Awada v Linknarf Ltd

Judgment - EX TEMPORE 1Mr John Vouris and others seek orders under sections 473, 502 and 511 of the Corporations Act 2001 (Cth) appointing respectively Mr Vouris, Mr Tolcher and Mr Tonks in place of Messrs Rapsey and Griffiths, upon the resignation of Messrs Rapsey and Griffiths as liquidators of specified companies set out in several schedules to the Further Amended Originating Process and to draft Short Minutes of Order which have been provided to the Court. 2The application is supported by affidavits of Mr Vouris dated 20 and 28 March 2013, an affidavit of Mr Tolcher dated 20 March 2013 and an affidavit of Mr Tonks dated 3 April 2013. Mr Vouris, Mr Tolcher and Mr Tonks are each official liquidators and registered liquidators. Mr Vouris and Mr Tonks are partners and directors of entities within the Lawler Partners Group and Mr Tolcher is a consultant to various entities within that Group. Mr Vouris and Mr Tonks are each based in Sydney and travel to Newcastle in connection with their work as insolvency practitioners and Mr Tolcher works in the firm's Newcastle office. Messrs Rapsey and Griffiths were formerly employed by the Lawler Partners Group but have recently resigned from that firm, and Mr Rapsey previously worked in the firm's Newcastle office. The arrangements for Messrs Rapsey and Griffiths leaving that firm provide for them to resign as liquidators of specified entities. 3The orders, in substance, contemplate the replacement of Messrs Rapsey and Griffiths as liquidators by one of Mr Vouris, Mr Tolcher or Mr Tonks. There is evidence that a significant amount of work has been done in respect of each of the liquidations to which Messrs Rapsey and/or Griffiths were appointed; the day to day work on those appointments was, as might be expected, done by staff of the firm under supervision of Messrs Rapsey, Griffiths, Vouris and/or Tolcher; the employees who have undertaken that work have detailed knowledge of the files; and they will remain with the firm. The replacement of Messrs Rapsey and Griffiths by Messrs Vouris, Tolcher or Tonks would avoid the need for other persons with other firms to familiarise themselves with the files, as would be required if those files were transferred to other firms. The plaintiffs rely on those matters, and the consequential cost savings in the liquidations, as supporting the orders which they seek. The plaintiffs also contend that the orders sought would bring about a costs saving by avoiding the need for meetings of creditors, in respect of those of the companies which are in voluntary liquidation, to approve the resignation and appointment of a new liquidator. These appear to me to be strong grounds on which to make orders of the kind sought, where it is established that the Court has jurisdiction to make those orders. 4The plaintiffs seek first, an order under s 473(7) of the Corporations Act that the vacancies that will arise upon the resignation of Mr Rapsey as court-appointed liquidator of two companies, following his filing of a memorandum of resignation dated 4 April 2013 with the Registrar and its lodgment with the Australian Securities and Investments Commission, be filled by the appointment of Mr Tolcher. In my view, the Court has jurisdiction to make such an order. Section 473(7) of the Corporations Act provides that a vacancy in the office of a liquidator appointed by the Court must be filled by the Court. Rule 7.1 of the Supreme Court (Corporations) Rules 1999 (NSW) in turn provides for the manner in which a liquidator appointed by the Court, who wishes to resign, may do so. The Court has power to replace a court-appointed liquidator, prior to his or her resignation: Re Wily [2003] NSWSC 1260; (2003) 49 ACSR 94; Re McGrath [2005] NSWSC 506; (2005) 54 ACSR 55; Re Free [2010] NSWSC 1079. It has commonly been noted that there will be benefit in such liquidations and to creditors in ensuring continuity within a firm on a resignation of this kind: Condon v Watson [2009] FCA 11; (2009) 69 ACSR 350; Re Free above at [6]; Re Porter v Mansfield [2012] NSWSC 220. In my view, the practical matters to which I have referred above, namely the saving of costs in allowing the conduct of the liquidations to remain with staff who have had primary carriage of it, support the orders sought, and the form of the proposed order accommodates the requirements of the Rules as to the manner of resignation of a court-appointed liquidator. I will, accordingly, make an order in the form of the first order sought by the plaintiffs. 5The second, third and fourth orders sought by the plaintiffs each rely on s 502 of the Corporations Act. By the second order, the plaintiffs seek an order that the vacancies which arise as a consequence of Mr Rapsey's resignation as liquidator of two companies listed in Schedule B, which are in creditors' voluntary winding up, be filled by Mr Vouris. By the third order, the plaintiffs seek an order that the vacancies which arise as a consequence of the resignation of Messrs Rapsey and Griffiths as the joint liquidators of fifteen companies listed in Schedule D, which are in members' voluntary winding up, be filled by Mr Vouris (I interpolate that there is no Schedule C). By the fourth order, the plaintiffs seek an order that the vacancies which arise as a consequence of the resignation of Messrs Rapsey and Griffiths as joint liquidators of companies listed in Schedule E, which are also in voluntary winding up, be filled by Mr Tolcher. 