Canadian Solar v ACN 138 535 832 Pty Ltd, In the Matter of ACN 138 535 832 Pty Ltd

Solicitor for the Second Defendant: SBA Law

Counsel for the Third Defendants: Mr S Ipp

Solicitor for the First and Third Defendants: Lander & Rogers Lawyers

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2461 of 2013

IN THE MATTER OF ACN 138 535 832 PTY LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) BETWEEN: CANADIAN SOLAR (AUSTRALIA) PTY LIMITED

AND: ACN 138 535 832 PTY LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (FORMERLY KNOWN AS REDSET GROUP PTY LTD)

LUKE TARGETT AND ROBERT MICHAEL SCALES AS ADMINISTRATORS OF ACN 138 535 832 PTY LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT)

JUDGE: PERRY J DATE OF ORDER: 29 JULY 2014 WHERE MADE: SYDNEY

1. Pursuant to s 482 of the Corporations Act 2001 (Cth) (the Act) the voluntary winding up of the First Defendant is terminated forthwith.
2. Pursuant to s 447A of the Act, Part 5.3A of the Act is to operate in relation to the First Defendant such that the Plaintiff is not prevented from applying for an order that the First Defendant be wound up in insolvency notwithstanding the provisions of s 444E of the Act.
3. Pursuant to s 459P of the Act, the First Defendant be wound up in insolvency.
4. Luke Christopher Targett and Robert Michael Scales be appointed as joint and several Liquidators of the First Defendant.
5. Pursuant to s 445D of the Act, the Deed of Company Arrangement executed by the First, Second and Third Defendants on 3 December 2013 is terminated.
6. Pursuant to s 447A of the Act, Part 5.3A of the Act is to operate in relation to the First Defendant so that regulation 5.3A.07 of the Corporations Regulations 2001 (Cth) does not operate with any effect as regards the First Defendant.
7. The First Defendant and Third Defendant shall pay the Plaintiff's costs of these proceedings, such costs to be as agreed or taxed.
8. The First Defendant shall pay the costs of the Liquidators' (being Malcolm Howell and Glenn Crisp) and the Second Defendant. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2461 of 2013

IN THE MATTER OF ACN 138 535 832 PTY LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) BETWEEN: CANADIAN SOLAR (AUSTRALIA) PTY LIMITED

AND: ACN 138 535 832 PTY LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (FORMERLY KNOWN AS REDSET GROUP PTY LTD)

LUKE TARGETT AND ROBERT MICHAEL SCALES AS ADMINISTRATORS OF ACN 138 535 832 PTY LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT)

JUDGE: PERRY J DATE: 29 JULY 2014 PLACE: SYDNEY

1. OVERVIEW 1 The plaintiff, Canadian Solar (Australia) Pty Limited (Canadian Solar), is a creditor of the first defendant, ACN 138 535 832 Pty Limited (subject to a deed of company arrangement), formerly Redset Group Pty Limited (Redset). Canadian Solar seeks orders the Corporations Act 2001 (Cth) (the Act) terminating a Deed of Company Arrangement (DOCA) entered into by Redset on 3 December 2013 and, in its place, seeks orders imposing a court winding up under s 459A. 2 The second defendants, Luke Targett and Robert Scales, were appointed as administrators of the DOCA (the Deed Administrators) on 10 September 2013 pursuant to s 449C of the Act. The Deed Administrators recommended in their prior capacity as voluntary administrators that the creditors vote against the resolution to approve the DOCA. They support the orders sought by Canadian Solar and contend that it is in the best interests of the creditors that they be appointed as the court appointed liquidators, given the work already undertaken by them into Redset's affairs. 3 The matter is complicated by the fact that on 17 April 2014, Malcolm Howell and Glenn Crisp of Jirsch Sutherland (the Voluntary Liquidators), were appointed as liquidators of Redset pursuant to a creditors' voluntary winding up under s 491(1) of the Act. Leave was granted by consent to the Voluntary Liquidators to intervene nunc pro tunc by orders made on 22 May 2014. 4 By an interlocutory process dated 2 May 2014, the Deed Administrators initially sought a declaration as to the validity of the appointment of Messrs Howell and Crisp on the voluntary winding-up and, in the event that they were validly appointed, sought their removal and replacement by the Deed Administrators. That challenge was ultimately not pressed. Nonetheless, for reasons later explained, the parties agreed that it would be undesirable for there to be any doubt about the validity of the Voluntary Liquidators' appointment, which is one of the considerations favouring termination of the voluntary liquidation and the appointment of a court appointed liquidator. 5 The Voluntary Liquidators support the orders sought by Canadian Solar, including the substitution of their appointment with a court appointed liquidator. However, the Voluntary Liquidators contend that the interests of the creditors would best be served by their appointment by the Court as liquidators or, alternatively, by the appointment of a liquidator selected from the Court list. 6 Since incorporation, Redset had been owned and controlled by the third defendant, Ross Brendan Young. Mr Young did not appear at the trial. However, while Mr Young initially opposed the grant of relief terminating the DOCA and had filed a defence, he advised the Court at a directions hearing on 30 April 2014 that he no longer opposed the grant of that relief. This was noted in the orders made on that day. I am also satisfied that Mr Young had been advised of the trial date and, in the circumstances, considered that there was no reason why the matter should not proceed in his absence. 7 It follows that the order terminating the DOCA is not opposed by any party. Nonetheless, while that is relevant in determining whether to make that order, it is not determinative. The parties submitted, and I accept, that it remains necessary for me to consider whether in all of the circumstances that is the appropriate course. Accordingly, evidence was led in support of the order and submissions were made by the parties. 8 For the reasons below, I am persuaded that the order should be made. I also consider that orders imposing the court winding up are appropriate and that it is in the best interests of the creditors that the Deed Administrators be appointed as the liquidators of Redset.

