ACN 104 635 369 (in liq) (formerly Total Plant Services Pty Ltd) v Combined Group Management Pty Ltd

Counsel for the First, Second, Third, Fourth and Fifth Defendants: Mr A Spencer

Solicitor for the First, Second, Third, Fourth and Fifth Defendants: Coleman Greig Lawyers

Counsel for the Seventh Defendant: Mr A J Macauley

Counsel for the Tenth and Eleventh Defendants: Ms A Hawkins

Solicitor for the Tenth and Eleventh Defendants: Thurai Rajah Lawyers

28 October 2015 In the medium neutral citation and on the coversheet, the Plaintiff's name has been corrected.

28 October 2015 On the coversheet, orders page and first page of reasons, the file number has been corrected.

29 October 2015 At paragraph 74, the word "[insert]" has been removed.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 658 of 2014

BETWEEN: ACN 104 635 369 (IN LIQ) FORMERLY KNOWN AS TOTAL PLANT SERVICES PTY LTD

WILLIAM JAMES HAMILTON IN HIS CAPACITY AS FORMER LIQUIDATOR

STEVEN ARTHUR GLADMAN IN HIS CAPACITY AS FORMER LIQUIDATOR

CHRISTOPHER DAMIEN DARIN AND GRAEME ROBERT BEATTIE, IN THEIR CAPACITY AS OFFICIAL LIQUIDATORS

JUDGE: GLEESON J DATE OF ORDER: 15 DECEMBER 2014 WHERE MADE: SYDNEY

1. The application made by the tenth and eleventh defendants to adjourn the proceedings be refused.
2. Pursuant to s 477(2A) of the Corporations Act 2001 (Cth) ("Act"), the compromise in the deed of settlement dated 12 August 2014 between the plaintiff, the first to fifth defendants and the ninth defendants, together with the compromise between the plaintiff, the sixth defendant and the ninth defendants in the letter from Access Law Group to the sixth defendant dated 25 November 2014, is approved.
3. The proceedings be dismissed as against the first to sixth defendants, with no order as to costs.
4. Pursuant to s 511(1)(a) of the Act, the proceeding be referred to a Registrar of the Court to determine the remuneration of each of the liquidators of the plaintiff to the extent that such remuneration has not already been fixed.
5. Any application by the tenth and eleventh defendants pursuant to s 564 of the Act to be made within 21 days of the determination of the liquidators' remuneration pursuant to order 4.
6. The plaintiff's costs of the interlocutory process dated 20 November 2014 ("interlocutory process") be costs of the liquidation.
7. Paragraphs 10 and 11 of the interlocutory process be stood over to 9.30 am on 31 March 2015. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 658 of 2014

