In the matter of FGM Print Pty Limited [2018] NSWSC 1478

Supreme Court New South Wales

Medium Neutral Citation: In the matter of FGM Print Pty Limited [2018] NSWSC 1478 Hearing dates: 14 June 2018 Decision date: 14 June 2018 Jurisdiction: Equity - Corporations List Before: Black J Decision: Order made appointing First Plaintiff as liquidator of the companies the subject of the application. Catchwords: CORPORATIONS – winding up – replacement of liquidator – where proposed liquidator is connected with the same firm as resigning liquidator – where no order is sought for payment of the costs of the application – whether proposed liquidator should be appointed liquidator of companies. Legislation Cited: - Corporations Act 2001 (Cth) ss 473, 473A, 499, 532 Cases Cited: - Re Equiticorp Australia Ltd (in liq) [2017] NSWSC 1456 - Re Porter and Mansfield [2012] NSWSC 220 Category: Principal judgment Parties: Amanda Young (First Plaintiff) Henry Peter McKenna (Second Plaintiff) Representation: Counsel: P Hegarty (Solicitor) (Plaintiff)

Solicitors: Hegarty Legal (Plaintiff) File Number(s): 2018/170560

Judgment – ex tempore (revised 22 june 2018) 1. By Originating Process filed on 31 May 2018, the Plaintiffs, Ms Young and Mr McKenna, seek, first, an order under s 473A of the Corporations Act 2001 (Cth) appointing Ms Young as liquidator of a company that is currently the subject of a court-appointed liquidation, FGM Print Pty Ltd, with that appointment to take effect immediately upon Mr McKenna filing a memorandum of resignation, in accordance with r 7.1 of the Supreme Court (Corporations) Rules 1999 (NSW), with the Registrar and lodging it with the Australian Securities and Investments Commission ("ASIC"). Ms Young and Mr McKenna also seek an order under s 499(3) of the Act appointing Ms Young as liquidator of three companies, which are presently in creditors' voluntary liquidation, with that appointment to take effect upon her filing the appropriate notice with ASIC. Ms Young and Mr McKenna also seek an order, to the extent necessary, that leave be granted under s 532(2) of the Act with the replacement of Mr McKenna with Ms Young as appointee of the companies. 2. The application is supported by three affidavits, two of Mr McKenna dated 31 May and 13 June 2018, and one of Ms Young dated 31 May 2018. By his first affidavit dated 31 May 2018, Mr McKenna refers to the dates of his appointment to the relevant companies, and identifies that one of those appointments is as a court-appointed liquidator, and the other appointments are in creditors' voluntary liquidations. He refers to his departure from the firm with which he was previously employed, Jirsch Sutherland, and says that he seeks to have his appointments as liquidator of the relevant companies, in effect, transferred to Ms Young. Mr McKenna refers to Ms Young's affidavit filed in this application and refers to his assessment that there would be expense and inconvenience in convening separate meetings of each of the companies that are in creditors' voluntary liquidation to consider the appointment of a replacement liquidator. He also indicates his intent to take any necessary steps to give effect to the order sought in an efficient way, including assisting Ms Young wherever it is appropriate to do so. 3. By a second affidavit dated 13 June 2018, Mr McKenna provided further information in respect of the application. He referred to his contractual arrangements with the firm by which he was previously employed, indicates the date that would be his final day with that firm, and confirms his continued wish that the appointments in his name be transferred to Ms Young. Mr McKenna's evidence is that the contractual provisions which applied on the termination of his employment, broadly, contemplated his resignation from offices related to or associated with his employment and his execution of consents reasonably required for that purpose. Where a liquidator brings an application of this kind, and leads evidence of the desirability of his replacement by a person associated with his former firm, it seems to me to be desirable that the liquidator discloses any contractual provisions in respect of his former employment which may bear upon that question. The Court may well accept, as it has often accepted in these applications, that there are good reasons why a liquidator connected with the former firm should be appointed. Nonetheless, the existence of such contractual provisions may well be a relevant matter in assessing the liquidator's evidence in support of the application. As I noted above, Mr McKenna has made appropriate disclosure of the relevant contractual arrangements. 