Australian Securities and Investments Commission v Wily & Hurst

Background

1. Crystal Carwash Pty Ltd operated car wash sites at various locations in the Sydney metropolitan area. At all relevant times, the director of Crystal Carwash (as recorded in the ASIC database) was Mr Anthony Sahade.

The 2007 Companies

1. Each of the 2007 Companies (classified by ASIC as the "Group A" companies) had provided labour hire services to Crystal Carwash. Typically, each 2007 Company was associated with a particular Crystal Carwash site. All but one had their registered office at the same address in Coogee, which (according to the ASIC database) was the home address of Anthony Sahade's father Victor Sahade, who was the director of one of the 2007 Companies.
2. The 2007 Companies went into liquidation, by way of creditors voluntary windings-up, in October 2007, with Mr Wily appointed as liquidator of each of them. They were all deregistered in August 2008.

The 2009 Companies

1. All but two of the 2009 Companies (the exceptions being Stone Cliff and one other), were incorporated on 12 September 2007, and each of them (other than Stone Cliff) had as its registered office the premises of Oliveri Legal Pty Ltd in Darlinghurst. Eleven of the 2009 Companies were in the business of providing labour hire to Crystal Carwash, at one or more of its carwash sites (including the same carwash sites as had previously been serviced by the 2007 Companies), and had a carwash site as its principal place of business. Stone Cliff provided administrative services to Crystal Carwash, and had its registered office and principal place of business at the Coogee address.
2. Five of the 2009 Companies had the same named directors as five of the 2007 Companies had had at the time of their liquidation; a sixth common director, Michael Srour, had also been a director of a 2007 Company (Bondi Carwash Pty Ltd) and later a 2009 Company (Msrour), but resigned within months before their respective liquidations.
3. Stone Cliff (the Group B company) went into liquidation, pursuant to a creditors' voluntary winding-up, on 11 March 2009. Sjain (the Group C company) did so on 6 July 2009; five other companies (the Group D companies) on 20 August 2009; and the remaining five (the Group E companies) on 31 August 2009. The primary unsecured creditors of each of the 2009 Companies were the Australian Taxation Office (for a total, across all the companies, of about $1.15 million), and Employers Mutual (for unpaid workers compensation premiums totalling $163,000).
4. The 2009 Companies have been deregistered, the last of them in May 2011.

ASIC's investigations

1. On 1 July 2009, ASIC's enforcement directorate (ASIC Enforcement) commenced an investigation into Mr Wily as deed administrator of Paddington Bowling Club Limited ("the Paddington Bowling Club investigation"), which was entirely unrelated to the liquidations of the 2009 Companies. On 16 November 2010, ASIC commenced a second investigation into conduct of Mr Wily, which included suspected activities in relation to a litigation funder in Vanuatu ("the Vanuatu investigation"), which again was entirely unrelated to the liquidations of the 2009 Companies. The Vanuatu investigation was amalgamated with the Paddington Bowling Club investigation.
2. Meanwhile, in about September 2010, ASIC learned, through reports in the media, that the Fair Work Ombudsman was investigating Crystal Carwash and its principals. Up to 27 June 2012, ASIC's insolvency practitioners section (ASIC IP) made enquiries and searches of a preliminary nature into several liquidated entities connected with Crystal Carwash.
3. The Paddington Bowling Club investigation was finalised in February 2013, with no action taken against Mr Wily. On 6 November 2013, ASIC IP referred its enquiries into entities associated with Crystal Carwash to ASIC Enforcement, and on 6 December 2013 ASIC Enforcement opened an investigation, under the auspices of (CTH) Australian Securities and Investments Commission Act 2001 ("ASIC Act"), s 13(3), into the liquidations of the 2009 Companies. Ms Plowman, a senior lawyer in ASIC Enforcement with the care and conduct of this matter, says that ASIC awaited the outcome of the Paddington Bowling Club/Vanuatu investigation before deciding to refer the conduct of the liquidations of the 2009 Companies to ASIC Enforcement for investigation.
4. Over the course of its investigation into the liquidations of the 2009 Companies, some 52 notices under ASIC Act, s 33, for production of documents, were issued, and 26 interviews or examinations were conducted. Significantly, Mr Wily was examined, under ASIC Act, s 19, over three days, on 17, 19 and 28 July 2015; and Mr Hurst was examined over two days on 20 August 2014 and 30 July 2015; several other employees of Armstrong Wily were also examined. The last examination was Mr Hurst's second, on 30 July 2015. ASIC explained, reasonably enough, that it was its general practice to conduct examinations after relevant documentary evidence had been obtained, including pursuant to s 33 notices.

Mr Wily's resignation

1. In April 2017, Mr Wily resigned from all appointments as a liquidator or administrator, and retired from practice as an insolvency practitioner. He did not apply for renewal of his registration under the Insolvency Practice Schedule (Corporations) [2] (IPS) before 24 April 2017 (being the expiry day of his registration under the previous regime). Having resigned from all his appointments, Mr Wily is no longer an external administrator of any company. Accordingly, by Corporations Act, s 1560(4), ASIC is therefore taken to have cancelled his registration as a liquidator.
2. On 3 July 2017, Mr Wily made an open offer to undertake to the court, without admissions, to retire permanently from the insolvency profession and not to apply for registration as a liquidator in the future, upon condition that the proceedings be dismissed, with no order as to costs. That offer, which was rejected, was renewed at the hearing, subject to the same conditions.

The proceedings

1. The proceedings were before the Court for directions on 9 February 2017 (when directions were made for ASIC to serve a notice of the documentary material it proposed to tender, and a list of the issues for inquiry), on 27 March 2017 (for directions in respect of ASIC's interlocutory process to set aside a notice to produce issued on behalf of Mr Wily), on 8 May 2017 (when one paragraph of the notice to produce was set aside), and on 15 May 2017 (when directions were made for service of evidence by the defendants and any evidence in reply, and for service of submissions, and the interlocutory application for an order that an inquiry be held was fixed for hearing on 5 and 6 September 2017).
2. The hearing of the application for an inquiry duly commenced on 5 September 2017 and concluded the following day. Although the hearing was economically confined to less than two days, the documentary material was extensive, comprising 17 heavily-laden lever arch folders, although only a selection of it was formally tendered.
3. The responsibility for the time which has elapsed since the hearing, which - although it represents only about 15% of the ten years that has passed since the relevant events in 2009 - is too long, is mine; it has been attributable to the competing demands of other matters which, given the absence of any present risk to the public interest in the circumstances which I have related, have warranted higher priority. The time I have taken is approximately equal to the time which elapsed between ASIC opening its investigation in December 2013 and examining Mr Wily in July 2015; or the time which elapsed between the conclusion of its examinations in July 2015 and its institution of these proceedings in December 2016.

