Bainbridge v Smith

Supreme Court of NSW|2009-11-03|Before: Barrett J

Reported Decision : 262 ALR 150 74 ACSR 616

CITATION : Walker re One.Tel Ltd [2009] NSWSC 1172

JURISDICTION : Equity Division Corporations List

CATCHWORDS : CORPORATIONS - winding up - creditors voluntary winding up - annual meeting of creditors - meeting adjourned - business remaining is confined to report of special purpose liquidator and possible motions concerning his administration and for reconstitution of committee of inspection - neither of the liquidators by whom the meeting was convened wishes to chair the balance of the meeting - their power to nominate a person to preside will then be exercisable - whether appropriate that special purpose liquidator chair the balance of the meeting - whether appropriate that insolvency practitioner unconnected with the winding up chair the balance of the meeting

LEGISLATION CITED : Corporations Act 2001 (Cth) Part 5.3A, ss 439A, 439B, 439E, 508, 511, 547, 548 Corporations Regulations 2001 (Cth), reg 5.6.17(1)

Bainbridge v Smith (1889) 41 Ch D 462 Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; (2003) 45 ACSR 612 Clifton v Mount Morgan Ltd (1940) 40 SR (NSW) 31 Dickason v Edwards [1910] HCA 7; (1910) 10 CLR 243 Hanlon v Brookes (1996) ATPR 41-523 McKerlie v Drillsearch Energy Ltd [2009] NSWSC 488; (2009) 72 ACSR 288 Onefone Australia Pty Ltd v One.Tel Ltd [2003] NSWSC 1228; (2003) 48 ACSR 562 Re A & D Hagan Pty Ltd [2003] NSWSC 531; (2003) 46 ACSR 434 CASES CITED : Re Ballan Pty Ltd (1993) 46 FCR 106 Re CMPS&F Pty Ltd (1997) 24 ACSR 728 Re HIH Casualty & General Insurance Ltd [2006] NSWSC 485; (2006) 57 ACSR 791 Re Love (as liquidator of 007 368 257 Limited) [2003] NSWSC 58; (2003) 44 ACSR 367 Re Norris Industries Pty Ltd (unreported, NSWSC, 23 March 1992). Second Consolidated Trust Ltd v Ceylon Amalgamated Tea and Rubber Estates Ltd [1943] 2 All ER 567 Smits v Roach [2006] HCA 36; (2006) 227 CLR 423 Stanham v National Trust of Australia (New South Wales) (1989) 15 ACLR 87 Weston v Publishing and Broadcasting Ltd [2009] NSWSC 321; (2009) 71 ACSR 577 Wilson v PLT Pipetech Pty Ltd (1988) 14 ACLR 697

PARTIES : Peter Murray Walker and Steven John Sherman, in their capacity as the joint liquidators of One.Tel Limited - Plaintiffs

Ms V E Whittaker - Plaintiffs COUNSEL : Mr C R C Newlinds SC/Mr D Kell - Committee of Inspection Mr M R Aldridge SC/Mr R D Glasson - Special Purpose Liquidator

Kemp Strang - Plaintiffs SOLICITORS : Baker & McKenzie - Committee of Inspection O'Neill Partners - Special Purpose Liquidator

