Australian Securities & Investments Commission v Edge [2007] VSC 170

Australian Securities & Investments Commission v Edge [2007] VSC 170 | Case summary | Zoe

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ASIC's principal submissions

8 Mr Woodward, counsel for ASIC, submitted that Mr Edge's contraventions and misconduct were the most serious imaginable, short of fraud. ASIC did not allege that the evidence supported a finding of dishonesty, but contended that the liquidator's approach to applying creditors' funds to the payment of his fees deserved particular condemnation. While some amounts in question were relatively small, other sums drawn as remuneration by Mr Edge were substantial, as in the case of CBS Global.

9 Mr Woodward submitted that Mr Edge's approach to the duties of his office had been, at best, cavalier and unworthy of a liquidator. His approach to ASIC's inquiries had been unsatisfactory. His evidence was shifting, and in some respects, was false.

10 ASIC contended that Mr Edge's derelictions of duty evidenced a consistent pattern of bad practice, in which the treatment of moneys, remuneration and cheques was particularly disturbing. Mr Woodward submitted that the failures to lodge forms and reports were not 'victimless' contraventions. Their essential effect was to deny information to the companies' creditors and members.

11 ASIC submitted that the Court should make the findings of breach of duty (including breaches of s.180 of the Act) it sought, in order to send a message both to the defendant and to the profession generally that such conduct by a liquidator would not be tolerated.

THE DEFENDANT'S PRINCIPAL CONTENTIONS

12 Mr Evans, counsel for the defendant, ultimately conceded that Mr Edge had failed to lodge many s.533(1)(c) reports, half-yearly and final accounts under s.539 and final meeting documentation under s.509. He contended that those contraventions were inadvertent.

13 Further, Mr Evans contended that there was little or no evidence of any complaints about Mr Edge's conduct by the directors, shareholders or creditors of any of the companies, no evidence of prejudice to creditors and no evidence of dishonest conduct. He argued that much of what ASIC submitted was founded on inferences drawn from limited documentary evidence.

14 Mr Evans submitted that although ASIC had commenced its investigation into Mr Edge's administrations under s.13 of the Australian Securities & Investments Commission Act 2001 (Cth) ("the ASIC Act") in July 2005, it did not communicate that to Mr Edge until January 2006 and ASIC thus bore the responsibility for Mr Edge's destruction of relevant documents during the intervening period, which had handicapped the Court's inquiry. Mr Evans submitted that the quality of evidence against Mr Edge was poor and the cross-examination of Messrs Edge and Armistead constituted "little more than officious intermeddling into matters where there was no foundation for any form of inquiry". There was, he said, "nothing of real substance in ASIC's complaints." The inquiry had disclosed nothing of significance which ASIC did not know when it issued the proceeding on 10 March 2006 and was "largely to serve ASIC's public relations purposes."

15 The defendant did not dispute that s.536 of the Act conferred jurisdiction for an inquiry into the companies in liquidation, but submitted that there was no power to make orders under s.447E of the Act in relation to the companies in voluntary administration or subject to a DOCA, because in no case could the Court be satisfied that Mr Edge, as voluntary administrator or deed administrator, "has managed or is managing the company's business, property or affairs in a way that is prejudicial to the interests of some or all of the company's creditors or members", or that Mr Edge's acts or omissions were or would be prejudicial to such interests. There was, in particular, no evidence of prejudice to the creditors of Tetherless, The Pines, Invaway or Eighth Taljan.

16 Mr Evans argued that a breach of a statutory obligation to lodge forms or contraventions of the provisions of Chapter 5 did not constitute a breach of duty under s.180 of the Act. In particular, a contravention of s.542 of the Act could not constitute a breach of duty, as the section deals with destruction of documents after deregistration, when duties could not be owed to the company.

17 Mr Evans complained that although a large number of the findings sought by ASIC could have an impact on third parties, no notice had been given to those parties. In particular, the creditors and directors of The Pines and Invaway had not been notified of ASIC's submission that the DOCAs were not executed and the companies were consequently in liquidation.

18 Mr Evans argued that much of what ASIC complained of was really a failure to observe "best practice", rather than a breach of duty under s.536, a contravention of a particular provision of the Act or a breach of duty under s.180 of the Act.

19 In particular, while Mr Edge did not deny his practice of signing cheques on company accounts in favour of the liquidator's third party creditors, thereby "short circuiting" the process of payment of his remuneration, Mr Evans submitted that it was only a failure of best practice, provided that there were adequate journal entries recording the fact that remuneration had been received.

20 Mr Evans also submitted that Mr Edge's failure to disclose his prior association with Mr Little and his failure to conform to Insolvency Practitioners' Association of Australia ("IPAA") recommendations in relation to the material to be included in the s.439A reports were merely failures to conform to best practice.

21 The defendant ultimately accepted ASIC's contention that Mr Edge had not lodged approximately 120 Form 524s or final accounts in relation to 20 companies, mainly after May 2003. Mr Evans argued that, at worst, this showed a reliance on Mr Armistead, as it was an easy matter to lodge such forms, and the failure to do so indicated Mr Edge's genuine belief that the relevant liquidations were complete and the companies deregistered.

AFFIDAVITS RELIED UPON

22 The principal affidavits relied on by ASIC were:

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25 Mr Armistead is a former employee and longstanding professional associate of Mr Edge.

CREDIT OF WITNESSES

26 The defendant did not cross-examine any of the deponents who swore affidavits on behalf of ASIC. Mr Edge and Mr Armistead were cross-examined.

Mr Edge

27 Although Mr Edge presented as self-assured and composed, he was not, in my opinion, a reliable witness. There was considerable inconsistency between his initial letters and communications with ASIC, his affidavits, his initial assertions in oral testimony and his ultimate concessions.

28 He did not respond to an initial letter of ASIC dated 27 April 2005, but contended that he had never received it, although it was correctly addressed. He initially asserted that the outstanding documents the subject of ASIC's complaint had been lodged. He persisted in that assertion during cross-examination, despite making a number of concessions. In final submissions, counsel for Mr Edge conceded that a large number of the documents had not been lodged. The letter of Mr Edge's solicitors, Madgwicks, dated 3 March 2006 (stated to be written on instructions), contained assertions from which he resiled in oral testimony. He asserted that his solicitors "got it wrong". I did not accept that assertion.

29 In his first affidavit, Mr Edge did not refer at all to the substantial delegation of his insolvency work to Harrisons Insolvency, which was revealed by the affidavit of Mr Wong sworn 28 June 2006. His subsequent affidavit sworn 31 August 2006 acknowledged the delegation to Harrisons Insolvency.

30 I do not accept Mr Edge's explanation that his original failure to advert to a significant, longstanding delegation of work in relation to the subject companies was due to inadvertence and that his subsequent recollection was provoked by discussions with Mr Armistead. The matter was highly relevant to the questions raised about the specified companies and I am persuaded that Mr Edge's initial approach was not one of frank disclosure but of deliberate suppression of relevant facts in order to serve his case.

31 Mr Edge also contended that he was unaware of his obligation to lodge reports pursuant to s.533(1)(c) of the Act, despite his long experience as a liquidator and his previous execution of, or reference to, several such reports on various occasions which were in evidence.

32 If Mr Edge were, as he asserted, unaware of a significant and fundamental statutory obligation, it would denote a serious want of competence which must reflect adversely on his fitness as a liquidator. I am not, however, persuaded that Mr Edge was unaware of the requirements of s.533(1)(c). His profession of ignorance was not credible. Similarly, Mr Edge contended that he was ignorant of the requirements of s.542 of the Act in relation to the destruction of the companies' books. His evidence on the destruction of documents and his understanding of the relevant requirements was shifting and inconsistent. I am not persuaded that Mr Edge was ignorant of the statutory requirements.

33 He initially contended that ASIC had previously acknowledged that it had "lost" documents which he had lodged. That was neither frank, nor convincing, in the light of relevant correspondence between ASIC and Mr Edge.

34 Mr Edge made a number of very specific, unqualified assertions about significant issues, which he later modified, abandoned or retracted in the course of cross-examination. In other instances, he professed an inability to recall relatively recent events (such as the signing of cheques to cash in May 2006, shortly before he swore an affidavit in the proceeding).

35 Mr Edge's evidence is discussed in detail below. Its general quality was vague, contradictory, inconsistent and untenable in the light of relevant documents.

Mr Armistead

36 Mr Armistead was, in my opinion, an unreliable and inconsistent witness. In oral testimony, he frequently contradicted assertions contained in his affidavit, and changed his testimony. He professed not to recall assertions contained in his affidavit. He initially failed to comply fully with the subpoena served on him, without any satisfactory explanation.

37 Mr Armistead's evidence concerning many matters was shifting and contradictory. His evidence concerning the mail register altered progressively. His account of the hours of work he committed to The Pines administration was unconvincing. Ultimately, Mr Armistead was unable to offer any explanation for many significant matters, including the basis on which direct payments were made to himself, Mr Edge or their creditors. His evidence is discussed in detail below.

ASIC'S SUMMARY OF SECTIONS AND REGULATIONS

38 In its detailed final written submissions, ASIC set out the following summary of a number of sections of the Act and Regulations relevant to the proceeding:

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(r) s.476 of the Act - requiring a liquidator in a court liquidation to lodge with ASIC a preliminary report based on the report as to the company's affairs to be submitted to the liquidator pursuant to s.475 of the Act.

(s) s.499(3) of the Act - providing that the committee of inspection or, if there is no such committee, the creditors may fix the remuneration to be paid to the liquidator in a voluntary winding up.

(t) s.504 of the Act - providing that in a voluntary liquidation a member or creditor, or the liquidator, may at any time before the deregistration of the company apply to the Court to review the amount of the remuneration of the liquidator.

(u) s.508 of the Act - requiring a liquidator in a creditors' voluntary liquidation to convene a meeting of creditors within 3 months after the end of the first year from the commencement of a winding up and at the end of each succeeding year, and lay before the meeting or each meeting an account of his or her acts and dealings and of the conduct of the winding up during the first year or that succeeding year, as the case may be, with notice of such meetings to be given in accordance with s.508(2) of the Act.

(v) s.509 of the Act - requiring a liquidator in a creditors' voluntary liquidation, as soon as the affairs of a company are fully wound up, to make an account showing how the winding up has been conducted and the property of the company has been disposed of and to convene a meeting of creditors (and, in the case of a voluntary winding up, a meeting of members) for the purpose of laying before it the account and giving any explanation of the account. Under this section, the liquidator is also required to convene the meeting by an advertisement published in the Gazette at least 1 month before the meeting specifying the date, time, place and purpose of the meeting and within 7 days after the meeting, lodging a return of the holding of the meeting and of its date with a copy of the account attached to the return. (Until 23 December 2004, the return and attachment was required to be in Form 523: see Regulation 1.0.03(1) of the Regulations).

(w) s.531 of the Act - requiring a liquidator to keep proper books in which he or she must cause to be made entries or minutes of proceedings of meetings and of such other matters as are prescribed. The matters prescribed are, according to Regulation 5.6.01, those required to give a complete and correct record of the liquidator's administration.

(x) s.533 of the Act - providing that if it appears to the liquidator of a company in the course of a winding up that an officer or employee may be guilty of an offence or that the company may be unable to pay its unsecured creditors more than 50 cents in the dollar, the liquidator must as soon as practicable lodge a report with respect to that matter with ASIC.

(y) s.537 of the Act - requiring a liquidator to lodge within 14 days after his or her appointment a notice of the appointment.

(z) s.539 of the Act - requiring a liquidator to lodge half yearly accounts within 1 month after the end of the period of 6 months from the date of appointment and every 6 months thereafter during the appointment and within 1 month after ceasing to act as liquidator. (Until 23 December 2004, the return and attachment was required to be in Form 523, see Regulation 1.0.03(1) of the Corporations Regulations).

(aa) s.542(2) of the Act - requiring a liquidator to retain the books of the company and of the liquidator that are relevant to the affairs of the company for a period of 5 years from the date of deregistration of the company. Subject to s.262A of the Income Tax Assessment Act 1936, only at the end of that period, the liquidator may destroy the books and records, unless consent to a shorter period is secured pursuant to s.542(3) of the Act. Under that section, the creditors of the company may by resolution direct a period shorter than 5 years, but in that case the liquidator is not entitled to destroy the books and records unless ASIC consents."

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40 The liquidator's essential functions are to identify, take possession of and realise the company's assets, to investigate and determine the claims against the company and to apply the assets to the satisfaction of those claims in accordance with the statutory scheme of priority.

41 While there is frequently a shortfall of assets with which to satisfy creditors' claims against a company wound up in insolvency, where there is any surplus the liquidator must distribute it to members and carry out the necessary steps to implement the company's dissolution.

42 The liquidator's functions, which are performed in the fiduciary capacity of agent of the company, necessitate the conferral of wide and extensive powers currently embodied in s.477 of the Act, including the power to carry on the company's business for the purpose of beneficial disposal or winding up, pay creditors, bring and defend proceedings in the company's name, enter agreements and (subject to some restrictions) compromise claims, sell and dispose of the company's property, make purchases and execute documents on its behalf. The company's books and records must be delivered to the liquidator, who has extensive powers to obtain information and is entitled to the assistance of the company's officers.

43 In Commissioner for Corporate Affairs v Harvey[2] ("Harvey"), Marks J recognised that "the balance of authority favours the liquidator being treated not as a trustee stricto sensu but as an agent of the company". It is clear, however, that a liquidator occupies a fiduciary position in relation to the company, its creditors and contributories. Although not a trustee in the sense, for example, that the property of the company is vested in him or her, the liquidator "is in a position of trust".[3]

44 The extensive powers vested exclusively in the liquidator entail a corresponding vulnerability in the creditors, members and the public. The liquidator is a fiduciary on whom high standards of honesty, impartiality and probity are imposed both by the Act and the general law. As an officer of the company, the liquidator has a statutory duty of care, diligence and good faith.

45 In Harvey, Marks J stated that the liquidator's fundamental duty is to:

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"As it turned out, the course of the liquidation was determined by the liquidator himself. He made no payments at all and thus defaulted under the head contracts. He ignored correspondence and overtures for negotiation on behalf of the head vendors. He took no steps to ascertain the wishes of the investors, did not apply for directions nor refer the matter back to Lush, J. Despite the cancellation of the contracts by the head vendors for default in payment of the moneys due the liquidator continued to pay insurance premiums in respect of the land including land on which no trees were planted. He took no steps to get in land which the head vendors had agreed to substitute for unsuitable parts of the land purchased.

The liquidator gave false and misleading information to investors, creditors and the C.C.A. He acted in breach of numerous statutory requirements, failed to comply with early requests of the Deputy Commissioner for Taxation to file taxation returns in respect of the companies, but did so after the C.C.A. had directed an audit of his accounts...

He delegated functions as liquidator to subordinates some of whom were insufficiently qualified and all of whom were insufficiently instructed and supervised. He appointed the firm of which he was a partner to act as his agent, allowed the liquidations to drift, provided little or no supervision or control over its administration, failed to keep books up to date and failed to keep himself fully informed of what was done. When he sought legal advice which he did largely at a late stage, he failed to act on it. He failed to co-operate with the C.C.A. and without cause displayed a hostile and uncooperative attitude to the audit which the C.C.A. had directed.

He received contributions from investors totalling nearly $50,000 without telling them he had no intention of maintaining the scheme.

Out of funds received he, without authority, paid out in excess of $10,000 in the early months of the liquidation to his firm on account of 'agency fees'. He put on bank deposit a further $33,000, said he was without funds, and took no steps to repay it. He made no application to the Court for ratification of the fees paid until after an investigator from the C.A.O. sought an interview about the liquidation. He then obtained an order ex parte ratifying the payments but concealed material facts from the Court.

The liquidator's administration was protracted and rudderless without any interim or final distribution. Nevertheless there was disbursement of large sums of money to persons with whom he had personal association."[31]

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75 Marks J observed that the provision then equivalent to s.536 posed problems of construction attributable to its drafting history, which included apparently accidental adaptations of, and grafts onto, prior provisions. He noted that "the provision in varying form has existed since the beginning of the century, but has been little (if at all) invoked", and had not previously been the subject of judicial scrutiny.[32]

76 His Honour rejected the proposition that s.536, in imposing investigatory duties on the Court, thereby invoked a European style procedure, abrogated the traditional common law adversary system or imposed "a unique responsibility on the Court arguably analogous to that which prevails in the courts of Europe".[33] Rather, the section provided for an inquiry, which was a process well known to the Courts. Although, unusually, the relevant inquiry was directed to be initiated and conducted by the Court, Marks J did not consider that "any fundamental departure from our entrenched fact finding process, via the 'adversary system'"[34] was intended.

77 His Honour recognised that the Court, even within the context of the adversary system, properly understood, was entitled actively to participate, to a degree falling short of pre-judgment. While the Court was entitled to be satisfied that all available and admissible material was before it, and had a discretion as to how the proceeding should be conducted, it was not equipped to "arrange the presentation of evidence, to investigate its availability or to effect the calling of witnesses".[35] Marks J acknowledged that it was therefore appropriate that in a s.536 inquiry, the corporate regulator should assist the Court as the representative of the public interest, by arranging for the attendance and cross-examination of witnesses.[36] He did not consider that an inquiry under s.536 would invariably require pleadings. In some cases, a report submitted under sub-section (2) would provide the requisite notice to the liquidator.

78 His Honour concluded that although the procedure was substantially within the Court's discretion and could (subject to the ordinary rules ensuring fairness) vary according to the circumstances of the case, an inquiry under s.536 could be conducted substantially as though there were a contest inter partes.[37]

79 In Re Hadfield Steelworks Ltd,[38] Needham J appeared more ready than Marks J to contemplate that s.536 might require a departure from adversarial litigation, although he recognised that the procedure of the inquiry would be similar, whatever its nature. Marks J's conclusion that a s.536 inquiry is adversarial in character was, however, endorsed in Re Day v Dent Constructions Pty Ltd (in liq)[39] and by the Full Federal Court in Ah Toy v Registrar of Companies for the Northern Territory.[40]

80 Marks J considered that an inquiry under s.536 was not confined to matters raised in the regulator's report, any affidavit in support of the application or any complaint. Other aspects of the liquidator's conduct, which arose in the course of the hearing, could be dealt with, although appropriate adjournments or directions might be required.[41] The Court could determine the ambit of the inquiry, and could, if apprised of any relevant matter, inquire into other liquidations in which the liquidator had been concerned.[42]

81 Marks J considered that the Court should consider "any evidence bearing generally on the conduct of the liquidator and his fitness for the office of official liquidator"[43] and was entitled to consider not only acts or omissions in other liquidations but also in receiverships, which involved similar duties and thus were "capable of throwing light on [a defendant's] fitness to act as liquidator".[44]

82 In Harvey, his Honour considered evidence which had emerged in relation to a receivership and liquidations other than those the subject of the regulator's report both "for what it reveals of the liquidator's conduct there, his attitude to his duties, his competence and his fitness as a liquidator" and for the aid it gave to the proper assessment of his conduct of the liquidations which were specifically the subject of the inquiry.[45]

83 In Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd,[46] McLelland J stated that s.536:

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84 The precise inter-relationship of the three sub-sections of s.536 of the Act is unclear.[48]

85 The section arose out of early corporations legislation in Australia (Companies Act 1961). In O'Toole v Mitcham,[49] the provision in question was s.278, which was substantially in the same form as the present s.536. The Full Federal Court in that case observed, by way of obiter, that sub-ss.278(2) and (3) conferred independent powers.

86 In Re Fermoyle Pty Ltd,[50] Crockett J acknowledged that the section was difficult to construe. In particular, the reconciliation of the sub-sections of s.278 presented considerable difficulty. His Honour observed that "it is by no means clear" that the inquiries provided for in sub-ss.(1) and (3) were the same. He concluded that sub-ss.(1) and (3) must operate independently, in the light of their construction and the apparent legislative intent that "the Court should have the widest power of supervision and control over liquidators whenever the need for the exercise of that power should...come to its attention."[51] That construction supported the view that an inquiry under sub-s.(1) was not (in contrast to sub-s.(3)) limited to a particular winding up.

87 Crockett J questioned whether the Court had power to order a party to "make good any loss" that a company may have sustained by reason of any misfeasance, neglect or omission, unless a report under sub-s.(2) had been made. His Honour observed that, because sub-s.(1) (which was in similar terms to its present day equivalent), empowered the Court to "make such order as it thinks fit" but sub-s.(2) empowered it to "make good any loss" in addition to "making any order it thinks fit", then the legislature must have contemplated a difference in the relief the Court could grant pursuant to the two sub-sections. The relief available under sub-s.(1) might not encompass "making good any loss", due to the explicit inclusion of that power in sub-s.(2). His Honour noted, however, that the expression "take such action as it thinks fit" were words which, on their face, bestowed powers of the greatest amplitude. He also recognised that inquiries under sub-ss.(1) and (3) could be expected to reveal misfeasance, neglect or omission.

88 In my opinion, the power to "take such action as it thinks fit" should be construed to encompass making orders for compensation for loss. Sub-section (1) would otherwise have a serious limitation on its effective operation. In some cases, it would not be possible effectively to remedy the consequences of a contravention or breach of duty found in an inquiry under sub-s.(1) unless a report pursuant to sub-s.(2) had also been made. While the predominant view is that the sub-sections create independent powers,[52] there is considerable functional overlap. The Court's power under sub-s. (1) to "take such action as it thinks fit" (derived from the provision's historical antecedents, which assumed a role by the Board of Trade) is extremely broad. It clearly includes, but is not limited to, a power to make orders (the principal form of "action" taken by a court). The literal breadth of the power conferred by sub-s.(1) should not be read down to exclude compensatory orders, which appear necessary to the effective operation of the sub-section.

89 In my opinion, on an inquiry under s.536(1), the Court is empowered to make a compensation order when its findings render that appropriate, whether or not a report under s.536(2) has been filed.

90 In the present case, Mr Woodward submitted that ASIC's final written submissions could constitute a report under s.536(2) that would empower the Court to make a compensation order, if such an order were not available under s.536(1).

91 Rule 7.11 of the Supreme Court (Corporations) Rules 2003 ("the Rules") states:

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95 While ASIC's final written submissions do not comply with the requirements specified in Rule 7.11(2)(a)(ii) and (b)(ii) or Rule 7.11(4) (as they were not filed in a sealed envelope and no restrictions were placed on inspection) the Court has wide discretion over the conduct and procedure under s.536 and could dispense with compliance.

96 I am satisfied, however, that the Court is empowered to make a compensatory order under s.536(1) irrespective of whether a report under s.536(2) has been filed.

Power under s.447E of the Act

97 Mr Evans challenged the Court's power to make inquiry into the defendant's conduct as an administrator or deed administrator under s.447E, on the ground that no prejudicial or potentially prejudicial conduct had been demonstrated in relation to the relevant companies. Such conduct is a precondition of making an order under s.447E(1). It is not, however, a precondition of the Court determining the existence of such conduct, on an application under s.447E(3) of the Act. Section 447E(3) provides for an application by ASIC, a creditor or a member, and contemplates that allegations of prejudicial or potentially prejudicial conduct may be made. As Marks J observed in Harvey, an inquiry under s.536 largely retains the adversarial character of common law litigation and, in the present case at least, the procedure adopted for the inquiry is equally appropriate for a determination under s.447E.