6Section 502 of the Corporations Act provides that, if for any cause no liquidator is acting in a voluntary winding up, the Court may appoint a liquidator. The Court's jurisdiction to make such orders was considered by Barrett J in Re Application Vouris v Godfrey [2004] NSWSC 384; (2004) 49 ACSR 543, where his Honour noted that ss 495(3) and 499(5) of the Corporations Act, in the case of a members' voluntary winding up and creditors' voluntary winding up respectively, each contemplate that a liquidator could resign and allow one method of appointing a replacement liquidator. His Honour referred to his earlier decision in Awada v Linknarf Ltd (in liq) [2002] NSWSC 873; (2002) 55 NSWLR 745 and observed (at [10]) that s 502 of the Corporations Act should be regarded as an overriding power exercisable by the Court in the circumstance of a vacancy in the office of a liquidator in a voluntary winding up, and permits the Court to appoint a liquidator in that situation, although the same result could have been achieved by an appointment in general meeting in a members' voluntary winding up under s 495 and by a creditors' meeting in a creditors' voluntary winding up under s 499. His Honour pointed to the factors to which I have also referred, namely the expense and inconvenience in convening separate meetings of every relevant company to consider the appointment of a replacement liquidator as a reason to exercise the Court's powers in this situation. I followed that approach in Re Sigelski [2012] NSWSC 449 at [4] and I would again do so in this matter. 7In my view, an order appointing such a liquidator is properly made for the same reasons, to preserve the continuity of the firm and staff involved in the winding-ups and to avoid the costs of new staff of another firm being required to familiarise themselves with the matter. I would therefore make the orders sought in the second, third and fourth proposed orders. 8The fifth and sixth orders sought by the plaintiffs are sought under s 511(1) of the Corporations Act, and respectively provide for the Court to determine that Mr Tolcher has, since the resignation of Mr Griffiths as one of the joint liquidators of two companies specified in Schedule F, been and continued to be a liquidator of those companies; and that Mr Tonks has, since Mr Griffiths' resignation as the liquidator of a company listed in Schedule G, been and continued to be the liquidator of that company. Mr Tolcher and Mr Tonks respectively were already appointed as joint liquidators with Mr Griffiths of the relevant companies at the time of his resignation. 9The form of the fifth and sixth orders is consistent with the reasoning of Lindgren J in Condon v Watson, where his Honour pointed to the effect of s 530 of the Corporations Act (introduced by the Corporations Amendment (Insolvency) Act 2007 (Cth) that, where two or more persons are appointed as liquidator, the function or powers of the liquidators may be performed or exercised by one of those persons unless the resolution appointing them otherwise provides. I interpolate that the resolution appointing Messrs Griffiths and Tolcher to the companies specified in Schedule F are in evidence and do not constrain the exercise of their powers so as to exclude the operation of s 530 of the Corporations Act. Mr Griffiths and Mr Tonks were appointed as joint and several administrators of the company specified in Schedule G which was subsequently placed in liquidation. There is also no suggestion that their powers in respect of that company were constrained so as to exclude the operation of that section. It follows from that analysis that, on Mr Griffiths' resignation, Mr Tolcher could act as liquidator of the company specified in Schedule F and Mr Tonks could act as liquidator of the company specified in Schedule G, exercising individually the powers conferred on the liquidators by their appointment. 10In Condon v Watson, Lindgren J made a determination under s 511(1) of the Corporations Act confirming that the remaining liquidator continued to be liquidator and had been and continued to be entitled to act as such following another liquidator's resignation. Barrett J followed the reasoning adopted in Condon v Watson in Re Free above. In my view, that the approach adopted by Lindgren J is a proper use of the Court's power under s 511 to determine a question arising in a voluntary winding up and desirable in affording certainty as to the position following a joint liquidator's resignation. I will therefore make orders in the form sought in the fifth and sixth paragraphs of the draft orders, which substantially correspond to those made by Lindgren J in Condon v Watson. 11I note that a question may arise in cases of this kind as to the application of s 532(2) of the Corporations Act if (although the evidence is not clear as to this matter) Messrs Vouris or Tolcher or their firm had claims for costs and disbursements exceeding $5,000 against any of the relevant companies. In that situation, they could not be appointed as liquidators of the relevant companies without leave of the Court. However, an appointment in that situation does not change the position of creditors in any adverse respect, since the claims for remuneration of the firm would be the same after the appointment as before, notwithstanding the change in the identity of the liquidator: Re Sigelski above at [7]. I will therefore grant leave under s 532(2) of the Corporations Act for each of the relevant persons to act as liquidator to the extent to which it may be necessary to do so. 12The plaintiffs also seek and I will make, an order to the effect made by Barrett J in Re Equiticorp Australia Ltd (in liq) [2011] NSWSC 1368 that the costs of and incidental to the application be borne, pro rata, as an expense in the liquidations of each of the relevant companies. 13I make orders in accordance with the short minutes of order initialled by me and placed in the file. I add a further order 9, that these orders be entered forthwith.