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

4947/09 PETER MURRAY WALKER AND STEVEN JOHN SHERMAN IN THEIR CAPACITY AS JOINT LIQUIDATORS OF ONE.TEL LIMITED JUDGMENT 1 Mr Walker and Mr Sherman are the liquidators in the creditors' voluntary winding up of One.Tel Limited. By application made under s 511 of the Corporations Act 2001 (Cth), they seek the court's guidance on a question that has arisen in the winding up. 2 On the hearing of the application under s 511, Ms V E Whittaker appeared for the liquidators. Submissions were also made by Mr M R Aldridge SC and Mr R D Glasson of counsel for Mr Weston, the "special purpose liquidator" of One.Tel; and by Mr C R C Newlinds and Mr D Kell of counsel for the members of the committee of inspection in the winding up. 3 The question raised by the application concerns the annual meeting of creditors of One.Tel convened in accordance with s 508 of the Corporations Act. 4 That meeting first proceeded to business on 25 August 2009. It was adjourned to 20 October 2009. There was then a further adjournment. The meeting is due to resume on 10 November 2009. At that point, creditors will be invited to consider a report made by Mr Weston. He is an additional liquidator of One.Tel appointed by the court for a special purpose: see Onefone Australia Pty Ltd v One.Tel Ltd [2003] NSWSC 1228; (2003) 48 ACSR 562 as well as several subsequent judgments in which his powers and functions have been varied by the court. 5 Mr Weston's report to creditors deals with the particular aspect of the winding up that has been committed to his administration by orders of the court. That aspect concerns possible pursuit of proceedings in this court for the benefit of One.Tel's creditors and against certain defendants. The defendants include Mr Sherman. It is convenient to refer to the proceedings as "the SPL litigation". A brief description of them and of the stage they had reached in April 2009 appears in the judgment in Weston v Publishing and Broadcasting Ltd [2009] NSWSC 321; (2009) 71 ACSR 577 at [5] to [11]: "The proceedings are proceedings under s 588FF(1) of the Corporations Act 2001 (Cth) in which the special purpose liquidator seeks an order requiring the defendants to pay money to One Tel Ltd. The special purpose liquidator was appointed for the specific purpose of investigating whether such causes of action existed. His powers and functions were later extended on several occasions to allow him to move, step by step, to the initiation of proceedings within the 3 year time limit created by s 588FF(3). As I have said, the statement of claim was filed on 25 May 2007. In November 2007, the court extended the special purpose liquidator's powers to enable him to seek litigation funding. This was appropriate because there were then insufficient funds in the One.Tel administration to finance litigation of the expected magnitude, yet there were clear prospects that the interests of One Tel's creditors might be well served by continuation of the litigation. On 22 October 2008, the court approved the making of an agreement between the special purpose liquidator and an overseas organisation engaged in the business of arranging and providing large scale litigation funding. The agreement was for the limited purpose of enabling the overseas organisation to assess the possibility of providing or arranging funding for this case. The committee of creditors of One Tel thereafter brought an application seeking to have the order of 22 October 2008 set aside and, in the interim, to have it stayed. On 10 November 2008, that dispute was settled. This was after the committee of inspection had been given certain information about the agreement with the overseas party. The process provided for in the agreement was thereafter pursued. The special purpose liquidator's affidavit refers to a number of steps that have been taken on both sides. It is not necessary to go into them in detail. It is sufficient to say that the parties appear to have proceeded with reasonable despatch and diligence, although there were some delays caused largely by other persons. The term of the agreement was extended on two occasions. The overseas party has invested significant time and resources in the funding investigation.