98 I also accept, as Mr Woodward submitted, that the Court is empowered to inquire into the liquidator's relevant conduct as an administrator as an incident of its inquiry under s.536 of the Act.

Requirements for approval of remuneration

99 In Re Stockford,[53] Finkelstein J extensively analysed the development of legislation and principles governing the remuneration of liquidators and administrators. His Honour held that the remuneration of the administrators of a large group of companies had not been validly fixed pursuant to s.449E of the Act and the administrators had therefore taken their fees without authority.

100 The creditors, at a second meeting of all companies in the group (irregularly held concurrently), resolved to approve a particular sum as remuneration for specified past periods. They also resolved to approve the administrator's further remuneration on the basis of the hourly rates set out in the creditors' report for the remainder of the administration period, subject to the committee of creditors' review and confirmation of the details of the remuneration claim.

101 The meeting was adjourned and a second report to creditors recommended that a DOCA be executed. The meeting of creditors resolved to execute the DOCA, which provided that the voluntary administrators and the deed administrators would be:

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125 Marks J criticised the performance of bank reconciliations by an unqualified person, the failure to record cash receipts and receipts from investors, the failure to give receipts or to maintain cash payment journals and the performance of unsupervised work.

126 In Harvey, Marks J criticised the liquidator's failure to open separate bank accounts for the companies in liquidation, his continued use of a receiver's account after the liquidation had commenced and his failure to make the cheques payable "to order". He also condemned the liquidator's failure to comply with s.238(2) and Rule 79(1)(b) (which required the payment of more than a specified sum into the bank account forthwith after receipt), and the delays in recording amounts received and in banking.[77]

127 His Honour condemned the keeping of the books and records which the liquidator was required to supervise in different places.[78] He noted that the liquidator signed a cheque to a hotel, which was given to a staff member owed out of pocket expenses, who cashed it at the hotel. Marks J observed that "at best the payment was on the liquidator's version in breach of duty".[79]

SUMMARY OF FACTS AND EVIDENCE

Professional history of Mr Edge

128 Mr Edge is an experienced insolvency practitioner who has been in practice for at least 27 years. He has conducted many liquidations and voluntary administrations. Although he was not a member of the IPAA, he was familiar with its guidelines on administrators' reports and on remuneration. He received copies of IPAA guidelines through the Institute of Chartered Accountants. He is a registered liquidator, an official liquidator and a Fellow of the Institute of Chartered Accountants.

129 From about 1978, he was a partner of Binder Hamlyn, a firm in which he gained his initial experience of insolvency practice. Mr Edge was registered as a liquidator from about 1980, pursuant to s.30(b) of the Companies (Victoria) Code. He was a partner of Ernst & Whinney from 1983 to 1987. From 1987 to 1989, he was the chief executive officer ("CEO") of Wallace International Ltd.

130 From about 1990 to 1996, he was a consultant employed by Ferrier Hodgson, a firm of accountants which conducted the liquidation of the Pyramid Building Society. While employed by Ferrier Hodgson, Mr Edge first met and worked with Mr William Armistead, an employee of Pyramid Building Society. Mr Armistead had no formal qualifications, but was an experienced loans recovery officer. A long professional association between Mr Edge and Mr Armistead commenced. On leaving Ferrier Hodgson in 1996, Mr Edge worked for six months in a firm of accountants practising under the name "Balcam Edge". He testified that he did not become a partner of that firm. Mr Armistead accompanied him to work for Balcam Edge.

131 Mr Edge was registered as an official liquidator on 6 September 1996, pursuant to s.1283 of the Corporations Law. In about February 1997, he commenced business as a chartered accountant in sole practice under the business name "Robert Edge & Associates". Again, Mr Armistead accompanied Mr Edge to work as his employee. The business name "Robert Edge & Associates" was registered on 16 October 1997 and its registration ceased on 16 October 2003.

132 In July 1999, Mr Edge was appointed the voluntary administrator and subsequently, in November 1999, the administrator of a DOCA of Solace Ltd. In March 2001, Solace Ltd changed its name to Global Technology Australasia Ltd ("Global"). In his first affidavit, Mr Edge stated that he was appointed a director and CEO of Global in April 2000, after the full performance of the DOCA. At the hearing, however, he conceded that he had in fact been appointed a director of Global on 19 November 1999 (three days after the DOCA was executed), and had been appointed the secretary of Global on 26 November 1999. He testified that he took legal advice from his lawyers on the propriety of holding those positions with Global concurrently. Mr Edge testified that in about January 2000, while the Global DOCA was still being performed, he became active in the management of Global's affairs. In April 2000, after the Global DOCA was fully performed, Mr Edge was appointed the CEO of Global. In mid-2000, Mr Armistead was also employed by Global.

133 Mr Edge deposed that from April 2000, coinciding with his appointment as CEO of Global, he largely ceased to practice as an insolvency practitioner.

134 Between late 2000 and early 2003, Mr Edge appointed Harrisons Insolvency to act as his agent in relation to the insolvency administrations of a number of companies of which he was liquidator. This is discussed in detail below.

135 On 25 June 2003, Mr Edge was appointed the interim chief financial officer ("CFO") of his current employer, International All Sports Ltd ("International All Sports"). On 31 October 2003, he was appointed permanent CFO of International All Sports and was appointed CEO on 30 June 2004.

136 International All Sports, a publicly listed company originally based in Darwin, was, at the time of Mr Edge's appointment, expanding its operations, including international operations. Mr Edge testified that his position was demanding and time-consuming. It involved travel both in Australia and overseas and restricted his capacity to act as a full-time insolvency practitioner. He therefore wrote to ASIC stating that he did not wish to accept any more Court appointments. He had, however, obtained the approval of the International All Sports board to continue to conduct the practice of Robert Edge & Associates "as required".

137 Mr Edge owns a women's fashion business called "The Compleat Woman" jointly with his wife, who manages the business.

138 Mr Armistead and his wife have owned and conducted a liquor store in Geelong since about 2003.

Initial correspondence between ASIC and Mr Edge

139 By a letter dated 27 April 2005, ASIC wrote to Mr Edge, complaining that he was failing to fulfil his obligations as an official liquidator and registered liquidator in relation to Vicsworth, The Pines, Wallistan and Eighth Taljan. The letter also questioned Mr Edge's general performance as a liquidator.

140 It asserted that he had failed to lodge the accounts required under s.539(1) of the Act in relation to the four specified companies and required him to advise it within 14 days how he intended to fulfil his statutory obligations. Mr Edge never replied to ASIC's letter of 27 April 2005. In his first affidavit, he deposed that, although the letter was correctly addressed, he did not receive it.

141 On 8 July 2005, ASIC commenced an investigation pursuant to s.13 of the ASIC Act in relation to suspected contraventions by Mr Edge of numerous statutory provisions and regulations in relation to 23 of the 24 companies the subject of the present proceeding.

142 ASIC subsequently issued a notice dated 21 June 2005 under s.30 of the ASIC Act requiring Mr Edge to produce documents in relation to specified companies. Mr Edge produced a number of files in response to the notice.

143 On 23 August 2005, ASIC commenced an investigation under s.13 of the ASIC Act in relation to Mr Edge's suspected contraventions of s.449E of the Act in relation to The Pines.

144 In October 2005, ASIC conducted historical searches of a number of companies, of which Mr Edge had been appointed liquidator or administrator.

145 By a letter to Mr Edge dated 27 January 2006, ASIC set out a table of over 120 forms which it alleged he had failed to lodge as required by the Act, in various insolvency administrations. The letter acknowledged that Mr Edge might no longer have the "practice capacity" to lodge the outstanding forms quickly, or to complete any administrations. It requested him to put a proposal in writing by 6 February 2006, giving dates by which the outstanding forms would be lodged, describing the outstanding tasks and identifying those insolvency administrations which could be finalised. The letter advised that, in the absence of a suitable proposal by 6 February 2006, ASIC would take action, probably involving proceedings under the Act. The letter also referred to the administrations of The Pines and Invaway. It asserted that Mr Edge had failed to disclose a previous association with the director of The Pines, had prepared manifestly inadequate reports to the creditors, had taken remuneration of approximately $129,000 without apparent authority and had failed to lodge any documents save for a notice of appointment. In particular, he had failed to lodge the DOCA purportedly entered into on 5 August 2005. ASIC alleged similar contraventions in relation to Mr Edge's administration of Invaway, including a failure to address legitimate queries made by the solicitor for a creditor.

146 The letter requested that Mr Edge undertake in writing not to take further appointments without notifying ASIC.

147 Mr Edge did not respond to ASIC's letter by the specified date. By his letter to ASIC dated 9 February 2006, he expressed surprise that ASIC had now raised, apparently for the first time, his alleged failure to lodge approximately 120 forms over an 8 year period. The letter stated that "the issue is not of such magnitude as presented".

148 The letter stated, inter alia, that Mr Edge was surprised that CTP Capital and Wallistan were still registered, because the liquidations had been completed and Form 523s had been lodged in 2001, but, "unfortunately these forms appear not to have been processed". That accounted for 16 forms alleged by ASIC to be outstanding. The letter asserted that 92 forms in relation to 14 other companies had also been lodged, on dates which would be confirmed by the provision of copies or by an affidavit sworn by Mr Edge or his senior staff.

149 In his letter to ASIC dated 9 February 2006, Mr Edge asserted that the Form 523s (final accounts) had been lodged for 12 companies. He also stated that he specifically recollected three or four final meetings, including those of Eurocapital, Tetherless and Vicsworth.

150 By a letter of 15 February 2006 to Mr Edge, ASIC, inter alia, noted that it had previously sent the letter dated 27 April 2005 and had also conferred with Mr Edge on 9 August 2005 in relation to its concerns. The letter stated that ASIC had no record of any of the forms which Mr Edge claimed to have lodged, and requested that he provide copies to ASIC immediately.

151 By a notice under s.540 of the Act, ASIC required Mr Edge to make good his defaults in failing to lodge documents required under the Act in relation to 19 specified companies.

152 By a letter to ASIC dated 3 March 2006, Mr Edge's solicitors, Madgwicks, stated that they were instructed that, in relation to 19 companies, the final meetings had been held, the liquidations finalised and (in accordance with resolutions passed at the final meetings), the companies' documents were then destroyed.

153 Mr Edge was therefore unable to locate any records for the purpose of completing "the reports that you request". The letter of Madgwicks stated that apart from Tetherless and Vicsworth, the companies had no assets. It proposed that Mr Edge or his staff would rectify the position by making statutory declarations. The letter further asserted that the final meetings of 21 companies had been held.

154 By a letter to Madgwicks dated 10 March 2006, ASIC rejected the defendant's proposal to address its complaints by swearing affidavits or statutory declarations and advised that it intended immediately to issue proceedings.

155 By his first affidavit, Mr Stack, a registered liquidator qualified in accountancy and financial investigation employed by ASIC, deposed to the searches conducted by ASIC. Mr Stack deposed that he believed, on the basis of ASIC's investigations, that:

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159 At the hearing, Mr Armistead stated that his functions in relation to the insolvency administrations included completing forms, calling and attending meetings, liaising with creditors, investigations, general clerical duties, office management and tax work. He also acted as the office manager of the practice of Robert Edge & Associates and was responsible for maintaining its practice records and financial accounts.

160 Mr Edge acknowledged that he was aware that Mr Armistead had no professional qualifications, but asserted that he had good clerical capability and very good general management skills. Mr Armistead had experience in managing the risk and recovery division of Pyramid and had managed senior files in major recovery actions. Mr Edge testified that he subsequently introduced Mr Armistead to managing tax and accounting matters for clients. He stated that he had never had a significant complaint about Mr Armistead's performance from clients or creditors. He conceded, however, that Mr Armistead had failed on several occasions since 2003 to pay storage fees for the practice when due. He was also aware that ASIC, in 1998, claimed that a number of forms had not been lodged.

161 Mr Armistead testified that he had not familiarised himself with the provisions of the Act relevant to the insolvency practice. He was unaware of IPAA publications or guidelines (other than for the IPAA rates) and had not seen any other practice notes or documents relevant to the practice. He had no knowledge of the legal requirements for the retention of documents produced as part of an insolvency administration. Mr Edge had not told him of any requirements.

162 Mr Edge testified that on most administrations prior to 2000, he reviewed the relevant files to make sure that Mr Armistead had undertaken the work of compiling documents and lodging them. He stated that he did not allow Mr Armistead to attend meetings alone or to deal with major issues on liquidations without Mr Edge's direct involvement.

163 Mr Edge conceded that after 2000, however, most of the insolvency administration work was of less consequence and he had "a much higher degree of confidence in [Mr Armistead's] work and reporting capabilities from my previous experience". Mr Edge conceded that he "probably just lowered the bar a little".

Lodgement of six monthly and final accounts and convening of final meetings by Mr Armistead

164 Section 538(1) requires a liquidator to lodge with ASIC a six monthly account (Form 524) and a final account within one month after ceasing to act, together with a verifying statement.

165 Section 509 requires a liquidator in a voluntary winding up to make up a final account and convene a final meeting. The meeting must be advertised in the Gazette and a return of the holding of the final meeting with the account attached must be lodged with ASIC.

166 ASIC alleges that:

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"My practice in relation to the creation of documentation required to be lodged with ASIC was essentially the same in each insolvency administration. I had a complete copy of pro forma ASIC forms on my laptop computer, which I could then customise for the particular company to which the form related. Once the form had been prepared, I would print off a copy for Robert to review and sign. If the form had particular information (such as in a Form 524), I would generally save a copy of the document on my laptop. If it did not, I wouldn't save a copy.

I used the same laptop computer for generating required documents for ASIC between June 2000 and November 2003, when the computer broke down and could not be repaired. I threw it away in about December 2003.

I have not prepared any forms for Robert at all since the end of 2003, other than in the case of the administrations of Invaway Pty Ltd, Eco Panels Australasia Pty Ltd, and The Pines Bloodstock Pty Ltd, and the liquidation of Hollycorp Investments Pty Ltd.

Until the end of 2003, I had a standing instruction from Robert to prepare six-monthly accounts for each of the liquidations where he was the liquidator. By the end of 2003, I believed that other than the liquidation of Hollycorp Investments Pty Ltd, all other liquidations where Robert had been appointed liquidator were completed, final meetings of creditors had been held, and the documents lodged with ASIC to achieve the deregistration of the companies.

At all times since 1997, I have been aware that in order to complete a liquidation, it was necessary to prepare final accounts, convene and hold a final meeting of creditors, and lodge the documents recording this with ASIC. I attended numerous final meetings of creditors between 1997 and 2003, and prepared Form 523s (being notification to ASIC of the holding of final meetings). I also believe that I lodged some Form 523s with ASIC, and that I provided others for Robert to lodge with ASIC, after the relevant meeting had been held (or if it was not held because there was no quorum).

Between January 2003 and May 2003 when I started work with Burbank Homes, I assisted Robert in finalising a number of liquidations which were essentially completed. I prepared numerous final accounts and convened a number of meetings, which were held no later than the end of June 2003. In May 2003 I told Robert words to the effect that "I will tidy up the paperwork and sort out the finalisation of your inactive liquidations, because I won't have time to do this after I've started with Burbank Homes". Robert instructed me to prepare the necessary documents, which I did.

Although I do not have a specific recollection of the identity of the companies where I convened final meetings in the first half of 2003, having been shown various documents relating to the companies the subject of this proceeding, I believe that I prepared final accounts for and convened final meetings at that time for the following companies:

(1) Balanceauto Distribution Pty Ltd ACN 051 929 992;

(2) Cameo Arch Pty Ltd ACN 006 809 043;

(3) Chelsea Springs Pty Ltd ACN 064 396 032;

(4) Media Sales Network (Vic) Pty Ltd ACN 003 789 866;

(5) Precision Interconnect Australia Pty Ltd ACN 056 678 963;

(6) Seymour Lands Pty Ltd ACN 074 469 408;

(7) Vicsworth Enterprises Pty Ltd ACN 057 780 453;

(8) CBS Global Communications Pty Ltd ACN 091 301 263;

(9) CTP Capital Trading Pty Ltd ACN 084 374 774;

(10) GCW Holdings Pty Ltd ACN 006 422 822;

(11) Greenchip Funds Management Pty Ltd ACN 007 383 682;

(12) J.G.S. (Vic) Pty Ltd ACN 073 464 561;

(13) Jewel Group Services Pty Ltd ACN 080 271 898;

(14) Tetherless Access Limited ACN 069 064 642.

I am unable to say why the appropriate ASIC forms in relation to those companies were not lodged in 2003.

I further believe that I prepared final accounts for and convened final meetings prior to June 2003 (but I am unable to specify a date) at Robert's direction for the following companies:

(1) ACN 007 335 168 Pty Ltd;

(2) ADF ACN 063 887 650 Pty Ltd;

(3) Eurocapital Pty Ltd ACN 065 694 466;

(4) Wallistan Pty Ltd ACN 005 861 450.

In relation to Invaway Pty Ltd, I sent the executed deed of company arrangement to ASIC at its Gippsland Mail Centre in September 2004.

In relation to The Pines Stud Bloodstock Pty Ltd, I have been involved with that administration. Among other things, I attended the meetings of creditors of the company, I prepared the deed of company arrangement, I prepared and sent the requests for lodgement of formal proofs of debt, and arranged for the payment of the first and final dividends to creditors (which amounted to 100 cents in the dollar). I sent the executed deed of company arrangement for The Pines Stud Bloodstock Pty Ltd to ASIC at its Gippsland Mail Centre in October 2004.

I have never received any correspondence or complaint in relation to the conduct of any of the insolvency administrations the subject of this proceeding."

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168 At the hearing, Mr Edge maintained that Mr Armistead had standing instructions to lodge all the necessary documents, in accordance with Mr Armistead's affidavit and Mr Edge's first affidavit.

169 Mr Edge initially appeared to assert that the relevant final meetings had been convened and held and that the forms had been lodged by Mr Armistead in accordance with his standing instruction. The letter of Madwicks dated 3 March 2006 asserted that the final meetings of 21 companies had been held. Mr Edge was, however, unable to produce any copy documents or other evidence of lodgement, such as a mail register or any evidence that a relevant meeting had been advertised in the Gazette, a newspaper or otherwise notified to creditors.

170 Mr Edge testified to an earlier dispute with ASIC in 1998 in relation to documents which he had allegedly failed to lodge. Initially, he believed that the dispute occurred in 2000 and appeared to suggest that on that occasion, ASIC had acknowledged that it had lost or failed to record documents which his practice had lodged. Ultimately, he acknowledged that ASIC did not make such a concession, but merely accepted copy documents instead of imposing penalties. Further, although Mr Edge did not concede it, I am satisfied that his letter to ASIC dated 12 November 1998, which stated, inter alia, "I am at present endeavouring to determine with your office which returns were not lodged", acknowledged that at least some forms in question had not been lodged.

171 In the present case, Mr Stack and Mr Honey deposed that ASIC had no record of the lodgement of the specified forms. They were not cross-examined.

172 I do not consider that there is any reasonable basis on which to infer that, in the present case, the relevant forms were lodged, but were subsequently lost, mislaid or not recorded by ASIC.

173 At the hearing, Mr Edge conceded that his assertion that the relevant forms had been lodged was only based on "my belief that they would have been lodged, because I understood the liquidations to be completed".

174 He testified that until he was contacted by shareholders of CTP Capital and Wallistan, who informed him that those companies were still on the register, he had believed that the required Form 523s had been lodged in 2001. He then acknowledged that he had no recollection of signing Form 523s for those companies, but asserted that he specifically recollected attending the final creditors' meetings, as both liquidations, although minor, had involved major clients. He conceded that he could not specifically say that the Form 523s were lodged.

175 Mr Edge ultimately conceded that he had no specific recollection of signing a Form 523 in respect of any of the companies in question, "but it would have been standard practice to do so". He also agreed that he did not know in fact whether the forms were lodged. Rather, he conceded "it's an assumption on my part". Despite the assertion made in the letter of his solicitors, Madgwicks, dated 3 March 2006, and his earlier testimony concerning CTP Capital and Wallistan, Mr Edge conceded that he had no clear recollection of a final meeting of creditors for any companies other than Tetherless, Vicsworth and Eurocapital. Initially, he contended that he recalled the final meetings of those three companies for particular reasons. He testified that Tetherless was a very substantial administration and liquidation. Eurocapital's final meeting was held in his new offices, and Vicsworth involved specific events in relation to a mortgage, which caused him to recollect the final meeting. Subsequently, however, Mr Edge conceded that his confidence in relation to the details of the final meeting of Vicsworth was mistaken, that he had no specific memory of the final meeting of Eurocapital and that his memory may have related to earlier, rather than final, meetings.

176 The letter of Madgwicks dated 3 March 2006 stated that there were no assets in any of the companies, save for Tetherless and Vicsworth. At the hearing, Mr Edge admitted that that assertion was not accurate. He conceded that Greenchip Funds Management had assets valued at approximately $25,000, Chelsea Springs had assets valued at approximately $6,000, CBS Global had assets valued at approximately $145,000, Cameo Arch had assets valued at approximately $10,000 and Eurocapital also had some assets. He testified that he did not see the letter of Madgwicks dated 3 March 2006 before it was sent, and that Madgwicks "got it wrong".

177 Mr Armistead testified that he created Forms 524 and 505 on his laptop computer (until it broke down in December 2003) between June 2000 and November 2003, save for when Harrisons Insolvency had management of the files.

178 He conceded that essentially, he "was doing all of the work" on the administrations until May 2003, when he commenced employment at Burbank Homes. Mr Armistead initially testified that he held meetings for the companies no later than the end of June 2003, in order to "sort out the finalisation", but conceded that he had no specific memory of convening or attending any of the final meetings or preparing or completing final accounts in respect of any of the 14 companies referred to in his affidavit.

179 In relation to the four other companies referred to in his affidavit, Mr Armistead testified that the final meetings were held at some time earlier than 2003, but he could not recall a date.

180 In final submissions, in relation to ACN 007, CTP Capital, Eurocapital, Pabulum and Wallistan, counsel for the defendant conceded that the defendant had either breached the obligation to make up final accounts, to convene a final meeting for the purpose of presenting and explaining a final account and to lodge a return which would lead to deregistration; or alternatively, (if the final meetings were held), that he had breached s.539 by failing to lodge half-yearly accounts. The defendant apparently did not concede that he failed to lodge half-yearly accounts (Form 524s) in relation to the five companies, where the liquidation had concluded prior to 2003, and contended that the forms may have been lost. There was no evidence that a Form 524 was ever lodged for Wallistan, Eurocapital or ACN 007.

181 In final submissions, the defendant ultimately conceded that he had, from 2003, failed to lodge the Form 524 six monthly accounts and statements required by s.539(1) of the Act in relation to Balanceauto, Cameo Arch, CBS Global, Chelsea Springs, GCW Holdings, Greenchip Funds Management, JGS (Vic), Jewel Group Services, Media Sales Network, Precision Interconnect, Seymour Lands and Vicsworth.

