recorded that the members of the COI were "extremely concerned" about the level of remuneration and expenses being incurred by the defendant. The Statement included the following (at [7]): The present position is that Mr Weston has investigated potential claims arising out of the "renounceable rights issue", has filed a statement of claim against various persons, has not served that statement of claim and has not obtained funding to run the case. To date, his remuneration and expenses total approximately $9 million. 87The Statement referred to the history between the COI and the defendant in which the defendant was repeatedly asking the COI to approve his remuneration and expenses in circumstances where the COI claimed it found it extremely difficult to form a view about whether the work that was done was "necessary and/or the amounts charged fair and reasonable". The Statement also recorded that one of the reasons the COI could not form such a view was because the defendant refused to provide the COI with some relevant confidential information because he claimed the COI could not be trusted. 88The Statement included reference to the COI's concerns about the incursion of legal costs and its attempt to avoid that outcome by suggesting a "high level" review of remuneration to which the defendant agreed. It also referred to the fact that Mr Hambrett, who conducted that review, had concluded that he was "not persuaded that the remuneration and legal fees were reasonable for a number of reasons". 89The Statement also recorded that there was a "complete breakdown in the relationship" between the COI and the defendant. It included a claim that it was fair to say that the defendant did not trust the COI with any information concerning what he was doing and the COI had lost faith in the defendant's ability to investigate the RRI proceedings in a "cost effective way and bring it to a satisfactory conclusion". 90The Statement also dealt with the application that the COI had filed in this Court on 13 October 2008 seeking orders for the convening of a general meeting of creditors. It recorded that approximately two days before the hearing the defendant allowed the COI's barristers and solicitors to view the due diligence agreement with a litigation funder on a "strictly confidential basis". The COI's lawyers advised that the proposed litigation funding agreement was such that it would not be unreasonable for the defendant to pursue the due diligence process. The COI also received advice that the terms of the due diligence agreement were reasonable. 91The Statement also recorded that the COI had proposed to defer its application for the meeting until after the litigation funding application was exhausted. However, because the defendant's lawyers had claimed that the deferral of the application may be detrimental to the litigation funding application, the COI agreed to its application being discontinued rather than adjourned "on the clear understanding" that the COI would not be prevented from making the same or similar application in the future. The Statement included the following (at [16]): The legal expenses incurred by the Committee in preparing for and conducting the hearing of its application, plus Mr Weston's application for payment of his fees, was in the amount of ~$260,000. The Committee believes the expenses were properly incurred and were reasonable. It is in the context of the Committee's own legal expenses that it finds the assertion that Mr Weston has spent approximately $1 million dealing with "COI issues" extraordinary. 92The Statement also included responses to the defendant's published allegations of leaking confidential information and conducting "covert" meetings with representatives of the RRI defendants. In respect of the former, the Statement included the following: 19. Mr Weston's Report to Creditors contains allegations that the members of the Committee have breached their duties to One.Tel and its creditors. This is not the first time Mr Weston has said this. 20. It is important to understand that each member of the Committee swore or affirmed an affidavit denying breaches of confidentiality and fiduciary duties which were alleged against them by Mr Weston: (a) In the case of John Deloughery and Gary Phillips, they were not required for cross-examination in relation to this affidavit evidence; (b) in the case of Alex Roth, he was not challenged in cross examination on his sworn evidence; and (c) in the case of Barbara Galloon, while she was asked questions in cross-examination on some aspects of the confidentiality undertakings and the disclosure of confidential information, she gave evidence consistent with her denial of any wrong doing, made no concessions and the Court made no findings on these issues. 93In relation to the allegations of covert meetings with representatives of the RRI defendants, the Statement included the following: 23. Without Mr Weston's knowledge at the time, the Committee met with Mr Paul Lindholm and his legal advisers on a few occasions, including one meeting which involved PBL's General Counsel, Mr Guy Jalland. The Committee would like to outline the context of those meetings: (a) for his own reasons, Mr Weston decided not to engage with Mr Lindholm on the issue of exploring settlement (as per Mr Weston's confidential letter); (b) Mr Lindholm subsequently approached a member of the Committee; (c) Mr Lindholm told the Committee that PBL wanted to talk; (d) the Committee's approach was always that it would need to inform Mr Weston as soon as there was an offer on the table - the Committee knew that it had no power or authority to negotiate; (e) the Committee's meetings with Mr Lindholm, his legal advisers and Mr Jalland did not require Committee members to divulge any confidential information about Mr Weston's activities, and no such information was divulged; (f) the Committee was genuinely concerned that if Mr Weston was told about Mr Lindholm's approach (prior to any offer being received), Mr Weston would terminate all contact and not engage. 24. An offer was received which was confirmed as a genuine offer in about July 2008 by Mr Weston. The Committee does not know what has happened with that offer. 25. The Committee asks creditors, rhetorically: if you were approached in similar circumstances, wouldn't you have been interested to know what offer might be made and possibly be put to creditors? 94The Statement also referred to Barrett J's decision on 25 August 2009; Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 865. That judgment related to an application by the COI to vary an order made in the proceedings commenced in October 2008 in which the COI sought to vary orders in relation to affidavits and evidence being kept confidential. Barrett J's judgment included the following: [8] Another contextual matter is important. It concerns the parties' relationship. The special purpose liquidator has defined functions in the winding up of One.Tel. They are defined by orders of the court. So too does the committee of inspection. Its functions are largely statutory functions, although there is an additional dimension briefly discussed in a judgment of 12 December 2008 (Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290). Each - that is, the special purpose liquidator and the committee of inspection - is obviously bound to pay attention to and promote the interests of the creditors of One.Tel, with the special purpose liquidator's obligations necessarily confined to his designated function. [9] There is no basis whatsoever for suggesting that all communications between the committee and the special purpose liquidator are confidential; nor is there any basis for suggesting that everything occurring within a meeting of the committee of inspection is confidential, any more than it can be said that everything that happens within a board of directors is confidential. [10] The true principle is that persons who, as liquidators or as members of a committee of this kind, obtain information, are duty bound to use and treat that information in a way that promotes, or at least, does not harm the interests of the general body of creditors. The constraint is one of proper use and proper application which may in certain circumstances and as to certain matters mean that confidentiality must be observed. The guiding factor is the interests of the body of creditors. [11] I turn to a third contextual matter. A meeting of One.Tel's creditors is to be held tomorrow. The special purpose liquidator has circulated a report in which he makes criticisms of the committee of inspection. The special purpose liquidator has also seen fit to issue a press release. He says that the committee of inspection has attempted to derail his efforts as special purpose liquidator resulting in substantial costs to creditors. He quantifies these at $1.5 million. He says that confidential information given to the committee of inspection has been "leaked" and the committee has had "covert meetings with representatives of the defendants to my proceedings"; also, that the committee has "on numerous occasions tried to interfere with my work", which leads him to question the committee's motives. ... [26] I would make a particular comment in conclusion. The fact that the special purpose liquidator and the committee of inspection are at loggerheads and have been for a long time is notorious. It is highly desirable that the general body of creditors have as much information as is practicable in relation to the differences existing between the special purpose liquidator and the committee. An expression of opinion by the creditors must carry significant weight with both parties. A meeting of creditors, not necessarily tomorrow's meeting, might also see fit to exercise certain formal powers. [27] The court encourages the body of creditors to absorb the information creditors have already been given and will be given for the purposes of the forthcoming meeting and to give serious thought as to how their own interests may best be promoted and protected in the circumstances of mistrust and friction now existing. 95The AGM was adjourned until 20 October 2009. However on that occasion the only resolution was to further adjourn the meeting to 10 November 2009 to allow the COI and the defendant to agree on the material to be distributed to the creditors. 96Prior to the adjourned date, the Court dealt with the question as to whether the GPLs would be justified in nominating an independent insolvency practitioner to chair the AGM on 10 November 2009: Re Walker and Another (in their capacity as joint liquidators of One.Tel Ltd) (2009) 262 ALR 150; [2009] NSWSC 1172. In answering the question in the affirmative Barrett J observed at [26]: Given the background of mutual and robust criticism of the committee of inspection by the special purpose liquidator and of him by the committee, it is likely that there will be a particular need to ensure that speakers from both "camps" are fairly accommodated and that an even handed approach is taken to ensure that relevant views are expressed and the true will of the meeting is ascertained. This will be particularly so if, as has been foreshadowed, motions such as a motion of no confidence in Mr Weston and a motion for some form of reconstitution of the committee of inspection are entertained by the meeting. 97On 29 October 2009 the GPL circulated the material that had been agreed between the defendant and the COI for distribution to the creditors. That included the defendant's Supplementary Report to Creditors dated 29 October 2009 and an Explanatory Memorandum to Creditors (EM) from the COI. Those documents advised the Creditors that there would be motions for the removal of some members of the COI and a motion of no confidence in the defendant. 98In the defendant's Report dated 29 October 2009 it was recorded that finalisation of the funding process for the RRI proceedings was "currently dependent upon" the delivery of the judgment in ASIC v Rich. It included claims that the Statement that was read at the AGM on 26 August 2009 by Mr Salier was misleading in a number of respects. It also included claims in relation to individual members of the COI. For instance there was a claim that Mr Phillips had "enjoyed a close and long-standing association" with Mr Ariff who had been banned for life from acting as a liquidator, administrator or in a similar position. There was also a claim that Mr Phillips had enjoyed a "close and longer standing relationship with Mr John Star, who is a corporate adviser" to Mr Rich. It then included the claim that Mr Star had long-standing connections with Mr Ariff. It was noted that as recently as 2008 Mr Phillips' business card contained a reference to his email address of Mr Star's firm. The Report included the observation that "Creditors may ask what motivates Mr Phillips' actions as a member of the COI". 99The Report also included the claim that the defendant had "concerns" that Mr Deloughery and Mr Roth "might be using their membership of the COI to further the interests of Mr Rich rather than the interests of the creditors of One.Tel" and that their conduct "gives rise to the view that each might have links to Mr Rich". The defendant recommended that creditors resolve to remove Messrs Phillips, Deloughery and Roth from the COI. 100In addressing the no confidence motion the Report included the following: 13.7 It is important for creditors to appreciate that the COI does not assert that I have breached my duties as SPL, that there exists a conflict of interest or a lack of independence on my part. Instead, the COI makes some general assertions which they claim leads them to the conclusion that they will "rely on the creditors' lack of confidence in [me] as a basis for [my removal]". There is strong court authority to the effect that mere loss of confidence in the liquidator is not a ground for removal. 13.8 The COI are advised by senior lawyers. It is telling that the EM does not, in my view, disclose any proper basis upon which a creditor might successfully apply for my removal. The EM is silent on this issue. Creditors, when considering the no confidence motion, ought to be aware that the prospects of any successful application for my removal, based on the material put forward by the COI, are very poor. 13.9 If a well-resourced creditor, such as Optus, is genuinely determined to make application to the Court for my removal, it can do so, at any time, without the need for a resolution of creditors. If the creditor does so and succeeds, then in the ordinary course, it will be awarded its costs by the Court, without the need for any resolution of creditors. 13.10 On the other hand, if the creditor does so and fails, then in the ordinary course it will be required to meet its own costs and also the liquidator's costs. But creditors should not use a vote of confidence or no confidence as a means to protect it from an adverse costs order if the removal application fails. AGM - 10 November 2009 101The defendant addressed the AGM with the assistance of a Power Point presentation. Under the heading "Topics" the following appeared: - Removal of 3 COI members - COI altering positions - the "flip flops" - COI costs - SPL fees and costs - Funding - SPL proceedings - COI resolutions - Way forward 102The slide on the first topic included the claim that the committee was "not acting in creditors' interests" and the following: - Current unworkable situation cannot continue - Creditors should be represented on their committee by creditors - Messrs Deloughery, Phillips and Roth are not creditors or employees or officers of creditors and appear to represent the interests of Jodee Rich - Mr Phillips' association with Mr Ariff in other administrations and with Mr Rich through his adviser, John Starr - COI confidentiality breaches: "leaks like a sieve" - covert meetings - COI interfering with the SPL Proceedings and exceeding powers - COI conduct has substantially increased SPL's costs 103The Minutes of the AGM record the following: 1. Committee of Inspection In relation to the COI, Mr Weston stated that: - the three COI members (Alex Roth, John Deloughery and Gary Phillips) are not (creditors); - these COI members appear to act on behalf or for the benefit of Mr Jodee Rich; - the COI should be represented by Creditors; - the COI had breached confidentiality by engaging in "convert (sic) meetings" and had otherwise interfered with the conduct of the Special Purpose Liquidation; and - that this interference had substantially increased the costs of the Liquidation. 