It is pertinent that one factor in the litigation funding negotiations is that judgment has not yet been delivered in Australian Securities and Investments Commission v Rich , the case heard by Austin J. As has been noted in other judgments on applications by the special purpose liquidator, that case and this involve a number of significant common issues. The special purpose liquidator expects that a number of matters relevant to the funding possibilities will become more clear-cut after judgment is delivered in Australian Securities and Investments Commission v Rich . The special purpose liquidator remains of the view that it is in the best interests of the creditors of One Tel that he pursue the litigation and, to that end, continue with his attempts to arrange the necessary funding." 6 Upon resumption on 10 November 2009, the meeting of creditors is likely to have before it for consideration, in addition to Mr Weston's report, a motion for a resolution expressing want of confidence in Mr Weston as special purpose liquidator and perhaps other motions for resolutions intended to convey views as to how Mr Weston's administration related to the SPL litigation should be conducted. There may also be proposed resolutions concerning reconstitution of the committee of inspection appointed under s 548 of the Corporations Act. 7 No point was raised in submissions about the utility, in the circumstances, of a motion of no confidence in a corporate officeholder: compare Stanham v National Trust of Australia (New South Wales) (1989) 15 ACLR 87 in which Young J, at 91, approved observations of Jordan CJ in Clifton v Mount Morgan Ltd (1940) 40 SR (NSW) 31 at 48-49 firmly rejecting propositions advanced by Cotton LJ in Bainbridge v Smith (1889) 41 Ch D 462. Nor was there any submission that the meeting will not be competent to deal with the other matters just mentioned. These are, in any event, questions that do not arise directly on the present application. 8 It is the circumstance that Mr Sherman is among defendants in the SPL litigation has been commenced that caused the court to appoint Mr Weston as special purpose liquidator. That same circumstance - coupled with the fact that certain of Mr Weston's actions have been criticised by the committee of inspection in the winding up (and that Mr Weston has been likewise critical of the committee) - has given rise to the question raised by the s 511 application. 9 That question is whether Mr Sherman and Mr Walker will be justified in nominating Mr A G McGrath to chair the meeting during the period of discussion of Mr Weston's account of his administration and the foreshadowed motions to which I have referred. Mr McGrath is an experienced insolvency practitioner who has no connection with the winding up of One.Tel. 10 Mr Sherman has acted as chairperson throughout the part of the meeting of creditors that has already been completed. The question now before the court must be approached in the light of that fact and the fact that Mr Sherman has indicated an intention of ceasing to chair the meeting during the period devoted to Mr Weston's separate administration and related matters. 11 I should at once set out the rule dealing with the chairing of meetings of this kind. The meeting being, as I have said, a s 508 meeting and therefore a meeting convened by the liquidators (see s 508(1)(b)(i)), the rule is found in regulation 5.6.17(1) of the Corporations Regulations 2001 (Cth): "If a meeting is convened by: (a) a liquidator; or (b) a provisional liquidator; or (c) an administrator of the company under administration or of a deed of company ; or (d) a liquidator mentioned in paragraph 579L (1) (e) of the Act; that person, or a person nominated by that person, must chair the meeting." 12 In the case of a s 439A meeting of the creditors of a company subject to Part 5.3A administration, a requirement that the administrator chair arises from s 439B; and it has been held that that statutory provision curtails, in such a case, what would otherwise be the operation of regulation 5.6.17(1): see Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; (2003) 45 ACSR 612; Re A & D Hagan Pty Ltd [2003] NSWSC 531; (2003) 46 ACSR 434. 13 In a case such as the present, by contrast, where neither s 439B(1) nor any like provision applies and the question is governed solely by regulation 5.6.17(1), there is no expressed requirement or expectation that the liquidator should preside. The legislative provision is satisfied if the liquidator chairs the meeting and also if a person nominated by the liquidator chairs the meeting. 14 It may be that, as a matter of good practice or diligent execution, the liquidator should chair the meeting in the absence of some good reason not to do so. The fact that the liquidator has a material personal interest in a matter to be considered by the meeting may suggest to him or her that it is inappropriate that he or she should chair the meeting while that matter is before it. The position of Mr Sherman as a defendant in the SPL litigation has caused him to take that attitude to the part of the meeting that concerns Mr Weston's administration. 