182 Again, he contended that he had believed that the liquidations of those companies were complete, the final meetings held and the companies deregistered.

183 Further, the defendant ultimately conceded that, as the relevant companies were not, as Mr Edge had believed, deregistered, any destruction of documents necessarily contravened s.542 of the Act.

184 I conclude that final meetings were not held and final accounts were neither prepared nor, as the defendant ultimately conceded, lodged, in relation to the relevant companies.

185 While the defendant submitted that the breaches were victimless minor infractions "essentially technical in nature", it is vital to the proper administration of insolvent companies and the due accountability of insolvency professionals that the relevant accounts and statements be made and lodged regularly, that an adequate account be made to creditors and shareholders, explanations given and a basis for possible challenge provided. The accounts and statements required pursuant to s.539(1) may be the subject of an audit and report under s.539(2) of the Act. As a company is an artificial entity with great potential to affect the interests of members, creditors and other parties, it is essential that an accurate public record of its current status be maintained. A final account and statement is a necessary prerequisite of deregistration. The liquidator has a duty to take timely steps to finalise a liquidation and to avoid its unnecessary prolongation.

186 In the present case, Mr Edge's persistent, chronic and wide-scale dereliction of duty in failing to prepare and lodge accounts, including six monthly and final accounts and statements, and in failing to hold final meetings for many companies over a period of years, was very serious. That dereliction is inextricably associated with his wholesale, long-term delegation of lodgement and other essential functions of the liquidations and administrations to Mr Armistead (who was, to Mr Edge's knowledge, not professionally qualified), and his consistent failure adequately to instruct, supervise or monitor Mr Armistead over a lengthy period of time in relation to numerous companies.

187 In this context, I reject the defendant's contention that the breaches did not constitute a failure to exercise due care and diligence as a liquidator because, having delegated the functions to Mr Armistead, Mr Edge reasonably relied on him to perform them. In the circumstances, the unsupervised delegation to Mr Armistead constituted an abdication of important professional responsibilities which Mr Edge alone was qualified properly to discharge. The reliance on Mr Armistead was unreasonable, improper and unprofessional. In some instances, it involved a startling inversion of the due chain of command. That is exemplified by Mr Edge's response to the valid query from a creditor of Eurocapital about his non-compliance with a significant provision of the Act. As discussed below, Mr Edge's only response was to seek assurance from his legally unqualified assistant, Mr Armistead, that there had been compliance with the applicable statutory requirements. In such circumstances, Mr Edge is properly liable for any defaults of his unqualified and unsupervised associate.

188 Regrettably, as set out in detail below, Mr Armistead's defaults in relation to the lodgement of documents, the creation and keeping of records, the receipt of mail, the treatment of company funds, the payment of remuneration and the expeditious conduct of the administrations were widespread and serious. To Mr Edge's knowledge, ASIC had alleged that the practice had failed to lodge documents in 1998 and Mr Armistead had subsequently failed on three or four occasions to pay storage accounts when due. Mr Edge nevertheless failed to introduce any measures actively to monitor Mr Armistead's performance. Mr Armistead lacked any formal qualifications. In contrast, the staff members in Harvey to whom responsibility was delegated were highly qualified, but Marks J condemned the largely unsupervised delegation. In the present case, many defaults were a predictable consequence of the substantial delegation of multiple liquidations and administrations which required the skills of a highly trained professional to an unqualified person, who was uninstructed, unmonitored, unsupervised and, moreover, simultaneously engaged in other full-time employment.

189 It is specious to contend that there were no complaints about the conduct of the liquidations or administrations, or that the breaches caused no actual loss or prejudice. First, it is not accurate. Complaints and requests for information, which received no, or no satisfactory, response were in evidence. Secondly, in the absence of meaningful reports and accounts which would permit scrutiny of Mr Edge's conduct, the existence and extent of any dissatisfaction, loss or prejudice cannot be ascertained. The contraventions not only cumulatively constitute a pattern of wide-scale, long-term non-compliance, but also have serious implications for each individual company involved. Mr Edge failed to furnish to the creditors and members of each relevant company the fundamental accounts of his stewardship, without which no meaningful review of his activities or any specific challenge could be made. In the present case, the consequences of the failure to prepare and lodge accounts have been aggravated by the extensive unauthorised destruction of relevant documents referred to below, which precludes the accurate reconstruction of accounts and records.

Marks J's reference to:

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192 Mr Wong deposed that Harrisons Insolvency received its instructions principally from Mr Armistead, and only occasionally from Mr Edge. Mr Wong never met Mr Edge, although he was aware that some employees of Harrisons Insolvency had met him.

193 Mr Wong deposed that Harrisons Insolvency principally prepared paperwork, including accounts of receipts and payments in relation to the relevant companies. The established practice was that Harrisons Insolvency would prepare the paperwork and send it to Mr Edge for signing. Mr Armistead gave evidence that typically, he would first receive and review the documents from Harrisons Insolvency before they were sent to Mr Edge for signing. If a document were to be lodged with ASIC, it would be returned signed, for Harrisons Insolvency to lodge. Harrisons Insolvency had no authority to sign accounts or to operate bank accounts in relation to the relevant companies. It sent periodic invoices for its services to Mr Edge.

194 Mr Edge routinely deducted 15% of all the bills of Harrisons Insolvency for all the administrations he delegated to it. He denied that the percentage was a commission for finding work to be performed by Harrisons Insolvency. It was, he stated, an appropriate percentage, based on an estimate of the administrative work likely to be involved.

195 In his second affidavit, Mr Edge deposed that he "still maintained control over the administrations/liquidations" of the companies the subject of the delegation to Harrisons Insolvency.

196 It is not disputed that Harrisons Insolvency lodged the documents which were returned to it for that purpose.

197 In January 2003, Global made Mr Armistead redundant. Mr Edge remained in his position with Global until March 2003. Mr Edge reiterated that he had largely ceased to be an insolvency practitioner by that time and that between April and July 2003, he was looking for employment.

198 He testified that he did not want to rebuild his insolvency practice and did not tell Mr Armistead that this was his plan. Despite an intention to complete his outstanding administrations, towards the end of the first quarter of 2003 (in March or April), Mr Edge reclaimed the delegated work from Harrisons Insolvency, so that Mr Armistead (who was also then unemployed) could do the work.

199 In early 2003, Mr Armistead informed Harrisons Insolvency that Mr Edge was rebuilding his liquidation practice. Mr Armistead's evidence was that he probably said that in order to "save face", as both he and Mr Edge were in fact uncertain of their professional future at that time. Mr Armistead collected all the relevant company books and records from Harrisons Insolvency. Harrisons Insolvency kept no hard copy documents or files in relation to the relevant companies, but on its computer it retained "soft copy" documents which it had prepared and which were produced in the present proceeding.

200 In May 2003, Mr Armistead obtained a position with his current employer, Burbank Homes. He resides in Geelong.

201 In his first affidavit sworn 16 May 2006, Mr Edge did not refer to his delegation of work to Harrisons Insolvency. In his second affidavit, he conceded that he had delegated the work as Mr Wong deposed. Mr Edge explained that the omission of any reference to the role of Harrisons Insolvency from his first affidavit was inadvertent and that his memory had subsequently been prompted by Mr Armistead's recollection. Mr Armistead, however, also failed to refer to the role of Harrisons Insolvency in his affidavit sworn 17 May 2006.

202 While Mr Edge denied that he acknowledged the Harrisons Insolvency agency only due to the revelation in Mr Wong's affidavit sworn 28 June 2006, as stated above, I am not persuaded that the omission of any reference to a significant delegation was merely inadvertent. I consider that Mr Edge was not candid or conscientious in his approach to giving evidence.

203 In my opinion, the delegation of the work to Harrisons Insolvency constituted a dereliction of duty. Harrisons Insolvency apparently carried out the delegated tasks competently. The appointment of an agent is, however, permitted only in circumstances where it is unreasonable to expect the liquidator to perform the relevant task personally. A general delegation of a company's affairs, or the retention of a liquidation which the liquidator is disabled from performing, is impermissible.

204 Relevant case law emphasises the importance of the liquidator's personal discharge of the duties and responsibility of office. In many cases, some of the necessary tasks of a liquidation will necessarily be performed principally by an appropriately supervised employee. The farming out of the bulk of the work on multiple liquidations over time in return for a set percentage of the fees, as occurred in the present case, is, however, wholly unjustifiable.

205 In the present case, there was no valid impediment to Mr Edge's personal performance of his duties as liquidator. Due to his own demanding full-time employment and that of his assistant, Mr Armistead, he elected not to perform the necessary work on the relevant administrations and liquidations. In such circumstances, it was his duty to resign. Instead, Mr Edge, although intending to wind down his practice, for a number of years made a general delegation of the work to Harrisons Insolvency. He then reclaimed the work to suit the immediate employment needs of Mr Armistead. In both the delegation and the resumption of the work, Mr Edge appeared to consult his own interests, rather than those of relevant companies. There is no evidence that he applied any significant individual judgment, discretion or input to the relevant administrations and liquidations during the delegation to Harrisons Insolvency. (He testified that he 'scanned' letters of Harrison's Insolvency in relation to Greenchip Funds Management and three other companies before signing them, so that their reference to a S.533(1)(c) report 'did not register' with him.) His standard 15% remuneration cannot be viewed as other than a commission for providing the work. His retention and delegation of the liquidations was, in my view, a serious breach of his duty as a liquidator.

Mr Edge's standard practices

Approval of remuneration

206 Mr Edge gave evidence that for both voluntary and court-ordered liquidations, it was his practice to seek prospective approval of fees before they were incurred, at an initial meeting of creditors. He testified that in court-ordered liquidations, he would call a meeting as soon as practicable (usually within a month or two), and would request that the creditors prospectively approve payment of the liquidator's fees, to be charged on the basis of the IPAA hourly rates. He did not produce any documents or place a ceiling on the fees when seeking prospective approval.

207 Mr Edge testified that, typically, he also sought retrospective approval for remuneration. On those occasions, he would produce timesheets, invoices, accounts and worksheets for the creditors' inspection.

208 According to Mr Edge, the timesheets showed the number of hours worked, identified the person who performed it, and gave a description of the work. The invoice set out the summary of the work performed by all relevant persons and usually stated some of the major tasks undertaken during the period. Mr Edge could not recall on what legal basis he adopted the practice in relation to approval of remuneration, which he testified he maintained up to 2003. He testified that since 2003, his insolvency practice declined dramatically. He only undertook the administrations of Eco Panels, Hollycorp and The Pines, for which he used electronic timesheets which indicated the individual staff member and the time worked. He relied on work files in order "to support what work was actually undertaken during those hours." Mr Edge conceded, however, that he took payment of his fees while performing the work, in reliance on the initial prospective approval.

209 Mr Edge had not seen the IPAA Statement of Best Practice Remuneration dated 1 July 2000 before, and was unaware of its recommendation that "capping" should be included for prospective approval.

210 Mr Armistead's evidence on the approval of remuneration did not accord with that of Mr Edge. Mr Armistead had no memory of any initial meetings being held for liquidations. He recalled that only final meetings were held, at which the approval of remuneration typically occurred.

211 In contrast to Mr Edge, Mr Armistead (who prepared the invoices) stated that the invoices did not contain any description of the tasks undertaken and did not give a breakdown of hours between Mr Armistead and Mr Edge. The invoices simply stated "a [specified] period...in accordance with IPAA rates - $X."

212 According to Mr Armistead, when a liquidation was to follow a voluntary administration, at the second meeting of creditors Mr Edge would give "just a ball park figure" without any cap or any indication of the rates to be charged for either Mr Edge or Mr Armistead. He testified that "the ongoing fees" to be incurred in the liquidation would then be approved, and at the end of the liquidation, there would be another meeting as a "ratifying process" in relation to the fees which had already been drawn down.

Document retention practice

213 Mr Edge testified that he had a document retention policy based on his understanding of the legal requirements at the time. During the period 2000-2005, he believed that documents must be retained for seven years, unless a shorter period was approved by the creditors and ASIC.

214 Mr Edge testified that, after the dispute with ASIC in about 2000 (ultimately established to be 1998) , in which ASIC alleged that a number of documents had not been lodged, he adopted a practice of taking a copy of all documents lodged with ASIC and maintained a mail register in order to prove what he had received or lodged. He testified that he maintained the practice and the mail register for about 18 months, until 2001. After 2001, he ceased to maintain the mail register, because he was winding down his insolvency practice. Thereafter, he kept a copy of each lodged document and would usually note the date on which it was lodged.

215 Mr Edge testified that the mail register which he kept from 2000-2001 no longer exists. He moved business premises four or five times during that period, and some documents were destroyed, whilst others were lost or destroyed in what he described as the "cleansing process".

216 Mr Armistead was responsible for maintaining the management accounts of the practice of Robert Edge & Associates. Mr Armistead testified that prior to the employment of Messrs Edge and Armistead by Global, he maintained the practice records on a computer network and printed off hard copies of documents. After Messrs Edge and Armistead commenced employment with Global, the hard copy records were removed to storage. Mr Armistead testified that he was unsure what became of the documents stored on the computer network. The computers themselves were destroyed at about the time when Messrs Edge and Armistead commenced employment with Global in 2000. According to Mr Armistead, those computers were "backed up" and the CDs were stored.

217 From about that time, while working at Global, Mr Armistead used his laptop computer to create documents for both individual insolvency administrations and the practice. He testified that he did not back up the laptop computer regularly and did not, generally speaking, save any documents, apart from "the odd spreadsheet".

218 Mr Armistead testified that the laptop computer on which all administration and practice records since about 2000 were stored "crashed" at the end of 2003 and was thrown out. No records were recovered from it.

219 Mr Armistead asserted that since the laptop computer crashed in 2003, he kept records only in relation to the current administrations on his new computer and did not keep any records of the practice itself. When calculating fees, he went directly to the computer records of the relevant administration.

220 He testified that he maintained cheque books, deposit books and bank statements for the practice and hard copy receipts and bills for each current year. At the end of each financial year, he presented the hard copy records and bills to Mr Edge for storage.

221 Mr Armistead testified that he typically prepared corporate forms, had them signed by Mr Edge and sent them to ASIC. He did not keep hard copies of the documents he sent to ASIC.

222 Mr Armistead appeared to assert that the practice maintained a mail register from about 2000 to 2005-2006, which recorded lodgements with ASIC. His testimony on that issue was, however, vague and confusing. Despite initially asserting that the mail register extended to 2005-2006, Mr Armistead subsequently asserted that the mail register, which was kept in a box on the floor of his garage, was destroyed by a flood which swept through Geelong in 2004 or 2005. He ultimately testified that the flood occurred in early 2005.

223 Initially, Mr Armistead contended that he did not currently maintain a mail register for the practice. He testified: "We don't have one now". Subsequently, he stated that he did have a new mail register at his home, which covered "the last 12 months".

224 Mr Armistead's evidence was fluctuating and unconvincing. Within a short space of time, he made contradictory assertions about whether he maintained a current mail register. Ultimately, he produced a mail register covering the period from 7 September 2005 to 22 June 2006. When asked to account for the mail register for the period from early 2005 (the date of the flood) and September 2005, he was unable to explain, but maintained that no further mail register existed.

225 At best, Mr Armistead's account demonstrates a deficient, haphazard and wholly inadequate approach to the creation and maintenance of records. Records were created on a computer without taking hard copies, "backing up" or storing CDs consistently. A mail register was not kept consistently and the only mail register for the practice was stored in a box on the floor of a garage and left vulnerable to destruction.

226 Mr Edge testified that cheque books for particular companies in liquidation or administration were kept in a locked metal cabinet and sent to storage when the relevant administration was complete.

227 In contrast to Mr Edge, Mr Armistead testified that cheque books for administrations were kept with the file while the file was current. When the matter ended and the file was sent to storage, the cheque books would be kept until the bank account was closed.

228 Mr Armistead explained that the bank account would not be closed, even if the file were otherwise completed, because "we hadn't drawn down our fees. There was no need to close the account. The fees were approved and we ... just draw down the fees as and when they were needed."

229 He was unable to explain why, if the fees were approved, a cheque was not written immediately and the bank account closed. Mr Armistead stated that they would wait "till whenever we decided to close the account". He was unable to suggest a reason for that practice.

230 Mr Edge testified that, following formal execution of DOCAs, he would prefer to lodge an original with ASIC, but was not sure that he always did so. He testified that he would keep a copy of the DOCA and initially stated that he would give a copy to the directors. Subsequently, he testified that he did not provide a copy to the company.

231 For the purposes of the proceeding, Mr Edge undertook a review of documents and files. At the time of swearing his affidavit, he had documents for current administrations, including Eco Panels, The Pines and Hollycorp, at his home office. Mr Edge received a subpoena from ASIC and visited Wilson Self Storage. On his solicitor's advice, he produced 29 boxes of documents, primarily from Wilson Self Storage.

232 Mr Edge testified that he kept his personal income tax records, which would show his income from the insolvency practice, for seven years. Mr Armistead maintained records of the insolvency practice's remuneration and expenses up to the end of 2003 on his laptop computer.

233 Mr Edge testified that at the end of each year, Mr Armistead gave him a global profit and loss figure for the practice, on the basis of his electronic records of statements of receipts and payments. Mr Armistead retained any hard copy receipts. Mr Edge testified that because his insolvency practice handled only a small number of administrations, it had few expenses. Storage expenses were paid by Mr Armistead, who sent cheques to the storage facility, although on several occasions, he failed to pay the storage facility account when due.

234 Mr Edge testified that in late 2003, Mr Armistead's laptop computer failed and was thrown away. In consequence, the detailed records of receipts and payments for the practice from 1997 through to late 2003 were lost. Mr Edge said that some hard copy documents and statements survived, but they were just global profit and loss statements. He possessed no documents underlying the profit and loss statements for the practice. He was unable to produce any document recording payments made to him or on his behalf as remuneration for the practice for the purpose of preparing his taxation returns, other than the practice's annual profit and loss statement. He did not know if Mr Armistead retained any more detailed underlying documents.

235 Mr Armistead also produced records of only the total amounts he had received as fees from Robert Edge & Associates for two financial years. He believed, however, that he would be able to produce an itemised breakdown on his computer.

236 Mr Edge testified that he kept an electronic diary at his employer's premises, but he did not record appointments related to the insolvency practice in his Global or International All Sports electronic diary, as he liked to keep his insolvency work separate.

237 According to Mr Edge, his insolvency practice professional appointments were recorded in Mr Armistead's laptop computer, which was destroyed. He explained that because there were only 15 or 20 meetings in 2002 (most of which would have occurred in the first six months of the year), he did not need to see Mr Armistead's electronic diary in order to remember his commitments. Mr Edge's assertion that the only diary for his practice was maintained by another person and that he did not need to see it, was, in my opinion, unconvincing.

238 Mr Edge testified that he informed Mr Armistead orally of what time he had spent on the relevant administrations and Mr Armistead kept the resulting timesheets for Mr Edge on the computer.

239 Mr Edge testified that, although Mr Armistead maintained the cheque books, the signatory was usually Mr Edge. Typically, Mr Armistead prepared the cheques, and Mr Edge signed them, although he authorised Mr Armistead to sign cheques in some circumstances, such as when he was travelling overseas.

240 Mr Armistead controlled all the relevant documents. Mr Edge could not explain why Mr Armistead had not produced any particular document on subpoena.

241 Mr Armistead was initially unsure whether he had given the documents for the year ending June 2006 to Mr Edge for storage. He believed that hard copy documents for the current financial year were "possibly still with me".

242 In the course of giving evidence, he conceded that he currently retained deposit books, receipts or invoices for storage and other documents, including tax records, disclosing the remuneration from the practice. Production of those documents was required under a subpoena served on him by ASIC, but he had failed to produce them. Towards the end of giving evidence, Mr Armistead produced a number of documents. This is dealt with in detail below.

243 In about 2000, after ceasing to practice as a full-time insolvency practitioner, Mr Edge decided to store documents. He testified that he sent documents to storage only after the relevant administration was complete. He packaged the documents, which were taken to Wilson Self Storage by Greens Transport or by Mr Armistead. He also sent his tax files to storage. Completion of administration, in his view, occurred on the lodging of the final accounts and necessary forms. He stored "live" files in the business premises.

Premature destruction of documents

244 In his first affidavit, Mr Edge deposed that:

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245 In his second affidavit, Mr Edge stated that he started storing material at Wilson Self Storage in Malvern in about 2000, in batches about four times a year. He had since periodically sent files to storage when he believed that the relevant liquidation or administration was complete.

246 Mr Edge testified that although he had now discovered that the relevant companies were not deregistered**,** he was satisfied, that in all cases, the companies had been inactive for two years or thereabouts. He testified that his understanding was that if a company were deregistered, creditors' resolutions approving destruction had been passed and there had been no inquiry from any creditor, director or shareholder for "a significant time", it was permissible to destroy the records.

247 Subsequently, Mr Edge conceded that he might have destroyed documentation before two years of inactivity had elapsed, but not significantly less. He testified that he was not aware of the requirements of s.542 and, despite the assertion in his affidavit, stated that he attached no particular significance to the period of two years.

248 Mr Edge believed that resolutions passed by the creditors at the final creditors' meeting for each relevant company had approved the early destruction of documents. He testified that it was "very much part of our standing practice at each final creditors' meeting to seek approval for the books and records to be destroyed in a shorter period than required by the Act". He also testified that he maintained a standard instruction that Mr Armistead should seek and gain ASIC's approval for the early destruction of documents and he assumed that Mr Armistead had done so. Mr Edge conceded that it was not his usual practice to see or sign any letter to ASIC seeking its approval of early destruction of documents. He believed, however, that he had attended most of the creditors' final meetings and was therefore aware that the standard resolution approving the destruction of the books and records had been passed. He ultimately conceded that he had no actual recollection of all the final meetings at which a resolution to destroy the books and records had been passed.

249 Mr Edge testified that prior to destroying the documents in September 2005, he asked Mr Armistead whether there was any reason why the files should not be destroyed, and was assured that there was not. Mr Edge personally visited the Wilson Self Storage premises, selected boxes of documents for destruction and couriered them to a destruction centre for shredding. He testified that, "generally speaking", he destroyed all the records for a particular administration, rather than "picking and choosing," but conceded that, in some cases, not all documents for a particular administration were destroyed because it was too big a job to destroy all of them at once. He had provided 29 boxes of surviving documents to ASIC.

250 Mr Edge did not keep a list of the insolvency administrations for which the documents were destroyed, but thought that the documents probably included cheque books. Any evidence of the creditors' resolutions approving early destruction was also contained in the boxes of documents which he destroyed.

251 Although it was impossible to identify what documents had or had not been destroyed, Mr Edge believed that many of the boxes of documents he had destroyed related to many of the liquidations or administrations in question in this proceeding. He denied that he had deliberately destroyed any particular documents.

252 Mr Armistead initially testified that he had no knowledge of the statutory or legal requirements for the retention of corporate documents obtained as part of an external administration. He was unaware of the requirements of s.542 of the Act and did not recall that Mr Edge had ever informed him of it. Mr Armistead testified to his "general understanding" that if a standard resolution to that effect were passed, all documents could be destroyed after 12 months had elapsed. Subsequently, he agreed that he was aware of the requirement to obtain ASIC's consent. Although it was his standard practice to send a letter to ASIC inquiring whether there was any objection to the dissolution of the relevant company, he conceded that the standard letter did not refer to the destruction of documents.