2. Flip Flops Mr Weston outlined the 'flip flop' position of the COI on a number of matters, including: - from September 2007, the COI had initially wished to remove the General Purpose Liquidators and have the Special Purpose Liquidator conduct all matters related to the Liquidation. - from April 2008, the COI; - urged the Special Purpose Liquidator to serve proceedings; and - did not want the Special Purpose Liquidator to meet with the defendants; - up to May 2009, the COI was approving remuneration of the Special Purpose Liquidator (but not legal fees); - in July 2009 there was a change to the legal fee regime such that the COI no longer had the authority to approve the Special Purpose Liquidator's fees going forward; - there had been allegations of misleading statements in that the COI had alleged that the Special Purpose Liquidator had failed to pursue settlement options; but that this was at odds with the COI's instructions that the Special Purpose Liquidator should not meet with the defendants. 3. Costs of Special Purpose Liquidation In total, the Special Purpose Liquidation has incurred fees and expenses of $8.9 million. This comprised: Solicitors fees: $4.1 million; SPL fees: $2.7 million; and Barristers fees: $2.1 million Mr Weston stated that all fees and expenses had been approved either by the COI or the Court with the exception of May/June - for which approval had not yet been obtained. Mr Weston further stated that ASIC were undertaking a full review of the costs incurred and that he welcomed this review. 4. COI Costs Of the costs incurred, Mr Weston estimated that $1.35 million (15%) were attributed to dealing with the COI (and this did not include the COI's legal costs of $270,000 plus GST that had been paid by One Tel). 5. Litigation Funding Mr Weston, provided the following update on the discussions with the litigation funder (Funder): the Funder was keen to proceed; 95% of the work done to secure funding had been completed; the claim was worth approximately $230 million (which would represent a return of 65 cents in the dollar); and the Special Purpose Liquidator and the Funder were awaiting the outcome of the ASIC vs Rich judgment (which had been reserved for 2 years); whilst the judgment would not affect the ability of the Special Purpose Liquidator to bring the action, the judgment was expected to provide an outline of important principles. 104When the resolutions for the removal of Messrs Phillips, Deloughery and Roth were debated the defendant was asked what the relevance was of Mr Phillips' association with Mr Stuart Ariff and whether there was any evidence that this was relevant to the liquidation. The Minutes record the following: Mr Weston stated that Mr Phillips had been associated with Mr Ariff in the past and that Mr Ariff had recently been banned for life from acting as a Liquidator. Mr Weston stated that there was no specific link to One Tel. 105During the course of the debate in relation to the vote of no confidence in the defendant, Ms Galloon addressed the meeting. The Minutes record the following: Ms Galloon introduced herself as the Commercial Director of Optus, and stated that: she had been a member of the COI since 2004; there was no evidence that any member of the COI acted as a stooge of Jodee Rich; the COI had been united for the past two years regarding the conduct of the Special Purpose Liquidator; the COI has no visibility over the Special Purpose Liquidator's funding options; and Mr Weston opposed the appointment of an independent chairman for the Meeting. 106The minutes noted that when Mr Roth addressed the meeting he also stated that he had "never acted as a stooge of Jodee Rich or anyone else". The Minutes also note: He was disappointed about the misrepresentations that had been made about him and the COI where the COI had always had the best interests of Creditors at heart; and He would be happy to step down from the COI if doing so meant that the Special Purpose Liquidator would disclose further information to the COI. 107Mr Deloughery was noted as having addressed the meeting. The Minutes included that Mr Deloughery stated that: One of the largest leaks of information in relation to the Special Purpose Liquidation was the interview Mr O'Neill gave to the Sydney Morning Herald; No confidential information had been received by the COI, so nothing could have been leaked; and Mr Deloughery stated that whilst he knew Mr Jodee Rich, he had not seen him in over three years. 108Maria Phillips, the General Manager of Group Credit Risk for Optus, was recorded in the Minutes as having addressed the meeting and stated that: Optus has lost confidence in the ability of Mr Weston to act as Special Purpose Liquidator; and that these views were based on substantial dealings that have been held with Mr Weston; The key issues Optus had include: costs incurred of $9 million cannot be justified; funding has not been received and may not be received; and whilst Mr Weston now refers to the delay in finalising funding on the ASIC v Rich judgment, this had not been previously communicated. 109Mr O'Neill also addressed the meeting, observing that the defendant was in a "difficult position" and emphasising that he was "an experienced liquidator of 25 plus years with an unblemished reputation". In addressing the motion of no confidence, Mr O'Neill advised that the courts would "only remove a liquidator for serious misconduct, conflict of interest, lack of independence". 110In respect of each of the resolutions to remove the members of the COI, there was a hung vote with a split between value and number. The chairman declared each of those resolutions as not carried. The resolution of no confidence in the defendant was carried with 15 voting for the resolution (with a value of $126,250,218.02) and one abstention (with the value of $55,397,632.22). 111There was a meeting of the COI on 4 December 2009 at which the defendant sought approval of his remuneration. That meeting was adjourned to 8 December 2009 at which the defendant's remuneration was not approved. 112On 7 December 2009 Ms Laver forwarded an email to the other members of the COI, with a copy to the defendant, seeking more information as to why the defendant considered certain costs should be charged as part of the liquidation. Those costs were the role played by a media adviser, Ms Krueger; the costs spent as a result of the liquidator transferring from Deloitte to Pitcher Partners; costs in relation to an "alleged defamation"; and costs in relation to dealings with the media. 113On 8 December 2009 the defendant's staff forwarded an email to the COI attaching a resolution to consider and, if thought fit, to approve the remuneration of the defendant for the period 1 July 2009 to 31 October 2009 in the amount of $261,135 plus GST. 114On 9 December 2009 Ms Laver sent an email to the defendant and the other COI members advising that she felt compelled to abstain from voting on the resolution attached to the 8 December 2009 email. Ms Laver advised that neither Telstra nor she had proper knowledge of much of the work undertaken by the defendant. In particular Ms Laver advised that she was concerned that the defendant had not put in place measures or controls to contain costs, including legal costs, and to provide a benchmark against which costs could be assessed. She advised that she was not satisfied that all of the items claimed by the defendant were reasonable and necessary. That email set out a number of concerns that Ms Laver said she had in respect of the costs that had been incurred. 115On 11 December 2009 the defendant forwarded a proposed "compromise resolution" and a proposed "alternative resolution" to the members of the COI. The compromise resolution provided for the approval of 90% of the defendant's fees. The alternative resolution provided for approval of 75% of the remuneration. That letter required the COI members to provide the defendant with their votes by 1pm on 14 December 2009. On 14 December 2009 the defendant wrote to the members of the COI advising that he had received no responses from two of the members of the COI but that he had received votes from the other three members. The compromise resolution was not passed. The alternative resolution was passed. 2010 116The defendant made application to the Court in February 2010, amended in March and April 2010, concerning his remuneration. He applied for an order determining his remuneration in the sum of $261,135 plus GST for the period of four months from 1 July 2009 to 31 October 2009 and in the sum of $182,199 plus GST for the period of four months from 1 November 2009 to 28 February 2010. 117After recounting the history of the requests for the approval of his remuneration by the COI in Onefone Australia Pty Ltd and Others v One.Tel Ltd and Others (2010) 78 ACSR 98; [2010] NSWSC 401, Barrett J said: [28] There are, in any event, disturbing features of the process apparently adopted with a view to decision making by "circular resolution"... ... [31] It is no part of the function of a liquidator to prescribe time limits within which members of a committee of inspection must act in relation to decision-making. ... [33] A liquidator is "entitled to receive" only such remuneration as is "fixed". He or she has no right to receive some form of contingent payment on account of remuneration to be fixed; nor does a committee of inspection have any right or power to award any payment on account of future remuneration. ... [37] The special purpose liquidator has been paid $215,436.10 to which he has no legal entitlement. 118It is appropriate to refer separately to the defendant's conduct towards two of the major creditors, Optus and Telstra. Optus 119On 7 April 2009 the defendant and Mr O'Neill met with the Chief Financial Officer of SingTel Optus Pty Limited, Murray King, Ms Galloon, Mr Salier and another Optus in-house lawyer. At this meeting the defendant said he would give consideration to allowing Optus "into the [information] tent" so that Optus could become more comfortable in relation to what was happening with obtaining litigation funding. 120On 3 July 2009 Mr King wrote to the defendant referring to the meeting in April 2009 and advising that he was prompted to write to express Optus' concerns about two aspects of the defendant's ongoing investigation. Those two aspects were identified as the "significant fees" that were being incurred in the defendant's investigation and the "serious lack of information" that was forthcoming in respect of litigation funding. That letter included reference to the background of Optus' involvement in the liquidation and that for the eight years since the collapse of OneTel, a representative of Optus had been on the COI. It also included reference to Optus' admitted claim in the liquidation in the order of $65 million (being just over 19% of admitted claims) and that Optus was keen to maximise its return in a prudent and timely manner. That letter included the following: The significant ongoing fees You have held the position of special purpose liquidator for approximately 5 ½ years and according to the article in The Sydney Morning Herald on 29 May 2009, you have been paid close to $9M out of the assets of One.Tel, inclusive of your legal fees. If the GPL had been able to pay that money to creditors then Optus would have received a dividend of approximately $1.65M. I am aware that the costs of your special purpose liquidation continue to run at a considerable monthly rate. ... An email report from the GPL on 9 March 2009 confirms that whilst the cash balance as at March 2009 stands at $18M, the estimated "free cash" specified by the GPL (before taking into account the accrued and future costs and expenses of your special purpose liquidation) is approximately $7.65M. Optus' concern is simply stated: the amount of costs and expenses that has been incurred is very worrying, both because as a gross number it is very large, and also because "free cash" funds are quickly disappearing. Our concern is only heightened by the Court's very recent decision on the costs approval process (I intended no criticism of the Court's decision, but simply make the observation that the checks and balances which previously existed in the process are largely non-existent now). A very serious question therefore arises: have we not arrived (or are we shortly arriving) at a point where incurring further costs cannot be justified? Lack of information re litigation funding Optus is very concerned that the level of information we are receiving in respect of the litigation, in particular the funding issue, is very limited. This is linked to the previous issue - as a major creditor we cannot allow significant fees to be incurred in circumstances where there is so little information available. We need to know, for example: How are the funding discussions proceedings? When are they expected to conclude? Are all avenues being explored to minimise the time being taken to secure funding? Optus understands that you have had concerns about protecting the confidential information, however, Optus does not understand why this should prevent Optus, in its capacity as one of the largest creditors of One.Tel, from being privy to information on this key issue. One issue which we raised at our meeting in April and which I understand has been raised with you at the most recent committee meeting, is the opportunity for Optus to become more closely involved with the funding issues. Could you please provide your promised written response on this issue? Without any further information, we are becoming increasingly concerned that funding is not going to be obtained. In conclusion, given the amount of money incurred by your firm and your advisers to date, it is important that you respond on an urgent basis and provide assurances that the money spent to date has not been wasted, that there is a clear strategy which you are pursuing and that your strategy is the best available in all the circumstances to achieve a valuable return for creditors. 121On 17 July 2009 Mr King wrote again to the defendant referring to his letter of 3 July 2009, to which he had not received a "substantive" response, and seeking a response to the matters raised in that letter. Mr King referred to the AGM to be held in late August 2009 and advised that it was important for Optus to receive a response to the earlier letter so that it could consider whether it wished to have any matters placed on the agenda for the AGM. 122On 24 July 2009 the defendant responded to Mr King's letter. He pointed out that although the orders appointing him were made in December 2003 he did not commence his substantive investigations until after 26 April 2006. He also advised Mr King that all of his remuneration and legal expenses that had been paid to that date had either been approved or not objected to by the COI or approved by the Court without any deduction. The defendant then focused on the email of 9 March 2009 from the GPLs to which Mr King had referred in his letter of 3 July 2009. After observing that although the email had not been sent to Mr King he had clearly had access to it. The defendant claimed that the information in the email was confidential and then continued: 2.3 This confidential information, in the hands of the defendants to the SPL Proceedings, including the Packer and Murdoch interests, may prejudice my administration, specifically the SPL Proceedings. I do not want any of the defendants to learn of the amount of "free cash" which might be available to me for the purpose of funding the SPL Proceedings. Certain of these well-resourced defendants would treat such information as a target to exhaust my resources. I trust as a major creditor you understand my concern. 2.4 I can only presume that access to the email was given to you by Ms Galloon, either directly or indirectly. If this is the case, this disclosure would be another breach of a confidentiality undertaking signed by Ms Galloon. 123On the topic of lack of information in relation to litigation funding, the defendant once again referred to the information being "highly confidential". The letter included the following: 4.4 In normal circumstances, a liquidator would entrust the members of the COI with such confidential information. Even so, a liquidator would normally limit the disclosure of such confidential information to the COI, and would not normally disclose such information to creditors generally, no matter the size of their admitted claim. 