AMP Music Box Enterprises Ltd v Hoffman

Chronology of events

1. I should set out a brief chronology of events, drawn from the affidavit evidence. Mr Johnson also relied on two further chronologies, one of which had (properly) excluded a substantial part of the material on which Corbis now seeks to rely, which was then subject to the implied undertaking from which Corbis had not then been released, and a further chronology which included that material after it was released from that undertaking. I have not found it necessary to deal in any detail with the events in issue in the Earlier Proceedings, or the events which Corbis contends would support further proceedings by the Company against Mr Ridley. Where both Corbis and the liquidators accept that the matters to which Corbis refers warrant further investigation, it is not necessary or appropriate for me to form or express any view as to the substantive merits of further proceedings which have not yet been commenced and which may ultimately be listed before me or another judge of the Court.
2. By way of background, Corbis provides architectural and engineering project delivery services internationally, and across a range of industries (Doble 27.5.16 [5]). It appears that, in about 2011, the Company agreed to provide Hassell with architectural project delivery services in respect of two projects, and the Company engaged Corbis to provide architectural services in relation to the projects.
3. It appears that another entity, Ridley & Co, was incorporated on 29 June 2012, and its directors include Mr Joshua Ridley and two other persons. On 9 October 2012, the Company changed its name to Ridley Capital Holdings Pty Limited.
4. On 6 March 2013, Corbis sent the Company a demand for a debt claimed by Corbis. On 22 May 2013, Corbis' solicitors sent a further letter of demand. Also on 22 May 2013, the Company applied to be deregistered by the Australian Securities and Investments Commission ("ASIC"). That deregistration did not proceed. On 6 September 2013, Corbis commenced proceedings against the Company in respect of the alleged debt in the District Court of New South Wales; the Company subsequently filed a Defence and Cross-Claim, and Corbis filed a Defence to that Cross-Claim; and the proceedings were transferred from the District Court to this Court in July 2014.
5. On 18 November 2015, the Court entered judgment against the Company in the Earlier Proceedings in the amount of $660,862.62 (Copeland 9.11.16 [6]). Two days after Corbis obtained judgment against the Company, on 20 November 2015, Messrs Copeland and Whitton were appointed liquidators of the Company in a creditors' voluntary winding up. On 23 November 2015, the liquidators issued their notice of a first meeting of creditors. I will refer to aspects of that notice below. Mr Copeland also refers to several searches undertaken by the liquidators, on their appointment, which do not disclose any real property, personal property or motor vehicles owned by the Company, and his evidence is that inquiries of financial institutions have disclosed two bank accounts with a balance of $956.36. Mr Copeland's evidence is that he has received three informal proofs of debt from Mr Ridley, Corbis and Sparke Helmore but will not proceed to call for formal proofs of debt in the winding up, and has not adjudicated any proof of debt, where he does not anticipate that there will be any dividend to creditors in the winding up, at least as matters stand.
6. By letter dated 22 January 2016 the liquidators wrote to Mr Doble advising that: "My investigations into the affairs of the Company have been completed and a report has been lodged with [the Australian Securities & investments Commission ("ASIC")] pursuant to s 533 of the [Corporations Act]. On 24 December 2015, ASIC responded advising its decision that it will not commence any further investigation. Furthermore, in reference to our telephone conversation on 20 January 2016, I note your client's interest in potentially funding the Joint and Several Liquidators to pursue further investigations into the Company. In light of the above, please confirm your client's intentions within 14 days hereof." I pause to note that s 533 of the Corporations Act relevantly provides for a liquidator to provide a report to ASIC in specified circumstances.
7. By letter dated 2 February 2016, Mr Doble advised the liquidators that Corbis: "… is prepared to fund, initially, a public examination of Mr Ridley pursuant to s 596A of the Corporations Act, on the basis that it will pay the legal fees associated with the examination and make a contribution to your remuneration in relation to the application for the issue of the Examination Summons." At that point, Corbis had imposed one limitation upon its commitment to funding an examination of Mr Ridley, namely that it would make an unquantified "contribution" to the liquidators' remuneration, which would implicitly be less than their reasonable remuneration in respect of that examination. Corbis subsequently sought to impose a significant further constraint upon the liquidators' conduct of that examination, to which I will refer below.
8. On 9 February 2016, Mr Doble attended a meeting with Mr Copeland where Mr Copeland identified a conflict of interest which he considered that Mr Doble would have in acting for the liquidators in relation to any public examinations in relation to the examinable affairs of the Company, on the basis that Mr Doble acted for a creditor of the Company (Doble 24.5.16 [11]). It is implicit in Mr Doble's evidence that by that time Corbis had indicated that it sought to have its solicitors act for the liquidators in the examination, or alternatively the liquidators had anticipated, correctly, that that was the case. Mr Doble, at the time of his dealings with the liquidators and up to the point of this hearing, does not accept that such a conflict existed. His evidence, admitted with a limitation under s 136 of the Evidence Act as evidence of his understanding only, was that: "I do not believe that I have a conflict of interest if I were to act for a liquidator of [the Company] in respect of the examinable affairs of that Company." I will assume that Mr Doble's evidence was intended to address the subject matter of conflicts more generally, including conflicts of duty and duty and duty and interest, since there would have been little point in Mr Doble observing that he did not have a conflict of interest, if he did not also believe that he did not have a conflict of duty and duty or a conflict of duty and interest.
9. By letter dated 16 February 2016, Mr Copeland wrote to Mr Doble noting that Corbis was prepared to fund a public examination of Mr Ridley. He referred to the recent meeting with Mr Doble and indicated that: "[I]n order for me to consider whether there are any examinable grounds forming the basis of any potential examination, [Corbis] is required to submit to me all available evidence in support of [its] assertions surrounding the potential phoenix activity together with details of the purported transfer of a $4m contract to a related entity of the Company." The reference to "potential phoenix activity" was to an allegation made by Corbis, which was repeated in strong terms in the course of submissions in this hearing, that the Company's business had been transferred to related entities within the Ridley Group, prior to or in connection with it being placed in liquidation. Mr Copeland also referred in that letter to having obtained quotes from three "independent law firms" which he would be prepared to engage for the purposes of conducting a two day examination, and referred to those quotes, which varied somewhat, in the estimate of legal fees, disbursements and counsel's fees. The reference to "independent law firms" implicitly distinguished the independence of those firms from a lack of independence facing Corbis' solicitors in representing the liquidators in the matter. It seems to me that that distinction was properly drawn, for reasons that I will note below.