Principles and Issues

1. Section 536 provided [3] for the Court or ASIC to inquire into a complaint with respect to the conduct of a liquidator in connection with the performance of his or her duties: 536 Supervision of liquidators (1A) In this section: liquidator includes a provisional liquidator. (1) Where: (a) it appears to the Court or to ASIC that a liquidator has not faithfully performed or is not faithfully performing his or her duties or has not observed or is not observing: (i) a requirement of the Court; or (ii) a requirement of this Act, of the regulations or of the rules; or (b) a complaint is made to the Court or to ASIC by any person with respect to the conduct of a liquidator in connection with the performance of his or her duties; the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit. (2) ASIC may report to the Court any matter that in its opinion is a misfeasance, neglect or omission on the part of the liquidator and the Court may order the liquidator to make good any loss that the estate of the company has sustained thereby and may make such other order or orders as it thinks fit. (3) The Court may at any time require a liquidator to answer any inquiry in relation to the winding up and may examine the liquidator or any other person on oath concerning the winding up and may direct an investigation to be made of the books of the liquidator.
2. Provision was made in respect of the institution of such proceedings by the (NSW) Supreme Court (Corporations) Rules 1999, as follows: 7.11 Inquiry into conduct of liquidator (Corporations Act s 536 (1) and (2)) (1) A complaint to the Court under paragraph 536 (1) (b) of the Corporations Act must be made: (a) in the case of a winding up by the Court - by an interlocutory process seeking an inquiry, and (b) in the case of a voluntary winding up - by an originating process seeking an inquiry. (2) A report to the Court by ASIC under subsection 536 (2) of the Corporations Act must be made: (a) in the case of a winding up by the Court - by filing: (i) an interlocutory process seeking orders under the subsection, and (ii) a written report in a sealed envelope that is marked with the title and number of the proceeding, and (b) in the case of a voluntary winding up - by filing: (i) an originating process seeking orders under the subsection, and (ii) a written report in a sealed envelope that is marked with the title of the proceeding and provision for its number. (3) The contents of a report filed under subrule (2) need not, at the time of filing, be verified by an affidavit. (4) Except with the leave of the Court, a report made under subsection 536 (2) of the Corporations Act is not available for inspection by any person except the liquidator or ASIC. (5) In this rule: liquidator includes a provisional liquidator.

The inquiry jurisdiction under s 536

1. The Court of Appeal has described the jurisdiction under s 536 as: [6] ... a broadly expressed supervisory jurisdiction over the conduct of persons in control of the affairs of a corporation, in circumstances where normal market forces and the exercise by shareholders of their rights to control are attenuated or non-existent. These powers are one part of a range of regulatory powers conferred on the court and/or ASIC to ensure the lawful, orderly and efficient conduct of the affairs of corporations during such a period. The detailed regulatory scheme found in the Corporations Act (Cth) manifests in this, as in so many other respects, the central significance of corporate conduct for the economic and social life of the nation.
2. The jurisdiction is of a supervisory and disciplinary character; it is concerned with matters which may warrant sanctions or control of a liquidator for disciplinary reasons. [7] While its origins lie in the Court's inherent supervisory jurisdiction over its officers, including liquidators of companies, its inclusion in Part 5.6 (Winding up generally) makes clear that, whether or not the inherent jurisdiction did so, the statutory jurisdiction applied to a voluntary as well as to a compulsory winding-up; s 513 provides: Except so far as the contrary intention appears, the provisions of this Act about winding up apply in relation to the winding up of a company whether in insolvency, by the Court or voluntarily.
3. The power conferred by s 536 is one in respect of a particular liquidation or liquidations, [8] as distinct from a general supervisory and disciplinary jurisdiction in respect of the liquidators' profession. [9] While the regulatory and disciplinary nature of the Court's jurisdiction has been emphasized, [10] and the Court can "take such action as it thinks fit", there is no express reference in it to deregistering a liquidator (whereas CALDB had that power under former s 1292(3); ASIC now has that power, on the recommendation of a committee, under IPS cls 40-55 and 40-65, and the Court now also has it under IPS cl 45-1). Although it is clear enough that the Court could under s 536 remove a liquidator from the liquidation subject to inquiry, it may be doubted that it could order his deregistration: specific provision for cancellation of a liquidator's registration was separately made in s 1292; and it was apparently for this reason that the final relief sought by ASIC included, somewhat curiously, an order that Mr Wily and Mr Hurst apply for their own deregistration. [11]