4.5 As I explained at our meeting, my administration is not a normal liquidation, for the reason that there have been serious breaches of confidentiality undertakings by members of the COI, such that I reached the view some time ago that the COI could not be entrusted with further confidential information and should not be involved in any considerations which might put at risk my administration, the SPL Proceedings and their funding. ... 4.9 The fact that the COI was prepared to engage with Mr Lindholm and meet secretly with him and Mr Jalland of PBL to discuss settlement of my proceedings, directly contrary to my stated position, and then not fully disclose such meetings to me until compelled to do so pursuant to Court process during the Court hearing despite repeated requests, despite repeated requests, is further justification for my entire lack of trust in the COI. 124The defendant then referred to the fact that a representative from Optus had been on the COI since the beginning of the liquidation and the fact that Optus (and Telstra) had voted against a proposal at the AGM of creditors directing the GPLs to approach the Court for the appointment of a special purpose liquidator. The defendant also observed that by reason of the resistance of Optus and Telstra to that resolution it "thereby failed". The letter continued in paragraph 5.1: (f) These matters raise squarely the issue of whether Optus's views in relation to my administration, which have been firmly expressed for some time, are designed to further the best interests of its commercial relationship with PBL, as distinct from the best interests of all creditors of One.Tel. The conduct of Optus described below highlights this conflict issue and the concerns I have. (g) This conflict of interest, between (on the one hand) Optus's own commercial interests and (on the other hand) the interests of all creditors generally, is precisely the situation discussed by Mr Powers in the attached article under the caption "Conflict of interest". I urge you to read the article. 125The defendant then went on to recount a telephone call between Mr King's predecessor, Ms Low, to the defendant's colleague at Deloitte who was responsible for the Optus audit, in which Ms Low said that the defendant had "gone ballistic" and rejected a settlement offer that had been made directly to the COI. The defendant observed that such a communication disclosed that confidential and privileged information was being provided to Ms Low, contrary to confidentiality undertakings signed by all the COI members, including Ms Galloon and Mr Salier. The defendant also observed that it was a further illustration of his concern that the Optus representatives attending the COI meetings are "untroubled to share that information with Optus". The defendant then claimed that his concern was heightened having regard to the conflict of interest that Optus suffered by reason of its commercial relationship with PBL. 126The defendant also advised Mr King that he considered the approach to his Deloitte partner to be "improper" because it was "clearly designed to exert commercial pressure" on him in the performance of his duties. The defendant complained that Optus had failed to disclose to him its commercial relationship with PBL and claimed that, until he observed Ms Galloon's cross-examination on 4 November 2008 in proceedings before this Court, he could not understand why Optus was going "to such lengths to exert pressure" on him to act in a way that the COI was purporting to direct him which he did not consider to be in the best interests of creditors. 127The defendant concluded (in paragraph 6.5 of the letter) that because there appeared to be an actual or perceived conflict of interest between Optus' own commercial interests and the interests of the creditors generally, he requested Mr King to inform him of the nature and extent of the relationship with PBL and the "details of all dealings and communications between" Optus and "the interests associated with the Packer family including PBL (now CMH), CPH and Crown" concerning the One.Tel administration, the RRI proceedings and the COI's activities. The defendant requested Mr King to provide him with that information within 14 days together with an undertaking not to disclose to any person or make use of any confidential information which he had concerning the defendant's administration. 128On 28 August 2009 Mr King responded to the defendant's letter of 24 July in terms that included the following: At the outset I want to record my great concern at the way in which your special purpose liquidation is progressing. Whilst I accept that I am observing these matters from a distance, the following facts trouble me considerably: 1. $9 million in fees have been spent on your special purpose liquidation to date and creditors still await service of the anticipated proceedings; 2. the committee of inspection (COI) continues to be denied access to confidential funding information; 3. fresh allegations are being made against Optus employees that by sharing with information that is derived from public sources that those employees have breached confidentiality obligations; 4. as a reason for denying Optus closer access to confidential funding information - information which could go a long way to allaying my current concerns - you have raised the issue of my predecessor's approaches to Deloitte; 5. you are now asserting that Optus might have some actual or perceived conflict of interest because of an existing commercial relationship between Optus and PBL. I do not propose to go into detail about each of the matters raised in your letter. You should not assume that I agree with your position if I have not responded directly to comments or statements made in your letter. GPL's email of 9 March 2009 I fail to understand how the information contained in Mr Sherman's 9 March email is confidential information. I say this for two reasons: 1. Mr Sherman has published each year his report to creditors and they remain publicly available on his firm's website. In section 9 of the GPL's 2008 Report to Creditors he mentioned the "net funds available for distribution to creditors" to be approximately $9M. In his 2009 Report to Creditors, Mr Sherman has once again (at section 7) indicated that "net funds available" are approximately $9M. 2. Mr Sherman has periodically provided details of the amount of "free cash" to the COI and has never indicated when doing so that the figures are confidential and are not able to be shared with someone such as me. ... I have already denied above the actual or perceived conflict of interest referred to in paragraph 6.5 of your letter, and so there is no proper basis to request the information you have sought in that paragraph. Suffice to say, Optus has a similar commercial relationship with PBL as it does with any large corporate entity with whom it deals as either a supplier to Optus, or a customer of Optus. I can also assure you that Optus is in no way supportive of the way in which PBL and other parties whom you are investigating conducted themselves in connection with the cancellation of the renounceable rights issue. At all times Optus' primary interest as a creditor of One.Tel has been, and remains, securing the maximum return for creditors. Optus has no in-principle objection to PBL being sued and damages being claimed from them. 129It is apparent that after the defendant received Mr King's letter of 28 August 2009, he commenced an investigation into the relationship between Optus and PBL. On 2 November 2009 the defendant responded to Mr King's letter of 28 August 2009 and, in particular, to the claim that Optus had a similar commercial relationship with PBL as it did with other large corporate entities who were either suppliers or customers. The defendant's letter included the following: Subsequent to your response, I viewed publicly available information concerning the commercial relationship between Optus and PBL. In particular, I reviewed publicly available information concerning the commercial relationship between Optus and Foxtel. I refer to Optus media releases dated 5 March 2002 and 13 November 2002. The latter media release discloses that the content supply arrangements referred to in these media releases resulted in an EBITDA benefit to Optus of up to $30 million per year and that the sale of satellite capacity will generate revenue to Optus of around $40 million per year. I understand the term of this contents supply arrangement, due to expire in 2010, has been extended, and that the present financial benefits to Optus well exceed those described in the 2002 media release. I do not understand how Optus can describe its relationship with its commercial partners in Foxtel (including PBL and News) as similar to the relationships Optus has with large corporate entities with whom it deals as a supplier or customer. To my understanding, the Optus commercial relationship with its Foxtel commercial partners is a special and singular relationship, particularly bearing in mind the fact that Foxtel dominates the Australian Pay TV industry, a substantial user of the Optus satellite services. I am disappointed that Optus has failed to disclose the true nature and extent of its commercial relationship with PBL and News, via its commercial relationship with Foxtel. I repeat my information request contained in paragraph 6.5 of my letter dated 24 July 2009. In the absent of full and proper disclosure, I consider the position of Optus as a creditor of One.Tel to be a conflicted position, by reason of its commercial relationship with PBL/News/Foxtel. 130On 18 November 2009 Mr King responded to the defendant's letter of 2 November 2009 advising him that his assertion that the relationship was a "special and singular relationship" was incorrect. That letter included the following: In any event, the fact that Optus has commercial agreements in place with Foxtel which may be significant in commercial value is, in my view, beside the point. In my view, what is relevant, for the purposes of whether or not Optus has a " conflicted position", is whether Optus regards itself as in any way compromised by those separate and completely unrelated commercial agreements in its determination to achieve, on the one hand, the best possible financial outcome for Optus, and, on the other, for the larger body of creditors, from the SPL Proceedings. I can confirm that Optus certainly does not, in any way, regard itself as so compromised. 131On 27 November 2009, Mr King wrote to the defendant advising that Optus considered it would be in the best interests of the conduct of the special purpose liquidation for him to be removed and that Mr Parbery be appointed as his replacement. Mr King observed that such an outcome would be in the best interests of One.Tel's creditors, subject to the defendant having a reasonable opportunity to complete his litigation funding negotiations. On 23 December 2009 the defendant advised Mr King that he did not expect the litigation funding to be finalised before February 2010. 132In his affidavit in these proceedings sworn on 19 March 2010 Mr King explained: 16. In 2002, Optus entered into a resale agreement with Foxtel. This agreement received significant coverage in the media. Through this agreement, Optus has had dealings with PBL and News Limited. Optus has never sought to suppress this relationship. 17. Along with Foxtel, Optus has significant relationships with many major public companies in Australia including its primary competitor, Telstra Corporation and other significant corporations. 18. There was, in my view, no proper basis for Mr Weston to suggest that Optus' commercial relationships with other major public companies in any way conflicts with Optus' participation in the liquidation of One.Tel and in particular, the support offered by Optus to Barbara Galloon in her capacity as a member of the Committee. 133Mr King agreed in cross-examination that in May 2010 he became aware that funding had successfully been secured and approval had been given to the defendant to enter into a funding agreement (tr 53). He agreed that obtaining funding was a matter that was a significant step forward in the litigation that would significantly enhance the prospect of any settlement, compared to a situation in which the administration was unfunded (tr 53). That cross-examination included the following (tr 61): Q. You received a further letter from Mr Weston on 2 November querying your description of the relationship between Optus and Foxtel which included as participants both PBL and News Corporations as being in effect an ordinary commercial relationship and he suggested it was closer to a special and singular relationship. It is true to say, isn't it, that the Foxtel relationship is the vehicle by which Optus conducts the principle part of its content business to subscribers? A. For our pay TV operations, yes, that's correct. Q. Insofar as it platforms off the facilities of Foxtel that is to say its cable and satellite facilities and the like, gives you access to a large and relatively unique facility? A. There is a whole subcommercial arrangement for the provision of content on Foxtel. Q. But in any event on page 156 you assured Mr Weston that Optus did not consider itself to be compromised, in your last sentence of that letter? A. Correct. Q. And so it was a matter I take it for Mr Weston to form a judgment as to whether or not he should accept your view or form his own view on that matter? A. We stated our position, correct. 134In re-examination (tr 76) Mr King said that the shareholders in Foxtel were Telstra, PBL and News and that Telstra's share was around 50%. Telstra 135Telstra Corporation Limited (Telstra) was represented on the COI from 24 July 2001 to 31 May 2005. In late July or early August 2009 the defendant contacted Sue Laver, the General Counsel, Dispute Resolution, of Telstra and requested that Telstra consider seeking representation on the COI. The defendant advised Ms Laver that he had "no faith" in the current COI members "acting in the interest of creditors". The defendant advised that he was encouraging the major creditors to consider joining the COI at the AGM on 26 August 2009. 136Ms Laver attended the adjourned AGM on 10 November 2009 at which she was appointed as a member of the COI. It was Telstra's intention, through Ms Laver, to vote against the proposed resolution of no confidence in the defendant. However during the course of the meeting Ms Laver formed the view that it would be extremely difficult and perhaps impossible for the COI to work effectively with the defendant, regardless of whether the composition of the COI was changed. Ms Laver also formed the view that this would effectively result in the overall return to creditors of One.Tel being adversely affected. Ms Laver's affidavit evidence was that the tone used by the defendant in addressing the creditors was "aggressive and antagonistic" and that in her view the language used by him in his presentation to creditors was inflammatory, particularly insofar as it related to the COI. Ms Laver said that she was particularly concerned by the defendant's references to "flip flops" by the COI. Ms Laver also gave affidavit evidence that there were significant differences between the accounts given by the defendant and by the members of the COI in relation to events leading up to the AGM. 137Ms Laver was cross-examined about this evidence and agreed that there was a "lot of history" from 2008 in relation to what had transpired between the defendant and the COI concerning the question of the settlement of the RRI proceedings (tr 83-84). She gave the following evidence (tr 84): Q. Is this right, that you considered that you were unable to form a view about where the respective merits of the positions lay as to the complaints each was making about the other? A. At what point in time? Q. At the time of the general meeting? A. At the beginning of the general meeting, yes. 138In re-examination Ms Laver gave the following evidence (tr 104-105): Q. "At the time of the general meeting" and you said, "At the beginning of the general meeting, yes". Do you recall giving that answer? A. Yes. Q. Did you have a view at the end of the general meeting? A. Yes, I did have a view. Q. What was your view by the end of the general meeting? A. I thought that the - it was an unworkable relationship between the committee and the special purpose liquidator. I had listened to the presentations from the special purpose liquidator and to some of the members of the committee and I formed the view that they really couldn't work together. Q. What was the basis for the view that you formed? What was your reasoning? A. I listened to the presentations from the - a number of people from Optus and that explained a number of the prior issues between the committee and the special purpose liquidator and gave a bit more context than I had heard before. I listened to the special purpose liquidator's presentation. I thought the language was unnecessarily inflammatory and antagonistic and I couldn't see how with that composition for both the liquidator and the committee it could function effectively in the administration of the special purpose liquidation going forward. Q. So what view did you form as to what you should do in those circumstances? A. I had gone into the meeting with the view of voting against the resolution to remove the special purpose liquidator. In the middle of the meeting, I - I changed the view that I had formed on the basis of the presentations given. HER HONOUR: Q. You mean the no confidence? A. Yes. SHEAHAN: Q. So what conclusion did you reach about that motion? A. That we would vote - Telstra would vote in favour - sorry, I am getting confused with the negatives. That Telstra would vote in favour of the motion of no confidence in the special purpose liquidator. 