10. That letter also estimated the liquidators' remuneration as $22,000 in respect of the examination, which was the same whichever law firm was retained. Mr Copeland also advised that he would require an up-front payment into his trust account before commencing any work in relation to the public examination. That requirement does not seem to me to have been unreasonable, where the liquidators would at least have been required to assume liability for solicitors' and counsel's fees in respect of the examinations, and s 545 of the Corporations Act provided that they were not liable to incur such expense in relation to a winding up of a company unless there was sufficient available property. No question needs to be determined in this application whether Mr Copeland ought properly have been prepared to proceed with examinations on the basis, for example, that he was permitted to retain independent solicitors and be advanced their costs and part of his remuneration, since Corbis would not fund the former and, perhaps unsurprisingly once they reached deadlock on that point, neither the liquidators nor Corbis raised the latter possibility.
11. Mr Doble does not address, in his affidavit evidence, whether he provided the information requested by the liquidators in the period from mid-February 2016 until early March 2016, although it appears that he did not, since the liquidators subsequently followed up in that respect. By letter dated 4 March 2016, the liquidators followed up on their earlier request that Corbis clarify its position in respect of the funding of a public examination of Mr Ridley and provide evidence of the allegations it had made as to "phoenix" activity, as follows: "Would you please confirm your client's intention regarding the funding of a public examination of Mr Ridley, the director of the Company. Furthermore, would your client please provide all available evidence in respect of [its] assertions surrounding the potential phoenix activity together with details of the purported transfer of a $4m contract to a related entity of the Company."
12. On 14 March 2016, Mr Doble responded to the liquidators' letter dated 16 February 2016 indicating that: "I am instructed that [Corbis'] offer to fund the public examination of the director of the Company is on the basis that this firm conduct the examination and on the basis of very limited remuneration to the liquidator pending any recovery. Would you kindly advise by return whether you are prepared to conduct examinations on that basis?" That letter did not respond to the liquidators' request (made about a month before) for access to documents supporting the conduct of a public examination. Mr Copeland, rightly, recognised the importance of access to such documents, and a file note made by Mr Doble on 14 March 2016 recorded a telephone conversation with Mr Copeland who: "… said he really needs to see the material upon which [Corbis] relies upon [sic] before he can make a determination as to whether to proceed with the public examination using this firm or another firm. He would really need to see something fraudulent (being something he has not seen before) in order to justify an examination."
13. Mr Johnson, in submissions, criticised the liquidator's reference to "need[ing]" something "fraudulent" to support an examination. Plainly, an examination may be justified by something less than fraud, although the existence of fraud is a matter that would strengthen a liquidator's potential claims, strongly support the conduct of an examination, and was at least implicit in the allegations that Corbis had already made that the Company or its related parties had engaged in phoenixing activity and had diverted a substantial contract to a related entity of the Company. It does not seem to me to have been unreasonable for Mr Copeland to have directed his attention, at least in part, to whether there was evidence of the "fraud" that was implicit in Corbis' allegations.
14. In late April 2016, at about the time that Mr Doble sent a letter to Mr Copeland attaching a subset of the relevant documents, to which I will refer below, he also had a conversation with another liquidator, Mr Lock, one of the persons who is now proposed for appointment in place of the liquidators. Mr Doble's evidence is that: "During that conversation, Mr Lock informed me and I believe that he would be prepared to conduct public examinations in relation to the examinable affairs of [the Company] on the basis that he would only seek to be paid remuneration in the effect [sic] that there were recoveries arising out of antecedent transactions in respect of [the Company]. He also informed me and I believe that he [w]as content for my firm to conduct the public examinations, to take action in respect of any voidable antecedent transactions and that he saw no conflict of interest in my firm so doing." Mr Doble's evidence as to Mr Lock's perception as to whether Mr Doble's firm had a conflict of interest was admitted with a limiting order, under s 136 of the Evidence Act, as limited to Mr Lock's understanding only. There is no evidence as to the extent of information that was provided to Mr Lock before he indicated that he was content to retain Mr Doble's firm and that he saw no conflict of interest in Mr Doble's firm so acting. As I will note below, it is not necessary for me to decide whether such a conflict existed, in fact, where Mr Doble and his firm have not had an opportunity to be heard as to that matter; it is therefore also not necessary to determine whether the view expressed by Mr Lock would have reasonably been open to him, if he were properly informed of the relevant facts; and it is sufficient in the present case to find, as I will below, that the contrary view was reasonably held by Mr Copeland.
15. Mr Neggo, who appears for the liquidators, submits that an inference arises from Mr Doble's contact with Mr Lock, before or at about the same time that documents were provided to Mr Copeland, that Corbis had by this time started to implement a strategy to remove the liquidators, where they were unlikely to acquiesce in its requirement that they work without remuneration for time spent on the examinations or that they retain Corbis' solicitors to act for them. I do not draw that inference, particularly where Mr Doble was not cross-examined to squarely put that suggestion to him. However, it is clear that by that time Corbis was at least preparing for the possibility that it would seek to remove the liquidators, either for that reason or because the issues in respect of the examinations otherwise could not be resolved.
16. On 28 April 2016, Mr Doble sent a letter to Mr Copeland attaching documents, which were described as being in support of Corbis' claims of: "phoenix activity, as indicated by the future opportunities diverted from [the Company] to Ridley & Co Pty Ltd … ." The documents that were provided to the liquidators with that letter were a small subset of the documents produced in the Earlier Proceedings on which Corbis now relies in its application to remove the liquidators. The basis of the selection of which documents were, and were not, provided to the liquidators was not explained by Mr Doble in his affidavit evidence and he was not cross-examined as to that matter. That selection is not explicable by the existence of the implied undertaking attaching to documents produced on compulsory process in the Earlier Proceedings, because both the subset of documents that were provided to the liquidators and the larger number of documents that were not, were subject to the implied undertaking, from which Corbis had not then been, but later was, released. Mr Doble did not refer, in that letter, to the larger number of other documents that had also been produced on compulsory process in the Earlier Proceedings, even to draw the liquidators' attention to their existence. It seems to me that that omission deprived the liquidators of an opportunity to consider the potential relevance of those documents and whether the liquidators should, or should request Corbis to, make an application for release from the implied undertaking in respect of the documents that Corbis had not provided, which would properly have extended to the subset of the documents that Corbis had already provided.