15 It is not suggested that Mr Sherman is not entitled to take that course or that he is to be criticised in any way for doing so (nor, I might say, is it suggested that regulation 5.6.17(1) cannot operate to produce different results in relation to parts of a single meeting, as and when circumstances at the meeting change). 16 Mr Sherman is, of course, one of two liquidators having the general administration of the creditors' voluntary winding up of One.Tel (it is not suggested that, in relation to the s 508 meeting, Mr Weston is a "liquidator"; the meeting was, for example, convened by Mr Walker and Mr Sherman only). If Mr Sherman elects to step down from the chair in the way I have described, does it follow that his co-liquidator, Mr Walker, must or should become the chairperson? 17 It was held in Re A & D Hagan Pty Ltd (above), in relation to s 439B(1), that where there are two administrators the requirement that "the administrator" preside is a requirement that one of them preside. It follows that the section is not complied with if neither administrator presides and both purport to nominate some third person under regulation 5.6.17(1). But where, as here, regulation 5.6.17(1) alone operates and the matter is not affected by any provision such as s 439B(1), the requirement is satisfied if a person nominated by "the liquidator" - which, where there are two, should probably be taken to refer to both - chairs the meeting. 18 It follows that if, first, Mr Sherman elects not to continue as chairperson during the part of the s 508 meeting devoted to Mr Weston's administration and related matters, second, Mr Walker elects not to be chairperson during that period (as he well might, given that he and Mr Sherman are members of the same firm) and, third, Mr Sherman and Mr Walker act together to nominate some other person to chair that part of the meeting, regulation 5.6.17(1) will require the person so nominated to preside. 19 Competing submissions were made on the question of who might appropriately be nominated by Mr Sherman and Mr Walker. Mr Weston contends that he should himself be nominated. Indeed, he has filed an interlocutory process seeking a direction to Mr Sherman and Mr Walker to that effect. The members of the committee of inspection support the proposed nomination of Mr McGrath. The position ultimately taken by Mr Sherman and Mr Walker is that they will be guided by the court: hence their application under s 511. 20 It was submitted on behalf of Mr Weston that, since the relevant part of the meeting will be concerned with his administration, part of the rationale underlying rule 5.6.17(1) - namely, that the liquidator in whose hands administration of the winding up lies ordinarily should chair the meeting - applies to make him the appropriate chairperson for that part of the meeting. It was further submitted on behalf of Mr Weston that, since the report to be considered by creditors during the relevant part of the meeting will be his report, there is a strong practical reason why he should preside. An allied submission is that regulation 5.6.17(1) shows a general intention that someone having a close connection with the administration should be the chairperson. Furthermore, it is said, the fact that a motion of no confidence and other motions critical of Mr Weston or impinging on his admission may be proposed during the relevant period does not mean that he is legally precluded form presiding as chairperson during that period. Reference was made, in this last connection, to the decision of French J (as he then was) in Re Ballan Pty Ltd (1993) 46 FCR 106. Indeed, that was the only authority to which counsel took me. 21 It was submitted on behalf of the members of the committee of inspection that the discretion of the liquidators in the matter of making a nomination under rule 5.6.17(1) is at large, in the sense that they are not required or encouraged to nominate any particular person and that the only constraint is that they act in good faith and in proper effectuation of the purpose for which the power of nomination exists. There is not, according to the committee of inspection, any requirement or expectation that Mr Weston be nominated in the particular circumstances. 22 It is necessary, at this point, to say something about the functions of the chairperson of a s 508(1) meeting. Those functions are, to some extent, shaped by the purposes of the meeting. Relevant provisions of s 508(1) impose on a liquidator a twofold duty with respect to a meeting of creditors: first, to convene the meeting; and, second, to "lay before the meeting . . . an account of the liquidator's acts and dealings and the conduct of the winding up during" the relevant year. Whether or not the second aspect of the duty applies to Mr Weston, as an additional liquidator appointed by the court for a special purpose, his intention and that of Mr Sherman and Mr Walker is that he will "lay before the meeting . . . an account of" his own acts and dealings as additional liquidator and the conduct of the relevant aspect of the winding up during the year in question. That is an entirely appropriate approach.