BETWEEN: ACN 104 635 369 (IN LIQ) FORMERLY KNOWN AS TOTAL PLANT SERVICES PTY LTD

WILLIAM JAMES HAMILTON IN HIS CAPACITY AS FORMER LIQUIDATOR

STEVEN ARTHUR GLADMAN IN HIS CAPACITY AS FORMER LIQUIDATOR

CHRISTOPHER DAMIEN DARIN AND GRAEME ROBERT BEATTIE, IN THEIR CAPACITY AS OFFICIAL LIQUIDATORS

JUDGE: GLEESON J DATE: 15 DECEMBER 2014 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 By interlocutory process dated 20 November 2014 ("interlocutory process"), the plaintiff ("TPS") applied to the Court for several orders. On 27 November 2014, I made the following orders: 1) The name of the Sixth Defendant be amended to Heather Lynne Byrne. 2) Steven Arthur Gladman in his capacity as former liquidator be added as the Eighth Defendant. 3) William James Hamilton in his capacity as former liquidator be added as the Seventh Defendant. 4) Christopher Damien Darin & Graeme Robert Beattie, in their capacity as official liquidators of the Plaintiff, be added as the Ninth Defendants. 5) AJ Azzopardi Industries Pty Ltd (ACN 060 651 845) be added as the Tenth Defendant. 6) AzBuild Pty Ltd (ACN 089 795 639) be added as the Eleventh Defendant. The Tenth and Eleventh Defendants file and serve any submissions as to (a) their standing in relation to proposed order 5 of the interlocutory application filed 20 November 2014 ("order 5"); and (b) whether order 5 ought to be made, by 5 pm on 4 December 2014. 8) The parties file and serve any submissions in reply by 2.15 pm on 8 December 2014. 9) The matter be stood over for judgment on order 5 and directions to 9.30 am on 9 December 2014. 10) Costs of today be reserved. 2 The plaintiff now seeks the following orders: (1) An order that the liquidators may accept the settlement with the first to fifth defendants as set out in the Deed of Settlement and Release dated 12 August 2014 and the settlement offer made by the sixth defendant by letter dated 21 November 2014, pursuant to s 477(2A) of the Corporations Act 2001 (Cth) ("Act"); (2) An order, pursuant to s 511(1)(b) and (2) of the Act, that the Court have power to deal with any part of the winding up from its commencement as if it were a winding up by the Court throughout the whole period of the winding up; (3) An order that a meeting of creditors, pursuant to s 473(4) of the Act be dispensed with; (4) An order that the matter be referred to a Registrar of this Court to determine the quantum of remuneration to the seven, eighth and ninth defendants; (5) An order pursuant to s 564 of the Act that, after payment of the remuneration, costs and expenses of the liquidators including the seventh, eighth and ninth defendants, the tenth defendant be afforded priority, ahead of unsecured creditors, for reimbursement of any funds paid to any of the liquidators by the tenth defendant. (6) An order for costs against the tenth and eleventh defendants relating to their application recorded in written submissions dated 4 December 2014. 3 The application was supported by affidavits of: (1) Mr Beattie, one of the ninth defendants and the current liquidators of TPS ("current liquidators"), sworn 20 November 2014; (2) Mr Lancaster, the current liquidators' solicitor, sworn 26 November 2014. 4 Proposed orders (1) to (5) above were not opposed by any party, except to the extent that the tenth and eleventh defendants ("Azzopardi Industries" and "Azbuild" respectively) sought an adjournment of the interlocutory process to an unspecified time. Azzopardi Industries and Azbuild claim to be creditors of TPS, and have been admitted as creditors for voting purposes. The claim of Azzopardi Industries is by far the largest claim made in the litigation. 5 The stated purpose of the adjournment application is to enable the current liquidators (or Azzopardi Industries and Azbuild) to make inquiries to satisfy Azzopardi Industries and Azbuild that the various liquidators from time to time of TPS have not omitted to locate an asset or assets that secured a bank guarantee provided by the plaintiff to Rail Corp.