17. The selection of documents attached to that letter provided evidence that, in April 2013, the Company had been engaged in discussions of future projects with at least one third party and that, by late 2013, Ridley & Co was dealing with that third party and in respect of other projects. It seems to me that those documents left open the question whether the activity could potentially be characterised as "phoenix activity", involving any breach of directors' duties or other duties by the directors of the Company, or as a wrongful diversion of business of the Company to Ridley & Co, which would have depended upon matters which those documents did not address. The fact that business of a kind undertaken by one entity, or with a customer of that entity, is later undertaken by another entity may be necessary to but not sufficient, without more, to establish a breach of such duties.
18. On 5 May 2016, Mr Copeland advised Mr Doble that: "I have reviewed the documents and note that the information contained therein does not evidence phoenix activity and does not give rise to sufficient grounds to conduct a public examination of the director. Accordingly, I will now be proceeding to finalise the liquidation."
19. The position taken by Mr Copeland in that letter was strongly criticised by Mr Johnson in the course of submissions. However, it should be recognised that, at that time, the liquidators were unfunded for further work in the liquidation; Mr Copeland had requested "all available evidence" in support of Corbis' allegations of "phoenix activity" and the transfer of a substantial contract to a related entity of the Company; he had been provided with a relatively small number of documents that did not provide a strong basis for those allegations; his attention had not been drawn to the existence of other documents which might support those allegations; and Corbis, by its solicitors, had made express, by its letter dated 14 March 2016, that it would only fund a public examination of Mr Ridley on the basis that its solicitors conducted the examination, as well as on the basis of "very limited remuneration" to the liquidators pending any recovery. For the reasons I explain below, Mr Copeland's view that Corbis' solicitors would be subject to a potential conflict, whether of duty and duty or duty and interest, in being retained by the liquidators to conduct the examinations, at the time they had a continuing retainer from Corbis, was well-founded. In these circumstances, it seems to me that Mr Copeland could reasonably take the view that he had little real alternative, given the conditions which Corbis had imposed upon the conduct of an examination, to proceeding to finalise the liquidation.
20. By letter dated 9 May 2016, Corbis' solicitors advised Mr Copeland that they were instructed to apply to the Court to appoint a special purpose liquidator for the purpose of conducting a public examination of the director of the Company and noted that, alternatively: "[I]t may be appropriate to apply to the Court to have you removed as liquidator under s 503 of the Corporations Act 2001." This application was ultimately brought on the latter and not the former basis, although Mr Johnson sought to invoke the principles applicable to an application for an appointment of a special purpose liquidator, as I will note below, in respect of the different application that was brought. On 10 May 2016, Messrs Sheahan and Lock consented to act as joint and several liquidators of the Company, should creditors so resolve or should the Court so order.
21. As I noted above, this application was brought by Corbis on 25 May 2016. On 2 September 2016, Corbis filed a motion in the Earlier Proceedings seeking to be released from the implied undertaking in relation to a limited range of documents produced on subpoena in those proceedings, being those that it had provided to the liquidators under cover of the letter from its solicitors dated 28 April 2016. Orders were made before Hammerschlag J, on 9 September 2016, granting a release from the implied undertaking in respect of that limited range of documents. As I noted above, orders for release from the implied undertaking in respect of the balance of documents in Exhibit A1 were made on the first day of the hearing of this application.
22. By letter dated 10 November 2016, prior to the second day of the hearing of this application, the liquidators' solicitors wrote to Corbis' solicitors addressing several issues in the proceedings. It is common ground between the parties that that letter repeated matters which had been raised, arguably on a without prejudice basis, by an earlier letter dated 3 November 2016, and that those matters had been brought to Corbis' attention by that earlier letter. The Iiquidators there accepted that at least some of the documents produced by Hassell on subpoena may be indicative of transactions which may justify an examination of Mr Ridley, if there were available funds to conduct such an examination. The letter identified several matters on which the liquidators relied to contend that the Court would not consider that matter to be relevant to an application for their removal. The liquidators there expressed the view that there was nothing in the documents produced by Sparke Helmore on subpoena that would alert a fair-minded independent observer to the likelihood of phoenix activity, and it seems to me that that observation was correct. The liquidators also submitted that there was nothing in the documents in the liquidators' possession, at the relevant time, which would alert a fair-minded independent observer to the likelihood of phoenix activity, and it seems to me that that observation was also correct. The liquidators' solicitors also contended that, in any event, the liquidators could not be required to carry out an examination without being funded to do so, or be required to retain Corbis' solicitors to act on the examination.
23. The liquidators offered two alternative proposals for resolution of the proceedings, both of which involved dismissal of the application for their removal with Corbis to pay their costs of that application. The first proposal contemplated that Corbis would indemnify the liquidators in respect of their remuneration and expenses of conducting an examination of Mr Ridley; and that an independent, third party firm, being neither Corbis' solicitors nor the solicitors retained by the liquidators to defend this application, could be retained by the liquidators. The liquidators also offered to permit Corbis to select that firm from three firms nominated by the liquidators. Alternatively, the liquidators pointed to the possibility that Corbis could itself apply to ASIC for authority to apply for the issue of a summons for examination, and the liquidators would take no steps to oppose or impede that application, and would take no steps to finalise the winding up pending such an examination undertaken by Corbis, with ASIC's approval, and pending any further discussions as to what steps would be taken following the examination, or any appeal by Corbis from a decision made by the liquidator in that respect. It seems to me that each of those proposals would have allowed the examination of Mr Ridley to proceed, on a proper basis, but neither of them was accepted by Corbis, even on a basis that reserved the question of costs for determination by the Court.