139There was a meeting between Ms Laver, a colleague of Ms Laver's from Telstra, the defendant and Mr O'Neill in Sydney on 16 November 2009. The purpose of the meeting was for Ms Laver to explain why Telstra had abandoned its original opposition in relation to the resolution of no confidence in the defendant. Ms Laver informed the defendant that she was concerned that if he did not voluntarily stand down, considerable fees would be spent on an application to remove him. The defendant advised Ms Laver that he would not be standing down and that the recent judgments of the Court vindicated his conduct. The judgments to which the defendant referred in this conversation with Ms Laver probably included the judgment of Barrett J delivered that day in respect of the defendant's renewed application concerning his remuneration: Onefone Australia Pty Limited and Others v One.Tel Ltd (in liq) and Others; Re Appln Weston (2009) 74 ACSR 716; [2009] NSWSC 1231. In that judgment Barrett J referred to his earlier judgment (to which reference has been made earlier: Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 822) at a time that the defendant was contending that the machinery for approval of his remuneration had broken down and proved unworkable. In his earlier judgment Barrett J had not accepted that position and required interaction and debate between the defendant and the COI to take place (at [12]). His Honour had said that if the COI requested further information or explanation, the defendant "ordinarily ought to provide that" (at [8]). It was in this judgment that his Honour made the observations about the COI that are referred to in paragraph [94] above. 140After Ms Laver's appointment to the COI, there were numerous communications between Mr O'Neill and Ms Laver in respect of the appropriate wording of the confidentiality undertaking that the defendant required Ms Laver to sign before she could receive any confidential information. Ms Laver expressed some concern with the wording having regard to her role as General Counsel. The discussions in relation to the confidentiality undertaking had not been concluded by the time of the planned COI meeting on 4 December 2009 at which the defendant was seeking approval of his remuneration. A compromise was reached for the purpose of attending the COI meetings in December 2009 referred to earlier, whereby Ms Laver was able to view the defendant's remuneration but not the legal fees. 141On 11 March 2010 Ms Laver resigned from the COI. In doing so she advised that having attended the COI meetings in December 2009 and having spent considerable time trying unsuccessfully to agree on a sensible confidentiality regime, Telstra did not consider that it could participate meaningfully as a member of the COI. ASIC Review 142It is apparent that a meeting took place on 4 September 2009 between the defendant and Mr O'Neill and representatives of ASIC. The defendant was advised at that meeting that ASIC wished to review the defendant's remuneration and expenses including legal costs incurred in the special purpose liquidation. On 11 September 2009 ASIC wrote to the defendant confirming these matters and requesting the provision of various documents by 22 September 2009. Between that date and May 2010 the defendant and his lawyers provided the material as requested by ASIC, subject to some documents being held back by reason of claims in respect of privilege and/or confidentiality. 143On 18 January 2010 Mr O'Neill wrote to ASIC in relation to a meeting that took place on 14 December 2009. That letter included the following: As stated at our meeting held on 14 December 2009, and as previously stated by the SPL in his Supplementary Report to Creditors dated 29 October 2009 (paragraph 13.7) and by the writer at the adjourned AGM held on 10 November 2009, a mere loss of confidence in the liquidator is not of itself a ground for removal. Such a factor must be accompanied by cogent evidence of serious misconduct on the part of the liquidator, breach of duty by a liquidator or conflict of interest on the part of a liquidator, of which there is none. 144On 12 May 2010 ASIC wrote to the defendant advising that its review to that date had highlighted a "number of concerns" in relation to the adequacy of information and/or quality of disclosure made to the COI; whether work performed by the defendant and his staff was reasonable and necessary; and whether legal expenses that he had incurred had been reasonable and necessary. ASIC then gave a number of specific examples in respect of which it sought a response from the defendant. It also referred to the defendant's legal expenses and requested an explanation from the defendant in relation to the steps that he had taken to monitor and satisfy himself as to the reasonableness and necessity of his legal costs. 145On 27 May 2010 the defendant advised ASIC that he had informed the COI of the "project work" being performed in relation to the RRI defendants' claims that they had been "profoundly misled". He informed ASIC that with the "informed support of the COI" he proceeded with his investigations into the anticipated "profoundly misled" defence and advised that before serving the pleading he "needed to be satisfied that the asserted "profoundly misled" defence was unlikely to succeed". The defendant also advised ASIC that the investigations that he carried out to assess the merits of the asserted "profoundly misled" defence were also conducted for the purpose of providing external litigation funders (both in Australia and elsewhere) with a comprehensive brief of materials concerning the merits of the claims in the RRI proceedings. He advised that he was "firmly of the view" that funding would not be available "unless and until" he had "as fully and properly investigated the merits of this asserted defence" as he could on the materials available. 146The defendant also provided a detailed response to each of the examples that ASIC claimed gave it "concern". He advised that he had taken steps to monitor his legal costs and to satisfy himself that the costs were reasonable and necessary. In this regard he said that he had a "close involvement" in the work performed by his "legal team"; that he had "regular strategy meetings and conference telephone calls" with his legal team and that he regularly questioned his legal team as to the necessity of work to be carried out; that he carefully reviewed the detailed monthly tax invoices; and that he required his solicitors to provide him with a bullet point summary of the work performed during the applicable month which he carefully reviewed. 147On 20 July 2010 the defendant wrote to ASIC seeking some indication as to when ASIC expected its review to conclude. On 5 August 2010 ASIC advised the defendant that having regard to the commencement of these proceedings it was not able to advise when its review was likely to conclude. The parties have approached this case on the basis that ASIC will take no further action until the outcome of these proceedings. 148During the course of the correspondence between ASIC and the defendant, Mr O'Neill advised ASIC on 18 January 2010 that the defendant considered that the "no confidence" motion passed at the AGM on 10 November 2009 was misguided. He also advised that the defendant considered that Optus was in a "conflicted position" by reason of its substantial commercial relationship with PBL and News via its contractual relationships in the Foxtel partnership. He also advised that the defendant regarded Telstra as being in a "conflicted position" as the 50% shareholder in the Foxtel partnership. In this regard Mr O'Neill advised that the defendant continued to support the ongoing participation of Optus and Telstra representatives on the COI but was mindful of the need to recognise and manage the allegedly conflicted position of Optus and Telstra and their nominees on the COI. Applicable Principles 149It is not in dispute in these proceedings that the status of the voluntary winding up was not changed by the fact that the Court appointed the defendant as special purpose liquidator. There is a distinction between a Court ordered winding up where the liquidator acts an officer of the Court, and a voluntary winding up that is "purely a statutory process" where the liquidator is not regarded as an officer of the Court: Clutha Ltd (in liq) v Millar and Others (No 5) (2003) 43 ACSR 295 at 300; [2002] NSWSC 833 at [18]. The distinction is important for reasons including whether costs orders may be made against liquidators: Clutha Ltd (in liq) v Millar and Others (No 5) at [12]-[16]. 150In this case the GPLs are gathering in the assets in the voluntary winding up pursuant to the statutory process. The defendant was appointed by the Court in that liquidation to identify whether particular assets existed (that is, rights of action in respect of the RRI), and if so, to gather those assets in by the process of litigation. This was the Court's exercise of a power to appoint an additional liquidator in a voluntary winding up for a specific purpose in the "purely statutory process" rather than in a winding up by the Court: In the matter of Cobar Mines Pty Ltd (in liquidation); Hall as Liquidator of Cobar Mines Pty Ltd (Unreported, Supreme Court of New South Wales, Santow J, 22 June 1998). There is no doubt that the defendant's powers and functions in the voluntary winding up were defined by Court orders. However these orders were necessary to identify the matters in the voluntary liquidation that were to be done only by the defendant, and not the potentially conflicted general purpose liquidator. 151In a court appointed liquidation (or a liquidation by the Court), a liquidator, as an officer of the Court, is a representative of the Court, entrusted with the reputation of the Court. It is expected that the liquidator will discharge the relevant functions and powers with impartiality and proper dispatch: Commissioner for Corporate Affairs v Peter William Harvey [1980] VR 669. Albeit that it may be inappropriate to refer to the defendant as "an officer of the Court" in this particular liquidation, it is expected that he would discharge his relevant functions and powers with impartiality and proper dispatch. 152The defendant has both statutory obligations and obligations to comply with the orders of the Court requiring him to perform certain functions and act in a particular manner, for example, to make recommendations to the COI. It is expected that the defendant will maintain an "even and impartial hand" in his dealings with those interested in the liquidation: In re Contract Corporation (1871-72) LR 7 Ch App 207 ('Gooch's Case') at 211. It is expected that he will be independent in the sense that he will deal impartially and objectively in the interests of the creditors: Tracker Software International Inc v Smith (1997) 24 ACSR 644 at 646. 153The winding up of the company In the matter of Cobar Mines Pty Ltd (in liquidation); Hall as Liquidator of Cobar Mines Pty Ltd sparked deep local community interest. Santow J observed that in those circumstances it was "especially important" for the liquidator to "attain the confidence of the employee creditors and other unsecured creditors and to keep these creditors regularly informed of developments" (at [8]). The liquidation of One.Tel also sparked community interest and the attainment of the confidence of the creditors is also important. 154Section 503 of the Act provides that "The Court may, on cause shown, remove a liquidator and appoint another liquidator". It has not been suggested in these proceedings that s 503 does not apply to the defendant. 155Section 503 confers a broad discretion on the Court. However, it is necessary that there be "some ground for removal, and the ground must be established by evidence": Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) (2003) 21 ACLC 1330; [2003] NSWSC 496 at [58]. The burden of showing cause for removal rests with the applicant: Re Keypak Homecare Ltd [1987] BCLC 409; (1987) 3 BCC 558. It is not necessary to prove misconduct or unfitness on the part of the liquidator in order to justify removal: In re Marseilles Extension Railway and Land Co (1867) LR 4 Eq 692; Northbuild Construction Pty Ltd v ACN 103 753 484 Pty Ltd (2008) 26 ACLC 893; [2008] QSC 182. 156A liquidator may be removed from office if the Court is satisfied that the removal would be in the best interests of the liquidation: In re Adam Eyton Ltd; Ex parte Charlesworth (1887) 36 Ch D 299; Re Giant Resources Ltd [1991] 1 Qd R 107 at 115; City & Suburban Pty Ltd and Others v Smith (as liquidator of Conpac (Aust) Pty Ltd (in liq)) and Another (1998) 28 ACSR 328 at 336 (and the cases cited therein); McAuliffe v Lidia Perin Memorial Hospital Pty Ltd (2006) 58 ACSR 666 at 671-672; [2006] ACTSC 88; Apple Computer Australia Pty Ltd v Wiley (2003) 46 ACSR 729 at 740; [2003] NSWSC 719 at [37]; Independent Cement and Lime Pty Ltd v Brick and Block Co Ltd (in liq) (recs and mgrs apptd) and Others (2010) 267 ALR 613 at 620; [2010] FCA 352 at [47]; Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) (2003) 21 ACLC 1330; [2003] NSWSC 496 at [58]. In Re Keypak Homecare Ltd Millett J (as his Lordship then was) observed, at 564, that "it may be appropriate to remove a liquidator even though nothing can be said against him, either personally or in his conduct of the liquidation". 157The legislation under consideration in In re Adam Eyton Ltd; Ex parte Charlesworth provided for removal on "due cause shewn" (at 303). In a passage approved by the Full Court of the Supreme Court of Queensland in Re Obie Pty Ltd (in liq) (No 3) (1984) 8 ACLR 774 at 780, Bowen LJ said at 306: In order to define 'due cause shewn' you must look wider afield, and see what is the purpose for which the liquidator is appointed. To my mind...the due cause is to be measured by reference to the real, substantial, honest interests of the liquidation, and to the purpose for which the liquidator is appointed. 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. 158Cotton LJ said at 303-304: [I]f the Court is satisfied on the evidence before them that it is against the interest of the liquidation, by which I mean all those who are interested in the company being liquidated, that a particular person should be made liquidator, then the Court has power to remove the present liquidator, and of course then to appoint some other person in his place. 159Long Innes J, as his Honour was then, was "content to be guided" by the principles expounded in these passages in determining an application to remove a liquidator in In re George A Bond & Co Ltd (1932) 32 SR (NSW) 301 at 310. 160In City & Suburban Pty Ltd v Smith, Merkel J observed at 336 (excluding citations): 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. 