Background to proceeding 6 TPS was a contractor of RailCorp, a New South Wales instrumentality. Azzopardi Industries was a sub-contractor of TPS. According to Azzopardi Industries, between August and November 2007, Azzopardi Industries provided services to TPS, as a result of which TPS incurred a debt to Azzopardi Industries of $570,809.80. 7 As part of RailCorp's arrangements with TPS, TPS provided RailCorp a deed of bank guarantee from ANZ Bank dated 23 June 2006 for the sum of $500,000 ("ANZ bank guarantee"). The material before me does not contain any information about any asset or assets which secured the bank guarantee, except that the guarantee was apparently provided in exchange for a guarantee previously provided by St George Bank. According to evidence given by the sixth defendant ("Ms Byrne") in December 2013, the ANZ Bank guarantee was returned to the bank. 8 The winding up of TPS commenced on 18 March 2010 as a members' voluntary winding up. Peter Hillig was appointed as the liquidator. 9 The winding up followed an investigation by the New South Wales Independent Commission Against Corruption into allegations of corruption affecting Railcorp. Following that investigation (whether or not it was a consequence of that investigation), in about March 2009 TPS lost its contract with RailCorp or that contract was not renewed. It has been alleged that a dividend of $600,000 was declared by the directors of TPS knowing that a substantial amount was owed by TPS to Azzopardi Industries and, thereafter, a conscious and deliberate decision was made that TPS would wind itself up as being solvent when, taking into account the amount owed to Azzopardi Industries, the true position was that TPS was insolvent. These allegations are not admitted by the first to sixth defendants. 10 In February 2011, the eighth defendant ("Mr Gladman") was appointed as the liquidator of TPS and the liquidation continued as a creditors' voluntary winding up. 11 It appears that Azzopardi Industries provided some funding to Mr Gladman for investigations in 2011 and funded storage of TPS documents to prevent their destruction. The current liquidators believe that the amount of this funding is $16,500 although, at least as of late August 2014, that amount was disputed by the solicitor for Azzopardi Industries and Azbuild, Ms Thurai Rajah. 12 On 25 May 2011, Mr Gladman sought approval for remuneration of Mr Hillig and himself. It was resolved that the liquidators' remuneration not be voted on until all issues relating to TPS and its liability to its creditors were investigated and resolved. 13 On 9 July 2013, a meeting of shareholders and creditors of TPS was held pursuant to s 509(2) of the Act, but no quorum was present. 14 On 15 July 2013, Mr Gladman filed a return under s 509(3) and 509(4) of the Act in relation to the 9 July 2013 meeting with the Australian Securities and Investments Commission ("ASIC"). Under s 509(5) of the Act, ASIC must deregister a company three months after the date on which a return is lodged. 15 Immediately before the 9 July 2013 meeting, Adam Azzopardi, the sole director of the Azzopardi Industries, learned of a report prepared by Mr Gladman for ASIC, at ASIC's expense, which revealed that TPS may have available causes of action relating to four matters. Azzopardi Industries was not prepared to fund Mr Gladman to pursue the actions against TPS's former officers and accountant and it appears that Mr Gladman did not wish to undertake further investigation or actions funded by Azzopardi Industries. It seems that there were unsuccessful negotiations between Mr Gladman and Azzopardi Industries for the possible assignment of TPS's causes of action to Azzopardi Industries. 16 In 9 October 2013, the seventh defendant ("Mr Hamilton") replaced Mr Gladman as TPS's liquidator: AJ Azzopardi Industries Pty Ltd v ACN 104 635 369 (formerly known as Total Plant Services Pty Ltd (in liquidation) [2014] FCA 710 at [15] ("AJ Azzopardi Industries"). That appointment was made by the Court pursuant to s 502 of the Act. When the order appointing Mr Hamilton was made, the Court also approved a funding agreement by which Azzopardi Industries agreed to fund Mr Hamilton to conduct public examinations of former officers of TPS and TPS's accountant with a view to obtaining legal advice concerning whether any action should proceed. The Court also extended the date of deregistration of TPS to 31 October 2018. 17 According to the current liquidators, Mr Hamilton received funding of $66,345.00 from Azzopardi Industries. Again, that figure appears to be disputed by Ms Thurai Rajah. 18 Five public examinations were conducted in December 2013. During the examination of the Ms Byrne, she was asked about a $500,000 bank guarantee provided by the ANZ bank to RailCorp to secure TPS's obligations under the contract between RailCorp and TPS. This appears to be the ANZ bank guarantee. Ms Byrne's evidence was that she returned the bank guarantee to the ANZ bank after receiving it from RailCorp. 19 In February 2014, Registrar Hannigan made the following order: The remuneration of the applicant ("Azzopardi Industries"), the third defendant (Mr Hamilton) and the liquidator of the first defendant (Mr Gladman) is approved in the sum of $92,095.23 excluding GST for the period from the date of appointment 9 October 2013 to 23 December 2013 inclusive. 20 Mr Hamilton resigned as liquidator on 3 June 2014, following the suspension of his registration as liquidator. 21 On 27 June 2014, the Court appointed the current liquidators: AJ Azzopardi Industries. At the time of the appointment, the Court also considered an application by Azzopardi Industries for approval under s 477(2B) of the Act for the current liquidators to enter into a retainer agreement "to rank in priority in the winding up insofar as funds advanced has first priority of such funds as are available for distribution to creditor prior to the costs of winding up": AJ Azzopardi Industries at [52]. At [54], Farrell J said: [Azzopardi Industries'] representative conceded that, insofar as the retainer agreement sought to confer a priority on distribution of amounts (if any) recovered by the liquidator, it would be necessary for an application to be made under s 564 at the time that the liquidator proposes to make distributions, and approval of the retainer agreement under s 477(2B) does not confer priority. I considered it appropriate to make the order under s 477(2B). 