The applicable legal principles

1. Mr Johnson submits, and I accept, that Corbis has standing to make an application for the removal of the liquidators as a creditor of the Company: Re Giant Resources Ltd [1991] 1 Qd R 107. Mr Johnson also submits that Corbis is the only creditor unrelated to the sole director of the Company in liquidation. It appears that that is the case, so far as the debt originally claimed by Sparke Helmore has been paid by Ridley & Co, and Mr Copeland accepts that there is no evidence supporting Mr Ridley's claim to be an employee of the Company.
2. Mr Johnson accepts that it is for Corbis to establish that a "cause" exists for the removal of the liquidators. Mr Johnson also made clear, in opening, that Corbis did not allege any impropriety on the part of the liquidators, although its submissions and cross-examination of Mr Copeland might at times have suggested the contrary. The matters relevant to an application for removal of a liquidator include not only whether that course would be for the benefit of the liquidation, and the body of persons interested in it, but also the need for confidence in the integrity, objectivity and impartially of the winding up. In Multi-Core Aerators Ltd v Dye [1999] VSC 205 at [48]; (1999) 17 ACLC 1172, which was quoted by Bergin CJ in Eq in SingTel Optus Pty Ltd v Weston [2012] NSWSC 674; (2012) 90 ACSR 225, although held not to be applicable in that case, Warren J (as her Honour then was) noted that "rancour" between the parties would not be sufficient to require removal of a liquidator, particularly if hostility had emanated from the party seeking the removal, rather than from the liquidator, where removal on that basis "would provide a creditor with an opportunity to manipulate the liquidation of the company". Nonetheless, I proceed on the basis that a loss of confidence based on reasonable grounds by the creditors may, although it will not necessarily, justify removal of a liquidator: City & Suburban Pty Ltd v Smith (as liquidator of Conpac (Aust) Pty Ltd (in liq) (1998) 28 ACSR 328 at 338; Re St Gregory's Armenian School (in liq) [2012] NSWSC 1215; (2012) 92 ACSR 588 at [30].
3. In AMP Music Box Enterprises Ltd v Hoffman [2002] BCC 996, in a passage that was also quoted with apparent approval by Bergin CJ in Eq in SingTel Optus Pty Ltd v Weston above at [164], Neuberger J (as his Lordship then was) observed that: "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 … 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."
4. In Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) [2003] NSWSC 496; (2003) 21 ACLC 1330, Austin J observed at [58] that: "The words 'cause shown' indicate that a liquidator is not to be removed unless there is some ground for removal, and the ground must be established by evidence. However, 'cause shown' is not a narrow concept. It is open to the applicant for removal to point to any conduct or inactivity on the liquidator's part that provides a basis for the conclusion that he or she should be removed, ranging from moral turpitude, to bias or partiality, lack of independence, incompetence or other unfitness for office. But the concept of 'cause shown' is not limited to matters relating to the unfitness of the liquidator to hold office. In Re Adam Eyton Ltd; ex parte Charlesworth (1887) 36 Ch D 299, speaking of a statutory formulation where the words used were "due cause shown" rather than 'cause shown', Bowen LJ said (at 306): "In many cases ... unfitness of the liquidator will be the general form which the cause will take upon which the Court in this class of case acts, but that is not the definition of due cause shown. In order to define 'due cause shown' you must look wider afield, and see what is the purpose for which the liquidator is appointed. … '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."
5. In Apple Computer Australia Pty Ltd v Wily [2003] NSWSC 719; (2003) 46 ACSR 729 at [37], Barrett J (as his Honour then was) referred to Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) above and observed that: "It is thus clear that 'cause shown' is a broad concept concerned not so much with a search for particular instances of wrong or inappropriate conduct (although a particular event of that kind may be sufficient) but with a more general enquiry into what is for the benefit of the administration and the body of persons interested in it, as well as the maintenance of confidence in the integrity, objectivity and impartiality of that administration. Removal is warranted, in a situation such as the present, if, taken as a whole, the conduct of the liquidator can be seen to be such as to ground in the mind of a reasonable observer a perception of lack of impartiality as among the interests he is committed to serve and lack of objectivity in serving those interests."
6. In Re St Gregory's Armenian School (in liq) above Brereton J referred to AMP Music Box Enterprises Ltd v Hoffman above and SingTel Optus Pty Ltd v Weston above at [164] and observed (at [24]) that the onus of showing cause for removal of a liquidator is not "lightly discharged" and that: "… it should not be seen to be easy to remove a liquidator merely because it can be shown that in one or possibly even more respects, his or her conduct has fallen short of the ideal. Otherwise, applications for removal by creditors who have not had their preferred liquidator appointed, or who are for some other reason disgruntled, would be encouraged... ." His Honour also referred (at [25]) to the proposition, well established by the several authorities noted by his Honour, that an order for removal will only be made if it is demonstrated that it would be for the better conduct of the liquidation or "to the general advantage of persons interested in the winding up" or "in the best interests of the liquidation".
7. It is also important that the Court should not overlook the professional consequences for a liquidator of an order for removal: SingTel Optus Pty Ltd v Weston above at [229]; Re St Gregory's Armenian School (in liq) above at [26]. It will be harder to establish a case for removal of a liquidator where a liquidation is well advanced and he or she has become acquainted with the company's affairs: Re Biposo Pty Ltd (1995) 17 ACSR 730 at 734; SingTel Optus Pty Ltd v Weston above at [165]. That proposition is, however, of lesser weight in the present case, where the resource constraints affecting the liquidators have the result that the investigations undertaken to date have been limited. There is also authority that "cause" for the removal of a liquidator will generally require more than a single decision of the liquidator, since (as I note below) an appeal to the Court would properly be brought in respect of a particular decision of the liquidator, even if the substance of the complaint is that that decision demonstrates incompetence, bias or unfitness for office: Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) above at [66]; Re St Gregory's Armenian School above at [25].
8. Mr Johnson submits that the question of "cause" for the purposes of s 503 of the Corporations Act is for practical purposes no different from the test which would be appropriate in the case of the appointment of a "special purpose liquidator". In Lo v Nielsen & Moller (Autoglass) (NSW) Pty Ltd [2008] NSWSC 407; (2008) 26 ACLC 497, Barrett J (as his Honour then was) considered an application for the appointment of a special purpose liquidator, and was there satisfied that it would be beneficial for the administration of the winding up and in the interests of the general body of creditors for that to occur, where a funder was willing to finance investigations only if the liquidator was someone other than the existing liquidator. In Re Ambient Advertising Pty Ltd (in liq) [2015] NSWSC 1079, Robb J considered an application for the appointment of a special purpose liquidator, rather than for the removal of the existing liquidators. The liquidators were there unable to complete investigations in an unfunded winding up, and a funder was not prepared to provide funding if investigations and proceedings were carried out by the liquidators. Robb J was there satisfied that investigations would not be pursued, if the Court did not make the orders sought, and the liquidators consented to those orders. That case is distinguishable, both because his Honour reached a finding, which I do not reach below, that it was highly likely that investigations would not be pursued unless the order was made; and because the application did not involve the removal of the existing liquidators and was not opposed by them.
9. In State of Victoria v Goulburn Administration Services (in liq) [2016] VSC 654, Sifris J also dealt with an application for the appointment of special purpose liquidators. In that case, the Victorian Department of Education and Training was willing to fund, by indemnity, investigations into the affairs of two companies, but only if special purpose liquidators were appointed to conduct the winding up in relation to the matters the subject of the investigations, where the existing liquidators had been selected by the directors or solicitors for the companies. His Honour referred to the decisions in Lo v Nielsen & Moller (Autoglass) (NSW) Pty Ltd above and Re Ambient Advertising Pty Ltd (in liq) above and made that appointment.
10. It seems to me that the question of removal of a liquidator, and the appointment of a special purpose liquidator, arise in somewhat different contexts. It also seems to me to be preferable to approach the question of the removal of a liquidator by reference to the authorities that are directed to that question, rather than by reference to authorities dealing with a different question. It also does not follow that, even if the Court might be prepared to appoint a special purpose liquidator, because of a view as to funding taken by a particular creditor, whether reasonably or unreasonably, it should remove an existing liquidator simply because a particular creditor, for whatever reason, will not fund work by that liquidator.

