In the matter of Equiticorp Australia Limited (in liquidation) and other companies [2017] NSWSC 1456

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Equiticorp Australia Limited (in liquidation) and other companies [2017] NSWSC 1456 Hearing dates: 23 October 2017 Decision date: 23 October 2017 Jurisdiction: Equity - Corporations List Before: Black J Decision: The Court appoints the Second Plaintiff as liquidator of the companies identified in his application. Catchwords: CORPORATIONS — Winding up — Liquidators — Replacement – where proposed appointee to vacancy is a partner of the same firm as resigning liquidator – whether Second Plaintiff should be appointed liquidator of companies Legislation Cited: - Corporations Act 2001 (Cth), ss 58AA, 473(7), 473A, Sch 2 s 90-15 - Insolvency Law Reform Act 2016 (Cth) Cases Cited: - Condon v Watson [2009] FCA 11; (2009) 174 FCR 314; 69 ACSR 350 - Re Ambridge Investments Pty Ltd [2015] NSWSC 1671 - Re Free [2010] NSWSC 1079 - Re Kukulovski, Arnautovic & Crisp [2015] NSWSC 2040 - Re McGrath [2005] NSWSC 506; (2005) 54 ACSR 55 - Re Porter and Mansfield [2012] NSWSC 220 - Re Wily [2003] NSWSC 1260; (2003) 49 ACSR 44 Category: Principal judgment Parties: Joseph David Hayes (First Plaintiff) Shaun Robert Fraser (Second Plaintiff) Representation: Counsel: J Anderson (Plaintiffs)

Solicitors: Baker & McKenzie (Plaintiffs) File Number(s): 2017/304571

Judgment – ex tempore (revised 23.10.17) 1. By Amended Originating Process filed on 23 October 2017, the Plaintiffs, Messrs Hayes and Fraser, seek orders under s 473A of the Corporations Act 2001 (Cth) and s 90-15(3)(c) of the Insolvency Practice Schedule (Corporations) ("IPS") in relation to the appointment of Mr Fraser as court-appointed liquidator of several companies associated with Equiticorp Australia Ltd (in liq) by reason of a vacancy in office created by the resignation of Mr Hayes as liquidator of each of those companies. 2. Section 473A(1) of the Corporations Act, as it stands following the passage of the Insolvency Law Reform Act 2016 (Cth), provides that a vacancy in the office of a liquidator appointed by the Court may be filled by, inter alia, the Court. Section 90-15(1) of the IPS in turn confers a general power on the Court to make such orders as it thinks fit in relation to the external administration of a company. A specific example of the orders that may be sought is found in s 90-15(3)(c) of the IPS which refers to an order that another registered liquidator be appointed as the external administrator of a company. The orders permitting the appointment of another liquidator under s 90-15 of the IPS correspond to a longstanding power of the Court to make orders for the appointment of a new liquidator, on the resignation of an existing liquidator. 3. The Plaintiffs rely on the affidavit of Mr Hayes sworn 9 October 2017 and the affidavit of their solicitor, Mr Walter, dated 19 October 2017. Mr Hayes indicates that he is a former partner of McGrathNicol and retired from the partnership on 30 June 2017, but has continued to be responsible for the day-to-day running of various matters, but now seeks to resign from those matters where he was appointed by Court order. Mr Fraser, the Second Plaintiff, is also a liquidator and partner of McGrathNicol. Mr Hayes' evidence establishes that each of the relevant companies which are the subject of this application are companies to which he was appointed as liquidator by order of the Court, and he also refers to the background of the liquidation of the Equiticorp companies and the Capitalcorp companies, which are associated entities, each of which has extended over a lengthy period. Mr Hayes refers to Mr Fraser's familiarity with the liquidations, having been involved in them as a foundation partner of McGrathNicol since 2004, and to the fact that staff employed by that firm will continue to be available to assist Mr Kogan, the continuing liquidator of the companies, and Mr Fraser as the newly appointed liquidator with the conduct of the liquidations after Mr Hayes' resignation. Mr Hayes' evidence is, not surprisingly in those circumstances, that he does not anticipate that there will be material delay or additional expense incurred in the liquidations by his resignation and Mr Fraser's appointment, and he refers to the fact that that approach will preserve the knowledge that McGrathNicol has acquired over the period in which the partners in that firm have been liquidators of the companies. 4. Mr Walter's affidavit dated 19 October 2017 establishes that the application has been served, properly, upon the Australian Securities and Investments Commission, which has indicated that it considers that this is a matter properly left for the Court's determination and that it does not propose to intervene in the proceedings or seek to appear at this hearing, and it has not done so. 5. I have been assisted by comprehensive submissions of Mr Anderson, who appears for the Plaintiffs, which refer to the background of the liquidations, as set out in Mr Hayes' affidavit, and to the applicable principles. Mr Anderson refers to the Court's power to appoint Mr Fraser as liquidator under s 473A(1) of the Corporations Act and s 90-15(3)(c) of the IPS to which I have referred above. Mr Anderson also rightly notes that that power is available to any "Court" within the meaning of s 58AA of the Corporations Act, a matter that is confirmed by the Court's decision in Re Ambridge Investments Pty Ltd [2015] NSWSC 1671 at [13]. That matter is of significance where liquidators were appointed to several of the companies by courts other than the Supreme Court of New South Wales. 6. The case law recognises the Court's power to replace a court-appointed liquidator who is about to resign, which was formerly found in s 473(7) of the Corporations Act, has been continued following the Insolvency Law Reform Act: Re Wily [2003] NSWSC 1260; (2003) 49 ACSR 44; Re McGrath [2005] NSWSC 506; (2005) 54 ACSR 55; Re Free [2010] NSWSC 1079. Mr Anderson also points to the recognition in the case law of the desirability, largely for purposes of cost efficiency, of retaining an appointment within the same firm upon the resignation of a liquidator: for example, Condon v Watson [2009] FCA 11; (2009) 174 FCR 314; 69 ACSR 350; Re Free above at [6]; Re Porter and Mansfield [2012] NSWSC 220 at [5]; Re Kukulovski, Arnautovic & Crisp [2015] NSWSC 2040. Mr Anderson also points to the practical advantages in having a second liquidator appointed, in place of Mr Hayes, where Mr Kogan will remain in office. Mr Anderson submits, and I accept, that the appointment of Mr Fraser would ensure continuity in respect of the liquidations of each of the companies and that there is a benefit to creditors of those companies in minimising the inconvenience or costs incurred where, as is inevitable in liquidations that continue over a long period, a liquidator may seek to resign while a company is still in liquidation. 7. I am satisfied that the interests of creditors and of the liquidation would be served by the Court appointing Mr Fraser as a liquidator of the relevant companies in place of Mr Hayes. I am also satisfied that the costs of this application should be costs in the winding up of the relevant companies. Accordingly, I make orders in accordance with the Short Minutes of Order, initialled by me and placed in the file.