22 This proceeding was commenced on 30 June 2014 by Originating Process accompanied by an affidavit of Mr Beattie sworn 30 June 2014. The proceedings were commenced immediately after the current liquidators' appointment in response to a concern expressed by Ms Thurai Rajah about the possible expiry of the limitation period in respect of the claim. The Originating Process sought orders including that the first to sixth defendants repay the amount of $600,000 to TPS. 23 Funding was provided by Azzopardi Industries to enable the commencement of the proceeding. 24 By letter dated 6 August 2014 to Ms Thurai Rajah, Mr Lancaster wrote: The liquidators' agenda is to seek recovery of the dividend that was paid from the Company to the related entities improperly, together with interest and costs. Alternatively, to recover the debts outstanding on the basis of insolvent trading or breach of duties. If there is some other matter that should be added to that agenda, please advise us. 25 There was no direct response from Ms Thurai Rajah to this request before the Court. 26 By email also dated 6 August 2014, Mr Lancaster referred Ms Thurai Rajah to the decision in Resource Equities v Carr [2009] NSWSC 1385, especially at [310] and [311] ("Resource Equities"). This reference drew attention to the possibility of claiming from the directors of TPS the costs of the litigation, on the basis that they had acted improperly in resolving to commence a members' voluntary winding up (by reason of the insolvency of the company). 27 By letter dated 11 August 2014 from Ms Thurai Rajah to Mr Lancaster, Ms Thurai Rajah wrote: Hypothetically, if one was to recover the principal and interest of the debt claimed by our client along with the missing bank guarantee monies, there will be sufficient monies to meet all claims on TPS (in liquidation) which would not have arisen had it not been for the conduct of the former members and shareholders of TPS. 28 I have not located any other reference to "missing bank guarantee monies" in the correspondence annexed to the affidavits of Mr Beattie and Mr Lancaster. The 11 August 2014 letter does not explain what is meant by "missing bank guarantee monies". There is nothing in the material before me to suggest that any monies are "missing" in connection with any bank guarantee. The written submissions made on behalf of the Azzopardi Industries and Azbuild complain that the liquidators "did not engage with the creditors on this topic". In my view, that is not a fair criticism in the absence of any identification in the 11 August 2014 letter, or otherwise, by Ms Thurai Rajah of any basis for believing that any monies were missing. 29 On 12 August 2014, a mediation was held between the current liquidators and the first to sixth defendants. The mediation was conducted by an experienced mediator, Grahame Berecry, from 11 am to 10:30 pm that night. According to Mr Lancaster's affidavit, the liquidators claimed an amount of $1,443,775.10 comprising the $600,000 alleged dividend, interest on the dividend ($235,452.77), the liquidators' costs (estimated at $358,588.33), the costs of Azzopardi Industries ($214,734, being a figure supplied by Ms Thurai Rajah) and Mr Lancaster's estimated legal costs of $35,000. 30 Mr Lancaster's letter to the current liquidators dated 26 November 2014 sets out various arguments raised at the mediation. The letter also identifies various risks and factors that Mr Lancaster advised the current liquidators to take into account in conducting the mediation. 31 At the mediation, Mr Lancaster recommended to the current liquidators that they accept an offer of $600,000 ("settlement sum") from the first to fifth defendants subject to the Court's approval. The current liquidators accepted the offer. 32 The terms of the settlement achieved at the mediation are recorded in a deed of settlement and release dated 12 August 2014 ("deed"). The settlement sum has been received and is held in an interest bearing account nominated by the current liquidators. 33 By clause 2.1 of the deed, the settlement sum is to remain in the settlement account to abide the outcome of the application for court approval. Clause 2.2 of the deed provides that, in the event that the Court declines to approve the settlement in the deed, the current liquidators are to repay the settlement sum (together with any interest earned on that amount) to the solicitors for the first to fifth defendants within 48 hours. 34 Clause 6 of the deed provides for the release of the first to fifth defendants from "any and all claims, including but not limited to the TPS and Liquidators Claims and the Proceedings". The "TPS and Liquidators Claims" are the claims made in the originating process and affidavit in support annexing contentions and the further allegations made by letter dated 7 August 2014. The 7 August 2014 letter does not appear to be in evidence. It seems likely that it refers to, at least, the claim in fact propounded at the mediation that the defendants were liable to pay the costs of the litigation on the basis that the voluntary members winding up was the result of their wrongful conduct: cf Resource Equities. "Proceedings" is defined in the deed to mean this proceeding. 35 The day after the mediation, Ms Thurai Rajah was informed by Mr Lancaster of the settlement with the first to fifth defendants, but not its terms. She was informed that the terms were required to be kept confidential until the application for Court approval under s 477(2A). In his letter informing Ms Thurai Rajah of the settlement, Mr Lancaster noted that an application for approval may not be made until November 2014 for reasons that included Ms Thurai Rajah's notified absence during September and October 2014. 36 The materials before me did not disclose any further mention by Ms Thurai Rajah of the bank guarantee after 11 August 2014, or any efforts on her part to seek information about the guarantee. There was no reference to any evidence of such matters in the written submissions on behalf of Azzopardi Industries and Azbuild. 37 In November 2014, the current liquidators' solicitors and counsel recommended that they accept the sixth defendant's offer of $5,000 subject to the Court's approval. The current liquidators accepted this advice.