The issues as to the suggested examination of Mr Ridley

1. I should first address the question whether the liquidators could reasonably have taken the view that they should not retain Corbis' solicitors to conduct an examination of Mr Ridley, which Corbis did not accept. I have addressed the correspondence as to this matter in setting out the chronology of events above. It was put to Mr Copeland in cross-examination, but he did not accept, that it would be reasonable for him, while reserving his right to obtain independent advice, to use the services of a legal practitioner who was familiar with the transactions and did not have to reinvestigate them. He did not accept that proposition and observed that: "I considered that there would be a conflict of interest to do a public examination from Corbis' own lawyer, which is why I recommended that we get an independent lawyer to undertake the public examination." (T84)
2. Mr Johnson also put to Mr Copeland, in a proposition that may be correct but hardly undermined Mr Copeland's concern, that it may be better to say "conflict of interest and duty" rather than "conflict of interest", and Mr Copeland responded, reasonably enough, that: "I just considered it was a conflict of interest, and there was no independence and I wanted a lawyer that would be independent with proceedings going forward." (T84)
3. Mr Copeland also did not accept that he had any knowledge that it would be cheaper to use the services of Corbis' lawyers, because he did not receive a quote from them. It is at least possible that that would not be the case, if the hourly rates by an independent solicitor retained by the liquidators were significantly less than the hourly rates of Corbis' lawyers, or if an independent solicitor was prepared not to charge for familiarisation time, in order to secure the retainer in the examination and any subsequent proceedings. Those matters have not been fully explored in the proceedings. Mr Copeland fairly acknowledged that he recognised that Corbis' lawyers would have a "substantial head start" over anyone else in the investigation, and indicated that he had advised Corbis' solicitors that he would be happy for that solicitor to supply questions for a public examination (T85).
4. It is not necessary for me to find that Mr Doble and his firm would in fact have been in a position of conflict of duty and interest or conflict of duty and duty, had the liquidators retained them, where they continued to act for Corbis. That position did not arise because the liquidators declined to take that course. I am also conscious that, although Mr Doble gave evidence in the proceedings, he was not cross-examined and such an allegation has not squarely been put to him, and he and his firm have not had an opportunity to be heard in their own right. It is sufficient for present purposes that I find, as I do, that the liquidators, and specifically Mr Copeland, were in fact concerned that a conflict would arise from their retaining solicitors with an ongoing retainer for Corbis in respect of the proposed examination and that that concern was reasonably based. That matter could also properly be characterised as a significant threat to the liquidators' independence.
5. In particular, there was reason to be concerned that the solicitors retained by Corbis would, in acting for the liquidators in the proposed examination, face a real and sensible conflict between their duty to take all steps that were properly available to advance the interests of Corbis, as a party to a long running dispute with the Company, and their duty to advise the liquidators who may be required to have regard to other considerations, including the public interest, in respect of the conduct of, and scope of, an examination. It seems to me that, in any event, the liquidators could also properly be concerned as to a conflict of interest and duty, since Mr Doble's and his firm's interest in preserving its existing client relationship with Corbis was also potentially in conflict with the duties that would be owed to the liquidators, if they were retained to act for the liquidators in the examination. It also seems to me that such a conflict would have been more difficult to address or manage, even if it were notionally possible to do so, where Mr Doble did not then or now accept that it existed.
6. Mr Johnson took issue with the suggestion that it would have been inappropriate for the liquidators to retain the services of Corbis' legal advisers, on the basis that they had familiarity with the trading activities and business of the Company, by virtue of their involvement in the previous litigation between Corbis and the Company. Mr Johnson submitted that insolvency practitioners must act in a "commercially [sic] and efficient manner" with a view to fulfilling their duties. Mr Johnson also referred to Coshott v Burke [2013] FCA 553 as authority for the proposition, which I accept, that a conflict of interest is not necessarily conclusive as to the legal advisers which should be permitted to conduct an examination. Mr Johnson also relied on my decision in Re Kala Capital Pty Ltd (in liq) [2012] NSWSC 1073, where I declined to prevent a liquidator retaining a solicitor previously engaged by a major creditor to conduct a liquidator's examination in the particular circumstances. That decision is, of course, readily distinguishable since the liquidator in that case was comfortable, rather than uncomfortable, with taking that course.
7. On the other hand, Mr Neggo points out, and I accept, that the courts have regularly cautioned against an insolvency practitioner engaging the solicitors who act for a substantial creditor, although there is no absolute rule preventing that course. Those cautions have been put in strong terms. In Smarter Way (Aust) Pty Ltd v D'Aloia [2000] VSC 408; (2000) 35 ACSR 595 at [26], Byrne J observed that an administrator's engagement of the solicitors retained by the appointing chargee "is, in general, undesirable", where creditors are entitled to an administrator's independent opinion. In Commonwealth Bank of Australia v Fernandez [2010] FCA 487; (2010) 81 ACSR 262 at [89], Finkelstein J observed that: "In Smarter Way (Aust) Pty Ltd v D'Aloi (as admin of) Smarter Way (Aust) Pty Ltd [above] Byrne J spoke about the undesirability of an administrator engaging solicitors who act for a secured creditor: at [26]. He said that such a course was undesirable. I would go one step further than did Byrne J. Not only should an administrator not appoint solicitors retained by the secured creditor, they should not appoint solicitors who are on the secured creditor's panel of solicitors. I think that solicitors on a secured creditor's panel are just as likely to be perceived as loyal to the secured creditor as is the solicitor who happens to be retained by the secured creditor."
8. In Re Kala Capital Pty Ltd (in liq) above, although I reached the result on which Mr Johnson relies, I also observed (at [29]) that: "I accept that it is generally undesirable for a liquidator to engage solicitors who act for a substantial creditor: Smarter Way (Aust) Pty Ltd v D'Aloia [above]. This is, however, not an absolute rule… ."
9. In Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 1613 at [14], I similarly observed that: "… liquidators and provisional liquidators to remain conscious of the reservations expressed by Byrne J in Re Smarter Way (Aust) Pty Ltd; Smarter Way (Aust) Pty Ltd v D'Aloia (as admin of Smarter Way (Aust) Pty Ltd) [above] at [26] as to the retainer by an insolvency practitioner of solicitors who act for a secured creditor. On the other hand, I accept that in some circumstances it may be appropriate for a liquidator or provisional liquidator to retain solicitors who have previously been engaged by a secured creditor to act for a company in liquidation in proceedings, although considerable care needs to be taken in that regard and the liquidator will need to remain alert both to his obligations as an officer of the Court and to the possible need for independent advice: Re Mustang Marine Australia Services Pty Ltd [2012] NSWSC 620."
10. In IND Energy Inc (a company incorporated in the British Virgin Islands) v Langdon & Rocke [2014] WASC 364 at [138], EM Heenan J similarly noted that, although there is no absolute bar preventing an administrator from seeking and obtaining legal advice from a solicitor who acts for a party interested in the company to which the administrator is appointed, "both Smarter Way and Commonwealth Bank of Australia v Fernandez incline strongly towards the unsuitability of such a practice."
11. It seems to me that a fundamental difficulty with Corbis' approach in this application is that it seeks to remove the liquidators who acted in accordance with the generally preferable approach, because the liquidators declined to take a different approach which is exceptional in character. It does not follow from the fact that the court may accept a liquidator's decision to retain the same solicitor as was retained by a creditor, in some circumstances, that it could or should hold that liquidators are obliged to take that exceptional course where they are uncomfortable with doing so, and that lack of comfort is consistent with the courts' lack of comfort with that approach generally.
12. Mr Johnson also submits that Corbis, which is a creditor with a substantial claim, considers it appropriate that another liquidator should be appointed and that a reasonable person would take the same view. I accept that Corbis plainly takes that view, and appears to have preferred, for some time, that the examination be conducted by liquidators who would not seek to be remunerated for doing so unless funded out of recoveries, and who would accede to Corbis' requirement that they use Corbis' solicitors to conduct the examination. However, it seems to me that, having regard to the importance of independence on the part of a liquidator, a reasonable creditor in Corbis' position would not have insisted on the latter condition, at least after the liquidators made clear they did not consider they could accept it, and a reasonable creditor in that position would not have lost confidence in the liquidators, at least by reason of the liquidators taking a proper view as to that matter.
13. Mr Neggo also submitted, in support of the liquidators' requirement that Corbis fund their remuneration for the examination, that a liquidator is not required to undertake work without remuneration or indemnity. It is by no means clear that either s 545(1) of the Corporations Act, which is directed to the incurring of expenses rather than to remuneration, or the authorities that recognise a liquidator's right to remuneration in general terms, where assets are available for that purpose, go that far, although that view may find some limited support in the observation of Young J (as his Honour then was) in Re Biposo Pty Ltd above at 734 that: "[T]he situation will often occur that there will be little money in the winding up and the liquidator will have to cut corners that he might not otherwise cut, and the court must be very careful not to impose too strict a duty which would stop that happening." There is also some force in Mr Neggo's submission that, even if s 545 of the Corporations Act does not apply to a liquidator's time costs, as distinct from expenses payable to third parties, the principle it reflects should inform an understanding of the liquidator's role. It is not necessary to determine that question in this case, where Corbis' refusal to provide funding for an examination, unless the liquidator used its solicitors, was sufficient basis for the liquidators to decline to proceed with that examination.