Conclusion on destruction of documents

253 It is clear that the destruction of numerous documents relating to insolvency administrations (including an indefinite number subject to the present inquiry) were destroyed in breach of s.542 of the Act.

254 Mr Edge conceded that the relevant companies were not deregistered. His previous belief that they were deregistered, if genuinely held, was not reasonably based. Such a belief arose from his dereliction of duty in failing to ensure that the final accounts were prepared, final meetings held, final accounts lodged and all steps necessary for deregistration were taken. Mr Edge either delegated those tasks to Mr Armistead without properly instructing him or failed to monitor and supervise Mr Armistead's due execution of tasks in accordance with instructions.

255 Irrespective of Mr Edge's mistaken belief that the companies were deregistered, s.542(3) permits the destruction of documents prior to five years from deregistration only in circumstances where (in a court-ordered winding up) the Court so directs (pursuant to s.542(3)(a)) (after notice to ASIC) or, in a voluntary winding up, where the company, the committee of inspection or the creditors so direct pursuant to s.542(3)(b) or (c) of the Act, and where ASIC also consents to the destruction pursuant to s.542(4) of the Act.

256 Mr Edge testified to a belief that the creditors and ASIC had approved the early destruction of the books. It is clear, however, that Mr Armistead did not seek the Court's or ASIC's consent and was, indeed, unaware of the requirement to do so. There is no evidence that any final meetings of the relevant companies were held at which the standard resolutions approving early destruction were passed. For reasons set out in detail above, I am of the view that those final meetings were not held. Therefore, even had the companies been deregistered, the preconditions of early destruction were not satisfied.

257 Mr Edge's professed ignorance of the terms of s.542 is inexcusable in any liquidator and, in a liquidator of his lengthy and extensive professional experience, it defies belief. While he initially asserted that he only destroyed documents after two years of no activity, Mr Edge subsequently retracted that assertion. He conceded that in particular instances, the destruction occurred after a much shorter period. He then contended that he attributed no particular significance to the two year period. The mode of destruction to which he testified, was if accurate, wholly haphazard. There can now be no idea of what once existed and was destroyed, or of what records never existed at all. No lists or records were kept of the administrations for documents which were destroyed. That, in itself, is a serious failure to conform to appropriate standards of care and diligence. There can be no confidence that Mr Edge destroyed documents only in relation to companies about which no inquiries had been made a substantial period of time prior to the destruction.

258 I considered Mr Edge to be an unreliable and self-serving witness. I am not persuaded that he did not receive ASIC's letter of 27 April 2005 expressing its concern over various administrations. Further, in June 2005, ASIC issued a Notice pursuant to s.30 of the ASIC Act requiring Mr Edge to produce documents relating to several companies. Despite that, in September 2005, he embarked on a deliberate programme of destruction of documents, without obtaining the necessary authorisation and consent. What was destroyed can never be established. Even if otherwise lawful, it would be imprudent and improper for a liquidator to embark on a wholesale destruction of books and records while aware that the regulator was concerned about his conduct and that its queries were unsatisfied.

259 ASIC did not allege that Mr Edge was guilty of dishonesty, but of serious misconduct falling short of dishonesty. I am not persuaded that Mr Edge's account of the destruction of the documents was full, frank and truthful. The evidence indicates that Mr Edge destroyed large numbers of documents in such a way as to render the destruction process itself untraceable and also to destroy evidence of his conduct of liquidations and administrations, whilst aware that the regulator was concerned about it and that its queries were, at that stage, neither comprehensively formulated nor satisfied.

260 Mr Edge's destruction of documents was, on the most favourable view, the result of gross ignorance, neglect and incompetence. On a less favourable view, it was deliberately unlawful conduct, designed to obstruct the regulator's investigation of his conduct.

261 As such, the destruction of the documents contrary to the requirements of s.542 is, on any view, extremely serious misconduct which indicates Mr Edge's unfitness for office. The defendant's submission that ASIC was, in effect, responsible for the premature, unauthorised destruction of documents, reflects a continued refusal to acknowledge the exacting standards of conduct and the importance of the duties of his office, an absence of any contrition for even acknowledged contraventions and a defiant and arrogant approach to the regulator's attempt to perform its vital supervisory role.

Failure to lodge reports under s.533(1)(c) of the Act

262 ASIC contends, and the defendant concedes, that Mr Edge failed to lodge reports pursuant to s.533(1)(c) of the Act in relation to Balanceauto, Cameo Arch, CTP Capital, GCW Holdings, JGS (Vic), Jewel Group, Media Sales Network, Pabulum, Seymour Lands, Tetherless and Wallistan, in circumstances where such a report was required because, in each case, the company was or may have been unable to pay its creditors more than 50 cents in the dollar.

263 A s.533(1)(c) report is fundamental to the Act's scheme of protection for creditors, shareholders and the public, because an officer of two or more companies which may have failed to pay more than 50 cents in the dollar may be the subject of a "show cause" notice and ultimately disqualified from managing corporations for up to five years, pursuant to s.206F of the Act. Such reports are essential to monitoring, and where appropriate removing, the directors of successive "bad debt" companies from continued activity which may place the public at risk.

264 Mr Edge deposed that, while he was aware of the obligation to lodge reports with ASIC pursuant to s.533(1)(b) if there had been breaches of law, negligence or misapplied or stolen property, he was "not aware until recently of the fact that I had an obligation to lodge a report where there might be a return of less than 50 cents in the dollar to unsecured creditors of the company".

265 At the hearing, he asserted that, throughout the course of over 25 years' practice as an insolvency practitioner, he had been unaware of the requirements of s.533(1)(c). He only became aware of the obligation to lodge a report under s.533(1)(c) when preparing for the hearing. He conceded, however, that he had been aware for some time that a director could be the subject of a "show cause" notice and disqualified if two or more companies of which he or she was a director failed to pay more than 50 cents in the dollar. He was aware that ASIC was dependent on the liquidator to notify it of such circumstances.

266 Mr Edge conceded that he signed a covering letter to ASIC dated 22 November 2002 and a report in relation to Greenchip Funds Management which stated, inter alia,

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267 He agreed that he would have read the letter before signing it. Three further letters and reports signed by Mr Edge in relation to Precision Interconnect, Chelsea Springs and Vicsworth contained a like statement.

268 Mr Edge explained that "These documents would have all been prepared by Harrisons, at the time. I would have scanned them and signed them". He reiterated that the relevant statement "simply didn't register with me... I did not know that it was a requirement until recently."

269 Mr Edge accepted that Greenchip Funds Management, Tetherless and GCW Holdings (companies of which Mr Little was a director) had failed to pay more than 50 cents in the dollar to their unsecured creditors. He acknowledged that ASIC, if alerted to that, could have taken action against Mr Little. Mr Edge denied, however, that he had deliberately refrained from lodging the s.533(1)(c) reports in relation to Mr Little's companies in order to protect his interests.

270 I am satisfied that Mr Edge contravened s.533(1)(c) of the Act in relation to each of the specified companies. I am not persuaded that he was unaware of the requirements of the sub-section.

271 The relevant breaches were, in my view, not trivial, but seriously jeopardised the regime of creditor protection established by the Act, of which s.533(1)(c) reports are a necessary element.

The Pines

272 Mr Edge was appointed voluntary administrator of The Pines on 6 July 2004.

273 ASIC contended that Mr Edge accepted the appointment as administrator of The Pines for the improper purpose of assisting the director, Mr Little, to resolve a matrimonial dispute, in circumstances where The Pines was neither insolvent nor likely to become insolvent at some future time, as contemplated by ss.436A and 436B of the Act.

274 Mr Edge testified that The Pines was a substantial administration which required considerable work by himself and Mr Armistead. At the time, Mr Edge was CEO of International All Sports, but he took on the work to oblige Mr Little and because it related closely to his work at International All Sports.

275 The letter of Madgwicks to ASIC dated 3 March 2006 stated that Madgwicks was instructed that Mr Edge was appointed administer of The Pines in order to resolve a matrimonial dispute between the director and his wife.

276 At the hearing, Mr Edge initially confirmed Madgwicks' statement. He testified that The Pines was neither insolvent nor likely to become insolvent, and ultimately returned 100 cents in the dollar to creditors. Mr Edge stated that he was not concerned that it was neither insolvent nor likely to become so, given that "both parties were concerned about the continuing management of the property while the marital dispute was operative".

277 Mr Armistead confirmed that he had been told that a voluntary administrator was to be appointed to The Pines because the director and his wife were proposing to separate. He did not understand the company to be insolvent, but understood that it would possibly become insolvent, depending on the dispute. He had no knowledge of how the voluntary administration would resolve the matrimonial dispute.

278 Despite his initial evidence that The Pines was neither insolvent nor likely to become insolvent, Mr Edge then asserted that the company "most likely" would have become insolvent if not properly managed. He suggested that his earlier evidence had been directed to "the precise moment".

279 Mr Edge denied that his primary motivation in accepting the appointment as voluntary administrator of The Pines was to resolve the director's matrimonial dispute. He stated that "the management of the company had no involvement in the dispute whatsoever. The marital dispute went on its own course,...I had no part to play at all in the marital dispute".

280 Although he had originally confirmed the broad accuracy of Madgwicks' description of the purpose of his appointment as the resolution of the matrimonial dispute, Mr Edge ultimately rejected it "as a generalisation by the solicitor" and contended that the solicitor's "choice of words is unfortunate".

281 Mr Edge then asserted that due to Mr Little's matrimonial dispute, it became necessary to manage the company in order to avoid insolvency. He stated that "the two parties were not going to ... continue to manage and fund this company while they were in a matrimonial dispute". Mr Edge conceded, however, that Mr Little's wife ceased to be a director of The Pines on the day of his appointment. He gave no coherent explanation of how the marital dispute had caused the company's probable future insolvency, other than that Mr Little gave the impression that he would not put any further funds into the company.

282 He testified that The Pines owned and managed over 100 horses which had to be realised over a period of two years, and that a shortfall was averted because entities related to Mr Little did not participate in the proceeds of realisation. The creditors of The Pines ultimately received 100 cents in the dollar, after a lengthy delay. Mr Edge testified that it became apparent very shortly after his appointment that the company would be able to pay 100 cents in the dollar.

Disclosure of prior relationship

283 ASIC also submitted that Mr Edge breached his duty by failing to disclose to creditors his prior dealings and relationship with Mr Little, the director of The Pines.

284 The assertion of non-disclosure was first made by the letter of Mr Honey dated 27 January 2006. In his responsive letter to ASIC dated 9 February 2006, Mr Edge did not assert that he had made any disclosure at all of a prior association with Mr Little. Rather, he stated that his only previous association with Mr Little had been acting as administrator of GCW Holdings and Greenchip Funds Management and as an insolvency adviser to the Greenchip Group. The letter asserted that those matters were not relevant to the creditors of The Pines.

285 In his first affidavit, Mr Edge stated that, prior to his appointment as voluntary administrator of The Pines, he had been appointed an administrator of other companies of which Mr Little had been a director, including GCW Holdings, Greenchip Funds Management and Tetherless. He deposed that "I believe that I disclosed my prior involvement to the creditors at the first meeting of the creditors of The Pines... " At the hearing, Mr Edge contended that at the first meeting of creditors of The Pines, he disclosed that he had had previous associations with Mr Little in a professional capacity. He testified that "I said that I'd had a previous association and had acted as an administrator in companies that Mr Little had been involved with." He conceded that he did not specify the companies or the details of his previous involvement.

286 Mr Edge ultimately acknowledged that his association with Mr Little was more extensive than either his letter to ASIC or his first affidavit disclosed. Mr Little was effectively the managing director of the Greenchip Group, to which Mr Edge gave insolvency advice in about 1999, prior to joining Global. Mr Little was also a director of a number of companies in the Greenchip Group. In his letter to ASIC dated 9 February 2006, Mr Edge described Mr Little as "employed by the Greenchip Group..." which tended to downplay Mr Little's prominence in the organisation.

287 Mr Edge conceded that he was also appointed a voluntary administrator of Firbank Arch Pty Ltd ("Firbank Arch") on 5 August 1997. Mr Little was appointed a director of Firbank Arch only 10 days before the voluntary administration began. At the hearing, Mr Edge stated that he had not dealt with Mr Little and was unaware that he had any involvement with Firbank Arch. Mr Edge had, however, been appointed an administrator of Tetherless only about a month beforehand. Mr Edge's denial of knowledge of Mr Little's role in Firbank Arch was unpersuasive.

288 Mr Edge conceded that Mr Little was the founder of Greenchip Funds Management which had an investment in Global (previously Solace), Mr Edge's employer, at the time he commenced his involvement with Global.

289 Mr Little's private company, Markam Arabian Pty Ltd ("Markam Arabian"), was also a shareholder in Mr Edge's employer, Global. Mr Edge denied knowledge of that. As a director of Global, however, he had signed annual returns which showed that Markam Arabian was a shareholder.

290 Mr Little was also a director in the early 1990s (1992 and 1993) of Global. Although Mr Edge professed to be ignorant of that circumstance, I considered his testimony unconvincing.

291 In cross-examination, Mr Edge conceded that, at the time of his appointment as voluntary administrator of The Pines in July 2004, he had known Mr Little socially for seven or eight years and had been his guest at dinner. He denied, however, that Mr Little was a close friend.

292 Under its former name "Black Type Stud Pty Ltd", The Pines issued an invoice to Robert Edge dated 4 November 2002 for $13,200 for a 20% interest in a filly. Mr Edge testified that he purchased the filly at auction for his wife, who was the owner of the interest in the filly. An authority to register the horse was, however, completed and signed by Mr Edge. He stated that he had been "wrong" and "hurried" in completing that authority, which he had never lodged. Mr Edge conceded that the filly was currently under the personal management of Mr Little, who was the trainer's point of contact for the syndicate.

293 Mr Edge testified that in July 2004, Mr Little was "the mailbox" for the syndicate which owned the filly. He conceded that in July 2004, the horse was possibly kept at Mr Little's property, where it had stayed for about 18 months. Mr Edge conceded that he did not disclose his wife's interest in the filly managed by Mr Little to the creditors of The Pines. He did not know whether Mr Little had an interest in the horse in July 2004.

294 Mr Armistead recalled that at the first meeting of creditors of The Pines, "Robert opened the meeting, introduced himself and the appointment of the administrator was ratified." Mr Armistead stated that he could not recall Mr Edge saying anything about his previous association with Mr Little.

295 No minutes of the first meeting of creditors of The Pines were lodged with ASIC or produced by Mr Edge, Mr Armistead or Mr Little under s.30 of the ASIC Act or relevant subpoenas.

Conclusion on appointment to The Pines and whether adequate disclosure

296 Mr Edge accepted the appointment as administrator of The Pines when he was a busy full-time CEO of a public company, long after his professed determination to cease work as an insolvency practitioner and to conclude the liquidations and administrations that were already on foot. The Pines, by his own account, was a complex administration involving the strategic sale of over 100 horses subject to varying ownership, syndicate and management rights, over a two year period.

297 The evidence, which emerged reluctantly under cross-examination, revealed that Mr Edge had a longstanding history of corporate connection with Mr Little. Mr Little controlled a corporate shareholder of Mr Edge's and Mr Armistead's former employer, Global. Mr Edge had previously provided insolvency advice to the latter prior to his appointment and to three "private" companies controlled by Mr Little. Mr Edge (or his wife) had an interest in a horse purchased from The Pines and under long-term management by Mr Little. He saw Mr Little socially. He acknowledged that he accepted the appointment primarily in order to assist Mr Little. Mr Edge professed not to know or recall some of the above associations. He was evasive and unpersuasive in denying that he, rather than his wife, owned the interest in the horse. Whether it was owned by Mr or Mrs Edge, that, and the other associations, should have been disclosed. His assertion that he made any disclosure at all was inconsistent with Mr Armistead's evidence and the assertions in his letter to ASIC.

298 Mr Edge's testimony that he made any disclosure was unpersuasive. If the disclosure to which he testifies were made, it was inaccurate, incomplete and inadequate to alert creditors to the network of prior and existing connections, both social and professional, which may reasonably have been perceived to impede the impartiality necessary for the proper performance of his office.[81] Mr Edge's failure, even at the hearing, to recognise that the creditors were entitled to the disclosure of matters which might give rise to a reasonable apprehension of a lack of impartiality, underscores a dismissive approach to the requirements of probity which renders him unsuitable for office.

299 Mr Edge's rejection of his solicitors', and his own, initial characterisation of the purpose of his appointment, was unpersuasive. I am satisfied that, as he originally asserted, he was motivated to accept the appointment (at a professionally inconvenient stage of his employment history, and contrary to his plan to wind down his insolvency practice) by a desire to assist Mr Little in relation to his matrimonial dispute. That finding is fortified by the evidence on his association with Mr Little, which I find he did not disclose. Mr Edge ultimately drew a distinction between the appointment resolving the matrimonial dispute, and the matrimonial dispute occasioning his appointment. His explanation, however, was unclear and unconvincing.

300 Although Mr Edge was not a person prohibited from acting as administrator pursuant to s.448C, his acceptance and maintenance of the role of administrator without a full disclosure of the nature of the association with Mr Little was a breach of his duty as a fiduciary to reveal potential conflicts of interest and to proceed only with fully informed consent.

301 The evidence before the Court does not enable me confidently to conclude whether or how Mr Edge's appointment as voluntary administrator affected the director's matrimonial dispute, or that the company was not in fact likely to become insolvent at a future time, or that Mr Edge had no belief that it would do so. Mr Little did not give evidence. I am therefore not satisfied to the requisite standard that the voluntary administration of The Pines was commenced, or that Mr Edge accepted his appointment, for an improper, collateral purpose.

302 The circumstances of the appointment and Mr Edge's unsatisfactory evidence (particularly in the light of related findings), nevertheless justify the regulator's concern about the prudence and propriety of his acceptance of the appointment. In my view, the acceptance of an appointment as administrator in order to oblige a director is not, in itself, improper, although any relationship or association related to such an intention to oblige should be disclosed.

303 Mr Edge's failure to file a s.533(1)(c) report in relation to Mr Little's companies, in circumstances where it would have exposed Mr Little to a "show cause" notice, was in itself, a breach of duty, and fortifies the impression that Mr Edge may have been unduly protective of Mr Little's interests.

304 Finkelstein J's observations, in Re Stockford, although made in a somewhat different context, are apposite here:

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312 The lodging form said to be attached to Madgwicks' letter was not in fact attached. Further, the creditors apparently resolved to enter a DOCA only on 20 September 2004, and Mr Edge himself executed it on 8 October 2004, so the DOCA could not have been lodged on 24 August 2004.

313 In his first affidavit, Mr Edge again deposed that: "I believe that a signed copy of the Deed of Company Arrangement was lodged with ASIC in 2004."

314 Although Mr Edge testified that he believed that the company had executed the DOCA, he conceded that he did not witness either the execution or the lodging of the DOCA. He knew nothing of the lodging form purportedly showing that the DOCA had been lodged on 24 August 2004, referred to in Madgwicks' letter. Rather, he acknowledged that his belief that the DOCA had been executed and lodged with ASIC was based on Mr Armistead's advice.

315 Mr Edge testified to a belief that it was prudent practice to keep copies of DOCAs which had been lodged with ASIC, in their executed form. Mr Armistead testified that he routinely kept a copy of each DOCA on the file and also lodged a copy with ASIC. Mr Armistead conceded that he did not recall seeing a DOCA for The Pines where a signature appeared beside the name of the company. He did not witness the execution of the DOCA by any person on behalf of the company. He did not know whether a document so executed had ever existed. Although Mr Armistead believed, and had deposed, that he had lodged a copy of the DOCA with ASIC, he conceded that he did not recall lodging it.

316 The belief of Mr Edge and Mr Armistead that a DOCA for The Pines was executed and lodged, in my opinion, lacks any credible basis. Further, such a belief is inconsistent with the practices of retention of copies of DOCAs, to which both Messrs Edge and Armistead attested.

317 I conclude, on the balance of probabilities, that no DOCA was executed by The Pines in accordance with s.444B of the Act. It would appear that this was the result of inadvertence and laxity and that all parties conducted themselves on the assumption that a DOCA was executed. Under s.446A of the Act, The Pines is taken, on a date that is 21 days after 20 September 2004, to have passed a resolution that the company be wound up voluntarily. Consequently, The Pines is presently in liquidation with Mr Edge taken to have been nominated as liquidator for the purposes of the winding up. The defendant complained that ASIC failed to notify third parties (such as the director and creditors of The Pines) that it sought such a finding and failed to call Mr Little. As in the case of Invaway (discussed below), the liquidation of the company is the automatic statutory consequence of the failure to execute the DOCA, which may ordinarily be addressed by an application pursuant to s.447A. ASIC subpoenaed Mr Little's documents and it was at all times open to the defendant to call him as a witness.

Deficiency of The Pines s.439A reports

318 ASIC contends that the s.439A reports to creditors of The Pines, dated 26 July 2004 and 13 September 2004 respectively, were seriously deficient.

319 The defendant ultimately conceded that both reports were defective, but contended that the deficiencies were excusable.

320 Section 439A(4) of the Act provides:

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322 The IPAA Statement of Best Practice on the Contents of an Administrator's Report dated 1 July 2001 sets out the matters which should, as a matter of best practice, be included in a s.439A report. It states that the administrator's report shall contain sufficient information to provide creditors with an understanding of the history of the company, provide details of the company's directors, shareholders and registered charges, whether the books and records have been properly maintained, the financial statements, a summary of the company's financial results and preliminary analysis and commentary thereon. Any prior involvement with the company, its officers, or any related parties should also be disclosed in the report. The report should include the director's explanation for the company's difficulties and information on offences, voidable transactions and insolvent trading. An estimated return on the winding up and key features of a proposed deed should be stated.

323 Mr Edge conceded that he was aware of the IPAA Report, and broadly agreed with its recommendations.

324 The report in relation to The Pines dated 26 July 2004, when examined by reference to the requirements implicit in s.439A(4)(a) and the IPAA Best Practice Report, is seriously inadequate.

325 It did not refer to the shareholders, or to the registered charge which the company had given. The report stated that there was no summary of the report as to affairs ("RATA") because no RATA had been received at that stage, and no books and records had been provided.

326 According to Mr Edge, neither he nor Mr Armistead had visited the company's premises by the date of the report dated 26 July 2004. Mr Edge testified that he met Mr Little in order to discuss the conduct of the company's business and the reasons for appointing an administrator. He could not recall whether he had asked Mr Little if the company had been trading profitably. The report, however, contained no reference to any discussion with Mr Little. It contained no reference to Mr Edge's fees and expenses. There was no reference to the company's financial position.

327 The report referred to Mr Edge's investigations of whether there were any voidable transactions. It concluded that, at that stage, in his opinion, there were no voidable transactions. Mr Edge conceded that he had not conducted any investigations of voidable transactions (other than for the discussions with the director to which he testified), as he did not have any books and records, and it was impossible to make any assessment without them. The tenor of the report, however, suggested that an investigation had been undertaken. The report made no reference to insolvent trading. Mr Edge stated that the absence of the books and records had prevented him from forming a view on insolvent trading.