Costs of liquidation 38 The costs claimed by each of the liquidators are identified in the evidence supporting the Interlocutory Process. It is plain that substantial costs have been incurred which are currently unpaid. 39 The costs of the liquidation have been partially funded by Azzopardi Industries, but the precise amount of the funding is not agreed. The current liquidators have identified funding of $99,490 while, in correspondence and in the written submissions provided to the Court, Azzopardi Industries and Azbuild refer to an amount of $214,734 (albeit this is said to include "monies paid to or on behalf of liquidators and costs claimed as per Court Orders"). 40 Complaints and criticisms have been made on behalf of Azzopardi Industries and Azbuild about each of the liquidators. In my view, having regard to the history of the relationship between Azzopardi Industries and Azbuild, which includes protracted and contentious correspondence between their solicitor, Ms Thurai Rajah, and the various liquidators, it is appropriate to conclude that the quantum of the liquidators' remuneration is highly unlikely to be resolved between the relevant parties. No party suggested otherwise.

Adjournment application 41 Azzopardi Industries and Azbuild did not tender any evidence in support of the adjournment application, but made lengthy written submissions. So far as they may relate to the adjournment application, the submissions raised the following matters: (1) They will be substantially out of pocket as a result of TPS's winding up; (2) They consider that they have had insufficient time and opportunity to examine the true financial situation of TPS and whether the proposed settlement is in fact in the interests of the creditors of TPS; (3) The liquidators have not reported to creditors about the proposed settlement; (4) The liquidators have not said whether they have taken any steps to investigate the bank guarantee or other causes of action that may exist against the directors and stakeholders of TPS. 42 Dealing with the last matter first: (1) There is no evidentiary basis for suspecting the existence of any cause of action relating to the bank guarantee. The written submissions made on behalf of Azzopardi Industries and Azbuild referred to the public examination of Ms Byrne. Her evidence is summarised above. It was submitted that "it would appear on the face of the matter that [the bank guarantee] is a potential asset of [TPS]". I do not agree with that proposition. On the face of the matter, there was a contractual arrangement between TPS and the ANZ bank which was terminated upon the return to the bank of the guarantee; (2) Mr Gladman conducted an investigation as to possible causes of action at the request of ASIC and at ASIC's expense. That led to the identification of four possible causes of action, one of which was pursued in this proceeding. No evidentiary basis has been identified for suggesting that the current liquidators should have conducted any further investigations, and there is no evidence that they have been funded to do so; (3) In fact, the current liquidators identified a claim against the directors of TPS for the costs of the liquidation based upon the decision in Resource Equities. That claim was part of the subject matter of the mediation in August 2012. 43 Having regard to these considerations, in my view, the fact that the liquidators have not investigated either the bank guarantee or other causes of action that may exist against the directors and stakeholders of TPS is not a matter which would justify an adjournment. 44 As to the other matters raised on behalf of Azzopardi Industries and Azbuild: (1) It is regrettable that, on their case, Azzopardi Industries and Azbuild will be substantially out of pocket as a result of the liquidation of TPS. However, there is no reason to believe that an adjournment will improve the position: to the contrary, it can only be expected to cause further expenses to be incurred to their detriment; (2) No evidence was tendered as to what precisely was intended to be done in the event that an adjournment was granted, or how much any particular steps might cost. In the absence of a clear plan of action, I am not satisfied that an adjournment would have any utility; (3) The evidence that has been served in support of the plaintiff's Interlocutory Process provides Azzopardi Industries and Azbuild with the information relied upon by the current liquidators to support the application. To require a report to creditors, in addition to this information, would only add another cost to the liquidation without any additional benefit. 45 In my opinion, the submissions put on behalf of the creditors do not support an adjournment of the liquidator's application. Rather, in my opinion, they seem to be predicated upon a confusion about the value of the bank guarantee. 46 On the present state of the evidence, in my view, I would simply be perpetuating an apparent confusion by allowing an adjournment. 47 Accordingly, the adjournment application is refused.