Several other criticisms of the liquidators' conduct advanced by Corbis

1. As I noted above, Corbis' case for the liquidators' removal shifted somewhat, or at least expanded, in the course of the hearing. Although Mr Johnson continued to maintain the position that it did not suggest any impropriety on the part of the liquidators, Corbis also advanced several particular criticisms of the liquidators' conduct of the liquidation.
2. Mr Johnson drew attention to matters which appeared to be intended to question the liquidators' independence and submitted that there was a "perceived" lack of independence on their part. Mr Johnson referred to the notice of the first meeting of creditors issued by the liquidators on 23 November 2015, which disclosed that, prior to his appointment as one of the joint and several liquidators of the Company, Mr Copeland met with the Company's director, Mr Ridley, and Mr Isserow, who was there described as "the [C]ompany's head of finance and operations", for the purposes of assessing the Company's financial position and determining whether joint and several liquidators should be appointed. Mr Johnson points out that Mr Isserow may more properly be described as the Ridley Group's head of finance and operations, but it seems to me that little turns on that description for present purposes. The liquidators expressed the view in their "Declaration of Independence, Relevant Relationships and Indemnities" that that meeting did not affect their independence, on the basis that: " - We did not receive any payment; - We obtained an understanding of the [C]ompany's financial position; - The meeting helped us to determine if we had sufficient capacity to accept such an appointment as Joint and Several Liquidators, which we would not have otherwise been able to determine; - The Courts and the ARITA Code of Professional Practice specifically recognise the need for practitioners to provide advice on the insolvency process and the options available, and do not consider that such advice results in a conflict or impediment to accepting the appointment; and - The pre-appointment advice will not influence our ability to fully comply with the statutory and fiduciary obligations in an objective and impartial manner."
3. The notice of the first meeting of creditors also recorded that Mr Ridley had provided an up-front payment to the liquidators of $11,000 to cover their initial remuneration and expenses associated with the creditors' voluntary liquidation of the Company, and there were no conditions on the conduct or outcome of the administration attached to the provision of those funds. It emerged in the course of the hearing that that description was inaccurate, or at least incomplete, so far as that payment had been provided from the Company's funds.
4. The liquidators were later provided a summary of the Company's affairs, signed by Mr Ridley, which identified Mr Ridley as a substantial creditor of the Company in an amount of $1,633,025 and Corbis and Sparke Helmore (who acted for the Company in the Earlier Proceedings) as creditors in lesser amounts. It appears that Sparke Helmore were ultimately paid the amount due to them by Ridley & Co. The liquidators were also provided a report of affairs provided by Mr Ridley, pursuant to the liquidators' request dated 19 November 2015, which again identified a preferential claim of the amount of $1,633,025 by Mr Ridley, and unsecured claims of $697,106, which included Corbis' claim. The report of affairs also identified an amount owed by Mr Ridley to the Company of $7,567, which was there described, without further explanation, as not recoverable.
5. Mr Copeland refers to a conversation with Mr Doble, Corbis' solicitor, at the first meeting of creditors of the Company on 1 December 2015, in which he was asked whether Mr Ridley would be able to claim his full employee entitlement as stated in his report as to affairs, and Mr Copeland had advised that, where Mr Ridley was a director of the Company, he could only claim the amount to which he was entitled under the Corporations Act. Mr Copeland also refers to having been asked whether the liquidators would look into the "transfer of the business" and "the proceeds which have been awarded to Corbis Global" and to his having advised that (Copeland 29.11.16 [8]): "The liquidators will be investigating all the transactions leading up to the appointment once we have been provided with all the [C]ompany records."
6. Mr Ridley also lodged an informal proof of debt which claimed $1,633,025 as "wages from 1 July 2011 to current" and that claim appears to have been admitted for voting purposes at the first meeting of creditors. It seems to me that nothing turns on that, where it appears that no objection was taken to that course at the first meeting of creditors and my attention has not been drawn to any relevant matter that went to a vote at that meeting. Mr Copeland's evidence is that his present understanding is that Mr Ridley's entitlement to be paid wages in priority to unsecured creditors would be limited by s 556(1A) of the Corporations Act to $2,000 and, in any event, his evidence in cross-examination was that he has seen no documents which would support a conclusion that Mr Ridley was an employee of the Company. Mr Copeland also reconfirmed in cross-examination that there was nothing in the liquidators' possession that suggests that Mr Ridley would have been entitled to claims against the Company as an employee (T78). Mr Copeland accepted that he had not raised with the Deputy Commissioner of Taxation the possibility that any amount may be outstanding in respect of a compulsory superannuation contribution in respect of Mr Ridley (T78); however, that is hardly surprising, where there is no evidence that Mr Ridley was an employee of the Company.