The complaint

1. Schedule D to the Originating Process is a document, entitled "Plaintiffs Contentions", which comprises the "complaint". [24] It is as follows: 2007 Companies 1. With respect to the 2007 Companies, Mr Wily knew, or ought to have known, by March 2009, that: (a) the business of each of the 2007 Companies was to provide labour hire services to Crystal Carwash; (b) the registered address of each of the 2007 Companies, other than Teimuraz, was 58 Xxx Street, Coogee, New South Wales; (c) 58 Xxx Street, Coogee, New South Wales was the residential address of Victor Sahade, the director of Boulder Shore; (d) despite the relevant company searches naming 58 Xxx Street, Coogee, New South Wales as the place of business of all but two of the 2007 Companies, the 2007 Companies primarily provided labour hire services to Crystal Carwash at the following sites: (i) Strathfield Carwash to the Strathfield Site; (ii) Mosman Carwash to the Mosman Site; (iii) Sand Bluff to the Chatswood Site; (iv) Bondi Carwash to the Bondi Site; (v) Sans Souci Carwash to the Sans Souci Site; (vi) Boulder Carwash to the Brookvale Site; and (vii) Teimuraz to the Kingsford Site; (e) as at Mr Wily's appointment to the 2007 Companies: (i) Mr Brkic was a director of Mosman Carwash; (ii) Mr Tbong was a director of San Souci Carwash; (iii) Mr Haigh was a director of Teimuraz; (iv) Mr Singh was a director of Strathfield Carwash; (v) Mr Gifford was a director of Bondi Carwash; and (vi) Mr Navaratnarajah was a director of Sand Bluff; (f) Mr Srour was a former director of Boulder Carwash (with his resignation effective 3 August 2007 and the notification lodged with ASIC on 8 October 2007); and (g) Victor Sahade was a person who had taken part in the formation, promotion, administration, management or winding up of each of the 2007 Companies. 2009 Companies 2. With respect to the 2009 Companies, each of Mr Wily and Mr Hurst knew, or ought to have known, on or shortly after the commencement of their liquidations, that: (a) the business of each of the 2009 Companies, other than the Group B company was to provide labour hire services to Crystal Carwash; (b) the business of the Group B company was to provide management, administrative and other services to Crystal Carwash; (c) apart from the Group B company, the 2009 Companies primarily provided labour hire services to Crystal Carwash at the following sites: (i) Pkhouri to the Strathfield Site; (ii) Htbong, Kgifford and Rgoel to the Mosman Site; (iii) Vbrkic and Sjain to the Chatswood Site; and (iv) Mboa and Psingh to the Brookvale Site; (d) as at Mr Wily's appointment to the 2009 Companies: (i) Mr Brkic was a director of Vbrkic; (ii) Mr Tbong was a director of Htbong; (iii) Mr Haigh was a director of Mhaigh; (iv) Mr Singh was a director of Psingh; (v) Mr Gifford was a director of Kgifford; and (vi) Mr Navaratnarajah was a director of Msrour; (e) Mr Srour was a former director of Msrour (with his resignation effective 6 May 2008 and notification lodged with ASIC on 7 August 2009); (f) according to the RATAs and company records, the liquidations of the 2009 Companies left creditors, including the ATO and Employers Mutual, with outstanding total claims of over $1,023,000; (g) Victor Sahade was a person who had taken part in the formation, promotion, administration, management or winding up of each of the 2009 Companies; and (h) Anthony Sahade was a person who had taken part in the formation, promotion, administration, management or winding up of each of the 2009 Companies. 3. During the course of the liquidation of the 2009 Companies, each of Mr Wily and Mr Hurst knew, or ought to have known that the business of labour hire to Crystal Carwash engaged in by each of the Group C, D and E Companies was, after their liquidation, being conducted by other companies at the same sites without a transfer or sale of that business. In this respect ASIC refers to the Group F and Group G companies listed in Schedule C, although it is not contended that each of Mr Wily and Mr Hurst knew or ought to have known the details of each of the Group F and Group G companies. 4. In the circumstances set out at [1] and [2] above, and with respect to each of the 2009 Companies, each of Mr Wily and Mr Hurst improperly accepted and maintained the appointment as Joint and Several Liquidator where there was, or there was likely to be perceived to be, a conflict of interest in circumstances where: (a) Mr Wily had conducted the liquidations of the 2007 Companies; (b) each of Mr Wily and Mr Hurst were conducting the liquidations of each of the other 2009 Companies; and (c) no potential conflict of interest was disclosed to creditors. 5. In the circumstances set out at [1] to [3] above, and with respect to each of the 2009 Companies, it appeared, or ought to have appeared to each of Mr Wily and Mr Hurst that Victor Sahade, alternatively Anthony Sahade and further or alternatively the directors referred to in [2(d)] above, may have engaged in the illegal phoenixing of the 2009 Companies and, thereby, may have been guilty of negligence, default or breach of duty in relation to one or more of the 2009 Companies. 6. In the circumstances, and contrary to section 533, Mr Wily and Mr Hurst, in their capacity as Joint and Several Liquidators of the 2009 Companies, failed to lodge a report notifying ASIC: (a) that each of Victor Sahade and Anthony Sahade was a person who had taken part in the formation, promotion, administration, management or winding up of each of the 2009 Companies and, as such, may be shadow directors of each of the 2009 Companies; and (b) of the matters set out in [5] above. 7. Further, in the course of the winding up of the 2009 Companies, each of Mr Hurst and Mr Wily, in their capacities as Joint and Several liquidators of those companies, failed to perform their duties and functions adequately, properly or faithfully, in that with respect to one or more of the 2009 Companies, each of Mr Hurst and Mr Wily failed to ensure: (a) that the books and records of each of the companies had been collected; (b) that an adequate and proper investigation into the affairs of each of the companies had occurred; (c) that potential claims were identified, investigated and reported to creditors, in particular: (i) the potential recovery of unpaid fees due from Crystal Carwash to each of the 2009 Companies; (ii) the potential recovery in relation to labour hire or management services arrangements, with Crystal Carwash, as uncommercial transactions; (iii) the potential recovery, by the Group B Company, of $25,000 paid to Crystal Carwash on 9 March 2009 as a voidable preference payment; (d) that adequate and proper reporting was made to creditors; and (e) that adequate and proper procedures were followed for the notification and conduct of creditor meetings, in particular: (i) notices were sent to over 300 employees addressed "c/- 58 Xxx Street, Coogee" where certain of those employees had previously notified alternative addresses; and (ii) proofs of debt from each of Crystal Carwash and Msrour were accepted for the purposes of voting, including with respect to the Liquidators' remuneration, in the Group B Company liquidation despite those entities not being creditors of the Group B Company.

Issues

1. It is convenient to address the issues that arise as follows: 1. whether there is a well-based suspicion - amounting to a positive feeling of actual apprehension or mistrust, as distinct from mere wondering - indicating a need for further investigation, [25] that, in connection with the liquidations of the 2009 Companies, Mr Wily and Mr Hurst did not act to the standard expected of reasonably competent liquidators with respect to: 1. conflicts and disclosure (in accepting and/or maintaining the appointments to the Companies, and their appointments to each of the other 2009 Companies); 2. breaches of reporting obligations under s 533 (in respect of the possibilities that Victor Sahade and Anthony Sahade were shadow directors, and that they or others may have engaged in unlawful phoenixing); and 3. otherwise failing adequately to perform their duties and functions (as to collecting books and records, reporting to creditors, conducting investigations, identifying potential claims and conducting creditor meetings); and if so 1. whether as a matter of discretion there should be an inquiry into those matters.

Conflict and Disclosure - s 506A

1. ASIC alleges that, by reason of what they should have appreciated to be the potential for "conflicts", the liquidators should not have accepted, or maintained, their appointments to the 2009 Companies, at the least without disclosing the potential for conflicts in their Declarations of Independence, Relevant Relationships, Indemnities and Remuneration Methods (DIRRIs). ASIC's concerns in respect of "conflicts and disclosure" involve four propositions, namely that: 1. each of Mr Wily and Mr Hurst knew, or ought to have known, the nature of the business conducted by each of the 2009 Companies (that is, providing labour hire or, in the case of Stone Cliff, administrative or other services, to Crystal Carwash), the identity of their directors as recorded in the official records, and their place of operations (that is, at one or more of the Crystal Carwash sites, or in the case of Stone Cliff at the Coogee address); 2. those matters - which appear from their company extracts, and in Veda Reports showing that directors of certain of the 2009 Companies had also been directors of certain of the 2007 Companies, which were on the Liquidation Files - would or should have alerted each of Mr Wily and Mr Hurst to "commonalities" shared across each of the 2009 Companies, and between the 2009 Companies and the 2007 Companies (in respect of the nature of their businesses, their directors, their association with Crystal Carwash, and their association with the Coogee address); 3. the commonalities across the 2009 Companies, and between the 2009 and 2007 Companies, indicated the potential for conflicts which ought to have been, but were not, disclosed to creditors of the 2009 Companies; and 4. the propriety of accepting and maintaining the appointments in 2009 is further brought into doubt by the evidence of Mr Hurst, in these proceedings, that it was Mr Wily who introduced the 2009 Companies to Armstrong Wily; that, at the time of the liquidations, Mr Hurst was not aware of the identity of the referrer; and that he subsequently, after the liquidations, became aware of the identity of the referrer, [26] who was common to all the 2009 Companies (although Mr Hurst does not reveal his or her identity). ASIC says that during its investigation it was unaware of these matters.
2. ASIC's first two propositions are at least sufficiently arguable and for present purposes may be accepted. However, the nub of the allegation is in the third: ASIC is concerned that the "commonalities" indicated a "potential for conflicts", which ought to have been disclosed. Importantly, ASIC does not allege that there was any actual conflict, and does not elaborate what was the "potential for conflicts". The fact that a group of companies that go into liquidation more or less simultaneously have common features - such as an association with a common address - is not only unremarkable, but does not point to any conflict between the liquidator's duty as liquidator and his or her personal interest, or duty to anyone else. Nor does the fact that a group of companies that goes into liquidation have commonalities of the kind to which ASIC refers with another group which has earlier gone into liquidation bespeak any such conflict. ASIC does not point to how the liquidators' interest might have been at odds with their duty. Nor does it point to any duty they might have owed to anyone else, inconsistent with their duty as liquidators. It is not apparent how being the liquidator of one of the 2009 Companies involved a conflict with being the liquidator of others of those companies. Nor is it apparent how being liquidator of a 2009 Company involved any conflict with having previously been liquidator of the 2007 Companies. Essentially, the allegation involves an amorphous reference to the potential for conflicts, with no specificity of how there might have been one.