23 An explanation of the purpose intended to be served by a liquidator's laying his or her report (or "account") before a s 508 meeting was provided in Re Love (as liquidator of 007 368 257 Limited) [2003] NSWSC 58; (2003) 44 ACSR 367 at [11]: "Implicit in any provision that a report or accounts or any other document be 'laid before' a meeting by a particular person are three clear expectations: first, that the person concerned will be in attendance at the meeting; second, that the document in question will be then and there in the possession of those present at the meeting or, at least, readily available to those of them who wish to have it; and third, that the content of the document and matters arising from it may be discussed by those present in the hearing of the person who has laid it before the meeting. Part of that process of discussion may be an opportunity for those present to direct questions to the person concerned, although probably without any implied obligation upon that person to answer any such questions. The requirement under the Companies (New South Wales) Code that accounts and a report and statement of directors be laid by directors before an annual general meeting was assumed by McLelland J in Re Direct Acceptance Corp Ltd (1987) 5 ACLC 1037 to entail an opportunity for those items to be considered at the meeting itself. Such an expectation is recognised, in the case of a company's annual general meeting, by s 250R(a) of the Corporations Act ." 24 In the context with which I am here concerned, therefore, the purpose of the relevant part of the meeting will be for Mr Weston, having made his report on the aspect of the winding up committed to him by the court, to hear discussion by creditors of the matters in the report. He may also receive questions from creditors about those matters but probably has no duty to answer any such questions (although it is obviously open to him to do so if he chooses). 25 The first event in the relevant part of the meeting will thus be Mr Weston's laying his report before the meeting. As his report has already been circulated, that will entail his taking some purely formal step such as placing a copy on the table before those present, at the same time referring to the fact that the report has previously been circulated and is accordingly in creditors' hands. The "laying before" process might also involve Mr Weston's making some supplementary remarks about his administration during the relevant year. 26 Such discussion as creditors desire will follow. The tabling of the report will be, in a practical sense (and if creditors so wish), the occasion for wide-ranging discussion of the activities of the special purpose liquidator. In the course of that, it will be necessary for the chairperson to call on speakers, to ensure that order is maintained and to deal with such procedural motions as may arise (for example, "that the speaker be no longer heard" or "that the motion be now put"). Any discretion there may be to decline to accept a particular procedural motion will rest with the chairperson. Given the background of mutual and robust criticism of the committee of inspection by the special purpose liquidator and of him by the committee, it is likely that there will be a particular need to ensure that speakers from both "camps" are fairly accommodated and that an even handed approach is taken to ensure that relevant views are expressed and the true will of the meeting is ascertained. This will be particularly so if, as has been foreshadowed, motions such as a motion of no confidence in Mr Weston and a motion for some form of reconstitution of the committee of inspection are entertained by the meeting. 27 The chairperson of a meeting must act impartially. It has been suggested that the duty of impartiality precludes a chairperson from moving a motion at the meeting. While, as the discussion in Re HIH Casualty & General Insurance Ltd [2006] NSWSC 485; (2006) 57 ACSR 791 at [22] indicates, that may be doubted as an abstract proposition, there are certainly other requirements at work in support of a general duty of impartiality. When deciding whether to demand a poll, a chairperson must act in a way calculated to ensure that the true will of the meeting is ascertained, rather than in pursuit of some personal desire or preference: Second Consolidated Trust Ltd v Ceylon Amalgamated Tea and Rubber Estates Ltd [1943] 2 All ER 567. A chairperson's power to adjourn the meeting must likewise be exercised not according to some personal preference or with a view to achieving some policy objective of another body, but so as to create a convenient forum in which the relevant constituency may consult together and exercise their voting rights in an orderly and constructive way: McKerlie v Drillsearch Energy Ltd [2009] NSWSC 488; (2009) 72 ACSR 288. The duty of impartiality is probably best viewed as a duty to facilitate the conduct of the meeting in such a way as to produce an expression of the true will of the participants, free from any distortion produced by the undoubted influence that can be exerted from the chair. 28 It was submitted on behalf of Mr Weston, on the basis of Re Ballan Pty Ltd (above), that he is not legally precluded from acting as chairperson just because a motion of no confidence and other motions critical of him may come before the meeting. The relevant motion in that case was a motion at a s 439E meeting that a new Part 5.3A administrator be appointed in place of the existing administrator. The existing administrator (Putnin) acted as chairperson throughout the meeting (which was not a meeting to which s 439B(1) applied, with the result that it was open to the administrator to nominate someone else to preside). The essence of the ex tempore decision of French J appears from the following passage (at 110): "So far as the conduct of that first meeting is concerned, it is said that when it was proposed that Levi be appointed as the administrator in lieu of Putnin, Putnin should have stood down as chairperson and that his failure to do so was a procedural breach. Reference was made to the rules of natural justice and to those of the rules of natural justice which require that no-one should be a judge of his own cause or, in other words, and in more contemporary language, that require the substance and appearance of fairness and impartiality in circumstances where the holder of power is required to exercise those powers impartially. In this case, the regulations (Corporations Regulations 5.6.17(1)(c)), require that where the meeting is convened by an administrator for a company under administration, that person or a person nominated by that person must chair the meeting. So, options available under that regulation for Putnin at the time that this issue arose would seem to have been either that he continue to chair the meeting or that his nominee chair the meeting for the purposes of the motion, assuming that you can have somebody chair part of a meeting under the provisions of that regulation. And it seems to be, whatever the true position so far as that latter point is concerned, the regulation is inconsistent with the application of a rule of procedural fairness that when a motion as to his continuance as administrator is raised, the appointed administrator must vacate the chair. I think that is inconsistent with the requirements of the regulations. I don't think the position is enhanced by the appointment of a nominee in those circumstances." 