328 The report was signed by Mr Armistead, who testified that he signed such reports in the ordinary course if Mr Edge were not available. Mr Armistead testified that he had first prepared the report himself and sent a facsimile of it to Mr Edge. He could not recall whether Mr Edge had made any comments or made any amendments.

329 Mr Armistead testified that he would ordinarily prepare a draft report containing the "bare" information, so that Mr Edge could write any inclusions or corrections by hand and send it back by facsimile.

330 The defendant contended that the failure to include all matters specified in the IPAA Statement was a mere deviation from best practice. Mr Evans pointed out that the provision of information on insolvent trading is not prescribed by the Act or Regulations. Relevant authorities establish, however, that the requirements of s.439A(4) represent a minimum standard for the contents of the report, which, in many cases, may need to be supplemented in order to ensure that it fulfils the fundamental purpose of informing creditors sufficiently to enable them to decide which course to adopt. In Hagenvale Pty Ltd v Depela Pty Ltd,[83] Cohen J stated_:_

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331 The contents and scale of a s.439A report will necessarily vary according to the circumstances and scale of the administration to which it relates. All matters specified in the IPAA Statement of Best Practice may not be relevant in every case. In all cases, however, the report should include all matters necessary for it to answer the statutory description of a report about the company's business, property, affairs and financial circumstances and must include, or be accompanied by, a reasoned statement of opinion on the course which will serve the creditors' interests, as a basis for decision on a resolution referred to in s.439C(a) to (c) of the Act.

332 In summary, the s.439A report for The Pines dated 26 July 2004 contained no information about the company's history or background, and no independent analysis of its current financial position or future prospects. It did not conform to the statutory definition of a report about "the company's business, property, affairs and financial circumstances". The report, which was two pages long, did not express any of the opinions required by s.439A(4)(b)(i) - (iii) to be set out, together with reasons for the opinions. It was a mere skeleton, and wholly ineffective for assisting the creditors to decide the company's fate.

333 Mr Edge's excuse that the relevant matters were "progressive" was unconvincing. It was his duty to make adequate investigations to obtain the books and records with reasonable despatch and to set forth reasoned opinions sufficient to assist the creditors to decide the company's future, as required by statute. Alternatively, he should have explained why it was not possible to do so or sought an extension of time. Instead, Mr Edge permitted his unqualified assistant, Mr Armistead, to produce and sign a pro forma, skeletal catalogue, thereby demonstrating a disregard for the report's vital function.

334 Although Mr Edge sought to excuse the report dated 26 July 2004 on the ground that the matter was in progress, the second report dated 13 September 2004 was also seriously deficient. The report dated 13 September 2004 was unsigned. It included a summary of the RATA (provided by the director), but again failed to include any independent assessment.

335 It stated that, based on the estimated realisable values and creditors disclosed in the RATA, unsecured creditors would receive approximately 90 cents in the dollar, after "administration costs of approximately $25,000 if the company were to be placed in liquidation", but, as some assets could not be realised for 12 months, funds would not be available in a liquidation as soon as they would be under a proposal for a DOCA.

336 The report stated that the director had proposed to offer creditors 50 cents in the dollar immediately and 50 cents in nine months' time, allowing the director sufficient time to realise "other assets not held within the company". It further stated, "in my opinion, it would be in the creditors' interest for the proposal to be accepted as it returns 100 cents in the dollar albeit over a period of nine months".

337 The report contained the same reference to investigations of voidable transactions as the first report. It contained no account of the company's history and no information about the reasons for the appointment of a voluntary administrator. It contained no reference to fees and remuneration, save for the estimate of $25,000 for a liquidation (which option the administrator did not recommend).

338 The report contained no reference to a specific DOCA and its details, as required by s.439A(4)(c), but simply referred to a generalised proposal. By the time of preparation of the report dated 13 September 2004, the administration of The Pines was nearly complete, but the report stated that "a complete review of the financial affairs of the company has not been completed" and a DOCA was therefore not proposed.

339 While it indicated that it was in the creditors' interests to accept a proposed DOCA because they would receive 100 cents in the dollar over nine months, there was no independent reasoning, and no independent data or assessment of the company's financial position or the creditors' options.

340 The unsigned report was, again, skeletal and perfunctory. It simply repeated the background information of the earlier report. It provided no basis on which creditors could critically discriminate between the different options referred to in s.439A(4).

341 I am satisfied that Mr Edge's failure to provide the creditors of The Pines with a sufficiently detailed report (informing them of the specified matters and providing an adequate independent assessment which would equip them to decide which course would best advance their interests) was prejudicial to the creditors' interests within terms of s.447E(b) of the Act. The poverty of the s.439A reports for The Pines was apparently the result of a practice whereby Mr Armistead prepared skeletal reports from information provided by other parties, and sometimes signed them himself, or sent them unsigned. The creditors were thus deprived of the minimum prescribed information to which they were entitled.

Other deficiencies in the administration of The Pines

342 Mr Edge also conceded that he delegated to the director, Mr Little, the task of sending material to creditors, including the notice of the first meeting of creditors of The Pines on 2 August 2004 and the administrator's report.

343 The facsimile dated 7 July 2004 of Mr Armistead to Mr Little stated: "Hi, Graeme, as discussed with Robert Edge notices to be sent to creditors. Regards, Bill."

344 Mr Edge conceded that he discussed the despatch of notices with Mr Little and stated "Mr Little had the addresses on his electronic records and it was a simpler process ... for us to send the notices to him." While Mr Edge stated that "it's the only time I've done it", he nevertheless justified the practice, stating, "I don't see any difficulty with it."

345 Mr Edge testified that he believed that the notices were sent and that every creditor received one, because he was not aware of any complaint. He conceded, however, that the notices were not sent under his supervision and he was unable to ascertain that all creditors had received a copy.

346 The delegation of sending the notices of meeting and the s.439A report to the company's director was a most imprudent measure. It is vital to ensure that all creditors are apprised of their opportunity to have a voice in the company's fate. Notification must therefore be the responsibility of a disinterested and competent professional person. In the absence of notice of a meeting, the creditors will be effectively deprived of their voice. In the case of The Pines, when combined with the evidence of Mr Edge's prior association with Mr Little and apparent predisposition to favour his interests, the delegation of the sending of material to creditors to Mr Little is particularly troubling.

347 The evidence reveals that only two creditors attended the first meeting of creditors of The Pines. Although the unsecured creditors ultimately received 100 cents in the dollar, they suffered the prejudice of a considerable delay in payment. Further, the costs of the administration (which totalled over $194,000) greatly exceeded the estimated costs of only $25,000 for a liquidation.

348 The DOCA for The Pines was purportedly approved at the creditor's final meeting on 20 September 2004. Clause 10 of the DOCA required Mr Edge, as deed administrator, to lodge six monthly accounts with ASIC. ASIC, however, had no records that such accounts were lodged.

349 Mr Edge asserted that he signed accounts which were prepared on a monthly basis and he understood that Mr Armistead lodged them. The only monthly accounts produced for The Pines were unsigned. Mr Edge ultimately agreed that he had only "sighted" the monthly accounts and had not signed them. He conceded that he could not confirm or deny whether Mr Armistead lodged the accounts, but stated that he would be "disappointed" if he had neglected to do so.

350 I am satisfied that Mr Edge failed to ensure that six monthly accounts were lodged, as required by the DOCA for The Pines. I have concluded, however, that the DOCA was not executed.

351 ASIC further contends that Mr Edge failed to prepare or lodge minutes of meetings of creditors of The Pines held on 12 July, 2 August, 16 August, 30 August and 20 September 2004. Further, it alleges that only the meetings on 12 July 2004, 2 August 2004 and 20 September 2004 were advertised in a newspaper.

352 There is no record that minutes for meetings of The Pines were lodged with ASIC. Mr Armistead contended that he recalled preparing "pro forma" minutes for meetings of The Pines, but could not recall giving the minutes to Mr Edge to sign. He did not recall sending the minutes to ASIC. He accepted that it was possible that he had neglected to send them.

353 Although no completed attendance register for the second meeting of The Pines has been located, Mr Edge maintained that an attendance register was completed. It was his practice to attach the attendance register to the minutes of the meeting. Mr Edge did not testify to a specific recollection of a completed attendance register or minutes of meeting, but relied on his general practice and assumed that it had been followed. He had no explanation of why no attendance register could be located.

354 No minutes for the meetings of The Pines for 2, 16 or 30 August 2004 were produced in response to the s.30 notice or the subpoenas. Advertisements were placed in The Australian only for the meetings on 12 July 2004, 2 August 2004, 20 September 2004 and 31 March 2006. The attendance register for the meeting on 2 August 2004 was blank. Mr Armistead could not explain that. He could not recall the meetings on 2 August, 16 August or 30 August 2004.

355 Draft minutes for the final meeting of The Pines, apparently prepared in advance, were produced. There was also an attendance register for the meeting on 20 September 2004. Mr Edge could not explain why there were no completed minutes for that meeting.

356 He had no specific memory of signing any minutes of meetings for The Pines, although he maintained that it was his invariable practice to prepare, sign and lodge minutes of meetings.

357 I conclude that no minutes of meeting for The Pines were completed or lodged. Save for the meeting on September 2004, no attendance registers were prepared. Several meetings were not advertised as required, and the sending of material, including notices of meeting, was improperly delegated to the director.

The Pines administration work and remuneration

358 There is considerable uncertainty as to what work was done by Messrs Edge and Armistead in relation to The Pines, and when any such work was done. In particular, it is not possible to determine what work was done before the resolution to execute a DOCA on 20 September (which I have found did not result in the execution of a DOCA) and thereafter, when it was assumed that a DOCA had been executed.

359 The initial estimate for fees of a winding up of The Pines contained in the s.439A report dated 13 September 2004 was "approximately $25,000". The report did not recommend that option. Ultimately, Mr Edge sought approval for remuneration of over $194,000 in relation to the administration and the purported DOCA of The Pines.

360 ASIC contends that the remuneration was not validly approved and further, that the claim was based on exaggerated and unreliable estimates of the work done by Mr Edge and Mr Armistead.

361 Although The Pines owned or managed over 100 horses, and the principal task was the orderly realisation of the horses over time, Mr Edge conceded that horses to the value of $1.4 million had already been sold prior to his appointment. Only about 30 horses remained to be sold after Mr Edge's appointment as administrator.

362 Mr Edge believed that the bulk of the work for the Pines was performed after the resolution to execute a DOCA on 20 September 2004. The accounts for The Pines prepared as at 3 March 2005 showed payments for administration fees without any dates.

363 Mr Edge contended that he performed considerable work in relation to the management of the horses, payment of creditors, purchase of animal feed, accommodation, medical treatment and transport arrangements. He could not recall specifically what work he did. He testified that he had a general management function in negotiating sales. He personally liaised with creditors, discussed the sale of horses and examined financial books and records. He agreed that Mr Armistead undertook the majority of the day to day work for The Pines.

364 Mr Armistead testified that shortly after the first meeting of creditors of The Pines, he had many discussions with creditors about likely dividends and realisation of the horses. He was working full-time at Burbank Homes at the time and could not recall how much time he spent working on The Pines.

365 The timesheets in relation to The Pines indicate that 29 hours of work were performed by Mr Armistead during the first week of the administration. The timesheets indicate that Mr Armistead performed ten hours of work on The Pines administration in the course of a single week day, while he was working full-time at Burbank Homes. I found Mr Armistead's explanation of what he had done unconvincing. Even if correct, it indicates that there was little value in some of the work, because, for example, he claimed to have spent four hours generating a Form 507 and a directors' questionnaire from scratch. He testified that the balance of the 29 hours would have been spent on meetings and discussions.

366 The timesheets indicate that during the following week, Mr Armistead worked for 16 hours on The Pines, "attending to creditors". The work was performed during week days, while he was working full-time.

367 The timesheets indicate that during the following week, Mr Armistead worked 19 hours on The Pines. He spent approximately 4 - 5 hours a day talking to creditors and to Mr Little's bookkeeper.

368 The timesheets indicate that during the following week, Mr Armistead worked a total of 20 hours on The Pines. He could not recall what tasks he had performed.

369 In December 2004, after most of the creditors had been paid, Mr Armistead spent 23 hours in the course of one week working on The Pines administration, according to the timesheet. At the hearing, Mr Armistead could not recall what tasks he had performed. He conceded that the sale of stock, the management of horses and the purchase of feed were handled by other persons.

370 Mr Armistead conceded that, at the same time as working the claimed number of hours on The Pines, he was working full-time at Burbank Homes and was also spending an average of 10 - 15 hours a week working in his liquor store. While he denied exaggerating the amount of time actually spent on the various tasks, for The Pines, I am satisfied that the times were exaggerated or, on the most favourable view, Mr Armistead spent far longer than a competent employee would have spent working on the administration.

371 No completed minutes of the meeting of the creditors of The Pines held on 20 September 2004 were lodged with ASIC or otherwise located. Mr Armistead could not recall completing minutes, giving them to Mr Edge to sign, or lodging them with ASIC.

372 A total amount of $151,092 in remuneration had already been paid by September 2004.

373 Mr Armistead stated that there was never a cheque book or a separate bank account for The Pines. The administration was run through the Robert Edge & Associates account. The receipts for the administration, such as the proceeds of sale of the horses, were paid directly into that account. Administration fees were paid to Robert Edge, Mr Armistead or Mr Armistead's creditors. The only records of the dates of such payments were on the Robert Edge & Associates account cheque butts.

374 Mr Little from time to time enquired about the state of the accounts. The email of Mr Little to Messrs Edge and Armistead dated 1 February 2005 asked how much cash was left and what was owing. The email from Mr Little to Mr Edge dated 15 September 2005 again sought information. It is not clear what information was provided to Mr Little. Mr Edge testified that he believed that Mr Little's initial inquiry was related to the matrimonial dispute.

375 Mr Edge conceded that no resolution approving remuneration was passed at the meeting of creditors of The Pines on 20 September 2004 and that no documents concerning remuneration had been provided to the creditors, either during the administration or thereafter.

376 He acknowledged that he had drawn fees for The Pines without obtaining approval, and that he should not have done so.

377 Mr Armistead also acknowledged that he could not recall that any resolution approving remuneration was passed at the meeting on 20 September 2004. He had no specific memory of the resolution being passed. Mr Armistead testified, however, that invoices to date "_would have been produ_ced". He conceded that no maximum amount of remuneration was stated. Rather, it was "just left open". He conceded that the invoices were general and did not provide any details of the work that had been done.

378 In recognition that he had drawn fees for The Pines without authorisation, Mr Edge convened a further meeting of creditors of The Pines on 31 March 2006, at which he sought the creditors' approval of fees for $194,088 as at 30 January 2005.

379 The minutes of the meeting of the creditors of The Pines held on 31 March 2006 reveal that the meeting was attended only by Mr Armistead, as the representative of three creditors, namely The Pines Stud Pty Ltd, Mr Little and Markam Arabian Pty Ltd. One stated purpose of the meeting was "To approve the Deed Administrator's Fees and out of pocket expenses".

380 The minutes stated, inter alia, that:

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381 The minutes recorded that "The Deed Administrator sought a motion that the creditors approve the Deed Administrator's out of pocket expenses and remuneration to be paid from the proceeds held by the Deed Administrators", which was carried unanimously.

382 Mr Armistead initially testified that at the meeting, invoices were produced to support a resolution approving the remuneration. He agreed that the expenses had already been paid and the total sum related to remuneration only. He was ultimately unsure what invoices were produced, at either the 20 September 2004 or the March 2006 meeting. The invoices produced for The Pines bore no relationship to the amounts shown in the accounts as having been paid to Mr Armistead and Mr Edge. Mr Armistead conceded that the invoices were never actually paid or sent to anyone, but were just left on the computer. They bore consecutive numbers, although Mr Edge conducted at least one other administration (that of Eco Panels) concurrently with that of The Pines.

383 Mr Woodward argued that the resolution for approval was restricted to the deed administration fees and did not cover the administrator's fees. It was clear, however, that the sum of $194,088.29 was not limited to fees in respect of the deed administration only, but included fees related to the period of the administration.

384 Mr Edge conceded that the wording of the resolution was inaccurate, because there were no expenses.

385 I am satisfied that the resolution approving the fees of Mr Edge passed at the meeting of creditors of The Pines on 31 March 2006 was ineffective. Gyles J in Re Aliance considered that a voluntary administrator's fee should be fixed at a s.439A meeting. The meeting was called pursuant to s.445F of the Act. I have found that the company was in liquidation from October 2004, due to the failure to execute the DOCA. Consequently, there was no deed administration. In any event, the s.445F meeting could not validly approve the fees of an administrator, but the amount purportedly approved clearly incorporated an amount related to the administration which had preceded the purported DOCA. It is not possible to discern from the terms of the resolution itself, or from any other available documentation, the period to which any part of the total amount of remuneration can be attributed. The supporting material provided to creditors, to which Mr Armistead testified, was, on any view, wholly inadequate. Further, the evidence indicates that the remuneration was based on an excessive and exaggerated claim of hours worked. No explanation was advanced for the disparity between the initial estimate of fees of $25,000 in the S.439A report for a liquidation and the fees in relation to the administration and purported DOCA, which were almost $200,000.

386 The defective approval of fees claimed by an administrator at a meeting pursuant to s.445F, and the failure to execute the DOCA, could be regularised under s.447A. In the present case, however, in addition to the 'technical' deficiencies, there are serious questions about the substantive validity of the claims to remuneration. While the defendant stressed that all creditors of The Pines were paid in full, there was a considerable delay. Further, any surplus would be an asset of the company.

387 The entire sum of $194,088.29 has been drawn without valid approval, in circumstances where it is unclear whether Mr Edge can make out his entitlement to any particular sum on proper grounds. .

Outstanding issues regarding The Pines

388 Mr Woodward submitted that a number of outstanding issues in relation to The Pines arose from the inquiry.

389 Mr Armistead initially confirmed that he kept accounts for the administration of The Pines, showing fees which had actually been paid. The accounts generated as at 30 January 2006 showed fees of $194,088.29. Mr Armistead testified that he believed that the administration was effectively concluded, with only the payment of the secured creditor (the NAB), outstanding.

390 Late in the course of his evidence, Mr Armistead produced a cheque book for the Robert Edge & Associates account for the period from 11 January 2006 to 2 August 2006.

391 The cheque book indicated that a cheque for $3,061 was written to Southern Independent Liquor on 18 January 2006. Mr Armistead conceded that Southern Independent Liquor was one of his creditors. A cheque to Robert Edge & Associates for $725.80 and a cheque to Mr Armistead for $1,000 (undated) were also paid. Mr Armistead testified that the moneys of The Pines and Eco Panels were intermingled in the account of Robert Edge & Associates. He believed that the above payments were for remuneration in relation to Eco Panels or The Pines, but he was unable to identify which administration.

392 On 18 January 2006, a payment of $25,000 was made to the Bet to Win Syndicate, a partnership which owned one of the horses sold in the administration of The Pines. The payment did not appear in the accounts of The Pines as at 30 January 2006. Mr Armistead explained that the omission was "an oversight".

393 Although Mr Armistead initially testified that the accounts for The Pines made up to 30 January 2006 were the final accounts, and that there was no further activity in the administration after that date, late in the course of his evidence he conceded that there was a subsequent set of accounts produced at the final meeting and an additional cheque book for the period ending on 11 January 2006. He believed that Mr Edge possessed the latest account and the relevant cheque book. Mr Edge did not, however, produce them.

394 It emerged that a number of payments were made after 30 January 2006 which may relate to The Pines.

395 A cheque to Southern Independent Liquor (Mr Armistead's creditor) for $3,569 was paid on 7 February 2006. A cheque to Twenty Third Hembard Pty Ltd for $16,500 was paid on 17 March 2006 and a cheque to Equine Sports Medicine for $66 was paid on 17 March 2006.

396 Mr Armistead testified that he had the records relating to the above payments "somewhere".

397 A cheque for $137,928.57 to the NAB, the secured creditor of The Pines, was paid on 27 March 2006. Mr Armistead testified that this was all that was left in the account as at that date, but was not sufficient to pay the NAB in full. The director was obliged to make up a shortfall, as the total debt to the NAB was $305,000.

398 The bank balance for The Pines was $210,928 as at 30 January 2006. Only two substantial cheques for $16,500 and $25,000, totalling about $41,500 were shown to be paid (or taken into account) in relation to The Pines between 30 January 2006 and 27 March 2006, yet the balance had reduced by about $73,000. There was thus over $30,000 in funds of The Pines which were apparently unaccounted for, and the payment of which was not recorded in the cheque book or elsewhere.

399 I conclude that the sum of approximately $30,000, apparently the property of The Pines, has been paid out in circumstances where it is not possible to identify the destination of the funds or the purpose of the payments.

Invaway

400 Mr Edge was appointed the administrator of Invaway on 22 June 2004.

401 He testified that, despite his full-time employment and consequent intention to wind down his insolvency practice, he undertook the Invaway administration after the directors approached him to act, because it was very minor.

402 The first meeting of the creditors of Invaway was held on 28 June 2004 at Mr Edge's home. Mr Armistead, although not chairman, signed the minutes. There was no attendance register attached to the minutes.

403 Mr Edge testified that creditors were given notice of the first meeting, but there was only one external creditor, who was located in Sydney. Only Messrs Armistead and Edge were present at the first meeting. Norman Waterhouse, the creditor's solicitor, by a letter to Mr Edge dated 25 June 2004, complained that Mr Edge had a conflict of interest. Mr Edge did not respond.

404 The s.439A report to creditors of Invaway was signed by Mr Armistead. Mr Edge explained that that was due to "a convenience factor", because the company had only one creditor and no assets. It appeared, however, that Invaway had several creditors related to the director and one independent creditor which was owed approximately $30,000.

405 The s.439A report for Invaway contained little information and no independent material or details of any independent investigation by Mr Edge. Rather, it recited a summary of the RATA. While in his first affidavit Mr Edge deposed that the RATA was true and correct, the report made no comment on its accuracy. The report contained no history of the company, and no material on its background or circumstances. There was no independent assessment of the company's financial position or affairs. Mr Edge testified that he had made such an assessment, but did not set it out in the report.

406 The report stated that the administrator had reviewed the company's books and records. Mr Edge explained that the review constituted his investigation. The report did not refer to insolvent trading. It concluded that unsecured creditors would receive nil cents in the dollar.

407 In his affidavit, Mr Edge deposed that he prepared the report in a brief form in order to keep costs down, due to the small scale of the administration, and because there was only one external creditor. He stated that he explained the situation to that creditor orally. Mr Edge's evidence on whether the discussion with the creditor occurred before or after the date of the report was shifting and inconsistent. Initially, he testified that he had a lengthy discussion with the creditor after preparing the report.

408 The external creditor's solicitors, Norman Waterhouse, by a letter to Mr Edge dated 20 July 2004, complained that the report did not disclose any or any sufficient details of the company's business assets, property, financial circumstances or reasons for failure. The letter also complained that the proxy for the first creditors' meeting had not been received. Mr Edge, on being taken to the letter, testified at that point that his discussions with the creditor took place after the date of the letter. Mr Edge then conceded that the discussion must have taken place before he provided the report. Ultimately, he was unable to recall.