Azzopardi Industries and Azbuild's claims for other relief 48 The written submissions on behalf of Azzopardi Industries and Azbuild also sought relief under ss 536, 600A and 1312 of the Act. However, no Interlocutory Process was filed and no supporting evidence was tendered. In those circumstances, at the hearing on 9 December 2014, I declined to hear any application for relief under those provisions.

Approval of settlement 49 Section 477(2A) provides: (2A) Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not compromise a debt to the company if the amount claimed by the company is more than: (a) if an amount greater than $20,000 is prescribed--the prescribed amount; or (b) otherwise--$20,000. 50 In this case, the claims made against the first to sixth defendant included claims based in debt. 51 In Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (In Liq) (No 14) [2013] FCA 459 at [9] to [10], Gordon J said, relevantly: [9] What then are the principles the Courts apply in considering whether to exercise its discretion to grant approval under s 477 of the Act? In Re Stewart; Newtronics Pty Ltd [2007] FCA 1375 at [26], the relevant principles were summarised as follows: (1) the court does not simply "rubber stamp" whatever is put forward by a liquidator. As Giles J said in Re Spedley Securities Ltd (In liq) [1992] HCA 28; (1992) 10 ACLC 1,742 at 1,745 in relation to the powers of a liquidator to compromise claims: [T]he Court is necessarily confined in attempting to second guess the liquidator in the exercise of his powers, and generally will not interfere unless there can be seen to be some lack of good faith, some error in law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct. The same restraint must apply when the question is whether the liquidator should be authorised to enter into a particular transaction the benefits and burdens of which require assessment on a commercial basis. Of course, the compromise of claims will involve assessment on a legal basis, and a liquidator will be expected (as was made plain in Re Chase Corporation (Australia) Equities Ltd) to obtain advice and, as a prudent person would in the conduct of his own affairs, advice from practitioners appropriate to the nature and value of the claims. But in all but the simplest case, and demonstrably in the present case, commercial considerations play a significant part in whether a compromise will be for the benefit of creditors. (2) a court will not approve an agreement if its terms are unclear: Re United Medical Protection (No 4) [2002] NSWSC 856; (2002) 20 ACLC 1, 647; (3) the role of the Court is to grant or deny approval to the liquidator's proposal. Its role is not to develop some alternative proposal which might seem preferable: Corporate Affairs Commission v ASC Timber Pty Ltd [1998] NSWSC 596; (1998) 16 ACLC 1,642; (4) in reviewing the liquidator's proposal, the task of the Court is: [not] to reconsider all of the issues which have been weighed up by the liquidator in developing the proposal, and to substitute its determination for his in ... a hearing de novo [but] ... simply to review the liquidator's proposal, paying due regard to his or her commercial judgment and knowledge of all of the circumstances of the liquidation, satisfying itself there is no error of law or ground for suspecting bad faith or impropriety, and weighing up whether there is any good reason to intervene in terms of the "expeditious and beneficial administration" of the winding up. … [10] As this extract makes clear, a Court will generally grant approval if a compromise would appear to be for the benefit of those concerned in the winding up, giving significant weight to commercial considerations and the judgment of the liquidators (and in this case the receivers). And the Court will generally not interfere unless there can be seen to be some lack of good faith, some error in law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct: Re Spedley Securities Ltd (In Liq) (1992) 9 ACSR 83; Re HIH Insurance Ltd [2004] NSWSC 5 at [15]- [18]; Re S&D International Pty Ltd (in liq) (No 7) [2012] VSC 551; (2012) 92 ACSR 38 at [73]-[80]. The principles applicable to the approval of the compromise for the Mews Receivers are substantially the same: see Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (in liq) (No 8) [2011] FCA 997 at [27]- [33].