4. Mr McKenna also provides detailed information concerning the current status of each liquidation, which indicates that, in at least three of the liquidations, it is unlikely that the funds available in the liquidation will support further claims for remuneration by the liquidators. Mr McKenna also recognises, rightly, in my view, that the limited funds in the liquidations supports the desirability of a liquidator from within his former firm being appointed in the relevant circumstances. 5. By her affidavit dated 31 May 2018, Ms Young refers to her having signed a consent to act as liquidator of each of the companies, and to a review that she undertook, in consultation with the relevant manager appointed to each of the liquidations, of the relevant files. Ms Young points out that, as is commonly the case in applications of this kind, a manager within the firm has been assigned to each of the liquidations, who has knowledge of the detail of those liquidations, and the relevant files are held within Mr McKenna's former firm. Ms Young identifies several matters that commonly support the appointment of a liquidator from within the same firm as the liquidator who seeks to resign, including that firm's ability to retain the same staff in the liquidation, and the desirability of the change of liquidator being dealt with by Court order so as to avoid the costs of a further creditors' meeting. 6. I have been assisted by comprehensive written submissions of Mr Hegarty, who appears for the Plaintiffs in the application, and draws attention to the relevant legal principles. Mr Hegarty points out that s 473 of the Corporations Act provides that a liquidator appointed by the Court may resign, and s 473A provides that a vacancy in the office of a liquidator appointed by the Court may be filled, inter alia, by the Court. Mr Hegarty also draws attention to r 7.1 of the Supreme Court (Corporations) Rules which provides for the manner of lodgement of a memorandum of resignation with ASIC, a process which is contemplated by the orders sought by the Plaintiffs. 7. Mr Hegarty also draws attention to s 499(3) of the Corporations Act, which relevantly provides that the Court may fill the vacancy that arises on the resignation of a liquidator in a creditors' voluntary liquidation. Mr Hegarty recognises that s 90-15 of the Insolvency Practice Schedule (Corporations) also permits the Court to make such orders as it thinks fit in relation to the external administration of a company and notes that I referred to that provision in Re Equiticorp Australia Ltd (in liq) [2017] NSWSC 1456. He submits, with considerable force, that it is likely not necessary to rely on that provision, in the particular circumstances, where s 473A and s 499(3) of the Corporations Act are specific sections that address the question of a liquidator's replacement. 8. Mr Hegarty also draws attention to s 532 of the Act, which may require leave of the Court for a liquidator from the same firm to be appointed, where amounts are due to that firm in respect of the liquidation. Such leave is sought in this application, and is commonly granted in applications of this kind. 9. Mr Hegarty draws attention to several of the matters which have often been recognised in the case law as supporting maintaining a liquidator within the same firm on the resignation of a liquidator, including the benefit of continuity of the liquidation, particularly so far as employees who are already involved in the liquidation may continue to work upon it, and consequential costs savings. Mr Hegarty rightly points out that these matters have been identified in the case law, including in Re Porter and Mansfield [2012] NSWSC 220 and several cases that were referred to in that decision. Mr Hegarty notes that, although it is not clear whether leave under s 532 of the Act is required in this situation, it is sought as a matter of caution, and the Court has often granted such leave, for example, in Re Porter and Mansfield above. As Mr Hegarty points out, there is no reason not to grant such leave, where it is not adverse to creditors, and the replacement of a liquidator by a liquidator in the same firm will deliver the efficiencies and the costs savings which have been recognised in the case law. Mr Hegarty also points out that no order is sought by the Plaintiffs for payment of the costs of the application from the assets of the companies, an appropriate course where the application is the consequence of matters that are internal to the relevant firm. 10. I am satisfied that in this case, as in many cases of this kind, there are efficiencies in appointing a liquidator from the same firm, to replace Mr McKenna in both the court-appointed liquidation and the three creditors' voluntary winding ups. It is convenient and cost effective for the Court to do so, rather than to require the calling of meetings of creditors which would involve costs that would not advance the progress of the liquidation. For all these reasons, I make orders in accordance with the Short Minutes of Order, initialled by me and placed in the file.