Failure to report - s 533

1. ASIC alleges that, contrary to s 533, the liquidators failed to lodge a report notifying ASIC that: 1. each of Victor Sahade and Anthony Sahade was a person who had taken part in the formation, promotion, administration, management or winding up of each of the 2009 Companies and as such may be shadow directors of the 2009 Companies; and 2. Victor Sahade or Anthony Sahade or the persons recorded as directors may have engaged in the illegal phoenixing of the 2009 Companies and, thereby, may have been guilty of negligence, default or breach of duty in relation to one or more of the 2009 Companies.
2. The relevant reporting obligations under Corporations Act, s 533, are as follows: 533 Reports by liquidator (1) If it appears to the liquidator of a company, in the course of a winding up of the company, that: (a) a past or present officer or employee, or a member or contributory, of the company may have been guilty of an offence under a law of the Commonwealth or a State or Territory in relation to the company; or (b) a person who has taken part in the formation, promotion, administration, management or winding up of the company: (i) may have misapplied or retained, or may have become liable or accountable for, any money or property of the company; or (ii) may have been guilty of any negligence, default, breach of duty or breach of trust in relation to the company; or (c) the company may be unable to pay its unsecured creditors more than 50 cents in the dollar; the liquidator must: (d) as soon as practicable, and in any event within 6 months, after it so appears to him or her, lodge a report with respect to the matter and state in the report whether he or she proposes to make an application for an examination or order under section 597; and (e) give ASIC such information, and give to it such access to and facilities for inspecting and taking copies of any documents, as ASIC requires. (2) The liquidator may also, if he or she thinks fit, lodge further reports specifying any other matter that, in his or her opinion, it is desirable to bring to the notice of ASIC. …
3. The defendants lodged s 533 reports in respect of each of the 2009 Companies, in the case of the Group D and Group E companies on 14 December 2010. Each report was in substantially similar terms, signed by Mr Hurst, and included: Books and records 2. Have you obtain or inspected the company's books and records? Yes If yes, in your opinion are the books and records adequate? No [if no consider and indicate same at question 4 eg. s286/s344]. Causes of failure 3. What do you consider are the causes of failure? (Please select all the causes which apply to this company) Poor financial control including lack of records Poor strategic management of business Possible misconduct 4. Are you reporting possible misconduct? Yes 4.2 Breaches of civil obligations. Does it appear to you that a person who has taken part in the formation, promotion, administration, management or winding up of the company may have committed any negligence, default, breach of duty or breach of trust in relation to the company in breach of any of the following sections of the Act (which impose civil obligations)? s286/s344(1) - Obligation to keep financial records Do you have documentary evidence to support this allegation? No Are you aware of documentary evidence in the possession of another person that supports this allegation? No s588G(1)-(2) - Insolvent trading Do you have documentary evidence to support this allegation? No Are you aware of documentary evidence in the possession of another person that supports this allegation? No From the information you have seen, do you believe that the director may be able to rely on a defence listed in s588H? Not known 5. If you answered 'yes' to questions at 4.1 to 4.4, have you referred this, or are you intending to refer this, to any other authority (i.e. apart from ASIC)? No 6. Do you recommend that, based on your assessment of the information and documentary evidence available to you, this case warrants inquiry by ASIC? No … Officers 8. In your opinion are there shadow directors? No

Possibility of shadow directors, in particular Anthony and Victor Sahade

1. ASIC contends that, although each of the 2009 Companies are recorded in its database as having had different directors, there are matters which suggest that Anthony and Victor Sahade operated the 2009 Companies, and Crystal Carwash, as a group, and exerted a degree of control over their operations, and of the decision that they be placed into liquidation. Essentially, the matters relied on for those contentions are the circumstances that the Coogee address, which was Victor Sahade's home (and which had been the registered office of the 2007 Companies), featured in some of the corporate documentation, and was the address to which all notices to employees were sent; and that Victor Sahade was a co-signatory with the named director on the bank account of four of the 2009 Companies.
2. ASIC's concerns in respect of "shadow directorships" involve the propositions that: 1. Crystal Carwash and the 2009 Companies were being conducted as a single group. Basic inquiries ought to have revealed the role that Victor Sahade, in particular, played regarding the accounts and finances of each of the companies, including being a joint signatory (with the nominal director [28] ) on several bank accounts: at least one letter from St George Bank, contained in the liquidation files, shows that Victor Sahade was a joint signatory on two companies' bank accounts. 2. Even assuming that the liquidators were unaware of those matters, they ought to have been aware of the "commonalities" between the 2009 Companies (in respect of their dates of incorporation; the style in which each was named, using the nominal director's first initial and last name; their businesses, in that each provided labour hire services to Crystal Carwash; and the coincidence of the timing of their referral for liquidation). 3. Those "commonalities" suggest a greater level of co-ordination in the companies' affairs than can reasonably be explained by their separate directors making independent decisions in the best interests of each company. 4. The liquidations of ten of the 2009 Companies (being the Group D and E Companies) were conducted as if they comprised a group; in particular, Armstrong Wily conducted preliminary company searches, signed the consents to act and conducted the first meetings of creditors in respect of each company in batches and on the same days as the other companies, and the s 533 reports for all ten Group D and E Companies were lodged on the same day and in substantially similar terms. 5. In addition, there are documents on the liquidation files recording links between all of the 2009 Companies and the Coogee address, including copies of correspondence addressed to the relevant company at that address, and print outs from MYOB showing that address as the company's address - from which it may be inferred that those documents had, at some stage, been at the Coogee address and that electronic and other files were maintained at those premises. Yet it is not apparent from the files how those documents came to be in the liquidators' possession, who provided them to the liquidators, or what further inquiries were made to obtain documents from the Coogee address. 6. The significance of the Coogee address must have been apparent to Armstrong Wily in circumstances where over 320 employee notices for ten of the 2009 Companies were sent to that address, although it does not appear on the relevant company search, nor in any correspondence from employees asking that their initial notices be sent to that address. It may be inferred that someone at the Coogee address had offered to co-ordinate the responses for the employees, which indicates that someone at Armstrong Wily was aware that there was a person at the Coogee address who had the relevant company records and could co-ordinate the responses across the relevant companies. 7. These matters ought to have sufficed to put each of Mr Wily and Mr Hurst on notice of the possibility that the companies were operating as a group, and being managed by a common guiding mind or will; but this potential was never reported to ASIC.