Consideration 52 If the settlement is approved, the liquidators expect there to be sufficient funds to pay, as a priority amount, the presently known amounts paid by Azzopardi Industries to each of the liquidators of TPS, in addition to the remuneration of Mr Gladman and Mr Hamilton, and the current liquidators' remuneration and expenses. It is unclear whether there is any amount payable to the first liquidator, Peter Hillig. 53 Mr Lancaster's affidavit annexes a detailed advice recording his recommendations to the liquidators to accept the proposed settlements, and the reasons for that advice. In summary, Mr Lancaster identifies both legal and commercial considerations favouring the compromise reached at the mediation and the settlement subsequently reached with the sixth defendant. 54 Mr Beattie's affidavit does not depose to a belief that the proposed settlement is in the best interests of the creditors of TPS, however, I do not consider that I should refuse to approve the settlement in the absence of such a stated belief, having regard to the detailed reasons set out in Mr Lancaster's advice, which support a conclusion that the settlement is indeed in the creditors' best interests. 55 Azzopardi Industries and Azbuild do not suggest that they have any reason to believe that the proposed settlements involve any error of law, or that there is any reason to suspect any bad faith or impropriety in connection with the proposed settlements. 56 Nor do they have any positive submission to make that there is presently any good reason not to approve the settlements, beyond the contentions supporting the adjournment application which I have rejected for the reasons given above. 57 Counsel for Mr Hamilton, Mr Macauley submitted that the proposed settlement with the first to fifth defendants is a "highly appropriate commercial compromise, having achieved a return of the entirety of the $600,000 dividend that was the subject of the proceedings". 58 Taking all these matters into account, and paying due regard to the liquidators' commercial judgment and knowledge of all of the circumstances of the liquidation, I am satisfied that there is no ground for suspecting any impropriety or bad faith in connection with the proposed settlements and that the proposed settlements should be approved.