161Similarly in Re Biposo Pty Ltd; Condon v Rodgers (1995) 120 FLR 399 Young J, as his Honour then was, observed (at 403 and 405) that the "end question" is whether it would be "to the general advantage of the persons interested in the winding up to remove the liquidators" and that the Court must determine this issue "by looking at the overall picture". However the Court "must take care that it does not allow itself to become an instrument of those who seek merely for their own purposes to disrupt the due course of the liquidation" Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) (2000) 18 ACLC 13; [1999] NSWSC 1046 at [22]. The wishes of creditors may be taken into account, but they are not decisive: Re Giant Resources Ltd at 115; see also Adsett v Berlouis and Others (1992) 37 FCR 201 at 213; (1992) 109 ALR 100, in which the position of a trustee in bankruptcy was considered. 162A loss of confidence in the liquidator based on reasonable grounds by the creditors may justify removal: cf Re Edennote Ltd; Tottenham Hotspur plc and others v Ryman and another [1996] 2 BCLC 389, in which the Court held that no adequate grounds had been shown for a reasonable loss of confidence. Similarly, an objectively justifiable loss of confidence by a committee of inspection "is of greater significance and relevance": City & Suburban Pty Ltd v Smith at 338. In City & Suburban, Merkel J observed at 338: In the present case the acrimony which has arisen between the liquidator and the committee of inspection has not come about as a result of any unreasonable conduct on the part of the committee. Rather, it has come about because the liquidator has carried out his tasks in respect of the liquidation with some insensitivity to the angst of the members of the committee of inspection..." 163In that case, the committee of inspection's loss of confidence was based on the liquidator's "general disregard" for the function of the committee under the Act and failure to consult with the committee on certain issues. Merkel J did not find that the liquidator was under "a legal duty to consult with or seek the approval of the committee". However his Honour concluded that it was "imprudent" for the liquidator not to do so in the circumstances: at 338-339. 164In AMP Music Box Enterprises Ltd v Hoffman [2002] BCC 996, Neuberger J (as his Lordship then was) considered the power under s 180(2) of the Insolvency Act 1986 (UK) to remove a liquidator "on cause shown" and said at 1001-1002: On the other hand, if a liquidator has been generally effective and honest, the court must think carefully before deciding to remove him and replace him. It should not be seen to be easy to remove a liquidator merely because it can be shown that in one, or possibly more than one, respect his conduct has fallen short of ideal. So to hold would encourage applications under s 108(2) by creditors who have not had their preferred liquidator appointed, or who are for some other reason disgruntled. Once a liquidation has been conducted for a time, no doubt there can almost always be criticism of the conduct, in the sense that one can identify things that could have been done better, or things that could have been done earlier. It is all too easy for an insolvency practitioner, who has not been involved in a particular liquidation, to say, with the benefit of the wisdom of hindsight, how he could have done better. It would plainly be undesirable to encourage an application to remove a liquidator on such grounds. It would mean that any liquidator who was appointed, in circumstances where there was support for another possible liquidator, would spend much of his time looking over his shoulder, and there would be a risk of the court being flooded with applications of this sort. Further, the court has to bear in mind that in almost any case where it orders a liquidator to stand down, and replaces him with another liquidator, there will be undesirable consequences in terms of costs and in terms of delay. 165It has been said that the "onus of proof will not be easy to discharge if the liquidator has become well acquainted with the business and affairs of the company, or the process of winding up has almost reached completion": Asche J in Aboriginal & Torres Strait Island Commission v Jurnkurakurr Aboriginal Resource Centre Aboriginal Corporation (in liq) (1992) 10 ACSR 121 citing the passage in the 3rd edition of McPherson's Law of Company Liquidation at 227-228. The length of time that a liquidator has been in office and the nature of the liquidator's specific obligations obviously need to be taken into account in determining whether in all the circumstances an order for removal is justified or appropriate. Grounds for removal 166The plaintiffs contend that there has been a "prolonged and worsening course of conduct" by the defendant that justifies an order for his removal as SPL. The first area of conduct relied upon by the plaintiffs in this regard includes the defendant's remuneration and expenses, both as to the high level generally and the claims for remuneration in respect of work not properly incurred in the liquidation. It also includes the defendant's conduct in seeking approval of his remuneration by circular resolution (Remuneration and Expenses). 167The second area of conduct relied upon by the plaintiffs in support of their application is in respect of the defendant's relationship with the COI. This includes the defendant's conduct in relation to the strategy for settlement of the RRI proceedings (which necessarily includes consideration of the delay in serving the pleading) and his response to the COI's disclosure of its dealings with Mr Lindholm and the settlement offer proffered by Mr Lindholm. It also includes the defendant's refusals of requests by the COI and his subsequent opposition to the COI's applications to the Court for the convening of a meeting of creditors, the variation of confidentiality restrictions and the appointment of an independent person to chair the AGM on 10 November 2009. It also includes the defendant's alleged misleading statements in the Report to Creditors dated 3 August 2009, the Media Release dated 7 August 2009, the presentation to the adjourned AGM on 10 November 2009 and the defendant's attempts to influence the COI's composition (Relationship with the COI). 168The plaintiffs also relied on the COI's loss of confidence and the creditors' loss of confidence in the defendant and the defendant's alleged loss of objectivity as warranting his removal (Loss of Confidence). Remuneration and Expenses 169It is not in issue that up to 31 May 2011 the defendant incurred more than $14 million in remuneration and expenses, approximately $8 million of which was incurred after the pleading was filed and approximately $5 million of which was incurred in the two-year period 2009 to 2011. The plaintiffs contend that this quantum is "extraordinarily and unjustifiably high" given that the central purpose of the defendant's appointment was to investigate possible causes of action surrounding the cancellation of the RRI and to commence the RRI proceedings. It is not in dispute that the investigation, formulation and funding of the RRI proceedings was complex and that a large amount of work was required to investigate them and commence the proceedings. 170The defendant emphasised that (except for those amounts that were disallowed, referred to below) all of the remuneration and/or expenses have either been approved or not objected to by the COI or approved by the Court. The defendant also emphasised that the plaintiffs have led no evidence, such as from an assessor or liquidator, to suggest that the remuneration and expenses incurred by the defendant are unreasonable or unjustified in their proper context, that is, relative to the scope and complexity of the special purpose liquidation and the RRI proceedings. The defendant submitted that the plaintiffs' complaint that the defendant has led no direct evidence that explains or justifies the ostensibly vast quantum of his fees and legal expenses is disingenuous having regard to the fact that the plaintiffs bear the onus of proof and have called no evidence to prove that the remuneration and expenses are unreasonable or unjustifiable. 171The plaintiffs have not suggested that the defendant's legal fees were inappropriate for the work actually done. That was a concession made in Court on 13 February 2012. That is not to say that the plaintiffs concede that the legal expenses were justified and relevant to the liquidation. Rather the concession should be understood as an acceptance that if the work is justified as work in the course of the liquidation and necessary for the liquidation, it is not suggested that the fees charged were inappropriate. However the plaintiffs maintain that there was work carried out that was not justified in the special purpose liquidation in respect of which legal expenses were incurred and in respect of which there was no justification for those fees being charged in the liquidation. 172The plaintiffs submitted that the amounts that have been charged are so large as to have attracted the scepticism of the COI, the attention of ASIC and Mr Hambrett's opinion that he could not approve the amounts the subject of his high-level review. Certainly an issue has arisen in the ASIC review as to whether the defendant has put in place effective measures to control expenditure. Indeed the COI tried to impose a $50,000 per month restriction on the defendant's incursion of additional fees and expenses in mid-2008. If that level of fees and expenses had been adhered to it could only have amounted to $600,000 per anum. The incursion of $5 million in fees and expenses in two years certainly raises a real issue as to whether there are proper controls on expenditure in place. It is not apt to answer this issue by simply claiming that the Court or the COI have approved the fees and expenses. The more recent exposure of the need for more information about the fees and expenses in this process (referred to below) will no doubt form part of ASIC's review. 173The defendant submitted that no weight should be given to Mr Hambrett's opinion in his 2008 high-level review because at the time that he conducted the review he lacked independence and, in any event, the remuneration and expenses the subject of his review were subsequently approved by the Court. The defendant emphasised that the plaintiffs do not seek to "go behind" the various approvals by the Court or the COI and submitted that in those circumstances the complaint as to the "overall" amount of the remuneration and legal expenses cannot be a ground for removal of the liquidator. 174It must be remembered that the process by which the remuneration and legal costs were approved by the Court (or the COI) was very much dependent upon the claims by the defendant that his fees were for work that was performed in conformity with the Court orders and the certification by the defendant that the legal costs were properly incurred and payable in the special purpose liquidation. 175When the COI failed to approve the defendant's remuneration in late 2009, the defendant approached the Court for the determination of the quantification of his remuneration for the period 1 July 2009 to 31 October 2009 and for the period 1 November 2009 to 28 February 2010. This was the first such application in which ASIC sought, and was granted leave, to intervene: Onefone Australia Pty Ltd and Others v One.Tel Ltd and Others (2010) 80 ACSR 11; [2010] NSWSC 1120 at [4]. Barrett J made observations about the information that had been provided by the defendant in support of his application. In one example, his Honour referred to the material that was provided to the Court in respect of the fees claimed for 6 November 2009 and said: [59] The understanding one can gain from the 6 November 2009 entries is very limited. On the surface, each entry seems to have something to do with a special purpose liquidator's administration, but there is no way of knowing any of three important things: first, whether the charges, as to time spent and (sic) reasonable charges; second, what was actually done during the recorded time; and third, whether the time spent relates to progressing of the special purpose liquidator's administration or protection of his personal position. 176His Honour was not satisfied that the evidence and explanations placed before the Court by the defendant were such as to permit a "clear view to be formed of the work" the defendant performed in the periods in question and "the relevance of that work to the special purpose liquidator's administration" (at [77]). In those circumstances his Honour required the defendant to "re-present" the material and to "reformulate" his claim in respect of the relevant periods (at [79]). 177There is some force in the defendant's contention that at the time Mr Hambrett expressed his opinion he was not independent. Mr Hambrett provided his opinion on 3 July 2008, within a week of having met with the defendant and Mr O'Neill to disclose the COI's dealings with Mr Lindholm. Mr Hambrett was acting as solicitor for the COI from April 2008 in relation to Mr Lindholm's approach. I am not satisfied that no weight should be attributed to Mr Hambrett's opinion. However I am satisfied that the weight that would have otherwise been placed on his opinion is diminished by these circumstances. 178The fact that the defendant failed to provide sufficient detail to the COI for them to approve his remuneration was recognized by the defendant as a "difficulty" for the COI and was a difficulty with which he said he sympathised. However, the defendant was of the view that the COI had caused this difficulty by dealing with Mr Lindholm without his approval or knowledge, thus destroying his confidence in the COI with the consequence that he refused to publish what he regarded as confidential information to the members of the COI. However, there was no need to withhold from the Court relevant information about the work that he had performed in respect of which he sought approval for his remuneration. Nonetheless that is what occurred. It was not until ASIC intervened in the defendant's application that the Court was taken to the need for more information from the defendant about the work and the remuneration. The fact that the defendant did not provide the detail necessary for the Court to understand the work and/or the relevance of the work to the special purpose liquidation gives credence to the COI's complaint that the defendant failed to provide it with relevant information. 179There is no doubt that the level of the remuneration and expenses is, prima facie, extraordinarily high. It is true that there has been no analysis in this case of the whole of that remuneration and/or expenses. The only detailed analysis that has been performed by the plaintiffs is in respect of the legal expenses for the months of August, September and October 2009 referred to below. It is understandable that the plaintiffs would be deeply concerned at the level of these fees particularly in the light of the dismissal of the RRI proceedings, irrespective of the outcome of the application for special leave to appeal to the High Court. However I agree with the defendant's submission that the fact that the figure is very high is not, on its own, a basis for removal of the defendant. However it is a matter to be taken into account with all the other circumstances of this case. 180The plaintiffs contend that during the course of the special purpose liquidation the defendant has incurred and sought to recover remuneration and legal expenses for tasks and activities that do not fall within the scope of his powers or functions. These tasks and activities include: investigations into the associations of members of the COI; investigations into the relationship between Optus and certain potential defendants to the RRI proceedings, particularly News and PBL; compliance by the defendant with ASIC's investigation into the level of his remuneration and expenses; briefings and attendances by the defendant with his firm's media adviser; and discussions between the defendant and members of the press. All of these charges were disallowed: Onefone Australia Pty Ltd and Others v One.Tel Ltd and Others (2010) 80 ACSR 11; [2010] NSWSC 1120. The defendant was unsuccessful in his application for leave to appeal from the judgment in which these charges were disallowed: Application of Weston [2011] NSWCA 250. 