7. Mr Copeland was also asked several questions which appeared to be directed to his independence in cross-examination, and accepted that Mr Ridley had contacted him directly in respect of the appointment as voluntary liquidator (T60) and that he had met with Mr Ridley and Mr Isserow for between 45 minutes and an hour on 12 November 2015 (T60). Mr Copeland was given some information about the proceedings brought by Corbis against the Company on that occasion (T61). Mr Copeland's evidence in cross-examination was that Mr Ridley had advanced a claim against the Company for $1,633,025 that reflected several years' outstanding wages, and that Mr Copeland had not found any substantiation of those wages in the Company's financial records, following his appointment (T68). Mr Johnson put to Mr Copeland that he had failed to disclose that matter to the Court in his affidavit evidence; however, the question in issue in these proceedings is not whether Mr Ridley is, or is not, owed outstanding wages by the Company, and it is not apparent to me that Mr Copeland was obliged to make a comment as to that matter, in the absence of any apparent relevance of that comment to the issues in the proceedings.
8. Corbis also criticised the fact that the liquidators had not challenged Mr Ridley's claim to be a creditor at the first meeting of creditors, and had not investigated the discrepancy between Mr Ridley's claim to be a creditor and the Company's financial records, as a basis for their removal. I do not consider that the former raises a real question as to their independence or supports their removal where, as Mr Copeland pointed out, no objection was taken to Mr Ridley's being recognised as a creditor at the first meeting, and no vote was taken to which that recognition was significant. I do not consider the second matter is significant, where Mr Copeland has made clear that, properly, he does not consider the documents held by the Company indicate that Mr Ridley is a creditor of it, and he recognises that, if Mr Ridley were a creditor, the amount for which he would be entitled to prove would be limited as I have noted above.
9. Mr Johnson also submits that the liquidators did not appear to be "interested" in conducting any or any proper investigation into the circumstances of the Company and its relationship with other entities bearing the name "Ridley", in circumstances that "[Mr Ridley] claims to be a substantial creditor which in the circumstances is not [supported] by any of the financial statements and is the initial funder". Mr Johnson also submits that the investigation conducted by the liquidators, prior to indicating that they proposed to finalise the liquidation, was "cursory" in nature and inconsistent with the statement made to Mr Doble at the first meeting of creditors that they would investigate transactions prior to their appointment. Mr Johnson also raises concerns as to the liquidators' willingness to finalise the investigation at an earlier point, with what he submits was "scant regard" to the materials provided to them.
10. Mr Neggo responds that Corbis' submission that the liquidators are not sufficiently "interested" in conducting an investigation is not supported by the chronology of events. Mr Neggo also submits that there are very limited assets in the liquidation, and insufficient assets to cover the costs of a public examination, where Corbis has not offered to indemnify the liquidators for their own remuneration in respect of the costs of examination or the costs of using independent lawyers. Mr Neggo submits that the liquidators cannot be compelled to carry out work beyond their statutory obligations, without remuneration, nor can the liquidators be forced to instruct Corbis' lawyers to act on their behalf. Mr Neggo submits that the material provided to the liquidators prior to the commencement of these proceedings did not strongly support a public examination of Mr Ridley, and emphasises that the liquidators were not provided with all of the relevant information known to Corbis or its solicitors.
11. I recognise that the liquidators appear to have done little to investigate the dealings between the Company and other companies within the Ridley Group. However, it must also be recognised that they were not funded to undertake such inquiries; that s 545 of the Corporations Act makes clear that they were not obliged to incur expenses to undertake such an investigation, unless they were funded to do so or the Court otherwise directed; and, as I have noted above, Corbis did not draw their attention to, or make available to them, the full range of documents which would be relevant to that inquiry, including those produced by Hassell on subpoena in the Earlier Proceedings. As I have noted above, in setting out the chronology of events, it seems to me that the liquidators could reasonably have considered that they had little alternative other than to complete the winding up, where the limited documentation provided to them at that time provided little basis to form a view that an examination was likely to be warranted, ASIC had advised it would not investigate the matter further, and Corbis would not fund them to conduct examinations and had insisted on their using its solicitors to conduct such an examination.
12. It seems to me that Corbis' submission that the liquidators, in fact, lacked interest in conducting an examination, or that there is a perceived lack of independence based upon it, does not have sufficient regard to the facts that the liquidators had requested, but not at any relevant time been provided by Corbis with, the full range of relevant documents. That submission also did not have sufficient regard to the fact that Corbis had sought to require the liquidators to conduct that examination using Corbis' solicitors to do so, and I consider that the liquidators could properly consider they should not proceed on that basis. That submission is also undermined by the fact that the liquidators, now having had access to those documents, have indicated that they consider an examination would be warranted, provided that they are funded for it and permitted to retain independent legal representation. There is no reason not to accept Mr Copeland's evidence as to that matter.
13. It seems to me that these matters raised no real question as to the liquidators' independence or the adequacy of the performance of their role in an unfunded liquidation. It is, of course, commonplace that a liquidator appointed by a company's directors in a voluntary liquidation, and initially partly funded by them or the company, may ultimately conduct examinations of those directors or bring proceedings against them. There is no reason to think that the liquidators would not take that course if a proper basis to do so emerges and they are funded to do so.