Possibility of unlawful phoenixing

1. ASIC contends that after the liquidation of the 2009 Companies, their businesses appear to have been carried on by other companies which were incorporated in 2009 and 2010, and that this may have involved "illegal phoenixing" whereby Mr Victor Sahade or Mr Anthony Sahade (or the nominal directors) may have been guilty of negligence, default or breach of duty in relation to one or more of the 2009 Companies.
2. ASIC's concerns in respect of potential breaches of involves propositions that: 1. Each of Mr Wily and Mr Hurst knew or ought to have known of matters which ought to have alerted them to the potential that the relevant directors were breaching their duties to each of the 2009 Companies by engaging in unlawful phoenixing. 2. In particular, basic inquiries ought to have been made as to whether the business of each of the 2009 Companies was continuing through a different corporate vehicle (which, apart from Stone Cliff, would have been answered in the affirmative). The existence of significant outstanding statutory creditors in the 2009 Companies ought to have suggested this phoenixing was in breach of the directors' duties to the company. 3. The precedent of the 2007 Companies (namely, their liquidation and continuity of the businesses through the 2009 Companies) provides important context for why such inquiries ought to have been made, assuming the defendants were otherwise ignorant of that conduct. In particular, where there were common directorships between a 2007 Company and a 2009 Company, and in circumstances where the company was conducting the same business, the potential for repeated phoenixing ought to have been apparent and reported.
3. Although ASIC contends that the businesses of the 2009 Companies (other than Stone Cliff) were, after their liquidation, carried on by other companies incorporated in 2009 and 2010, ASIC does not suggest that the defendants were aware of or had any involvement in those later companies' operations or their subsequent liquidations. Absent any suggestion that the defendants were aware of this, it is not readily apparent how it could inform an assessment of their conduct, let alone how they can be culpable for a failure to report it. Nonetheless, ASIC suggests that, particularly in the context of the history of the 2007 Companies, the defendants ought to have discovered and reported it, by making inquiries as to whether the business of each of the 2009 Companies was being continued through a different corporate vehicle.

Other matters

1. ASIC also raised concerns that each of Mr Wily and Mr Hurst failed to ensure: 1. that they collected books and records of each of the companies; 2. that they carried out an adequate and proper investigation into the affairs of each of the companies; 3. that potential claims were identified, investigated and reported to creditors, in particular: 1. the potential recovery of unpaid fees due from Crystal Carwash to each of the 2009 Companies; 2. the potential recovery, in relation to labour hire or management services arrangements with Crystal Carwash, of uncommercial transactions; 3. the potential recovery, by the Stone Cliff, of $25,000 paid to Crystal Carwash on 9 March 2009 as a voidable preference payment; 1. that adequate and proper reporting was made to creditors; and 2. that adequate and proper procedures were followed for the notification and conduct of creditor meetings, in particular: 1. notices were sent to over 300 employees addressed "c/- 58 Xxx Street, Coogee", where some of those employees had previously notified alternative addresses; and 2. proofs of debt from each of Crystal Carwash and Msrour were accepted for the purposes of voting at creditors meetings, including in respect of the liquidators' remuneration in the Group B Company liquidations, despite them not being creditors of that company.
2. Insofar as these matters involve contentions that the liquidators should have undertaken more extensive inquiries, it is relevant that Corporations Act, s 545, provides: 545 Expenses of winding up where property insufficient (1) Subject to this section, a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property. (2) The Court or ASIC may, on the application of a creditor or a contributory, direct a liquidator to incur a particular expense on condition that the creditor or contributory indemnifies the liquidator in respect of the recovery of the amount expended and, if the Court or ASIC so directs, gives such security to secure the amount of the indemnity as the Court or ASIC thinks reasonable. (3) Nothing in this section is taken to relieve a liquidator of any obligation to lodge a document (including a report) with ASIC under any provision of this Act by reason only that he or she would be required to incur expense in order to perform that obligation.
3. While there may be room for debate as to whether this provision applies only to out-of-pocket expenses and not to the liquidator's own time, authority favours the view that what a liquidator is expected to do must be affected where there are no available assets. In Clasquin SA v AAR International Pty Ltd, [29] Cohen J said, of a materially identical predecessor provision: [30] The liquidator says that he should not be required to incur expense to get in the books although normally that would be a duty under s 374 which requires a liquidator to get in all the property of a company. The Corporate Affairs Commission, on the other hand, submits that s 429(3) should be read down so as to include not only an obligation to lodge a document but also an obligation to get in the books which would enable that document to be lodged. In effect it is said that as there is a public interest in the lodging of reports and a requirement of the Code then the means for the preparation of the report must be sought by the liquidator notwithstanding the fact that he would incur expense. I do not accept that s 429(3) should be read down so as to require the liquidator to incur considerable expense in order to obtain the means of lodging a document. In my belief s 429(3) goes to the preparation and physical lodgment of the document and notwithstanding that there may be costs incurred in the use of the liquidator's staff or equipment in preparing that document, he is required to expend money for that purpose. I do not however consider that it requires him to incur heavy expenditure in getting in assets including the books for the purposes of the preparation of the report. The question of the incurring of expense under the equivalent of s 429 was dealt with by Needham J in Re Tulloch Ltd (in liq) (1978) 3 ACLR 808 ; ACLC 32,014 In that case the liquidator had been seeking to disclaim some real estate. It was held that where he had no funds available to him he was entitled to a direction that until he had assets available to him he would be justified in taking no action with respect to the keeping in repair of the property and the payment of rates in respect thereof. That principle is called in aid in this application on the basis that the getting in of the books is the equivalent of the preservation of property. For the Corporate Affairs Commission it is submitted that that is a different situation and it is said that there is a public interest in the preservation of documents, that access may be required and it is important that there be someone responsible for the upkeep of the documents. The first thing that I should observe in respect of this is that the liquidator does not have the documents and they have not been delivered to him. I think that in general it is the duty of the liquidator to get in the books and records and to use them for the purpose of making such reasonable investigations as he can do. I think however that the general effect of s 429 is to relieve the liquidator from expenses other than those of a comparatively small nature which are required in order that he may carry out his statutory duties to provide reports, returns and the like. I do not consider that it requires him to expend large sums of money both in the getting in and the storage of records which would permit that to be done. Each case however must depend upon its facts.