181The defendant submitted that the disallowance of these claims "is a matter of record and is not in issue in the proceedings". It was submitted that the plaintiffs' claim that the defendant had "incurred and sought to charge" to the liquidation the disallowed items was of "no consequence" because the "disallowed items were subsequently removed from the claim and no payment was made" to the defendant. The only reason that there is "no consequence", as the defendant puts it, is that three members of the COI contended before the Court that certain activities for which the defendant sought remuneration and fees should not properly be regarded as part of his functions: Onefone Australia Pty Ltd and Others v One.Tel Ltd and Others (2010) 80 ACSR 11; [2010] NSWSC 1120 at [32]. Until that time the defendant had maintained his claim that they were properly payable. The submission that it was of "no consequence" was a most unimpressive submission, in particular having regard to the fact that the defendant sought to overturn the disallowance on appeal in which he maintained an entitlement to these fees. It was submitted that it could not be contended that the defendant did not have the "power" to seek leave to appeal. Indeed it was not so contended by the plaintiffs. The point is that the defendant apparently did not understand the inappropriateness of these claims in the first place. 182The plaintiffs contend that the defendant also incurred legal expenses in relation to the very same categories of work in respect of which the defendant's remuneration was disallowed and has not sought to reconcile the legal expenses incurred by him in respect of those activities. The fees in respect of those categories of work were certified by the defendant as having been "properly incurred and payable" in performing his functions required to be performed in conformity with the orders of the Court. 183The plaintiffs also contend that notwithstanding that the remuneration claimed by the defendant was disallowed, he has not taken any steps to quantify or repay the remuneration received by him in relation to such similar categories of activities "in prior periods". Properly understood, the plaintiffs' submission is that the defendant has, on previous occasions, charged to the liquidation fees in respect of activities in the same categories of activities disallowed by the Court. The defendant submitted that the plaintiffs did not particularise any such remuneration or lead any direct evidence on that issue. However, the plaintiffs emphasise that the defendant should have been at pains to ensure that this reconciliation should have occurred promptly; either after Barrett J's judgment at first instance or certainly immediately after the unsuccessful application for leave to appeal. 184I am satisfied that the defendant's submissions demonstrate his failure to recognise the seriousness of the situation in which he has claimed an entitlement to receive fees that he was not entitled to receive and certified that legal expenses were properly incurred and payable when they were not. After the finding that the fees were disallowed, or at the latest, after the application for leave to appeal from that disallowance was dismissed, every effort should have been made by the defendant to review the certifications that had been given to the Court to ensure that any expenses in a similar category were adjusted. 185It is apparent that the defendant has taken legal advice for almost every step in his administration. Notwithstanding his absence from the witness box in these proceedings, I am satisfied that the defendant was concerned to take advice about what he should do in this complex liquidation. However some of the costs that have been incurred have been questioned in these proceedings. The plaintiffs relied upon tax invoices from the defendant's solicitors to the defendant for the periods 1 August 2009 - 31 August 2009; 1 September 2009 - 30 September 2009; and 1 October 2009 - 30 October 2009 (Ex A). In those three months alone $46,410 of costs were incurred by the solicitors on investigations into the associations of the members of the COI. 186One aspect of investigation in this category referred to earlier was the relationships of members of the COI with Mr Ariff, in particular, the relationship between Mr Phillips and Mr Ariff. The solicitors charged for perusing articles in the newspaper in relation to Mr Ariff and Mr Phillips. They also charged fees for attending the Supreme Court to observe the hearing of the proceedings against Mr Ariff. They also charged for obtaining a copy of the judgment and perusing it, making application for access to the documents in the case and for conferring in relation to all of those matters. The amount charged by the solicitors for this investigation alone from 12 August 2009 to 31 August 2009 was $11,069.50. 187In Onefone Australia Pty Ltd and Others v One.Tel Ltd and Others (2010) 80 ACSR 11; [2010] NSWSC 1120 Barrett J made the following observations in relation to the defendant's investigation of the relationship between Mr Phillips and Mr Ariff and the defendant's investigation of the relationship between Optus and the RRI defendants: [48] In this particular administration, the court has specified certain of the special purpose liquidator's functions in a way that requires him to consult with the committee of inspection. There is thus a non-statutory overlay. In addition, the court has, from time to time, expressed a wish or hope that the special purpose liquidator and the committee of inspection might work constructively together. Such a committee may be a source of advice. On occasion, a liquidator may find it useful to be able to resort to a sounding-board at his or her option. [49] The wish or hope that there might be a constructive relationship in this case has not been realised. That being so, it is open to the special purpose liquidator, if he chooses to do so, virtually to ignore the committee except in relation to specific matters on which the court has directed consultation (a requirement, it may be noted, that entails nothing more than consultation) and in relation to the matter of remuneration which is something that will certainly arise for consideration from time to time and in which the committee has a clear statutory role to play. That course of minimal contact has, in fact, always been available to the special purpose liquidator. [50] How was it, then, any part of the function of the special purpose liquidator in this administration to spend time delving into associations of members of the committee of inspection? Let it be assumed that Mr Phillips is or was "a business associate" (whatever that means) of Stuart Ariff (who, in August 2009, was banned for life from acting as a liquidator) and that Singtel Optus, an employee of which is a member of the committee of inspection, has or had "substantial commercial relationships" (whatever that means) with two of the defendants in the proceedings at the suit of One.Tel for which a special purpose liquidator has responsibility. What follows? [51] The answer, to my mind, is not obviously such as to make it part of the special purpose liquidator's incidental function (it is certainly not part of his specifically conferred functions) to spend remunerated time enquiring into those matters, given that the committee's functions lie within the very limited compass I have mentioned. ... And, bearing in mind that the court has, to a limited extent, required consultation by the special purpose liquidator with the committee, there is no apparent reason why he should see it as within his functions to seek to influence the composition of the body with which the court has required him to consult. 188The defendant's functions are defined in the orders appointing him as special purpose liquidator. He was required to "consider and make recommendations to the creditors" as to whether any rights of action existed in relation to the cancellation of the RRI, the decision to appoint voluntary administrators, and whether any action should be commenced against any person. The orders required him to recommend to the COI whether such an action should be commenced and if the COI, by majority, accepted that recommendation (or did not oppose it) the defendant was required to commence the proceedings on behalf of One.Tel. The orders also required him to perform such work as he considered necessary to advise the COI and make final recommendations to the COI concerning the RRI proceedings. Irrespective of the extent of the defendant's contact and/or engagement with its members, the COI was an entity that was integral to the functions and powers of the defendant in the liquidation. The defendant was to investigate the matters so ordered by the Court and not to investigate the COI to which he was to make recommendations. The investigations that he pursued in this regard and the fees and expenses that he claimed in respect of them demonstrate a serious lack of judgment. 189On 11 December 2009 the defendant emailed the members of the COI and presented alternative circular resolutions in respect of the approval of his remuneration for the period 1 July 2009 to 31 October 2009. Such conduct was described as having "disturbing features", in particular the fixing of a deadline by which the members of the COI were required to submit their votes. Such conduct was described as "no part of the function of a liquidator". Indeed the Court concluded that the defendant had been paid $215,436.10 "to which he has no legal entitlement": Onefone Australia Pty Ltd and Others v One.Tel Limited and Others (2010) 78 ACSR 98; [2010] NSWSC 401 at [37]. The plaintiffs submitted that notwithstanding all of these findings made on 7 May 2010, the defendant did not repay that amount until 28 January 2011. It was submitted that this should have occurred more promptly. I agree. 190There was a further sum of $242,707.40 (excluding GST) in remuneration purportedly fixed by earlier circular resolutions that also had to be adjusted. The plaintiffs contended that the defendant did not make this adjustment of his own accord but did so only after complaint was made. The plaintiffs submitted that it should not have been necessary for the complaint to be made in this regard to prompt the defendant into action. I agree. Relationship with the COI 191The plaintiffs contend that the defendant adopted a strategy under which he would not attempt to negotiate a settlement of the RRI proceedings with any of the RRI defendants until he had secured litigation funding and served the pleading on the RRI defendants. The plaintiffs contend that this strategy shut the members of the COI out from the exercise of procuring litigation funding and attempting to settle the RRI proceedings, to the detriment of each process. The plaintiffs submitted that when the defendant first initiated settlement discussions with some of the RRI defendants in approximately mid-2008 at the urging of the COI (following receipt of the offer from Mr Lindholm to pay $17million to settle the proceedings), the negotiations were ultimately unfruitful. The plaintiffs contend that the defendant failed to implement any sensible or reasonable settlement discussions with the RRI defendants. 192As I have said earlier the defendant wished to wait until he had secured litigation funding before he proceeded to negotiate a settlement with the RRI defendants. Irrespective of whether that forensic judgment was justifiable, the fact of the matter is that the defendant held a firm view, probably on legal advice, that the most effective time to negotiate a settlement was when the defendants were, as he put it, "at risk". His thinking in relation to that aspect of the matter was that the well resourced RRI defendants would not regard themselves as being "at risk" if the litigation was unfunded. Whereas if the litigation had a funder behind it, the RRI defendants would regard themselves as being at risk of a lengthy and complex trial and would be more amenable to settlement. 193However the focus of the plaintiffs' submissions was that the defendant's position in failing to pursue settlement discussions was unreasonable because of the effluxion of time. It was submitted that the further away in time negotiations are from the relevant events, the more difficult it is to broker a settlement agreement. The plaintiffs also submitted that the defendant's position was unreasonable not only because of the very large amounts of fees and costs incurred to date but also the costs that were likely to be incurred in prosecuting the claim at trial. It was submitted that this combination has adverse implications for creditor recovery because it would now require a multi-million dollar settlement simply to cover costs to date, let alone accommodating any contribution to the funder (whatever that may be). 194The defendant tried to make clear to the COI that he did not wish to pursue settlement discussions either through Mr Rich or through Mr Lindholm. Notwithstanding that the members of the COI were clearly on notice that the defendant was concerned that any settlement discussions should not be pursued through Mr Lindholm, they proceeded to do just that. I have no doubt that the members of the COI were motivated to do what was in the best interest of the creditors, exemplified in part by their retention of a senior lawyer to assist them in this regard. However, by the time this approach occurred, there was obvious tension between the COI and the defendant that could only have been exacerbated by pursuing these discussions without notice to the defendant. 195The period during which the members of the COI conducted themselves in this fashion through their solicitor, Mr Hambrett, was a relatively short period in the life of this special purpose liquidation. The approach by Mr Lindholm was in March 2008. Mr Hambrett's letter to Mr Lindholm was in April 2008 and the meeting with the defendant and his solicitor at which the process was disclosed was in June 2008. Although the period during which this conduct occurred was relatively short, the ramifications of the conduct were to the detriment of not only the relationship between the defendant and the COI, but to the creditors generally. It was after this conduct that the defendant's attitude to the COI became entrenched and it seems to me that his judgment in respect of the way forward was compromised. This is reflected in the language he adopted in his Report to Creditors dated 3 August 2009 and in the Media Release that he published and posted on his firm's website. It is also reflected in the presentation he gave to the AGM on 10 November 2009. 196The defendant attacked the members of the COI in his Report to Creditors dated 3 August 2009. He made broad-brush allegations of "serious leaks of confidential information" without particularising what the confidential information was and to whom it was allegedly leaked. There did not appear to be any reason for sensitivity by this stage because the defendant was impliedly alleging that any confidentiality had been lost when the members of the COI disclosed such information to third parties in breach of their obligations. When the members of the COI sought to defend themselves from his attack by making an application to the Court to be freed from the constraints of confidentiality, the defendant opposed that application. When they then sought to defend themselves by issuing a media release on 6 August 2009, the defendant issued a Media Release on 7 August 2009 in which he again attacked the members of the COI. He maintained the broad-brush allegations, this time claiming that the COI had made attempts to "derail" and to "interfere" with his work and alleging breaches of fiduciary duties without any particularisation. The defendant also claimed in the Media Release that "all work" conducted by him had been "at the direction of the Court". This seems to have been an attempt to justify his conduct by giving it the imprimatur of the Court. The reasonable reader of this Media Release would assume that the defendant intended to convey that all of the members of the COI had conducted themselves in serious breach of their obligations and could not be trusted. 197Further evidence of the compromise of the defendant's judgment is his correspondence with Mr King. Mr King's correspondence was quite professional and very reasonable. However it is apparent that rather than indicate to Mr King that he would not be admitting Optus into the information tent as the parties had discussed, the defendant embarked upon an attack on Mr King for an alleged failure to disclose a relationship between Optus and the RRI defendants. The defendant adopted an inappropriate adversarial approach to Mr King demanding that he produce documents evidencing relationships and discussions over the years. 