Whether the liquidators failed to identify a claim against Sparke Helmore

1. Mr Copeland accepted in cross-examination that he had not investigated the status of Sparke Helmore's initial proof of debt, in the amount of $36,279.80 since his appointment, although he accepted that claim for the purpose of voting at the first meeting of creditors, since there would presently be no dividend to creditors (T68-69). It is not apparent to me that that approach was unreasonable. Mr Copeland's attention was drawn to documents produced by Sparke Helmore on subpoena (Ex A1, 366) which appear to indicate that the relevant invoices were paid by Ridley & Co and he accepted that he had no reason to doubt that matter (T70). Mr Copeland's evidence was that he had not given thought, when reviewing the invoices for the purposes of these proceedings, to whether Sparke Helmore may have received an unfair preference in respect of payments within the period of six months prior to the commencement of the winding up, as he had limited time to review that information (T70). Mr Copeland, somewhat inconsistently, then suggested that he had looked at that that question, and considered that the payments were made "in the normal course of business" (T71).
2. Mr Johnson contended, in closing submissions, that the documents produced by Sparke Helmore in the Earlier Proceedings (Ex A1) raised the possibility that payments had been made to Sparke Helmore that constituted preferences in the period prior to the winding up. That submission had a potential difficulty, not fully explored in submissions, as to whether Sparke Helmore could properly be characterised as an unsecured creditor, where it may have been entitled to rely on a solicitor's lien in respect of its unpaid debts. It does not seem to me that a failure of the liquidators to investigate that matter, by reference to documents that had not been provided to them at any relevant time, provides any real support for the application for their removal.

The position as to funding and alternatives available to Corbis

1. I have referred to the offers made by the liquidators prior to the second day of the hearing above. Mr Neggo submits, plainly correctly, that an "eligible applicant" may apply for a director of a company to be examined under s 596A of the Corporations Act, and an "eligible applicant" includes a person authorised in writing by ASIC under s 9 of the Corporations Act. Mr Neggo submits that it is open to Corbis to apply to ASIC for such authorisation, and points to authority that a creditor may be authorised to conduct such an examination: Re Excel; Worthley v England (1994) 52 FCR 69 at 82; Wainter Pty Ltd, In Re New Tel (in liq) [2005] FCAFC 114 at [248]. Mr Neggo points out, and I accept, that an examination conducted by Corbis in that manner would not give rise to the difficulties which arise in the present case by reason of its insistence that the liquidators use its solicitors.
2. Mr Johnson submitted that Corbis is not prepared to fund the existing liquidators because it has no confidence in them. The evidence establishes at least that Corbis has not funded the liquidators while this application is ongoing. If this application is allowed, the newly appointed liquidators, Messrs Lock and Sheahan, would presumably conduct such an examination without requiring funding from Corbis, and may proceed to retain Corbis' solicitors to conduct that examination, if they hold to the views they have previously expressed despite the conclusions that I have reached above. If this application is dismissed, the possibilities seem to me that, first, Corbis will apply to ASIC to conduct its own examination and will be permitted to do so, in which case it will not be required to fund the liquidators; or, where the liquidators have not been removed, Corbis will recognise that reality and fund them to conduct an examination, and permit them to retain independent representation, rather than leaving the liquidators in a position where they do not conduct the examination; or, third, that Corbis will not do so, and will permit any claims that might be available in the liquidation to be lost. I would not assume, without direct evidence of that matter, that Corbis would take the third course.
3. It also does not seem to me that the Court should remove the liquidators simply because Corbis, as a major creditor or even the only creditor, of the Company claims to have, or has, lost confidence in the liquidators where any loss of confidence is the product, in substantial part, of an unreasonable requirement by Corbis that the liquidators use its solicitors to conduct the examination. It seems to me that that approach would undermine the ability of liquidators to perform their statutory duties, and their independence, since it would increase the risk that they would be removed if they did not simply accede to the demands of major creditors in a liquidation.

Availability of relief under s 1321 of the Corporations Act

1. Mr Neggo submits that, to the extent that Corbis is aggrieved by the decision of the liquidators not to conduct an examination of Mr Ridley, the proper course was for Corbis to bring an appeal from that decision under s 1321 of the Corporations Act, rather than seek the liquidators' removal under s 503 of the Corporations Act. I accept that the authorities indicate that, where a complaint relates to a particular decision of a liquidator, an appeal to a court under s 1321 of the Corporations Act would ordinarily be the proper course: Apple Computer Australia Pty Ltd v Wily above at [36]; Re St Gregory's Armenian School above at [25]. The wisdom of that course is emphasised by this case, where a challenge to the liquidators' view that they did not have sufficient information before them to warrant an examination, or that they were entitled to insist on an indemnity for their remuneration or the right to obtain independent representation, could have been determined under s 1321 of the Corporations Act without the risk of the adverse reputational consequences of an application for removal of a liquidator. That, it seems to me, is another reason not to grant the relief sought in this application.

Summary and orders

1. I have held above that the liquidators reasonably formed the view that they should not retain Corbis' solicitors to conduct an examination of Mr Ridley, on the basis that those solicitors were exposed to a conflict, and that course was potentially inconsistent with the liquidators' independence. It is not necessary to determine whether the conflict that the liquidators reasonably considered existed would properly be characterised as a conflict of duty and duty or a conflict of duty and interest or both. It is also not necessary to determine whether the liquidators could reasonably require that they be paid their remuneration in respect of such an examination in full, since Corbis did not at any relevant time offer to fund the costs of the retainer of independent solicitors on a basis that made a lesser, or no, allowance for the liquidators' remuneration.
2. I have held that Corbis has not established, by reference to the other matters on which it relies, any lack of commitment of the liquidators to undertaking further inquiries, now that they have been provided with documents that establish a basis for them and if they are funded to do so. It does not seem to me that declining to remove the liquidators will necessarily prevent, or likely prevent, further investigation where Corbis may approach ASIC for authorisation itself to conduct an examination, or alter its present position that it will not fund the liquidators to retain independent legal representation. However, even if it does so, it does not seem to me that the Court should remove the liquidators simply because Corbis claims to have, or has, lost confidence in them in the circumstances set out above. Had I not dismissed the application on that basis, I would have dismissed it on the basis that the proper means to address the liquidators' decision not to proceed with an examination in the relevant circumstances was either an appeal under s 1321 of the Corporations Act from the liquidators' decision, which would also have failed in the relevant circumstances or, possibly, an application for appointment of a special purpose liquidator to conduct the examinations, which was not pursued by Corbis.
3. The proceedings are dismissed with costs.

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: 21 December 2016