Discretionary factors

1. Some of the discretionary factors are of general application, while others, which will be considered subsequently, relate specifically to one or other of Mr Wily or Mr Hurst.
2. The discretionary factors are to be considered in the light of what would be involved in an inquiry. ASIC proposes to call at least 13 witnesses in the inquiry, which - it appears uncontroversial - would require not less than a week of court time.

Strength and nature of the allegations

1. I have concluded, above, that, I am not satisfied that there is a well-based suspicion indicating a need for further investigation, in the relevant sense, that, in connection with the liquidations of the 2009 Companies, Mr Wily and Mr Hurst did not act to the standard expected of reasonably competent liquidators with respect to conflicts and disclosure; in not reporting pursuant to s 533 the possibility that there might be shadow directors; in not reporting pursuant to s 533 the possibility that persons involved in the promotion, formation or management of the 2009 Companies might have engaged in "unlawful phoenixing"; and in respect of the "other matters" alleged by ASIC.
2. Moreover, as has been foreshadowed above, if I am incorrect in concluding there is not sufficient suspicion that Mr Wily and Mr Hurst did not act to the standard expected of reasonably competent liquidators, the following considerations are relevant to whether, as a matter of discretion, an inquiry should be ordered: 1. Even if, contrary to the view I have expressed, the relationship of liquidator and director is a relevant relationship which ought to have been disclosed, the nature of that relationship, the arguability of the proposition that it was not a relevant relationship, and the circumstance that it was at the margin of the 24-month period, are factors which mitigate the gravity of any such omission. 2. Even if the possibility that there were shadow directors ought to have been reported, the circumstance that it is not a reportable matter under s 533, and the absence of an allegation that the liquidators had or should have affirmatively formed the opinion that there were shadow directors, mitigate the gravity of any such failure. 3. Even if the possibility of illegal phoenixing ought to have been reported, the circumstances that it is not suggested that the liquidators knew that the new companies incorporated in 2009 and 2010 provided the services which had formerly been provided by the 2009 Companies before their liquidation; that the nature of the business of the 2009 Companies was such as did not lend itself to the transfer of their assets to a "phoenix" company; and that the real vice was in allowing the 2009 Companies to incur liabilities, including taxation liabilities, without the ability to pay them, and the liquidators reported in their s 533 reports that there was possibly insolvent trading in respect of each of the 2009 Companies, mitigate the gravity of any such failure. 4. As set out above, ASIC acknowledges that the other allegations it raises would not of themselves warrant an inquiry.

Delay

1. The 2009 Companies went into liquidation between March and August 2009, and had been deregistered by May 2011. Although ASIC was alerted to concerns about the liquidations in 2010, it did not commence inquiries until mid-2012, and an investigation was opened only in December 2013. It was mid-December 2016 before these proceedings were instituted.
2. The chronology of ASIC's investigation has been set out above. [35] Notably: 1. it was almost two years from when ASIC became aware through media reporting, in about September 2010, that the Fair Work Ombudsman was investigating Crystal Carwash and its principals, until it first made any enquiries about the 2009 Companies in June 2012; 2. it was a further 18 months before ASIC opened an investigation into the liquidations of the 2009 Companies; 3. it was still a further 18 months before ASIC conducted examinations of the defendants; and 4. it was yet a further 18 months until the proceedings were commenced on 15 December 2016.
3. There is some evidence that this passage of time is associated with the degradation of relevant records, and of the memory of the defendants in relation to relevant events. Mr Wily's solicitor, Ms Banton, asserts that his recollection of events has faded, and his written records degraded; while Mr Hurst observes that it appears that a number of documents - relevantly, staff work papers and file notes regarding investigations, which could potentially have substantiated his satisfaction with the investigations carried out by staff at the time that he signed the s 533 reports - are missing from the liquidation files, that his independent recollection of events is limited, and that insofar as his involvement in the liquidations of the 2007 Companies is relied on as providing relevant context, his ability to defend the allegations is affected because the files in relation to the 2007 Companies have been destroyed.
4. ASIC submitted that the liquidators ought not be allowed to rely on their own defaults to resist an inquiry into their conduct. It was submitted that they were the architects of the delay they now say compromises their defences, in that "[i]t goes without saying that prompt and comprehensive reporting of potential contraventions to ASIC would have engaged ASIC's attention just as the converse is true". This may be doubted: first, prompt reporting of insolvent trading produced only a response to the effect that no action would be taken by ASIC; and secondly, even if it produced a response, it would not have been an investigation into the conduct of the liquidations, but into the matters reported. There is greater force in ASIC's argument that the liquidators should not be able to complain of the loss or degradation of their records, in circumstances where they were obliged to maintain them, yet Mr Wily appears to have destroyed the 2007 files prematurely.

Utility

1. Under the rubric of this heading I consider overlapping factors which include those that have been described in the authorities as including the stage that the liquidation has reached, the utility of an inquiry, and the legitimate interest of the applicant, all of which go to informing whether an inquiry will beneficially advance the purpose for which the power to inquire is conferred. Those factors are to be seen in the context of the nature and strength of the complaints, the delay to which I have referred, the circumstance that Mr Wily has retired, and the circumstances of Mr Hurst's practice since 2012.
2. As the regulator of the liquidators' profession - and in that capacity, the representative of the public interest - ASIC has a legitimate interest in upholding the standards of the profession, and scrutinising misconduct. So much can be accepted.
3. ASIC submitted that there was a particular interest in examining the matters the subject of inquiry; that unlawful phoenixing was costly to other businesses and the Australian economy generally, and destructive of confidence in the efficient operation of the market economy; that the public ought to be protected from those people who, through controlling corporate vehicles, cause loss or repeated losses to others; that ASIC's disqualification powers are only effective if those people are identified either as directors or potential directors and their potential breaches reported; and thus that there was a public interest in ensuring that liquidators fulfil their reporting obligations in respect of potential misconduct. This submission is somewhat redolent of ASIC's suspicion that there may be more to these administrations than meets the eye - and more than it is currently prepared to allege despite its extensive and protracted investigation. As currently framed, ASIC's concerns do not include that the liquidators were implicated in unlawful phoenixing, but only that they ought to have discovered and reported the possibility of it. As already explained, while raising the spectre of "unlawful phoenixing", ASIC has not explained how it arises in the context of this type of company.
4. As has been mentioned, the last of the 2009 Companies was deregistered in May 2011. As has been noted, the fact of deregistration does not preclude an inquiry. [38] However, it is relevant that the inquiry and its outcome can secure no benefit for the administration, or for the creditors of the 2009 Companies. Nor is the relief sought (which does not include compensatory orders) of a character that would do so.