409 The report for Invaway did not contain sufficient material to assist the creditors meaningfully to determine the company's fate. Mr Edge's assertion that he made an independent assessment, but failed to include it in the report, is unpersuasive. An oral explanation is, in any event, no substitute for a written report providing the prescribed relevant information to all creditors. Such a report guarantees the accountability of the insolvency practitioner and the equal access of all creditors to appropriate information.

410 I conclude that the report for Invaway was seriously deficient. While the scale of the administration will necessarily affect the level of detail required, in the present case, the small scale of the administration and the asset-less state of the company did not justify neglect of the fundamental requirements.

411 The second meeting of creditors for Invaway was held on 19 July 2004. Mr Orlizki, of the creditor's solicitors, attended. Mr Edge was unsure whether minutes of the meeting of the creditors of Invaway on 19 July 2004 were prepared or lodged. At the hearing, contrary to his earlier assertion, he ultimately agreed that Mr Armistead prepared draft minutes in advance, which were to be completed as the meeting proceeded. No minutes of the meeting were, however, lodged with ASIC or produced by Mr Edge or any other party.

412 In his first affidavit, Mr Edge deposed that he had signed the minutes and that they had been lodged. Only unsigned minutes of the second meeting of Invaway, to which no attendance register was attached, were produced. At the hearing, Mr Edge conceded that his assertion was based solely on "his invariable practice". He acknowledged that he had no specific memory of signing an attendance register.

413 Mr Edge testified that a DOCA for Invaway was approved at a meeting on 2 August 2004. Only a draft unexecuted DOCA for Invaway was, however, produced. No executed DOCA for Invaway was produced by Mr Edge or any other person. Mr Armistead deposed in his affidavit that he had lodged an executed DOCA for Invaway with ASIC by mail in September 2004. At the hearing, he disclaimed any knowledge that he had so deposed. Ultimately, he acknowledged that he had no recollection of sending an executed DOCA for Invaway to ASIC. Mr Armistead's evidence on that issue was evasive and unconvincing. Mr Edge could provide no explanation for the absence of an executed DOCA, given that his avowed practice was to keep significant documents, including executed DOCAs. Mr Edge did not recall that he or the director, Mr Ratcliffe, signed a DOCA for Invaway. He conceded that it was possible that the DOCA for Invaway had not been executed.

414 I conclude that, as in the case of The Pines, no DOCA for Invaway was executed as required by s.444B of the Act. Consequently, pursuant to s.446A of the Act, Invaway is taken to be in voluntary liquidation from late August 2004, with Mr Edge nominated as the liquidator.

415 I conclude that the s.439A report to creditors prepared by Mr Edge was seriously deficient, that he failed to sign and lodge minutes of meeting and failed to ensure that the DOCA was executed in accordance with s.444B.

416 In the circumstances, I am satisfied that Mr Edge's management of the company's business, property or affairs and his acts or omissions, were or would be prejudicial to the interests of some or all of the company's creditors or members, within the terms of s.447E(i) of the Act.

Eighth Taljan

417 In his first affidavit, Mr Edge conceded that he was appointed administrator of Eighth Taljan on 29 March 2001, although he had previously mistakenly believed that he had not been appointed.

418 Minutes of the first meeting of creditors of Eighth Taljan were lodged with ASIC on 5 April 2001. They indicated that the meeting took place at the offices of Global. No attendance register was attached to the minutes. No other documents in relation to Eighth Taljan were located. Mr Edge could not recall the first meeting of creditors. He testified that he believed that, despite the minutes, the meeting was not held.

419 The minutes indicated that the creditors were informed that the second meeting of creditors would occur within 21 days. It is undisputed, however, that no second meeting was held and that the company returned to the control of the directors. The administration of Eighth Taljan therefore came to an end in or about late April 2001.

420 Mr Edge could not explain or recall anything about the Eighth Taljan administration. He asserted that he had been unable to rectify the failure to comply with lodging requirements, as he had no documents and could not remember any details.

421 He testified that at a meeting on 1 May 2006 with Messrs Honey and Stack of ASIC, he had offered to lodge the outstanding documents in relation to Eighth Taljan. Due to the lack of source documents, he could not insert the dates, but offered to state a belief that documents had been lodged. Mr Edge attributed his failure to fulfil the intention stated in his first affidavit to lodge the documents confirming that the administration had come to an end to ASIC's failure to respond to his offer. His affidavit, however, was sworn after the meeting with ASIC.

422 I am satisfied that Mr Edge did not keep any record of his appointment as administrator or his conduct of the company's affairs in that capacity. He persistently failed to lodge documents with ASIC advising that the voluntary administration of Eighth Taljan had come to an end in April 2001. The failure to discharge his obligations was, or was potentially, conduct prejudicial to the interests of some or all of the company's creditors or members within terms of s.447E(i) of the Act. It was not an isolated default, but was characteristic of his approach to ASIC's inquires about the administrations the subject of the present proceeding. Mr Edge was unapologetic and sought to blame the regulator for deficiencies in his administration.

Eco Panels

423 Mr Edge deposed that he was appointed administrator of Eco Panels on 26 October 2005 and became the liquidator pursuant to the resolution of creditors at an adjourned second meeting of creditors of 21 December 2005.

424 The company, which had a licence to make panels to construct kit homes, was trading, but had defaulted on payments under the licence.

425 At the time, Mr Edge was the full-time CEO of International All Sports. He testified that he had believed that the administration of Eco Panels would be short, due to negotiations between the director of Eco Panels, Dr John Tickell, and the Catholic Church Insurance Group (the secured creditor). Mr Fabio Parutti, an adviser to Eco Panels, had proposed a "work out" for the company, with Mr Edge as manager.

426 ASIC contends that Mr Edge's report pursuant to s.439A of the Act in relation to Eco Panels suffered from many of the same deficiencies as those for The Pines and Invaway. It contained no history of the company. It simply summarised the RATA. It stated that the unsecured creditors totalled $272,850. The report referred to the Catholic Church Insurance Group's registered debenture, but did not disclose that the significant amount of $3 million was owed to the secured creditor. It did not deal with insolvent trading. It stated that the administrator could not identify any voidable transactions.

427 Mr Edge said that he spoke orally about a number of matters which were not included in the report. The report did not refer to remuneration. Mr Edge stated that it was discussed at the meeting on 21 December 2005, but no specific sum or capping was mentioned and no estimates or documents were provided. He contended that he requested the creditors to approve his fees, but acknowledged that those measures were inadequate to secure valid approval.

428 He testified that he believed that, as yet, he had taken no remuneration for Eco Panels. He acknowledged that he had no invoices or timesheets containing details of the work done. Mr Edge believed that he estimated the fees at approximately $18,000 at the meeting on 21 December 2005. He testified that he also discussed his intention to charge IPAA rates, but did not mention specific sums or a cap. He did not present any documentation to the meeting.

429 Minutes of the meeting of the creditors of Eco Panels on 21 December 2005 were prepared, but were unsigned and there was no record that they were lodged with ASIC. Mr Armistead could not explain why minutes of the meeting were not lodged.

430 The letter of Robert Blank, solicitors, dated 29 November 2005, warned that the prescribed convening period for the second meeting of Eco Panels would expire on 15 November 2005. The convening period ended on 16 November 2005 and the meeting was required to be held on or before 22 November 2005, pursuant to s.439A(2), but was scheduled for 29 November 2005 and subsequently adjourned to 21 December 2005. As there was no application to extend the convening period, the administration came to an end when the convening period expired. The company returned to the control of the directors.

431 Mr Edge testified that, on receipt of the letter of Robert Blank, he had asked Mr Armistead if the notices and dates of the meeting were within the appropriate rules. When Mr Armistead assured him that they were, he took no further action because he relied on Mr Armistead to make the calculations. He made no attempt to calculate the convening and meeting dates himself.

432 Mr Armistead recalled that he was concerned about the questions raised by Robert Blank and referred the matter to Mr Edge to deal with. Mr Armistead recalled that Mr Edge asked whether the notices of meeting had been sent in accordance with the correct time frame. Mr Armistead conceded that he advised him that they had, but acknowledged that he did not first check the dates.

433 The resolution to wind the company up at the second meeting of Eco Panels on 21 December 2005 was a nullity, due to the failure to hold the meeting within the prescribed time. The position of Eco Panels and the appointment of Mr Edge as liquidator was subsequently regularised by Mr Edge's application to the Federal Court pursuant to s.447A of the Act.

434 Mr Stack, by his affidavit sworn 21 July 2006, complained that the documents of Eco Panels provided under subpoena were so disorganised that he could not tell what steps had been taken in the administration and the maintenance of files was very disorderly. Mr Edge testified that the files were maintained and forwarded by Mr Armistead, and could not explain why they would not be kept well. Mr Armistead conceded that the files were not in very good order when he was requested to supply them to ASIC.

435 A cheque for $1,960 payable to Eco Panels dated 24 October 2005 was still unbanked. Mr Edge could not explain that and acknowledged that it should have been banked. Mr Armistead was also unable to account for the unbanked cheque.

436 Despite Mr Edge's assertion that he believed that no remuneration had been taken for Eco Panels, Mr Armistead's evidence indicated that a number of cheques may have been drawn on Eco Panels to pay remuneration. Further, Mr Armistead, at a late stage in his evidence, produced the cheque book of the Robert Edge & Associates cheque account for the period from 11 January 2006 to 2 August 2006. The cheque book for the preceding period was not produced. The cheque butts indicated that cheques written on the Robert Edge & Associates cheque account in January 2006 may have related to Eco Panels. Mr Armistead confirmed that the Robert Edge & Associates account held money received by Mr Edge as the liquidator of Eco Panels, intermingled with other Robert Edge & Associates money and the proceeds of realisations in the administration of The Pines. Money was drawn from the account in order to pay remuneration incurred in the Eco Panels voluntary administration and liquidation. Mr Armistead considered that the payments were made from Robert Edge & Associates' money. He was unable to explain, and had no record to indicate, how the remuneration was allocated between various administrations.

437 A cheque for $1,000 written to Mr Armistead on 11 January 2006 was marked "Eco Panels". Mr Armistead denied that it was a payment from Eco Panels to himself. He contended that it was a payment from Robert Edge & Associates. He conceded, however, that Eco Panels was "who it's to be billed against" and that funds of Eco Panels, which had been raised in the course of the administration and liquidation, were in the account at the time. Mr Armistead stated that the money "will be fees against Eco Panels".

438 On 16 January 2006, a cheque for $589.70 marked "Eco Panels" was paid to Arcay Pty Ltd, a company controlled by Mr Armistead.

439 A cheque for $3,061 was written on 18 January 2006 to Southern Independent Liquor, a creditor of Mr Armistead, on the Robert Edge & Associates cheque account, at a date when funds of Eco Panels, The Pines and Hollycorp were intermingled in the account. Mr Armistead explained that the payment represented money owed to him by Robert Edge & Associates for various administrations. He could not state which administration was involved. The following exchange then occurred:

[174]

442 The contraventions and breaches of statutory provisions by Mr Edge in his capacity as the administrator of Eco Panels were or would be prejudicial to the interests of some or all of the company's creditors or members, within terms of s.447E(i) of the Act.

443 The contraventions of the statutory provisions applicable to liquidators and the misapplication of funds by or on behalf of Mr Edge while he was acting in the capacity of liquidator (albeit his appointment was a nullity until regularised) constituted a failure faithfully to perform his duties as a liquidator. While counsel for Mr Edge contended that his lien for remuneration precluded an order that he deliver the company's books and records to a new liquidator, I am satisfied that in the circumstances, the assertion of such a lien would not be conscionable[85].

COURT ORDERED LIQUIDATIONS

Asset-less administrations

444 ACN 007, Balanceauto, Media Sales Network, Precision Interconnect and Seymour Lands were wound up by the Court in insolvency, and Mr Edge was appointed liquidator. The companies were apparently without significant assets. No half-yearly accounts pursuant to s.539 were lodged with ASIC for three or more years. Mr Edge and Mr Armistead testified that the liquidations had ended, but no final accounts were prepared or lodged as required by s.539 of the Act.

445 The sole director of Seymour Lands, Mr Bennett, deposed that he was never, at any stage, contacted by Mr Edge or anyone else on his behalf. Mr Edge testified that he had asked Mr Armistead to contact Mr Bennett to get the company's books and records. He could not recall whether Mr Armistead followed that instruction. Mr Bennett was not cross-examined. Mr Armistead's evidence did not support the testimony of Mr Edge. He did not recall a request to contact Mr Bennett and had no contact details with which to do so.

Administrations where remuneration paid

Cameo Arch

446 Mr Edge was appointed liquidator of Cameo Arch on 10 November 1998.

447 The last Form 524 lodged for Cameo Arch was dated 10 November 2002. It showed receipts of $11,000, and payments totalling $9,674, of which $8,788 were payments already made to Mr Edge as liquidator. Mr Edge acknowledged that two further payments of $493 on 19 February 2003 and $650 on 29 August 2003 were subsequently made to him for remuneration.

448 Mr Edge testified that he paid himself remuneration at the time because it was "due and payable". He could not recall any approval by the creditors or if there was ever any meeting of the creditors of Cameo Arch. No minutes of any meeting of creditors were lodged with ASIC. No final accounts were lodged or produced.

449 Mr Edge contended that it was his practice to convene a meeting of creditors, even for a small liquidation. There is, however, no record of any advertisements in The Age or The Australian for any meeting of the creditors of Cameo Arch.

450 Mr Edge's sole basis for believing that a meeting of creditors had occurred was his confidence that Mr Armistead, who was instructed to take all necessary steps, would have convened it.

451 Mr Edge could not explain why he was paid $650 for remuneration in August 2003 although the last Form 524 was lodged on or about 10 November 2002 and the administration was completed in mid-2003.

452 The bank account for Cameo Arch was still not closed. Cheques had been written after the date of the alleged final meeting. Mr Edge conceded that, in such circumstances, it was possible that the final meeting was never held.

453 He could not recall signing the cheques, although he was the signatory on the account. He could not recall querying why cheques were being written in relation to an administration which had been completed.

454 I am satisfied that no final account was prepared or lodged, no meeting, including a final meeting was held, no advertising occurred and no minutes of meeting were lodged for Cameo Arch.

455 I am satisfied that Mr Edge failed faithfully to perform his duty as a liquidator by failing to ensure that the above steps and associated requirements to conclude the liquidation were fulfilled, and by failing to close the company's bank account after the administration was essentially complete.

456 I am also satisfied that Mr Edge drew at least $9,932.74 in remuneration for Cameo Arch, which was not approved by creditors pursuant to s.473(3) of the Act or at all.

Chelsea Springs

457 Mr Edge was appointed liquidator of Chelsea Springs on 17 April 2002. Mr Edge deposed that he destroyed the books and records of Chelsea Springs in September 2005. He deposed that he believed that Chelsea Springs had few assets of value.

458 The most recent Form 524 for Chelsea Springs was lodged by Harrisons Insolvency on 30 May 2003, for the period from Mr Edge's appointment to 17 April 2003.

459 It revealed receipts totalling $6,415 and payments totalling $4,273. The sum of $4,000 was paid to Mr Edge for remuneration. A tax invoice of Harrisons Insolvency dated 19 February 2003 indicated that Harrisons Insolvency invoiced Mr Edge for $4,000 and that Mr Edge deducted $600 (15%) for himself. Bank statements after the date of the last Form 524 revealed further receipts totalling $2,500 and further payments, including one of $3,600.

460 There was no record that a meeting of the creditors of Chelsea Springs was ever held. No minutes of meetings, records, notices, or advertisements were located. Mr Edge was unable to explain the absence of records of a meeting.

461 In his affidavit sworn 16 May 2006, Mr Edge deposed that he believed that a final meeting of creditors of Chelsea Springs was held in about June 2004, and that it approved the payments of remuneration.

462 In his affidavit, Mr Edge acknowledged a payment of $3,600 by Chelsea Springs, which he described as either a payment to himself for remuneration or a payment to Brandon Partners in respect of the costs of the winding up.

463 The cheque for $3,600 drawn on Chelsea Springs on 2 April 2004 was, however, paid to Arcay Pty Ltd, a company established by Mr Edge on 1 December 2002. Mr and Mrs Armistead became the directors of Arcay Pty Ltd on 17 June 2002.

464 Mr Edge testified that the cheque of Chelsea Springs to Arcay Pty Ltd represented fees to Mr Armistead, and was a direct payment of a share of profits or a bonus 20%. He stated:

[176]

Mr Edge contended that the payment to Arcay Pty Ltd would have been shown as income of Robert Edge & Associates.

465 He conceded that the "preferred practice" was to pay remuneration to Robert Edge & Associates and then distribute it to himself or Mr Armistead.

466 Mr Edge conceded that he could not recall a final meeting of the creditors of Chelsea Springs at which his remuneration was approved. He conceded that it was possible that no final meeting of Chelsea Springs had been convened or held.

467 Mr Armistead conceded that, although he had deposed that a final meeting of Chelsea Springs was held in June 2003, payments from a preferential creditor were received in its bank account until 2004 and a final meeting therefore could not have been held in June 2003. He conceded that he had no memory of a final meeting.

468 Mr Armistead confirmed that the amount of $3,600 paid to Arcay Pty Ltd on 17 April 2006 "would have been fees owed to Robert Edge & Associates and in turn paid to myself." He agreed that the payment "bypassed" Robert Edge & Associates.

469 As at 31 March 2006, there was $888.84 in the bank account of Chelsea Springs. Mr Edge testified that he was not aware until 11 March 2006 that the account was still open.

470 Mr Armistead gave evidence that if he received a letter addressed to a company after he no longer had the file, he would probably "just destroy the envelope" without opening it first. He would routinely throw out an envelope from a bank without opening it to check whether there was any money in the account. It would appear that this occurred in relation to Chelsea Springs.

471 Mr Armistead conceded that he did not keep any records on his computer for Chelsea Springs. He did not keep notices of meetings or records in 2004 or 2005.

472 I conclude that no final meeting of the creditors of Chelsea Springs was held and that the sum of $7,600 paid to or at the direction of Mr Edge as remuneration in relation to Chelsea Springs was not approved pursuant to s.473(3) of the Act or at all.

Vicsworth

473 Mr Edge was appointed the liquidator of Vicsworth in June 1997. The last Form 524 for Vicsworth, lodged on or about 30 December 2002 related to the six month period up to 10 December 2002. The Form 524 showed that Viscworth had cash at bank of $5,989.50 and that the total remuneration owed to the liquidator was $3,785.40, but a "nil" amount had been paid.

474 Mr Edge, in his second affidavit, acknowledged that the cash for Vicsworth had fallen to $4,605.50 by 23 July 2003. He could not explain the reduction.

475 Mr Edge testified that he believed that there would have been approval of his fees for Vicsworth.

476 The bank statements revealed that a cheque for $3,500 was written on Vicsworth's account on 1 September 2003 and a cheque for $959 was written on Vicsworth's account on 27 September 2004. The latter was only about 12 months before Mr Edge destroyed documents in September 2005. Mr Edge was unable to recall whether the payments were for his remuneration or payments of legal fees to Mr Abbott incurred in the liquidation. Correspondence between Mr Edge and Mr Abbott about their respective fees was in evidence. Mr Abbott's account exceeded $5000, but Mr Edge had no recollection of the matter. Mr Armistead testified it was likely that the sum of $959 was in respect of remuneration.

477 In his affidavit, Mr Edge deposed that he believed that the liquidation of Vicsworth was completed in June 2003. At the hearing, he conceded that most of the activity occurred in 2001-2002. The cheques, however, were written in September 2003 and 2004. Further, a sum of over $1,000 remained in the bank, which was also inconsistent with the completion of the liquidation in June 2003.

478 Mr Edge agreed that if the bank account were not closed, it was not possible properly to prepare a final account and to hold a final meeting. It was therefore possible that a final meeting was not held and a final account was not prepared.

479 No final account for Vicsworth was located. Mr Edge did not recollect seeing a final account. He conceded that his previous recollection of a final meeting of Vicsworth in 2003, in offices that were closed in 2000, was not necessarily correct.

480 ASIC submitted that on the balance of probabilities, the sum of $959 was paid in remuneration to Mr Edge and the sum of $3,500 legal fees to Mr Abbott. The defendant submitted that there was insufficient evidence to infer that Mr Edge received either the $3,500 or the $959 and observed that ASIC had not called Mr Abbott.

481 I conclude, however, on the balance of probabilities, that at least $959 paid in September 2004 was paid to, or at the direction of, Mr Edge for remuneration and that the payment was not approved pursuant to s.473(3) or at all.

482 I also conclude that a final account for Vicsworth was not prepared and no final meeting of Vicsworth was held.

CREDITORS' VOLUNTARY LIQUIDATION

Companies where no remuneration paid

483 There is no evidence that CTP Capital Trading, JGS (Vic), Jewel Group, Pabulum and Wallistan had any assets and no evidence that any remuneration was paid. I am satisfied, however, that no final accounts were prepared, no final meetings were advertised, convened or held, and no returns of the holding of the meetings with the account attached were lodged, as required by s.509 of the Act.

ADF

484 Mr Edge was appointed liquidator of ADF on 29 April 1997.

485 A final account for ADF dated 15 October 1998, made up to 24 August 1998, was lodged with ASIC.

486 Although Mr Edge deposed in his first affidavit that the books and records of ADF were destroyed in September 2005, Mr Stack deposed that the entire file for ADF was produced in response to a subpoena. Mr Edge testified that he had overlooked the file when he searched his documents in relation to his affidavit and the subpoena.

487 Mr Stack's affidavit referred to discrepancies in the flow of funds of ADF. Although the final account for ADF made up to 24 August 1998 showed that total remuneration of $4,171.81 had been paid to the liquidator and the amount owing to the liquidator was left blank, on 14 January 1999, a further payment of $1,449.10 was made to Mr Edge. The payment of remuneration of $1,449.10 apparently made on 14 January 1999 was not included in the final account. It thus could not have been included in the accounts laid before the creditors and approved by them, even if a meeting were held. Mr Edge was unable to explain the further payment. He stated that Mr Armistead had charge of the matter.

488 There was no record that the minutes of a final meeting of ADF were lodged with ASIC. Mr Edge did not lodge a notice of final meeting of ADF until August 2005. In his affidavit, he acknowledged that he had no minutes of the final meeting, but deposed that it had occurred in 1998. At the hearing, he conceded that he had no memory of a final meeting and it was possible that no final meeting had been held. He could produce no records in relation to his remuneration.

489 I am satisfied that no final meeting of the creditors of ADF was held as required by s.509, and that there was no approval of remuneration, as required by s.499(3) of the Act.

490 ADF was deregistered by ASIC on 30 November 2005. Section 504 of the Act has been held to preclude any review of remuneration after deregistration. In GIS Electrical Pty Ltd v Melsom,[86] Steytler J stated:

[180]

constituted a failure by Mr Edge faithfully to perform his duty as liquidator of ADF.