198The defendant contended that the settlement of the RRI proceedings is a matter for him. It was submitted that the process is highly strategic and highly subjective and that decisions in this regard are attendant with risk. It was further submitted that this is why hindsight is extremely dangerous as a basis for assessing conduct undertaken in a state of uncertainty and where reasonable minds may well differ. This submission has force. It is very important to be very cautious in making judgments with the benefit and luxury of hindsight. There is no doubt that this was a complex process. 199The COI members urged the defendant to serve the pleading years, or certainly many months, before it was served. Had the defendant taken the guidance from the COI at that time he may not have found himself with the outcome of the RRI proceedings being dismissed. However, he believed he had reasonable grounds to resist the guidance of the COI in this regard. He believed that he needed to have funding and insurance cover for an adverse costs order in place before the RRI defendants considered themselves to be "at risk". 200The defendant gave evidence in the proceedings before Ward J in which the RRI proceedings were dismissed. Her Honour outlined the various reasons given by the defendant for the need for the extensions of time within which to serve the pleading: Weston (in his capacity as special purpose liquidator of One.Tel Ltd (in liq)) and Another v Publishing and Broadcasting Ltd (now known as Consolidated Media Holdings Ltd) and Others (2011) 83 ACSR 206; [2011] NSWSC 433 at [279]-[456]. Ward J noted that the defendant accepted that the "sole reason" he was not prepared to serve the pleading in April 2009 was that funding was not "locked in", although he acknowledged that he may have had enough funds to "commence running the proceedings" (at [383]). The defendant's affidavit evidence in those proceedings was that he was of the view, certainly at the time of the application in April 2009, that the "prospects of success" of the proceedings were "high" and that it was in the "best interests of creditors of One.Tel for the litigation to be pursued" (at [376]). The defendant was still of that view in November 2009 (at [403]). 201Ward J concluded that the defendant's "deliberate decision" in September 2009 to pursue a funding option that required awaiting the outcome of the ASIC v Rich proceedings rather than an alternative option that did not require such delay was a "significant factor" that pointed against the granting of the extension in November 2009 (at [417]). Her Honour concluded that this choice meant that the defendant "had made it impossible to progress the proceedings diligently at that point" (at [424]). Her Honour also concluded that the defendant took a "calculated risk" of waiting to see if a more "cost-effective" funding arrangement could be procured after the judgment in ASIC v Rich was handed down (at [444]). 202The defendant apparently claimed that he believed that there was a "measure of acquiescence" from the RRI defendants in delaying the service of the pleading. Ward J did not accept that there was a reasonable basis for that belief (at [446]). Her Honour concluded that any inference that such acquiescence was present could no longer have existed by 2009 and that the defendant paid "little, if any, regard" to the "necessity to prosecute the proceedings with due expedition" (at [447] and [480]). I should say that her Honour observed that this may be explained by the defendant's belief that the RRI defendants were content to await the outcome of the ASIC v Rich proceedings but concluded that such a belief was "unfounded" (at [480]). 203The evidence relating to exactly what the defendant did in respect of a settlement strategy is far from clear. It is obvious that the COI's conduct in dealing with Mr Lindholm caused the defendant a great deal of anxiety. He was very concerned that his administration might be compromised. From the moment he was informed that the COI and Mr Hambrett had been dealing with Mr Lindholm and that an offer had been made, an atmosphere of deep distrust arose not only in respect of the members of the COI but also in respect of the companies they represented. It is true that the defendant instructed Mr Cussen to assess the bona fides of the offer that was made by Mr Lindholm, however once that process was concluded it appears that the defendant decided on a strategy that no further steps would be taken to try to settle the proceedings at least until the pleading was served. That strategy depended upon the defendant's view about the need for funding. The defendant also held the view that he would only have "'one shot'" at settling the RRI proceedings. However it has not been explained in these proceedings with any clarity why the defendant would be so constrained. 204The fact that the RRI proceedings have been dismissed needs to be viewed with caution. It is important to look at the defendant's conduct along the way rather than to work backwards from the dismissal. There is no doubt that the defendant believed that his strategy of not serving the pleading until he had funding and insurance in place was the better one. He believed he was acting in the best interests of the creditors. The fact that his strategy resulted in the dismissal of the RRI proceedings does not affect his belief that he was acting in the best interests of the creditors. The defendant could have served the pleading in the RRI proceedings earlier than he did. His reasons for not serving it earlier based on certain beliefs, including beliefs about the attitudes of the RRI defendants, were found to be unjustified and were errors of judgment with serious consequences, irrespective of the outcome of the application for special leave to appeal to the High Court. 205The plaintiffs allege that the defendant unreasonably opposed and vigorously defended a number of requests and applications by the COI. The first was the application made by the COI in October 2008, seeking orders that a general meeting of creditors be convened. That was the application referred to earlier in this judgment that was ultimately not proceeded with after the COI's legal representatives were given confidential access to the due diligence agreement. 206The second was the application made by the members of the COI in August 2009, to have the confidentiality orders made in October 2008 varied to enable them to respond to the allegations made against them by the defendant in the 3 August 2009 Report to Creditors and the Media Release dated 7 August 2009. The members of the COI were successful in having the confidentiality orders varied so as to enable them to deal with some of the allegations made against them by the defendant. By the time this application was made, it had been over 12 months since the defendant had been advised of the dealings with Mr Lindholm. The COI was represented by solicitors and counsel and it is obvious that the members of the COI were concerned not to breach any confidentiality orders in publishing material to defend themselves against the allegations made by the defendant that they were interfering with his work, trying to derail him in his work and committing breaches of fiduciary duty. It is of real concern that the defendant did not take a more conciliatory approach to this application rather than run up further costs in the liquidation. Notwithstanding the luxury of hindsight, it must have been obvious and if it was not it should have been, that the members of the COI needed to be placed in a position so that they could fairly defend themselves from these most serious allegations. 207The third was an application made by the GPLs in about September 2009 under s 511 of the Act seeking directions, inter alia, in appointing an independent person to chair so much of the adjourned 2009 AGM as related to the special purpose liquidation. This application was successful: Re Walker and Another (in their capacity as joint liquidators of One.Tel Ltd) (2009) 262 ALR 150; [2009] NSWSC 1172, per Barrett J at [39]. 208It has been suggested by the plaintiffs that one reason why the defendant opposed this appointment may have been so that he would have the casting vote. That may be so. I do not know. I am satisfied that the defendant's opposition to this appointment demonstrates a lack of appreciation of the seriousness of the situation in which he had been placed, in many respects by reason of his own lack of judgment in publishing the Media Release. The defendant was justified in being upset or even appalled by the conduct of the members of the COI in dealing with Mr Lindholm without his knowledge, in circumstances where he had made it very clear that Mr Lindholm should not be used as an intermediary. I regard the members of the COI's dealings with Mr Lindholm as misguided and lacking in good judgment. 209However this conduct needed to be viewed in circumstances where millions of dollars had been expended, where the events the subject of the proposed litigation had occurred seven years previously (and by the time of the AGM, eight years previously), and where the creditors were hoping to avoid further millions of dollars being expended. However the defendant did not seem capable of putting the lack of judgment in the members of the COI aside in his further dealings with them. This became an impediment to the maintenance of any objectivity, resulting in his serious error of judgment in publishing the Media Release and behaving in an intensely adversarial manner not only to the members of the COI but also to the creditors. This was far from being in the best interests of the liquidation as a whole. Indeed it resulted in an "unworkable" situation. 210Irrespective of his legal entitlement to oppose the application, it would have been far better for the defendant to agree to the appointment of an independent person to chair the adjourned AGM, particularly where he had issued the Media Release, proposed the removal of three members of the COI, and was on notice of a motion of no confidence in relation to his administration. 211The plaintiffs also contend that the defendant adopted an onerous and unreasonable approach toward the members of the COI, with his insistence that much of the material provided by him to them be kept confidential. He required each member of the COI to provide him with a written confidentiality undertaking and has recorded all COI meetings since 2008. It was submitted that despite such undertakings having been executed, the members of the COI continued to receive negligible information relating to matters of the funding and settlement of the RRI proceedings. It is submitted that the paucity of information has hindered the ability of members of the COI to perform their functions in assisting the defendant, in particular, to counsel, warn and advise him in respect of the conduct of the RRI proceedings. 212The defendant has, on several occasions, alleged both privately and publicly that the members of the COI have disclosed confidential information in breach of their confidentiality undertakings. The defendant has maintained these allegations notwithstanding that each member of the COI swore an affidavit denying breaches of confidentiality and fiduciary duties in proceedings before this Court in 2008. 213The defendant has relied upon these alleged breaches to restrict the information available to members of the COI and Mr Salier. His insistence on confidentiality has extended to seeking to preclude Ms Laver, while a member of the COI appointed to represent the interests of Telstra, from discussing any confidential information with Telstra due to its commercial relationship with Foxtel. Similarly, the defendant instructed Mr King of Optus to keep certain matters confidential and has alleged that Mr King's receipt of information disclosed a breach of confidence. 214I am satisfied that the COI's dealings with Mr Lindholm without notice to the defendant, was the catalyst for the ultimate breakdown in the relationship. As I have said, I have no doubt that the members of the COI were motivated to achieve a result and assist the defendant to achieve a result that might be acceptable to all creditors and avoid further costs in the litigation. It was wrong-headed for the COI to have dealt directly with Mr Lindholm. The members of the COI well knew that the defendant had a particular penchant for the maintenance of confidentiality. The COI had no control over Mr Lindholm and it was not possible for them to monitor what representations he was making to the proposed RRI defendants about his role or relationship with either the defendant or the COI. This was a cocktail for potential disaster. As it turned out, with the reasonably prompt disclosure to the defendant, no obvious damage was done. However the defendant harboured doubt about that and was not able to regard the COI's conduct with proportionality. The failure to do so resulted in the intensification of the defendant's distrust of the COI in every aspect of his administration, including the highly inappropriate publication of the Media Release. Loss of Confidence 215The evidence relied upon by the plaintiffs included the evidence of Mr King (Optus), Gary Alan Phillips (representing a former director of One.Tel), Ms Galloon (Optus), Mr Salier (Optus), Ms Laver (Telstra), Benjamin Kumar Sharma (Roadhound Electronics Pty Ltd) and David Sieu Huy Lam (Cisco Systems Capital (Australia) Pty Ltd). Each of these witnesses claimed inter alia to have lost confidence in the defendant. Each was cross-examined. In circumstances where the defendant decided not to give evidence in these proceedings, the cross-examiner was somewhat constrained. However, the general thrust of the cross-examination was to establish the reasonableness of the defendant's conduct and to challenge the bases of the claims for the witnesses' lack of confidence in the defendant. 216The plaintiffs contend that the defendant's conduct in investigating the relationships between the members of the COI and others and the relationships between some of the creditors and the RRI defendants justifies the loss of confidence in the defendant. The defendant spent time and money researching the relationship between some of the members of the COI and Mr Rich. It is apparent that the defendant had formed the view that Mr Deloughery was effectively doing Mr Rich's bidding, although there was no evidence as to what it was that Mr Deloughery was alleged to be trying to achieve for Mr Rich. 217The members of the COI felt that they had to defend themselves at the AGM against the allegation that they were the "stooges" of Mr Rich. Indeed, in cross-examination Ms Galloon gave evidence that she had no reason to believe that Messrs Roth, Deloughery or Phillips were "stooges" of Mr Rich. She agreed that she accepted as truthful their denials of any "relationship or engagement" by Mr Rich (tr 210-213). The defendant relied upon a number of tax invoices that Mr Deloughery forwarded to Mr Star, an adviser to Mr Rich. Those invoices described Mr Deloughery's services as including "Accounting and Administrative Services" in connection with the liquidation of One.Tel including arranging proxies for the AGM and a "follow up report" to creditors following the AGM. The defendant also relied upon a document apparently prepared by Mr Deloughery that includes references in February and March 2008 to "telephone calls J Rich" (Ex 5). This was, of course, at around the time that the COI was dealing with Mr Lindholm and pursuing the prospect of settlement negotiations. 218The defendant relied upon this material to suggest that his suspicions that there was a relationship between at least one of the members of the COI and Mr Rich were justified. It is obvious that Mr Deloughery was in communication with Mr Rich and was apparently paid for some services that may have included his work on the COI. It appears that he had some relationship with Mr Rich through Mr Star and although his claim at the 2009 AGM that he had not seen Mr Rich for three years might have been accurate, he had certainly spoken to Mr Rich on the telephone a number of times within that period. However that does not establish that Mr Deloughery was infecting the processes of the COI by reason of his communications with Mr Rich, notwithstanding that Mr Rich was attempting to obtain at least $2 million in the proposed settlement. 