Alternative remedies

1. It may be relevant, where there are multiple remedies available, that an applicant for relief has elected not to avail itself of an available remedy. [40] In this case, ASIC had a number of courses open to it if it wished to take disciplinary action against Mr Wily and Mr Hurst.
2. ASIC could have applied to CALDB for the cancellation of the liquidators' registration, under (former) Corporations Act, s 1292(3). [41] Such a course is the ordinary one for disciplinary proceedings by the regulator against a liquidator, particularly where the issues are not limited to a particular administration, and no remedial relief for the benefit of the administration is sought. [42] However, just as the Court retains and sometimes exercises inherent supervisory and disciplinary jurisdiction over lawyers, notwithstanding that the more usual procedure is to involve the jurisdiction of the professional tribunals (now NCAT, formerly the Legal Services Tribunal and the Legal Profession Disciplinary Tribunal, and originally the Solicitors Statutory Committee), so it retained, under s 536, a supervisory jurisdiction over liquidators.
3. More significantly, however, ASIC did not need the Court to conduct an inquiry under s 536; it could have done so itself and, having done so, reported its findings to the Court, which could then have ordered the liquidator to make good any loss that the estate of the company had sustained and made such other order or orders as it thought fit. Such proceedings would no doubt involve affording the liquidator an opportunity to contradict the report with evidence and submissions. But they commence from the position that ASIC has formed the opinion and reported that there has been a misfeasance, neglect or omission on the part of the liquidator.
4. Although it has conducted an investigation, ASIC has not conducted an inquiry under s 536; it has chosen not to do so itself, but instead to ask the Court to do so. When asked why, counsel for ASIC distinguished an inquiry from an investigation, and continued: And, of course, an inquiry, properly understood under s 536, is an adversarial process. Parties' rights, of course, can be represented and properly protected. So, your Honour, there are significant differences. And ultimately, the Court is in the best position to make the relevant findings of fact having regard to the adversarial nature of the process and the necessary protections that are built into that process.

Mr Wily

1. As has been noted, Mr Wily has resigned all appointments, and retired from practice. As a result of the deemed cancellation of his registration, he is no longer a registered liquidator. For reasons that have already been explained, that does not of itself mean that an inquiry could serve no proper purpose, because there is a public interest in exposing and censuring impropriety, even if the liquidator is no longer registered. However, this interest is mitigated, in this case, by my conclusions about the nature and strength of the allegations, and by the delay, especially in the context of the vexatious aspect to which I have referred.
2. Moreover, any application by Mr Wily for re-registration would be governed by Div 20 of the Insolvency Practice Schedule (Corporations), under which an individual may apply to ASIC to be registered as a liquidator. Such an application must be referred to a committee - consisting of ASIC, a registered liquidator chosen by a prescribed body, and a person appointed by the Minister - to assess the application against criteria which include the applicant's conduct and fitness. The committee must report its decision to ASIC, and only if the committee decides that the applicant should be registered, must ASIC register the applicant as a liquidator.
3. Thus, should Mr Wily ever again apply to become registered as a liquidator, ASIC will be in a position to ensure that its concerns about Mr Wily are considered. The significance of this is that, even if there is a possibility that Mr Wily would as a liquidator pose some risk to the public, he could only resume practice after ASIC had ample opportunity to address the matter. This mitigates the importance at this stage of formal proceedings and findings to inform consideration of any later application for reinstatement.

Mr Hurst

1. Mr Hurst raises a number of considerations specific to his circumstances - in particular, that his involvement in the liquidations of the 2009 Companies was as a "secondary appointee"; that the arrangements under which he has practised since 2012 include measures which mitigate the risk of recurrence; and that he has insufficient resources to defend himself.

Mr Hurst's role as "second appointee"

1. There are particular features of Mr Hurst's role in the liquidations of the 2009 Companies which provide context for the significance of his practice since then. First, Mr Hurst was not an appointee in relation to the 2007 Companies, although he had some limited involvement in those administrations. Secondly, Mr Hurst was not involved in introducing the liquidations of the 2009 Companies to the firm, and was not at the time of his appointment to them aware of the source of the referral. In determining that there was no conflict, he relied principally upon Mr Wily, who was the partner who had introduced the matters to the firm, to identify, via Armstrong Wily's standard conflict check review form, which was completed for each company, whether there were any conflict issues.
2. Thirdly, he was the junior appointee. He explains that he was not the "lead appointee", in circumstances where he was an employee of Armstrong Wily and thus subject to the direction of Mr Wily. He was made an appointee jointly with Mr Wily, chiefly so that there would be someone to act if Mr Wily were absent. Mr Hurst was not primarily responsible for supervising the work performed by Armstrong Wily in relation to the 2009 Companies; it was Mr Wily who selected and supervised the team. When he did sign documents or chair meetings, which was typically because Mr Wily was absent from the office, Mr Hurst checked them, reviewed supporting documentation (conformably with the firm's policies and procedures) if some discretion was involved, and obtained information from staff members working on the matter. He also received and scanned copies of relevant email correspondence, and reviewed reports, generated by "Chieftain", a scheduling engine that manages various aspects of insolvency appointments.
3. With the benefit of hindsight and knowing what he now knows, Mr Hurst accepts that he should have been more actively involved in the liquidations of the 2009 Companies than he in fact was. He says that had he known of the matters giving rise to ASIC's concerns, he would have reported the issues to Mr Wily and asked that Mr Wily investigate them, or investigated them himself; reported any suspected phoenixing activity or shadow directorships to ASIC (as is consistent with his practice now at HoskingHurst); made any necessary disclosures to the directors, shareholders and creditors of the 2009 Companies; and sought to resign from his appointments if he believed that he could not continue to act.

Mr Hurst's practice since 2012

1. As has been recorded, Mr Hurst left Armstrong Wily in July 2012 and established his own insolvency practice, specialising in corporate insolvency matters. In late August 2012, Mr Phillip Hosking joined him in that practice, which is now known as HoskingHurst.
2. As has been noted, Mr Hurst has given evidence that he accepts now that he should have been "more across" the liquidations of the 2009 Companies. He also explains why there is little risk of the matters about which ASIC is concerned arising in his current practice. Mr Hurst deposed, without challenge or contradiction, to procedures, policies and practices established at HoskingHurst which minimise any risk of recurrence at HoskingHurst of such problems as ASIC contends existed in relation to the 2009 Companies. These include formal weekly staff meetings, attended by all professional and senior administrative staff; a schedule of workflow/current matters which is updated on a weekly basis and made available to all staff; the preparation of a comprehensive conflict review form, which is supplemented by an email to all staff requesting identification of any relationships with the company or director(s); regular training sessions for all staff; and monthly director meetings. Importantly, given the context of the concerns expressed about the liquidations of the 2009 Companies and the nature of Mr Hurst's role in them, joint appointments are exceptional at HoskingHurst, and prior to accepting a joint appointment, Mr Hurst and Mr Hosking discuss the proposed appointment and whether it should be taken on, and if it is taken on, the arrangements for its conduct. The firm's procedures, policies and practices described above contribute to ensuring that both appointees are appropriately across the details of any matter in which there is a joint appointment.
3. No suggestion has been raised of any lapse in Mr Hurst's professional conduct since 2012. ASIC's reply submissions acknowledge that, to Mr Hurst's credit, his evidence suggests that his current practice embraces systems designed to avoid some of the issues that arose in the liquidations of the 2009 Companies. However, ASIC submits that this is not a basis upon which to decline to order an inquiry, by reason that the systems that had been in place at Armstrong Wily did not prevent that firm's partners accepting, without disclosure, appointments to 12 voluntary liquidations from a common referrer, some with the same named directors as prior liquidations conducted by one of the proposed appointees; and that concerns regarding Mr Hurst's fitness focus upon his judgment and discretion. In this respect, ASIC points to his signing and lodging, on 14 December 2010, the ten s 533 reports for the Group D and E Companies in almost identical terms (including that each of the companies failed due to poor financial control and lack of records; all the directors failed in their obligations to keep financial records; and that there were no shadow directors), in circumstances where (1) company records obtained by the liquidators included a MYOB payroll activity print out dated within days of the date of liquidation, with the Coogee address as the company address, but the liquidators do not appear to have sought or obtained the MYOB electronic files; and (2) the en globo lodgment of the section 533 reports in the same terms suggest the companies were being treated as a single group by the liquidators, despite having different directorships and shareholdings, and thus some awareness of an overarching co-ordination between them, and yet it appears Mr Hurst was unable to consider and report on the possibility that there was a shadow director.