Liquidators' costs 59 The current liquidators seek to have their remuneration and the remuneration of the other liquidators fixed by a Registrar. Counsel for Azzopardi Industries and Azbuild agreed that this would be an appropriate course. As Barrett J noted in Re Walker [2005] NSWSC 557; (2005) 221 ALR 320 at [6] ("Re Walker"), "[a] liquidator in a creditors' voluntary winding up, as in any other winding up, has an entitlement to be remunerated and an entitlement to have the remuneration fixed". 60 There is some doubt about the Court's powers to achieve this result. The current liquidators relied upon ss 473 and 511(1)(b) of the Act. 61 However, the winding up is a creditors voluntary winding up, so that it is also necessary to consider s 499 of the Act. 62 At least Mr Hamilton and the current liquidators are Court appointed liquidators, so that s 473 of the Act may apply to the question of their remuneration. The difficulty in this case is that, in the absence of a resolution put to creditors to approve remuneration, the Court does not have power itself to approve remuneration by s 473: Re Interchase Corp Lted (in prov liq) (1993) 44 FCR 501; Australian Securities and Investments Commission v Drury Management Pty Ltd (in liq) [2005] QSC 306; (2005) 55 ACSR 425. 63 Although the liquidators sought an order that the Court dispense with the requirement to convene a meeting of creditors, pursuant to s 473(4) of the Act, no source of power for that order was identified. 64 Section 499(3) provides: The remuneration to be paid to the liquidator may be fixed: (a) If there is a committee of inspection - by that committee; or (b) By resolution of the creditors. 65 Section 499(3A) provides: (3A) If: (a) no remuneration has been fixed under subsection (3); and (b) a meeting of the company's creditors is convened; and (c) a resolution under paragraph (3)(b) cannot be passed because of the lack of a quorum; and (d) there has been no previous application of this subsection to the remuneration of the liquidator; the creditors are taken to have passed a resolution under paragraph (3)(b) determining that the liquidator is entitled to remuneration of: (e) whichever is the greater of the following amounts: (i) $5,000; (ii) if an amount is specified in regulations for the purposes of this subparagraph - that amount; or (f) if the liquidator determines a lesser amount - that lesser amount. 66 In this case, there is no prospect of the liquidators' remuneration being fixed by resolution of the creditors. Section 499(3A) has no relevant application. This is not a case in which a resolution cannot be passed because of the lack of a quorum: the problem is that Azzopardi Industries and Azbuild will not agree to the remuneration that the liquidators would propose. This finding is based on the following matters: (1) The history of disputation between Azzopardi Industries and or Azbuild and the various liquidators of TPS, including the evidence before the court of lengthy and protracted correspondence; (2) The May 2011 resolution of creditors not to vote on remuneration for the first and second liquidators; (3) The contentions on behalf of Azzopardi Industries and/or Azbuild to the effect that Mr Gladman did not act in the interests of the creditors; (4) Ms Thurai Rajah's statement, by letter dated 19 November 2014, to Mr Lancaster that her clients "object to the remunerations claimed by Mr Bill Hamilton". By email dated 8 July 2014, Mr Thurai Rajah had told Mr Beattie and Mr Lancaster that her clients denied Mr Hamilton's entitlement to claim a lien for unpaid costs over his file; (5) The submission that "[g]iven that the proposed [deed of settlement] favours the liquidators and directors, and leaves very little for the creditors; and given that [Azzopardi Industries and Azbuild] are the major creditor (sic) of TPS, the [deed of settlement] would have been unlikely to have been accepted at a creditor's meeting in its current terms"; (6) The submission that "the outstanding issue of the bank guarantee, together with a lack of investigation into whether there are any causes of action available to the creditors in relation to the former directors, shareholders and stakeholders provide sufficient basis for the Court to require further information from the parties as to both assets and costs. 67 Section 499(3A) does not apply because no meeting of company's creditors has been convened in compliance with s 499(3A)(b). 68 In those circumstances, the decision in Re Walker supports conclusion that the Court has power under s 511(1)(a) of the Act to determine the liquidators' remuneration, which can be exercised by a Registrar.

Priority payment to Azzopardi Industries and Azbuild 69 The liquidators seek an order pursuant to s 564 of the Act that, after payment of the remuneration, costs and expenses of the liquidators, Azzopardi Industries be afforded priority, ahead of unsecured creditors, for reimbursement of any funds paid to any of the liquidators by the tenth defendant. 70 Azzopardi Industries has foreshadowed that it may seek priority ahead of the liquidators but acknowledges that the question may well be moot depending upon the amounts of remuneration fixed by the Registrar. 71 Accordingly, I will direct that any application by Azzopardi Industries for an order pursuant to s 564 of the Act be made within 21 days of the determination of the various liquidators' remuneration. 72 I will also stand over paragraphs 10 and 11 of the Interlocutory Process to 31 March 2015.

Costs sought against Azzopardi Industries and Azbuild 73 The plaintiff and the ninth defendants sought an order for costs against Azzopardi Industries and Azbuild relating to their application recorded in written submissions dated 4 December 2014. 74 The Interlocutory Process was filed on 20 November 2014 and made returnable on 24 November 2014. In my view, it was not unreasonable for Azzopardi Industries and Azbuild to seek an adjournment of the Interlocutory Process to enable them to consider the proposed settlements. The hearing of the Interlocutory Process took place on 9 December 2014 and the Court's orders were made on 15 December 2015. While Azzopardi Industries and Azbuild were unsuccessful in their application, it was made in the context of hearings which, in my opinion, were necessitated by the Interlocutory Process itself. In those circumstances, I consider the appropriate order to be that the costs of the Interlocutory Process, including costs relating to the application made by Azzopardi Industries and Azbuild be the costs of the liquidation. I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.