219Barrett J provided some guidance in relation to the approach the defendant had been adopting in relation to alleged breaches of confidentiality in Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 865 extracted at paragraph [94] above. Notwithstanding this guidance, the defendant maintained his attack on the members of the COI. Accepting that the defendant was justified in his criticism of the COI for approaching Mr Lindholm without his knowledge and in the face of a request not to do so, the continuation of the defendant's claims against the members of the COI seem to me to be out of all proportion to what had occurred. This lack of proportionality led the defendant into the erroneous course of investigating members of the COI and also investigating the relationship between creditors and the RRI defendants. There was no justification for spending hours on these investigations. The nature of the relationship between Optus and PBL through Foxtel was apparently in the public domain. Mr King described it quite candidly in his correspondence. However it appears that the defendant thought that it was of some relevance to his administration to spend time and money on investigating this relationship. A far better course would have been to accept that the relationship existed, either as disclosed by Mr King or in some other form, and proceed from that premise in whatever steps he took in the liquidation. It may be that if the COI had suggested a particular settlement should occur, the defendant could have taken into account that one or other creditor represented by the members of the COI might be propounding a particular settlement for their own commercial comfort and/or advantage. Ultimately the defendant would have an obligation to achieve a settlement in the best interests of the creditors as a whole. The fact that one or other creditor might have a direct or indirect commercial relationship with one or more of the RRI defendants that they may wish to continue, notwithstanding the RRI proceedings, is but a factor to be taken into account in considering whether any proposed settlement may be in the best interests of the creditors as a whole. 220The language used by the defendant in his presentation at the AGM on 10 November 2009 was insulting to the members of the COI. The use of the term "flip flops" is quite demeaning of professional people attempting to assist as best they could with the process of the special purpose liquidation. By this time the defendant had already besmirched the reputations of the members of the COI by making allegations that they had tried to derail his work and had breached their fiduciary obligations. Obviously a liquidator must perform his duties robustly and with independence. However the defendant's conduct, in particular between August 2009 and November 2009, in his attacks on the COI demonstrates that he wished to damage the standing of the members of the COI to persuade the general body of creditors that some of the members of the COI should be removed. His attacks in this regard seem also to have been made in support of his resistance to the motion of no confidence. These claims failed to persuade the creditors that they should remove the members of the COI. They also failed to convince the creditors not to support the motion of no confidence. In my view the evidence of Ms Laver was very balanced and impressive. The change in approach to the motion of no confidence was as a direct result of the perceived inflammatory language used by the defendant. I am satisfied that such a change was justified in all the circumstances. 221Mr Sharma's memory of the location of a meeting with the defendant and Mr O'Neill seemed to be erroneous and there was some uncertainty in relation to a business arrangement that he had for the delivery of $6 million worth of handsets. It was suggested to him in cross-examination that he informed the defendant and Mr O'Neill that the contract for the handsets came from Optus and that it was just before the 2009 AGM in circumstances where he had not done business with Optus prior to that time. Mr Sharma denied this conversation. He also denied the suggestion that Mr Salier had telephoned him to solicit his vote in support of the no confidence motion at the 2009 AGM. In this regard it should be said that Mr Salier was not cross-examined to suggest that he had sought to solicit Mr Sharma's vote. Neither the defendant nor Mr O'Neill gave evidence and, in these circumstances, irrespective of what Mr Sharma might have said to the defendant or Mr O'Neill, I am not persuaded that Mr Sharma's evidence in relation to his lack of confidence in the defendant should not be accepted. When pressed in cross-examination about his attitude to the Court approving the defendant's remuneration he gave the following evidence (tr 178): Q. You don't accept that the court is able to assess the proper remuneration of the special purpose liquidator at all? A. No, it's not that. I was just frustrated that the people that are paying the bill, the creditors are not able to do something like dismiss the special purpose liquidator. That was my frustration. In the commercial world you can hire and fire people. Here, you cannot do that. You just have to live with it. A third party will decide whether you can fire that person or not, in the meantime you just bleed and pay and shut up. 222I am not satisfied that the veracity of the evidence of the plaintiffs' witnesses has been successfully challenged in cross-examination. The irresistible conclusion from the evidence is that the creditors and the members of the COI have lost confidence in the defendant. The manner in which the defendant attacked the members of the COI, when I have no doubt that they were seeking to discharge their obligations honestly and diligently, provides justifiable grounds for them to have no confidence that the defendant can bring a dispassionate mind to bear on matters of importance in the liquidation and the manner in which limited resources should be used. 223The defendant submitted that a mere loss of confidence, without more, does not justify removal of a liquidator. In this regard the defendant relied upon what Warren J (as her Honour then was) said in Multi-Core Aerators Limited v Dye and Rennie [1999] VSC 205 at [48] as follows: However, in my view it is not sufficient that a court remove a liquidator merely because of levels or feeling and rancour between parties especially where the hostility has at all times emanated from the party seeking the removal of a liquidator. To do so would provide a creditor with an opportunity to manipulate the liquidation of the company. 224I regard those observations as inapt to the circumstances of this case. There were certainly levels of feeling and rancour between these parties. However the "hostility" in this case, evidenced by the defendant's intensely adversarial approach to both the COI and to the creditors, emanated from him. Failure to give evidence 225The plaintiffs submitted that in contrast to their officers giving evidence and being exposed to cross-examination, the defendant has declined the opportunity to give an account of his stewardship (tr 280). It was submitted on the defendant's behalf that it was "not necessary" for the defendant to give evidence because there was no factual dispute as to the basis of the progress of the administration with which the Court is dealing in this case. It was submitted that when one looks at the factual matrix, it is perfectly uncontroversial (tr 313). However the plaintiffs submitted that there are a number of matters that required explanation from the defendant. For instance, why it was that he framed the Media Release in the way that he did in August 2009; why it was that he used such inflammatory language at the AGM; and why it was that he was opposed to the appointment of an independent chairman of the AGM on 10 November 2009 when the motion of no confidence was to be propounded. 226One matter that I regarded as calling for an explanation was why it is that the defendant wishes to retain his appointment as special purpose liquidator when he has concluded and admitted at the AGM that the relationship between him and the COI is "unworkable" and that it "cannot continue". It is all very well to rely upon the terms of the various judgments that have been published in respect of the various applications that have been made to justify minimal contact with the COI (for instance, Onefone Australia Pty Ltd and Others v One.Tel Ltd and Others (2010) 80 ACSR 11; [2010] NSWSC 1120 at [49]). However when it was conceded on the defendant's behalf during the course of this case that the relationship between the COI and the defendant lacked civility (tr 300), the absence of any explanation from the defendant as to why this should be tolerated in a liquidator tends to support the finding pressed for by the plaintiffs that the defendant has reached the point where he is now unable to dispassionately assess the true interests of the creditors in this administration and how limited resources should be spent (tr 278). Apart from this observation I have not drawn any adverse inference against the defendant by reason of his absence from the witness box. Rather I have reviewed his conduct from the whole of the circumstances disclosed in the evidence. 227That there is a pervasive perception amongst the creditors that the defendant lacks the capacity to dispassionately deal with the interests of the creditors is a significant factor to be taken into account with all the other relevant circumstances. Indeed I am afraid it is more than a perception. The defendant's conduct satisfies me that he has lost objectivity and the capacity to properly and dispassionately focus on the purposes for which he was appointed. That is why he embarked on inappropriate investigations that have cost thousands of dollars that should not have been claimed in this liquidation. Other matters 228It was submitted on the defendant's behalf that his removal would not be in the best interests of the liquidation because his wealth of knowledge would be lost to the process and additional costs would be incurred in the process: McGrath & Anor re HIH Insurance Ltd & Ors [2006] NSWSC 385 at [11]-[12]. The submission that the wealth of knowledge will be lost to the liquidation seems to me to be somewhat inconsistent with the defendant's explanation as to why it was unnecessary for him to give evidence; that is, that his conduct during his administration can be gleaned from the documentary evidence. There is no doubt that there will be additional cost incurred in replacing the defendant. However most of the purposes of the special purpose liquidator's appointment are no longer extant. Those that presently remain are the prosecution of the RRI equitable claims and the application for special leave to appeal to the High Court in respect of the dismissal of the RRI proceedings. This was another factor relied upon by the defendant as to why he should not be removed. It was submitted that now that there is little or less need for communication with the COI the Court could have confidence that the special purpose liquidation can proceed more efficiently and effectively. I am not satisfied that the absence of the need for such communication assists the defendant at this stage. 229I am conscious that the defendant is a very experienced liquidator and that his removal may have serious professional consequences. Towards the conclusion of the trial and in response to discussions during final submissions, the defendant expressed the view through his Senior Counsel that he had "no objection to working with Mr Parbery, in a joint appointment or something of that nature" (tr 334). This was an alternative outcome that had not been propounded in any of the evidence or written submissions. Nor was it suggested to any of the plaintiffs' witnesses. It was taken no further than a suggested alternative and there was no evidence called to support a finding that it would be cost effective or efficient (let alone workable) or that it would be in the best interests of the liquidation. Indeed the plaintiffs submitted that it would be a "disaster" (tr 335). 230Another alternative that was discussed was the termination of the special purpose liquidation. However in the circumstances that the RRI equitable claims have now been commenced and the application for special leave to appeal to the High Court in respect of the dismissal of the RRI proceedings has been made, it is not appropriate to terminate the special purpose liquidation. However the special purpose orders will require amendment to reflect the circumstances that now pertain. 231The defendant has both prior to and during the proceedings contended that the creditors' loss of confidence in him is not enough to justify his removal. Rather he has contended that there must be some serious misconduct, conflict of interest or lack of independence. The authorities referred to earlier establish that serious misconduct is not a pre-requisite to the exercise of the Court's power under s 503 of the Act. In any event it has certainly been demonstrated that the creditors have lost confidence in the defendant's capacity to bring a dispassionate mind to bear in exercising his powers in the liquidation. I am satisfied that their loss of confidence is justifiable. The vast amounts of money that have been expended, at least $14 million to 2011 and in particular some $5 million in the two year period 2009 to 2011, cause real concern that appropriate mechanisms to control expenditure are not in place. There have been inappropriate investigations into the relationships of the members of the COI with third parties and inappropriate investigations of the creditors' relationships with some of the RRI defendants, with consequential unjustified claims for fees and expenses. The defendant's reaction to the misguided conduct of the COI in dealing with Mr Lindholm was out of all proportion to the conduct of the COI. The publication of the Media Release on 7 August 2009 and the refusal to remove it from his website (other than in the usual course of business) demonstrated a serious lack of judgment and objectivity. 232It is true that the wishes or views of the creditors may be taken into account but they are not decisive. The Court must look at "the overall picture": Re Biposo Pty Ltd; Condon v Rodgers at 405. As Bowen LJ made clear, "fair play to the liquidator himself must not be left out of sight, but the measure of due cause is the substantial and real interest of the liquidation": In re Adam Eyton Ltd; Ex parte Charlesworth at 306. Conclusion 233I am satisfied that it is in the best interests of this liquidation for the defendant to be removed as special purpose liquidator and for Mr Parbery to be appointed in his place. The defendant is to meet with Mr Parbery and provide him with any advice, documents or other assistance sought by Mr Parbery so that he may be in a position to pursue the remaining purposes of the special purpose liquidation in the most cost efficient manner. 234I am conscious that ASIC's review of the defendant's remuneration and fees has effectively been put on hold pending the outcome of these proceedings. I am satisfied that it is appropriate to defer any ruling in relation to conducting an inquiry under s 536 of the Act until ASIC's review has concluded. It may be that, having regard to the defendant's removal and/or the outcome of ASIC's review, the plaintiffs may no longer wish to press for such an inquiry. Orders 235The orders are: 1. Paul Gerard Weston is forthwith removed as Special Purpose Liquidator of One.Tel Limited (in liquidation). 2. Stephen James Parbery is appointed as Special Purpose Liquidator of One.Tel Limited (in liquidation) in place of Paul Gerard Weston. 3. Paul Gerard Weston is to provide such assistance to Stephen James Parbery in the special purpose liquidation of One.Tel Limited (in liquidation) as reasonably required by Stephen James Parbery. 4. I grant leave to the parties and to Mr Parbery to bring in Short Minutes of Order with any further orders necessary to facilitate the transition to Mr Parbery. 5. The matter is listed at 10am on 22 June 2012 for the making of any further orders and for directions in relation to any argument as to costs. 6. These orders are to be entered forthwith. ********************** 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: 19 June 2012