29 The approach to be taken to a stipulation that a particular officeholder "must" (or "shall") preside at a meeting was discussed by the High Court in Dickason v Edwards [1910] HCA 7; (1910) 10 CLR 243. That case concerned a friendly society the rules of which said that a particular official (the District Chief Ranger) "shall preside at" certain meetings, including meetings of the "District Executive", a committee in the nature of a judicial tribunal constituted by the rules. Another rule (rule 29(c)) dealing with proceedings of the committee or tribunal required certain particulars to be given to "the District Chief Ranger or Chairman of the Committee" at the time of the meeting. 30 The District Chief Ranger brought a complaint against a member in respect of the member's conduct towards the District Chief Ranger himself. The complaint was determined by the tribunal, with the District Chief Ranger presiding throughout. An argument that he was compelled to act as chairperson was dealt with by Griffith CJ as follows (at 252)): "Now as to the point that the District Chief Ranger must preside, I think that is negatived by two considerations. First of all, rule 29 (c) assumes that the chairman may be someone else than the District Chief Ranger; and, secondly, the ordinary rule of common sense which governs all matters of this sort must apply, namely, that if a body is composed of several persons and one of them is ill or for some other reason is absent, there is no reason why the other members of the body should not go on with the business and appoint a chairman pro hac vice. If he is not there the functions of the committee are not to cease. So that the District Chief Ranger is not bound to sit." 31 Having thus concluded that the District Chief Ranger, although the object of the "shall preside" rule, was "not bound to sit", the Chief Justice continued (also at 252): "Then may he sit? I think it is clear that inasmuch as the District Chief Ranger is a member of both these committees, and is head of the District Executive, and as a charge may be brought by the District Executive against a member, it was not intended that he should be disqualified merely by the fact that he is formally a party to a charge brought against a member. But, if he is not merely a formal party but is in substance an individual complaining of an offence against himself, then I think very different considerations apply. Then it becomes his own cause, not in a technical sense, but substantially." 32 There must be, in other words, an evaluation of the substance of the matter to be addressed by the meeting and the course the meeting is likely to take in order to determine the course properly to be adopted by a person directed to preside. Re Ballan Pty Ltd (above) concerned the first meeting of creditors in a Part 5.3A administration. The question whether the administrator chosen in the first instance by the company's directors should continue or be replaced is a necessary part of the business of every such meeting. That routine question arises, moreover, very soon after commencement of the administration and before the initial appointee has done very much. The meeting is accordingly usually not the occasion for any real evaluation of the initial administrator's performance. That context is to be contrasted with one in which an appointee has been in office for a long time and complaints about performance have arisen and been aired in a way that has attracted publicity. In the latter case, much more than the former, the appointee is likely to be on the defensive and concerned to place his or her own case before the meeting. 33 It is instructive to review cases in which a concept of "independent chairman" has been recognised. In Hanlon v Brookes (1996) ATPR 41-523, Teague J had occasion to consider the affairs of a partnership in which dissension and disagreement among partners had emerged. His Honour referred to several measures that had been taken towards constructive resolution of the difficulties. One was described thus (at 42-697): "The appointment of an independent chairman could be seen as a mechanism for increasing objectivity with a view to minimising the prospect that more subjective or emotional considerations like loyalty would be subjugated by partners to considerations such as economic rationalism when a vote had to be taken." 34 In Wilson v PLT Pipetech Pty Ltd (1988) 14 ACLR 697, Young J had before him an application for winding up in insolvency. He decided that it was appropriate to defer a decision pending an expression of the wishes of creditors at a meeting of creditors convened by direction of the court under the then equivalent of s 547 of the Corporations Act. His Honour then turned his attention to the form of the meeting. Among the orders made was an order that the meeting be chaired by a liquidator agreed on by the parties or, in default of agreement, a person nominated by the President of the Law Society. Young J directed that the notice of meeting contain a statement: "There will be an independent chairman of the meeting." 35 In a later case about a meeting of creditors to consider a Part 5.1 scheme of arrangement, Young J observed that "meetings of this nature should have an independent chairman": see Re Norris Industries Pty Ltd (unreported, NSWSC, 23 March 1992). Although the report of Re CMPS&F Pty Ltd (1997) 24 ACSR 728 does not refer to it, an order appointing as chairman of Part 5.1 members' meetings a solicitor unconnected with the company and its members was made by Santow J in that instance. 36 The thinking reflected by these cases is that the particular meeting's purpose would be seen to be more effectively and more efficiently achieved if a person aloof from the issues at hand and able to bring dispassionate judgment and objectivity to bear played the administrative role that falls to a chairperson. Value was obviously attached to what has been termed in other contexts "the reality and the appearance of impartiality": Smits v Roach [2006] HCA 36; (2006) 227 CLR 423 at [101].