Mr Hurst's financial circumstances

1. Mr Hurst says that he does not have sufficient financial resources to defend himself if an inquiry is ordered, so that as a matter of reality ASIC would succeed by default without him having a fair and proper hearing. ASIC submitted that Mr Hurst's financial circumstances provide no basis for not ordering an inquiry, and I agree.
2. For Mr Hurst, reliance was placed on Hall v Poolman [44] as indicating that the availability of funds to pay for an inquiry is a relevant discretionary factor. In Hall v Poolman, the reference to this being a factor was in the passage cited from Leslie v Hennessy, set out above. In neither Hennessy nor Poolman was the reference elaborated, but in my view, it was directed to the availability of funds in the liquidation, or to the applicant, rather than to the circumstances of the respondent liquidator. As Mr Pike SC, for Mr Hurst, acknowledged, it could not be that a respondent's impecuniosity would be a reason for declining to conduct an otherwise warranted inquiry.

Conclusion

1. I am not satisfied that there is a "well-based suspicion indicating a need for further investigation" - in which context the notion of "suspicion" involves a "positive feeling of actual apprehension or mistrust, as distinct from mere wondering" - that, in connection with the liquidations of the 2009 Companies, Mr Wily and Mr Hurst did not act to the standard expected of reasonably competent liquidators in: 1. accepting and/or maintaining the appointments to those companies, and/or in failing to disclose supposed potential conflicts of interest arising from Mr Wily's appointments to the 2007 Companies, and their appointments to each of the other 2009 Companies; 2. complying with their reporting obligations under s 533, in respect of possibilities that Victor Sahade and Anthony Sahade were shadow directors, and that they or others may have engaged in unlawful phoenixing - not least because they did report the possibility of insolvent trading, which was the real vice; and 3. otherwise adequately perform their duties and functions in collecting books and records, reporting to creditors, conducting investigations, identifying potential claims and conducting creditor meetings.
2. Even if I am incorrect in those conclusions, in my view, the allegations are not of a strength or nature as would justify an inquiry.
3. Moreover, ASIC bears the onus of persuading the Court to exercise its discretion to order an inquiry, notwithstanding the time which has passed, for which it is essentially responsible. Although I give little significance to prejudice by way of loss of records and deterioration of memory arising from the delay, the passage of time since 1999 weighs against ordering an inquiry in circumstances where Mr Wily continued to practice until his retirement in 2017, and Mr Hurst still does, apparently without further complaint, so that the prospects of establishing present unfitness by conduct which occurred in 2009 are much diminished, and there is a significant element of vexation in pursuing Mr Wily in respect of this matter only after other investigations into his conduct had come to nothing. It is also relevant, though far from decisive, that notwithstanding its investigation, ASIC has chosen not itself to conduct the inquiry it could have under s 536, and has not formed the opinion which it could have reported to the Court, that there has been a misfeasance, neglect or omission on the part of the liquidator.

Endnotes

1. Both these sections were repealed by (CTH) Insolvency Law Reform Act 2016.
2. Corporations Act, Schedule 2.
3. Section 536 was repealed by the (CTH) Insolvency Law Reform Act 2016 (ILRA), with effect from not later than 1 September 2017, but as explained below remains applicable: see [25]-[26].
4. By reg 10.25.02(3)(i) of the (CTH) Corporations Regulations 2001, introduced by the (CTH) Corporations and Other Legislation Amendment (Insolvency Law Reform) Regulation 2016.
5. Explanatory Memorandum, Insolvency Law Reform Bill 2015, [6.207].
6. Hall v Poolman (2009) 75 NSWLR 99; [2009] NSWCA 64 at [53].
7. Commissioner for Corporate Affairs (Vic) v Harvey [1980] VR 669; (1979) 4 ACLR 259; Re Day & Dent Constructions Pty Ltd (1984) 32 NTR 13; (1984) 75 FLR 355; (1984) 9 ACLR 319; (1985) 3 ACLC 11, affd Ah Toy v Registrar of Companies (NT) (1986) 10 FCR 356; (1986) 10 ACLR 630; (1986) 4 ACLC 480; Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 at 438; (1989) 1 ACSR 79; (1989) 8 ACLC 39; Belvista Pty Ltd v Murphy & Triden Contractors Ltd (1993) 11 ACSR 628 at 630; GIS Electrical Pty Ltd v Melsom (2002) 172 FLR 218; [2002] WASCA 302; Re Love (2003) 44 ACSR 367; [2003] NSWSC 58; Re Glowbind Pty Ltd (in liq); Takchi v Parbery (2003) 181 FLR 208; [2003] NSWSC 1190 at [21]; Hall v Poolman (2009) 75 NSWLR 99; [2009] NSWCA 64 at [69]; Singleton Earthmoving Equipment Hire Pty Ltd v Singleton Earthmoving Pty Ltd [2009] NSWSC 688 at [19].
8. See now IPS, Div 90, especially cls 90-5, 90-10, 90-15.
9. As to which see former Part 9.2, Div 3 of the Corporations Act, and in particular s 1292(3), which provided for cancellation or suspension of the registration of a liquidator by the Companies Auditors and Liquidators Disciplinary Board (CALDB), including on the application of ASIC; see now IPS Div 40 (Disciplinary and other action) and Div 45 (Court oversight of registered liquidators).
10. Hall v Poolman (2009) 75 NSWLR 99; [2009] NSWCA 64 at [66]-[67].
11. Cf ASIC v Edge (2007) 211 FLR 137; [2007] VSC 170 at [612]-[613].
12. GIS Electrical Pty Ltd v Melrom (2002) 172 FLR 218; [2002] WASCA 302 at [49].
13. BL & GY International Co Ltd v Hypec Electronics Pty Ltd (2010) 79 ACSR 558; [2010] NSWSC 959 at [81].