Eurocapital

493 Mr Edge deposed that he was appointed the administrator of Eurocapital on 21 October 1997. He deposed that the creditors resolved, on 16 January 1998, to execute a DOCA, which was executed and lodged in February 1998.

494 Mr Edge recalled that $400,000 was paid to creditors under the DOCA, which was fully performed, but he was reappointed administrator in July 1999, and subsequently became the liquidator. He believed that the liquidation of Eurocapital was completed in 2000 and that the creditors received five cents in the dollar in April 2000, as a final dividend.

495 No Form 524s were lodged in relation to Eurocapital. The search and records were unclear as to the terms of Mr Edge's appointment as administrator. Mr Edge could throw little light on that question.

496 The bank statements for Eurocapital show that $400,000 was paid in during the administration, whereas in his affidavit, Mr Edge deposed that it was paid in during the DOCA.

497 A payment of $301,999 was made on 17 August 1999, a deposit of $308,156 was made on 15 September 1999 and a payment of $154,249 was made on 16 March 2000. In May 2000, a number of smaller payments were made. In June 2006, a single payment of $28,159 was made. Mr Edge was unable to explain any of the payments.

498 Mr Edge initially asserted that the final accounts were prepared, although he was unable to explain why they were not received by ASIC. Initially, he also contended that he recalled the final meeting of Eurocapital. Ultimately, he conceded that he could not recall the final meeting. He considered that if it occurred at all, it took place in 2000.

499 As no Form 524s or other records of payments and receipts for the period of the administration were produced, it was not possible to identify the nature of payments disclosed by the bank statements. In particular, it was not possible to identify what remuneration was paid.

500 Neither Mr Edge nor Mr Armistead could identify a payment of $28,000 made on 14 June 2000, a number of smaller payments made in May 2000 or a final payment of $5,138.51 made to Robert Edge & Associates' trust account.

501 From 11 July 2000 until March 2001, the sum of approximately $20,000 remained in the bank account of Eurocapital.

502 Mr Woodward submitted that, based on the practices disclosed in relation to other administrations, it was "likely that a number of the payments made from the liquidation account for Eurocapital Pty Ltd were in respect of remuneration, particularly the payments totalling $20,184.15 made well over a year after the liquidation appears to have effectively ceased", although there was no evidence to confirm the position in relation to remuneration one way or the other. I am satisfied that, as ASIC submitted, no half-yearly accounts were lodged, no final account was prepared, no final meeting was held as required by s.509 of the Act, and that remuneration was drawn without being fixed, as required by s.499(3) of the Act. Eurocapital was deregistered by ASIC on 28 August 2005. Because it would be necessary to reinstate the company in order effectively to address the question of unauthorised remuneration, ASIC did not seek orders.

503 I am satisfied that Mr Edge's failure to lodge half-yearly and final accounts, his failure to advertise and convene a final meeting of creditors as required by s.509 of the Act and to seek a resolution of creditors fixing amounts drawn as remuneration, constituted a failure by Mr Edge faithfully to perform his duty as a liquidator.

CBS Global Communications

504 Mr Edge was appointed the administrator of CBS Global, a company associated with Mr Little, on 27 June 2000. On 23 July 2000, he became the liquidator of CBS Global.

505 Mr Edge recalled that the directors of CBS Global were involved in disputes over the sale of computer equipment and intellectual property, an alleged acquisition of equity and the claims of shareholders. He testified that due to the disputes, he had done a considerable amount of work. The work on the sale of the company's assets went on for several years. He could not, however, identify what work was completed between the date of voluntary administration and that of the liquidation.

506 The minutes of the s.439A meeting of creditors of CBS Global on 21 July 2000 indicate that the creditors passed resolutions, inter alia, that the company be wound up, that a committee of creditors be appointed, that the remuneration of the administrator be approved, and that the destruction of the books and records of the company be approved.

507 The form of the resolution for approval of remuneration (which was repeated in the case of GCW Holdings and Tetherless) was as follows:

[182]

508 Mr Edge could not recall what invoices were tabled at the meeting of creditors on 21 July 2000.

509 On 9 May 2001, Mr Edge opened a bank account with the ANZ containing $108,387.73 for CBS Global.

510 In his first affidavit, Mr Edge deposed that he believed that most of the books and records of CBS Global were destroyed.

511 In his second affidavit, Mr Edge deposed that he received no further correspondence from ASIC in relation to CBS Global between November 2000 and February 2006.

512 Mr Rofe, a director of CBS Global, deposed that he had no further communication with Mr Edge or Mr Armistead after the meeting of creditors on 21 July 2000. Further, he had left messages, but had obtained no response. He sent a letter of complaint to Mr Edge, which went unanswered. Mr Edge testified that he recalled some contacts. Mr Rofe deposed he was contacted by Harrisons Insolvency in 2001 about sale of switches, and then had no further contact until ASIC contacted him.

513 It would seem that the liquidation of CBS Global was completed by mid-2002. There were no further outgoings after that time and invoices from Harrisons Insolvency had practically ceased. Mr Edge could not recall doing anything of substance after that date.

514 The Form 524 for CBS Global made up to 21 January 2003 and lodged on 28 January 2003 showed total receipts of $145,356, total payments of $78,878 (of which $36,417.31 had been paid to Mr Edge as liquidator) and $66,478.16 in remaining funds. $1,693.41 was stated to be still owing for remuneration.

515 A further payment of $2,189.90 to the liquidator (of which $1,870.55 was remuneration) was recorded on 30 January 2003.

516 Despite the fact that all work was completed by mid-2002, and the Form 524 dated January 2003 indicated that only about $1,600 was owed for outstanding remuneration, the $66,000 in remaining funds was subsequently applied to pay further remuneration. Mr Edge's initial account of the disposition of the $66,000 indicated, however, that only $10,125 was paid in further remuneration. In his first affidavit, Mr Edge stated that he had found a journal transaction which recorded that he was paid $10,125.37 on 19 May 2003 for remuneration. The journal document was located in his storeroom.

517 He further deposed that he believed that part of the balance of about $56,000 had been used to pay an office administrator, a general manager and a third party who had paid the sum of $50,000 to CBS Global in consideration of a share issue. He deposed that the share issue had arguably not occurred, a proceeding was issued and the sum of $50,000 was repaid to the third party.

518 The account of disposition of funds in Mr Edge's affidavit was not consistent with the bank statements and copy cheques produced in response to a subpoena served on the ANZ Bank. They disclose the following payments:

[183]

519 The Compleat Woman was a business operated by Mr Edge in partnership with his wife. Mr Edge initially denied that the $50,000 paid to The Compleat Woman was the same $50,000 to which he referred in his affidavit. He indicated that there was another $50,000. He then testified that the $50,000 paid to The Compleat Woman was for his remuneration, because: "That's the only grounds on which I should take funds from that company across to my own private interests." He defended the propriety of the payment of remuneration directly to his business.

520 Mr Edge subsequently conceded that the $50,000 was never repaid to the third party as he had deposed. He also agreed that the payments to the two employees (which he had deposed came out of the $56,000 some time after January 2003), had in fact been paid in November 2001.

521 Mr Edge conceded that the payments to Carlton & United Breweries Ltd were remuneration, although he could not recall seeing those cheques. He suggested that Mr Armistead may have filled out the cheque for $10,125 after he had signed it in blank. Mr Edge then acknowledged that this was "not preferable treatment... not the best way to do it and it's certainly not the way I would have done it." He agreed, however, that it was his practice to sign blank cheques for Mr Armistead to fill in.

522 He asserted that the two cheques to Carlton & United Breweries were recorded as income of the business of Robert Edge and Associates, although he did not have the accounts to prove it, nor could he specifically recall it. His practice did not file a tax return, as he was a sole proprietor.

523 The cheque dated 10 May 2006 for $1,194.27 for cash was drawn on CBS Global and was signed by Mr Edge. Mr Edge could not recall signing that cheque, although it occurred six days prior to swearing an affidavit in the present proceeding, in which he stated that he had no bank records for CBS Global, but was endeavouring to obtain them from the Commonwealth Bank of Australia..

524 Mr Edge testified that he asked Mr Armistead about the cash cheque and was told that it was written to close the account, which should have been closed previously. He agreed that it would have been prudent to ask to see the cheque book.

525 The tax invoices to CBS Global from Robert Edge & Associates for professional services, and the firm's letters to Harrisons Insolvency, indicated that Mr Edge took 15% of the total remuneration.

526 Mr Edge conceded that by the time of the Form 524 prepared up to 20 January 2003, the bulk of the work had been done in relation to the liquidation. He could not recall doing any more work of substance after that period. He then asserted that he had outstanding fees of $66,000 which had not been paid by January 2003. He maintained that the $50,000 (or rather, the invoice that was rendered for a similar amount) represented work done by himself and Mr Armistead over the two previous years of the liquidation, which had not been billed. According to Mr Edge, Mr Armistead had not been billing the job through the period prior to the engagement of Harrisons Insolvency. Mr Edge acknowledged that he had signed the Form 524 in January 2003, which showed an amount owing to the liquidator of only about $1,600, when, by his account, a sum of about $66,000 was still owing. He testified that "I did a great deal of work over two years and there's no evidence, as best I can see from what's available, of me being remunerated for that work."

527 There was no evidence of the work which Mr Edge claimed was done, the hours spent or the person who performed it. Mr Edge contended that the evidence of that work was contained in Mr Armistead's computer, which had been destroyed.

528 Mr Armistead also testified that the remuneration drawn for CBS Global was considerably more than the last Form 524 disclosed. Mr Armistead believed that the entire $66,000 in the CBS Global account in about January 2003 was disbursed towards fees, calculated by reference to timesheets, similar to those produced for Eco Panels and The Pines. He could not recall the cheque for $50,000 to The Compleat Woman. He assumed that it was for remuneration and was written at Mr Edge's request.

529 Mr Armistead testified that he never discussed with Mr Edge the practice of by-passing the Robert Edge & Associates account by making payments for fees directly from a company's liquidation account to their respective creditors. He was surprised that Mr Edge had expressed disapproval of the practice.

530 ASIC contended, and I am satisfied, that:

[187]

534 I am satisfied that Mr Edge drew remuneration from the funds of CBS Global without it being validly fixed pursuant to s.499(3) of the Act. This finding is discussed further below. Further, there is no satisfactory basis on which to determine what, if any, work was performed in relation to the $66,000.

535 I am satisfied that Mr Edge failed to lodge half-yearly accounts in accordance with s.539 and failed to advertise, convene and hold a final meeting and prepare a final account for CBS Global in accordance with s.509 of the Act. In my opinion, by reason of the matters referred to above, Mr Edge failed faithfully to perform his duties as a liquidator.

Greenchip Funds Management

536 Mr Edge was appointed the administrator of Greenchip Funds Management, another company associated with Mr Little, on 17 November 2003. He deposed that on 15 December 2003, at a meeting pursuant to s.439A of the Act, the creditors resolved to wind the company up and he was made liquidator.

537 The minutes of the meeting, however, contained no reference to a resolution to wind the company up, nor any resolution in relation to remuneration or the destruction of books. Mr Edge suggested that was due to a printing problem with the minutes. He conceded that he had no actual recollection of the resolutions or of what was involved in the liquidation. He believed, however, that the liquidation was completed in 2003 and that the final meeting was held in 2003.

538 The most recent Form 524 for Greenchip Funds Management for the period to 15 December 2002 showed that total remuneration of $8,197.28 had been paid. $298.38 was still owing. The Form 524 stated that Mr Edge held $13,871.07 on behalf of the company. The statement of receipts and payments prepared by Harrisons Insolvency disclosed a further payment for remuneration and expenses of $462.80 on 30 January 2003. The invoice stated that $351.01 of that sum was for remuneration (including GST).

539 Bank statements and copy cheques disclosed the following further payments:

[192]

544 Mr Evans opposed that course, contending that all relevant matters should have been dealt with in the course of the hearing. He argued that the Court's inquiry should not be extended by means of a special referee. It was, he submitted, contrary to the principles of procedural fairness to subject Mr Edge to an ongoing inquiry.

545 As Marks J made clear in Harvey, the procedure under s.536 is a matter for the Court. His Honour expressly contemplated that if "other aspects of the liquidator's conduct emerge in the course of an inquiry then any embarrassment to him can be met in the usual way by permitting any necessary adjournments and giving of directions".[87] His Honour considered that such a course would be "practical especially where there is one hearing without any preliminary examination..."[88]

546 In my opinion, it would be open to the Court to pursue a matter which emerged unexpectedly in the course of a s.536 inquiry by means of referral to a special referee or otherwise, subject to appropriate directions. The subjection of the liquidator to further inquiry by such means would not, in itself, be inconsistent with procedural fairness. In the present case, the question of the propriety of a payment by Greenchip Funds Management to a creditor potentially related to Mr Little emerged as a result of documents produced late in the hearing. As Mr Woodward acknowledged, however, the referral of further issues may produce diminishing returns. In my opinion, the establishment of the nature and propriety of the payment of $13,100 does not warrant investigation by a special referee when considered in the context of the inquiry as a whole.

Tetherless

547 Tetherless was another company of which Mr Little was a director. Mr Edge testified that it was a substantial company with a number of employees. He was appointed the administrator of Tetherless on 3 July 1997. At a meeting of creditors under s.439A of the Act on 16 January 1998, the creditors resolved that the company be wound up and Mr Edge became the liquidator.

548 Mr Edge believed that he destroyed the books and records of Tetherless in the second half of 2005, but he ultimately produced six boxes of documents in response to a subpoena. The boxes did not contain any final accounts. He deposed that the liquidation of Tetherless was "significant" and had involved him in travel to the USA to secure its major asset, which was intellectual property. Ultimately, little was realised. The work occurred in 1999 and 2000.

549 The last Form 524 for Tetherless was for the period to 16 January 2003. It showed that there were total receipts of $62,066.13. $4,355 had been paid for remuneration and $52.35 was owed. An amount of $30,031.31 was still held on behalf of the company. Mr Edge believed that the balance of those funds would have been paid to him for remuneration.

550 There was no indication in the minutes of the meeting pursuant to s.439A that any remuneration was approved and Mr Edge could not recollect that any documents were produced to support a claim to remuneration.

551 A statement of receipts and payments prepared by Harrisons Insolvency showed a further payment of $56.80 to Mr Edge for remuneration and expenses. Bank statements and copy cheques disclosed the following payments:

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552 Mr Edge testified that Australian Liquor Marketers was a supplier to Mr Armistead and the payment of $9,600 was a payment of remuneration, made directly to Mr Armistead's creditor. Mr Armistead confirmed that the payment was a payment of remuneration directly to his supplier.

553 Mr Edge had "no idea" of what the payment of $18,401.61 to American Express was. He denied that American Express was a creditor of his business, The Compleat Woman. He acknowledged that he had "substantial American Express accounts" and while it was "possible" that the payment was of one of his accounts, he was unable to recall.

554 Mr Armistead acknowledged that he also had an American Express account, but believed that a payment of such a sizeable amount would be directed to Mr Edge's account. He could not recall any discussion with Mr Edge in relation to the payment.

555 I am satisfied that Mr Edge's failure to lodge accounts, including final accounts, failure to comply with the requirements of s.509, failure to lodge a report pursuant to s.533(1)(c) and failure to maintain books and records together with the drawing of remuneration without approval, constituted a failure faithfully to perform his duties as a liquidator.

GCW Holdings

556 GCW Holdings was another company associated with Mr Little. Mr Edge was appointed administrator on 19 June 2000. On 17 July 2000, at a meeting under s.439A of the Act, the creditors resolved to wind the company up and Mr Edge was made liquidator. He recalled that the company had few assets other than about $10,000 in cash, but had very substantial liabilities of approximately $19 million.

557 Mr Edge recalled few details of the liquidation of GCW Holdings. He deposed that he delegated the majority of its conduct to Mr Armistead.

558 The last Form 524 for GCW Holdings, prepared to 17 January 2003, was lodged on 28 January 2003. It showed that Mr Edge had been paid total remuneration of $5,744.30 and that $92 was still owing. The company had cash of $3,005.66.

559 Mr Edge deposed that he believed that the balance of $3,005.66 was remuneration which "would have been approved by the creditors of the company at the final meeting of creditors", held in the first half of 2003, although he could not recollect that meeting. Mr Edge believed that the liquidation was completed in 2003.

560 Harrisons Insolvency prepared a statement of receipts and payments which disclosed a further payment of $114.21 for remuneration and expenses.

561 Bank statements and copy cheques showed that the following payments were made from the account of GCW Holdings.

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562 Mr Edge conceded that the completion of the liquidation coincided with the termination of the Harrisons Insolvency agency. He testified that Mr Armistead was no longer employed by Global and was therefore available to complete a number of liquidations at that time. Mr Edge agreed that, apart from the payment of fees, many of the liquidations had been dormant.

563 Mr Edge assumed that the three cheques were drawn for remuneration. He identified the cheque to Australian Liquor Marketers as a payment to Mr Armistead. He could not recall the cheque to Telstra and had no memory at all of the cheque for cash.

564 Mr Edge did not remember signing the cheques. He conceded that it was possible that he signed blank cheques. He stated that, at some point, Mr Armistead informed him that the cheques were to pay fees but did not state that he had written some cheques directly to his suppliers.

565 I am satisfied that Mr Edge failed to lodge a final account and hold a final meeting as required by s.509, that funds now characterised as remuneration were paid directly to a creditor of Mr Edge's associate at his direction or with his consent, that a cheque to cash was written and that proper records and accounts were not maintained. In the circumstances, Mr Edge failed faithfully to perform his duty as a liquidator.

Validity of resolutions for CBS Global, GCW Holdings, Greenchip Funds Management and Tetherless

566 Mr Evans, submitted that**,** as the above companies were in creditors' voluntary liquidations, s.499(3) applied. Section 499(3) provides that the committee of inspection, or if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator.

567 Mr Evans contended that the form of resolution approving remuneration for CBS Global, GCW Holdings, Tetherless and (probably) Greenchip Funds Management, and the notices of meeting, satisfied the essential criterion for prospective approval endorsed by Gyles J in Re Aliance, in that there was no evidence that more than one rate applied to the work to be performed by Mr Edge, Mr Armistead or Harrisons Insolvency. The vice of the resolution at issue in Re Stockford was therefore avoided. Mr Evans argued that where a valid resolution under s.499(3) had been passed, ASIC had no standing to instigate a review of remuneration. Further, he argued that even if the remuneration had not been properly fixed, the paramount power in relation to remuneration was vested in the creditors and the Court may lack power to fix remuneration in the absence of a resolution of creditors.

568 In my opinion, (save, perhaps for the case of a deregistered company), the Court is empowered under s.536 to inquire into the remuneration of a liquidator where there is a prima facie case for investigation, whether or not a resolution approving the remuneration has been passed. In that context, the Court is not constrained by the ordinary statutory regimes for review or fixing of remuneration, but may make such orders as are necessary in order effectively to address the circumstances disclosed by its inquiry in any particular case.

569 In Burns Philp Investment Pty Ltd v Dickens (No 2)[89], the plaintiffs successfully sought an inquiry under s.536 into the conduct of a liquidator appointed to a company in voluntary liquidation. The plaintiffs complained, inter alia, of very large fees, contending that the quantum, in itself, indicated a proper case for an inquiry.[90] They submitted that the overall fees exceeded the highest end of the range, that there may have been double charging by the liquidator's firm and that the preparation of time spent by the liquidator compared to that spent by his firm was extremely unusual.[91]

570 Young J accepted that once apprised of any matter bearing on the conduct of the liquidator, the Court's jurisdiction to inquire into the reasonableness of the conduct in relation to remuneration and expenses of the liquidator was "beyond question".[92]

571 In any event, I do not consider that the relevant form of resolution in the present case would satisfy the criteria endorsed in Re Stockford and Re Aliance.

572 The essential defect in Re Stockford was that it was unclear which rates of remuneration were applicable to employees within a particular category and the elements of the formula could not be objectively identified. Further, there was no means of discerning the reasonableness of the proposed rates, which Finkelstein J considered essential to a valid "fixing".

573 In Re Aliance, the time based formula for remuneration was sufficiently objective to be arithmetically applied. There was also a cap, although Gyles J did not consider it essential. The resolutions in the present case did not refer to a particular Insolvency Practitioners Association of Australia Guide to Hourly Rates, but to such Guide "from time to time." As Mr Woodward submitted, in contrast to the present case, in Re Aliance the relevant rates were set out in the report to creditors.

574 In my opinion, if remuneration is based on a set of rates, the document setting out the rates should be provided prior to the resolution for approval. There is no evidence that any IPAA Guide to Hourly Rates was provided for the resolutions in the present case.

575 The IPAA Hourly Rates Guide of December 1997[93] includes explanatory notes which state, inter alia:

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579 The IPAA Guide thus has no category into which, on the evidence, Mr Armistead falls. It provides that an appropriate charge out rate for such a staff member must be determined by the practitioner and must ultimately be justified.

580 Therefore, even if it be assumed that the reference to a Guide "from time to time" did not, in itself, pose a difficulty, the incorporation of the IPAA Guide rates into the resolution would not remove the obstacle to validity found in Re Stockford. Mr Armistead's rate of charge could not be ascertained from the IPAA Guide, but was required, under that Guide, to be determined by the practitioner himself. The incorporation of the IPAA guide did not result in a formula capable, without a further decision by the liquidator, of objective application.

581 As such, even if it were established that the resolutions for approval of remuneration for the relevant companies were duly passed, they would not, in my opinion, comply with the fundamental requirements of validity stated in Re Stockford and Re Aliance.

582 The minutes of the meeting of creditors of Greenchip Funds Management are, in any event, truncated and there is no evidence that the resolution was passed. In the case of CBS Global, the minutes indicate that the resolution was passed by the meeting of creditors, rather than first being put to the committee of inspection which had been formed, as required by s.499(3).

583 Gyles J's recognition of the validity of a resolution for prospective approval is also predicated on the possibility of an effective review, which in turn presupposes the preparation of adequately detailed documentation.

584 In the present case, amounts now characterized by the defendant as remuneration have been drawn from the relevant companies' funds without valid approval. The question is not one of review, but of the appropriation of funds to which, on the available evidence, the liquidator was not entitled. Much documentation has been unlawfully destroyed by Mr Edge. Mr Armistead's evidence indicates that the timesheets, invoices and other relevant records which were prepared were inadequate according to the standards endorsed in Re Stockford and like authorities, and as required by s.531 and Regulation 5.6.01, in that the records, including accounting records, did not give a complete and accurate record of the liquidator's administration of the companies' affairs.

The cash cheques

585 ASIC contends, and I accept, that the drawing of the three cheques payable to cash in the voluntary liquidations of GCW Holdings for $39, Greenchip Funds Management for $117.07, and CBS Global for $1,196.27, all on 10 May 2006 (five days before Mr Edge swore his first affidavit in this proceeding), was "most troubling".

586 Neither Mr Edge nor Mr Armistead referred to those cheques in their affidavits. The relevant bank statements and copy cheques were produced in response to a subpoena served on the ANZ.