37 The question in this case is not whether Mr Weston is disqualified or precluded from being nominated under regulation 5.6.17(1). It is whether, in exercising the power of nomination, Mr Sherman and Mr Walker should prefer Mr Weston or Mr McGrath. There is no basis on which the court could conclude, as a matter of fact, that Mr Weston would not bring dispassionate judgment and objectivity to bear in performing the administrative functions of chairperson during the part of the meeting devoted to the SPL litigation and the items of business related to it. But there is basis for concluding that those items of business are likely to be highly contentious and to give rise to robust debate, so that an informed bystander might well conclude that "the appearance of impartiality" will be compromised if Mr Weston presides - the more so, of course, if it is apprehended that he will choose to answer criticisms levelled at him and thereby to become a participant in the debate.

38 This is something to which Mr Sherman and Mr Walker will properly have regard in exercising their power of nomination under regulation 5.6.17(1). Mr McGrath, by contrast, has no connection with the One.Tel winding up. There can be no doubt that both "the reality and the perception of impartiality" will be secured if he is nominated to chair the relevant part of the meeting.

39 There is no legal requirement that Mr Weston be nominated and no compelling case, in any practical sense, for him to chair the relevant part of the meeting. He obviously does not need to be the chairperson in order to act effectively in delivering his report, speaking to it and otherwise explaining and justifying actions taken in the course of his administration. The considerations of perception to which reference has been made - emphasised by the potentially contentious nature of the foreshadowed debate about Mr Weston's administration and the expectation that he will participate in that debate - therefore cause the court to answer the question raised pursuant to s 511 of the Corporations Act as follows: Direct that Steven John Sherman and Peter Murray Walker, as liquidators of One.Tel Limited, would be justified in nominating Anthony Gregory McGrath, of McGrath Nicol, pursuant to regulation 5.6.17(1) of the Corporations Regulations 2001 (Cth), to chair the reconvened annual meeting of creditors scheduled for 10 November 2009. **********

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

At a glance

Court

Decision date

Before

Source

Judgment (18 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (12)

Cited By (6)