587 In Harvey, Marks J stated that "the liquidator was guilty of a serious breach of duty in signing a 'cash' cheque, no matter what the amount".[94]

588 The evidence of both Mr Edge and Mr Armistead in relation to the cash cheques was unsatisfactory. In each case, Mr Edge gave evidence that he did not recall signing the relevant cheque. He did not deny signing the cheques. He stated, "I'm not disputing that that's the date on the cheque and that's my signature so I assume it happened but I don't recall."

589 Mr Edge disclaimed any knowledge of the circumstances, and could not recall what became of the cash drawn on the cheques.

590 Mr Armistead testified to his extraordinary routine practice of throwing out letters from banks without opening them after activity on particular administrations ceased. He stated that, due to the proceeding, contrary to his usual practice, he opened a letter from the bank and had found there were still funds in the account.

591 Mr Armistead swore his affidavit in the proceeding on 17 May 2006, only one week later, but it made no reference to the cash cheques.

592 Mr Armistead's evidence fluctuated considerably on this issue. Initially, he contended that he paid the cash into the Robert Edge & Associates account, but there was no evidence of any deposits in May 2006. Mr Armistead then testified that the money was paid into another account.

593 Mr Armistead asserted that money was owed to the practice because there was money in the account. He conceded that no invoices were outstanding and that he had hitherto treated the relevant administrations as at an end. His apparent assumption was that any funds remaining in a company's account after activity had ceased must belong to the liquidator. His testimony was illogical and inherently incredible.

594 He believed that he had discussed the cash cheques with Mr Edge in May 2006. He asserted that Mr Edge had rebuked him in May 2006 because the bank accounts were still open, and had instructed him to close them. Mr Armistead could not recall whether the May 2006 cheques were pre-signed or whether he asked Mr Edge to sign them contemporaneously.

595 Mr Edge testified that he rebuked Mr Armistead over the practice of writing cheques to cash. He did not, however, suggest that Mr Armistead deliberately concealed the writing of the cash cheques from him.

596 The evidence of both Mr Edge and Mr Armistead was unsatisfactory and mutually contradictory.

597 I conclude that Mr Edge was aware that the cash cheques had been written in May 2006. Mr Armistead testified that there was some discussion at that time and Mr Edge did not suggest that Mr Armistead concealed his activity from him.

598 Mr Edge is, in any event, fully responsible for the writing of the cash cheques which he had signed, whether in blank or not, and had left within the control of an unqualified and unsupervised subordinate.

PRINCIPAL RELIEF SOUGHT

599 ASIC seeks that the Court make a number of specified findings, including findings that the defendant had breached particular sections of the Act or Regulations in relation to particular companies. It also seeks findings or declarations that by reason of specified contraventions of particular sections of the Act, the defendant breached his duty of diligence and care pursuant to s.180(1) of the Act in relation to each relevant company.

600 ASIC also seeks a finding or declaration that, in all the circumstances, the defendant has not duly fulfilled his duties as an official liquidator, has not faithfully performed his duties as a voluntary administrator and liquidator and has not observed the requirements prescribed by the Act and Regulations.

601 Like Marks J in Harvey, I consider it unnecessary to determine whether declarations can properly be made in an inquiry under s.536 of the Act. It is also, in my view, unnecessary to determine whether declarations or findings of breach of s.180 (1) of the Act can properly be made in such a context.

602 Section 180(1) of the Act imposes an obligation on officers of a corporation to exercise their powers and to discharge their duties with a degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation's circumstances, occupied the office held by the relevant officer, and had the same responsibilities within the corporation. By s.180(2), an officer who makes a business judgment is taken to have met the requirements of s.180(1) if the officer satisfies the conditions of the "business judgment rule" set out in s.180(2).

603 Section 181(1) imposes an obligation on officers of a corporation to exercise their powers and discharge their duties in good faith in the best interests of the corporation and for a proper purpose.

604 While a liquidator is an "officer" subject to the obligations in ss.180 and 181, the focus of those sections is upon duties owed to a particular corporation. Section 180(1) directs attention to the particular circumstances of the corporation to which the duty is owed. The vast majority of cases decided under ss.180 and 181 concern directors.

605 The Court may make a declaration of contravention of s.180 or s.181 under s.1317E which, under s.1317F, is conclusive evidence of the matters declared under s.1317E(2). A pecuniary penalty order may consequently be imposed under s.1317G or a compensation order may be made under s.1317H(1) of the Act. ASIC may apply for a declaration of contravention, a pecuniary penalty order or a compensation order pursuant to s.1317S. In my opinion, for the reasons set out in detail above, the Court is also empowered to make compensatory orders pursuant to s.536(1) of the Act.

606 In contrast to ss.180 and 181, the focus of s.536 is on the conduct of a liquidator only.

607 No authority in which a finding or declaration under s.180(1) of the Act was made in the context of an inquiry under s.536, or which considered the relationship between a breach of s.180(1) and a failure or a liquidator faithfully to perform his duty under s.536, was identified.

608 While s.536(1) expressly distinguishes between a failure faithfully to perform the duties of a liquidator and a failure to observe a requirement of the Act, Regulations or Rules, there is a potential overlap, in that a particular failure to observe a requirement of the Act, Regulations or Rules could, in some cases, constitute a failure faithfully to perform the duties of a liquidator. In other cases, a series of failures to observe requirements of the Act, Regulations or Rules in relation to a number of companies cumulatively could, in my opinion, constitute a failure faithfully to perform the duties of a liquidator.

609 On the other hand, a deliberate contravention of a provision of the Act, such as the knowingly unauthorised destruction of a company's books and records, would not, in my opinion, be aptly characterised as a failure to exercise care and diligence in breach of s.180(1).

610 Further, in my opinion, conduct by an administrator or deed administrator prejudicial or potentially prejudicial to members or creditors could comprehend and extend beyond conduct constituting a breach of either s.180 or s.181 of the Act. It is possible, although unlikely, that some kinds of conduct in breach of s.180 or s.181 would not be prejudicial or potentially prejudicial to members and creditors.

611 It is unnecessary for the purposes of the present inquiry to explore further the potentially complex relationship between ss.180 and 536 or s.447E of the Act, as, in my opinion, it is sufficient to make formal findings under s.536 or s.447E in the light of the evidence and the issues canvassed before the Court.

612 ASIC also seeks orders pursuant to ss.536 and 1324 of the Act that the defendant: lodge, within 7 days, a request pursuant to s.1290 of the Act that his registration as a liquidator be cancelled; that he be restrained until further order from consenting to, or accepting, appointment as a receiver, voluntary administrator, deed administrator, provisional liquidator or liquidator of a corporation; and that he be restrained from making application under s.1279 of the Act or otherwise, for registration as a liquidator, or as a liquidator of a specified body corporate.

613 Mr Evans submitted that it was inappropriate to compel the defendant to seek, pursuant to s.1290 of the Act, that his registration as a liquidator be cancelled or to restrain him from applying for registration as a liquidator under s.1279 of the Act. Mr Evans argued that the Companies Auditors and Liquidators Disciplinary Board, rather than the Court, should determine whether the defendant's registration as a liquidator should be cancelled under s.1292(2). He submitted that the orders sought by ASIC encroached on the Board's powers. I am satisfied, however, that the Court has power under s.536 to make such orders as will most effectively ensure that the defendant's registration as a liquidator and an official liquidator are cancelled and that he does not reapply for such registration, or act as a liquidator, provisional liquidator, receiver, administrator or deed administrator for a specified period.

614 ASIC seeks an order that the defendant, within 14 days, pay into Court a total sum of $410,564.77, being amounts drawn as remuneration as follows.

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615 ASIC also seeks orders that an official liquidator be appointed Under Rule 39.01 of the Rules as receiver of the fund with specified powers, and that the defendant be permitted to apply only to the Court for approval of any remuneration to which he is entitled, following which any balance of moneys in the fund (after deduction of the receiver's fees and expenses) would be distributed to creditors.

616 Mr Evans contended that the defendant should not be required to disgorge any funds found to be drawn as unauthorised remuneration without approval pending his application for approval. He relied, in that context, on Re Clynton Court Pty Ltd.[95]

617 In Re Clynton Court Pty Ltd, deed administrators applied under s.449E(1)(b) for the fixing of their remuneration by the court, in circumstances where it had emerged that a resolution purporting to fix it was ineffective due to non-compliance with the principles expressed in Re Stockford.

618 The deed administrators were in dispute with a creditor that contended that the interim remuneration they had already drawn should be disgorged.

619 Finkelstein J referred the fixing of the administrator's fees to a registrar, rather than an independent assessor.

620 His Honour did not consider that the deed administrators should disgorge any of the remuneration they had already drawn, because it was clear that they had performed work in their capacity as administrators and that they had "acted in good faith and in the belief that their remuneration had been fixed by... the deed. This has turned out to be wrong because of two events, neither of which is of the administrators' doing".[96]

621 Finkelstein J considered that in the circumstances, it would be "both wrong and unfair to withhold relief".[97] He concluded that the administrators could retain what they had received to date without deduction, and take a percentage of their claims for future remuneration subject to an undertaking to pay interest on any amount required to be repaid after the court had fixed the remuneration.

622 In Pace v Antlers Pty Ltd (in liq),[98] the liquidator's remuneration was approved by the vote of creditors who were not in fact entitled to vote. Lindgren J observed that:

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623 In the present case, I am not satisfied that the defendant drew the remuneration in good faith and in the belief that the remuneration had been validly fixed. Further, I am not satisfied as to what work has been performed. ASIC did not dispute, however, that Mr Edge had performed some work for which he is entitled to be remunerated. Further, it was not suggested that remuneration should not be paid for the work performed by Harrison's Insolvency. In the circumstances, I consider that the amounts drawn for remuneration without valid approval should be paid into Court and any application by the defendant for approval of remuneration should be made to a Master.

624 Mr Evans argued that in the event that the Court found that funds had been drawn as remuneration without approval, the defendant was entitled to have his remuneration determined pursuant to s.473 (3) of the Act in the case of court-ordered liquidations or pursuant to s.499 (3) in the case of voluntary liquidations, rather than determined by the Court. He submitted that the paramount power of determining a liquidator's remuneration rested primarily with the creditors and the Court's power was ordinarily exercisable only in default of their decision.

625 In my opinion, the Court's extensive powers pursuant to s.536 are not circumscribed by the provisions usually applicable to review where a resolution approving remuneration has been passed. Further, where funds have not been fixed or have been drawn without any valid approval, and their character as remuneration is not established, the Court's power to take 'such action as it thinks fit' is not, in my view, restricted by the provisions which govern the fixing of remuneration in the usual case.

626 The Court's power to disallow remuneration under s.536 is undoubted and was exercised by Marks J in Re Harvey. The Court may also establish an appropriate procedure to enable the liquidator to make out an entitlement to all or any part of a fund which he or she has been required to disgorge because it was drawn without valid approval.

627 In the unusual circumstances of the present case, as ASIC submitted, it would be unsatisfactory if the task of fixing the defendant's remuneration were cast upon the creditors, given the serious practical difficulties arising from the lengthy periods of inactivity in many of the companies and the nature of the findings made against the defendant.

628 In my opinion, the defendant's entitlement to any part of the total sum paid into Court for his fair and reasonable remuneration should be determined by a Master pursuant to an application made by the defendant within an appropriate time. The plaintiff should, in my view, be a contradictor in any such application.

629 I shall invite further submissions on the form of orders, addressing, inter alia, the precise amount to be paid into Court, the time that should be set for the payment into Court by the defendant and the time within which any application for approval of remuneration should be made. The directions for such an application should be determined by the Master.

630 ASIC also seeks orders pursuant to Rule 50.01 of the Rules, that a special referee determine specified questions in relation to Greenchip Funds Management and The Pines. For the reasons set out in detail above, I do not consider that the question in relation to the payment of $13,100 by Greenchip Funds Management warrants reference to a special reference. The question of the nature, purpose and propriety of the payment of approximately $30,000 from the funds of The Pines, which appears to be unaccounted for, and any consequential orders, should also be referred to the Master for determination.

FINDINGS

631 A number of specific findings sought by ASIC which (with certain modifications), may, in my opinion, properly be made on the basis of the evidence, are set out in Schedule A to these reasons.

CONCLUSION

632 In my opinion, the evidence establishes that for a period of some years, the defendant repeatedly contravened numerous significant provisions of the Act and Regulations in relation to numerous companies. His chronic and widespread failure to comply with the statutory requirements to maintain proper books and records (including books of account), prepare and lodge half-yearly and final accounts and statements, hold and advertise meetings, and prepare and lodge s.533(1)(c) reports, cannot be viewed as mere technical or administrative default. Rather, the defendant's repeated contraventions struck at the heart of the statutory regime designed to ensure the liquidator's accountability, to facilitate the audit and review of his conduct and to inform and protect members, creditors and the public. Similarly, the defendant's failure to advertise meetings, lodge minutes, prepare adequate s.439A reports and ensure that DOCAs were duly executed was conduct prejudicial to the creditors and members of companies of which he was administrator or deed administrator.

633 The defendant's wholesale destruction of the books and records of many companies, in breach of s.542 of the Act, has rendered impossible a detailed and comprehensive review of his conduct of the relevant liquidations and administrations. The unauthorised destruction of the books and records was a serious breach of duty.

634 The defendant's long-term delegation to, and reliance upon, an unqualified, unsupervised and incompetent associate did not, as the defendant submitted, excuse the contraventions, but was itself a serious breach of duty, as was his delegation of numerous insolvency administrations to another firm.

635 The defendant repeatedly drew or caused to be drawn funds characterised as remuneration, which, in some cases, was paid by a cheque directly to a party subsequently identified as a creditor of the defendant or his associate. The remuneration was not validly approved and satisfactory supporting documentation was not prepared or was not in evidence. The defendant failed to open separate bank accounts for some administrations and caused the funds of various companies to be intermingled in the bank account of his practice, from which payments were subsequently made without making or maintaining any appropriate record. The defendant signed blank cheques, which he provided to his associate, and permitted cheques to be written to cash.

636 The defendant's counsel argued that there was no express statutory prohibition on many practices he adopted, including writing cheques on the accounts of companies directly to the creditors of the defendant and his associate, and the long-term maintenance of bank accounts for companies from which remuneration was drawn after all activity in the liquidation had ceased.

637 It is self-evident that legislation cannot exhaustively prescribe all the duties incumbent on a liquidator or an administrator, which are frequently dictated by common sense or the professional norms of a chartered accountant holding special qualifications, training and experience, who is acting for remuneration and profit. The indefinite maintenance of company bank accounts for no proper purpose is implicitly prohibited by the requirement (stated in s.480 of the Act) that liquidations should not be needlessly protracted and that any distribution should be made with due despatch. While not expressly prohibited, the writing of cheques directly to the liquidator's creditors is contrary to the appropriate professional norms of an officer entrusted with the exclusive knowledge and absolute control of funds to which he is not beneficially entitled. The creditors, members and the public are entitled to total assurance that such officers will handle corporate funds with probity and transparency and will not exploit their power to benefit or enrich themselves. The direct payment of corporate funds to the practitioner's creditors obscures, and (particularly when coupled with the failure to create and preserve appropriate records), may permanently disguise the transfer of moneys to the liquidator or for his or her benefit.

638 In the present case, the intermingling of funds and the repeated drawing of amounts characterised as remuneration without approval or adequate supporting documentation were most serious breaches of duty, pursuant to which the defendant has appropriated the funds of numerous companies.

639 I am satisfied that, by reason of the matters discussed in detail above, the defendant failed faithfully to perform his duty as a liquidator, and has conducted administrations in a manner prejudicial or potentially prejudiced to the creditors and members of the relevant companies. The entrenched pattern of contraventions and dereliction of duty has demonstrated his unfitness to conduct liquidations as the representative of the Court or to exercise the extensive powers of a voluntary administrator or receiver. The defendant's attitude to ASIC's investigation was needlessly uncooperative. He was not a conscientious, candid or reliable witness. The evidence establishes that the defendant has failed to maintain the high standards of impartiality, probity and competence demanded by his important fiduciary office. In my opinion, the defendant should be removed from those offices he currently holds and should be prohibited from holding the office of liquidator, provisional liquidator, voluntary administrator, deed administrator or receiver for a period of ten years.

SCHEDULE A

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1. In the case of each of ACN 007 335 165 Pty Ltd, Balanceauto Distribution Pty Ltd, Media Sales Network (Vic) Pty Ltd, Precision Interconnect Australia Pty Ltd, Seymour Lands Pty Ltd, Cameo Arch Pty Ltd, Chelsea Springs Pty Ltd, Vicsworth Enterprises Pty Ltd, CTP Capital Trading Pty Ltd, J.G.S. (Vic) Pty Ltd, Jewel Group Services Pty Ltd, Pabulum Enterprises Pty Ltd, Wallistan Pty Ltd, CBS Global Communications Pty Ltd, GCW Holdings Pty Ltd, Greenchip Funds Management Pty Ltd, Tetherless Access Ltd and Eurocapital Pty Ltd Mr Edge failed to lodge accounts including a final account as required by s539 of the Act and thereby failed faithfully to perform the duty as a liquidator.

2. In the case of Cameo Arch Pty Ltd, Chelsea Springs Pty Ltd and Vicsworth Enterprises Pty Ltd remuneration has been paid to or at the direction of Mr Edge in circumstances where there was no resolution fixing such remuneration as required by s473(3) of the Act and Mr Edge thereby failed faithfully to perform his duty as liquidator.

3. In the case of CTP Capital Trading Pty Ltd, J.G.S. (Vic) Pty Ltd, Jewel Group Services Pty Ltd, Pabulum Enterprises Pty Ltd, Wallistan Pty Ltd, ADF ACN 063 887 650 Pty Ltd, CBS Global Communications Pty Ltd, GCW Holdings Pty Ltd, Greenchip Funds Management Pty Ltd, Tetherless Access Ltd and Eurocapital Pty Ltd, Mr Edge failed to comply with s509 of the Act, and thereby failed faithfully to perform his duty as a liquidator.

4. in the case of ADF ACN 063 887 650 Pty Ltd, CBS Global Communications Pty Ltd, GCW Holdings Pty Ltd, Greenchip Funds Management Pty Ltd, Tetherless Access Ltd and Eurocapital Pty Ltd remuneration has been paid to or at the direction of Mr Edge in circumstances where there was no resolution fixing such remuneration as required by s499(3) of the Act, and Mr Edge thereby failed faithfully to perform his duty as liquidator.

5. Mr Edge's destruction of the books and records of various companies in breach of s.542 of the Act constitutes a failure by Mr Edge faithfully to perform the duty as liquidator.

6. Mr Edge's evidence that he recalled particular final meetings is unreliable. In the absence of any other evidence that such final meetings were held or final accounts prepared and lodged in respect of each company, I find that no such final meeting was in fact held.

7. In circumstances where Mr Edge had practiced for 27 years as an insolvency practitioner, knew about the existence and importance of a "show cause notice" and had read and signed at least four reports specifically referring to the requirement, I reject Mr Edge's testimony that he was unaware of the need to lodge and file reports under s.533 when a company fails to pay more than 50 cents in the dollar.

8. A total of $7,600 was paid in the liquidation of Chelsea Springs to or at the direction of Mr Edge in respect of remuneration and that remuneration was never approved by creditors as required by s.473(3) of the Act or at all.

9. In the case of each of CTP Capital Trading Pty Ltd, J.G.S. (Vic) Pty Ltd, Jewel Group Services Pty Ltd, Pabulum Enterprises Pty Ltd and Wallistan Pty Ltd, in no case was there a final account prepared or a final meeting of creditors as required under s.509 of the Act or at all.

10. In the case of ADF ACN 063 887 650 Pty Ltd, while it appears that accounts purporting to be a final accounts were prepared, there was no final meeting of creditors as required by s.509, no other approval of remuneration as required by s.499(3) of the Act and the payment of remuneration of $1,449.10 apparently made on 14 January 1999 was not included in the final accounts and, accordingly, could not have been part of the accounts laid before the creditors and approved by them even if a meeting was held.

11. In the case of ADF ACN 063 887 650 Pty Ltd, Mr Edge's failure to advertise and convene a final meeting of creditors as required by s.509 of the Act and seek a resolution of creditors fixing his remuneration and the payment of $1,499.10 in respect of remuneration after a final account had been prepared and lodged, constituted a failure by Mr Edge properly to perform his duties as a liquidator of ADF ACN 063 887 650 Pty Ltd.

12. Mr Edge was aware of and tolerated or condoned the practice of by-passing the account of Robert Edge & Associates and making payments for fees directly from a liquidation account to a personal creditor or supplier. I reject Mr Edge's testimony to the contrary.

13. Mr Edge's failure to lodge half-yearly accounts as required by s.539 of the Act and seek a resolution of creditors fixing his remuneration, constituted a failure by Mr Edge properly to perform his duties as liquidator of Eurocapital Pty Ltd.

14. In respect of each of Balanceauto Distribution Pty Ltd, Cameo Arch Pty Ltd, CTP Capital Trading Pty Ltd, GCW Holdings Pty Limited, J.G.S. (Vic) Pty Ltd, Jewel Group Services Pty Ltd, Media Sales Network (Vic) Pty Ltd, Pabulum Enterprises Pty Ltd, Seymour Lands Pty Ltd, Tetherless Access Ltd and Wallistan Pty Ltd, Mr Edge failed to lodge with ASIC a report pursuant to s.533 of the Act, in circumstances where it was evident that such reports should have been lodged.

15. In respect of each of ACN 007 335 168 Pty Ltd, ADF ACN 063 887 650 Pty Ltd, Balanceauto Distribution Pty Ltd, Cameo Arch Pty Ltd, CBS Global Communications Pty Ltd, Chelsea Springs Pty Ltd, CTP Capital Trading Pty Ltd, Eurocapital Pty Ltd, GCW Holdings Pty Limited, Greenchip Funds Management Pty Ltd, J.G.S. (Vic) Pty Ltd, Jewel Group Services Pty Ltd, Media Sales Network (Vic) Pty Ltd, Pabulum Enterprises Pty Ltd, Precision Interconnect Australia Pty Ltd, Seymour Lands Pty Ltd, Tetherless Access Ltd, Vicsworth Enterprises Pty Ltd and Wallistan Pty Ltd, Mr Edge failed to ensure the safekeeping and retention for five years after deregistration, as required by s.542(2) of the Act of all books of the company and the liquidator that are relevant to the affairs of each company.

16. In respect of the voluntary administration of each of Eco Panels Australia Pty Ltd, Invaway Pty Ltd and The Pines Stud Bloodstock Pty Ltd, the deed administration or purported deed administration of each of Invaway Pty Ltd and The Pines Stud Bloodstock Pty Ltd and the winding up of Eco Panels Australia Pty Ltd, Mr Edge failed to maintain and/or keep any or any proper records of attendances or other tasks undertaken by him or persons acting in his employ or on his behalf and otherwise maintain files to an acceptable professional standard that adequately record steps taken by him.

17. In respect of each of the companies in liquidation referred to in paragraphs 14, 15, 16 above, the failures referred to therein constitute a failure by Mr Edge to properly to perform his duties as liquidator and in relation to the companies in administration or subject to a DOCA, constituted management of their business, property or affairs, or acts or omissions, prejudicial or potentially prejudicial to the interests of some or all of their creditors or members.

18. In the above circumstances, Mr Edge:

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