2.1 Insolvency of Redset 9 Redset was incorporated on 28 July 2009 and, from that time until 7 August 2013, conducted business as a distributor and supplier of solar technology equipment. It began operations from premises in Western Australia and later leased premises in South Australia, Queensland and Victoria. Since incorporation, Redset had been owned and controlled by Mr Young. 10 According to the second defendants' Report to Creditors dated 1 November 2013 issued pursuant to s 439A of the Act in their capacity, at that time, as voluntary administrators: a) Redset was consistently incurring substantial operating losses on a monthly basis for most of the period from June 2012; b) in March 2013, the company received a report from external accountants advising that it was distressed; c) as at 31 July 2013, Redset owed trade creditors approximately $4.5 million (excluding statutory creditors), of which approximately $785,000 was overdue by 60 or more days and approximately $870,000 by 90 or more days; and d) a security interest in favour of Rodney and Yvonne Rate, who are Mr Young's parents-in-law, was lodged on the Personal Property and Security Register on 31 July 2013 in relation to a debt in the sum of $800,000 said to be owed to them by Redset.

2.2 The sale of the whole of Redset's assets 11 On 6 August 2013, Mr Young entered into an agreement with 'The Mawson Group', a firm of business advisors, to identify a buyer for, and to sell, the whole of the business undertaken by Redset, including its assets (the Mawson Retainer). The agreement provided that the Mawson Group were to be entitled to a fee of $450,000, including GST, upon the successful sale of Redset in whole or in part, which would be due upon settlement. 12 On 7 August 2013, AJK Group Pty Ltd (ACN 165 187 146) (AJK) was incorporated. Since incorporation, an employee or officer of the Mawson Group has been the sole director and secretary of AJK. According to ASIC, the shares in AJK are held by Mawson Beneficiary Pty Ltd and SKCAJ Pty Ltd, neither of which holds the shareholding beneficially. 13 On the same day and at a time when Redset was insolvent, Redset entered an agreement with AJK for the sale of the whole of Redset's assets (the asset sale agreement). AJK paid the Mawson Group $300,000 in partial payment of the fees due under the Mawson Retainer. The assets purchased were defined in cl 1.1 of the asset sale agreement to mean the debtors, plant and equipment, intellectual property, benefit of any contracts entered into by Redset and statutory licences, stock and records. The purchase price was defined in cl 3.2 to include: a) the aggregate value of three items, namely, the amount equal to the transferring key employees entitlements and aggregate value of other creditor liabilities agreed to be assumed by the buyer (if any); and b) the amount equal to the aggregate of the secured creditor liabilities defined in cl 1.1 to mean: i. the "180 Debt", being a debt of approximately $400,000 owed to 180 Capital Funding Pty Limited; and ii. the "Rate Debt", being the debt of approximately $800,000 owed to Mr Young's parents-in-law, Mr and Mrs Rate. 14 However, the agreement was structured such that not a single dollar in fact passed between AJK and Redset. Specifically, "Payment" of the purchase price was structured so that: a) by cl 3.3.1, AJK was to assume the 180 Debt and the Rate Debt owed by Reset by taking a novation of Redset's obligations in relation to those debts, from which Redset was to be released; and b) by cll 3.3.2, 3.3.3 and 3.5, AJK agreed to assume the transferring key employee entitlements and assume liabilities, and to indemnify and keep indemnified Redset in respect of those entitlements and liabilities. 15 As Canadian Solar submitted, the effect of the asset sale agreement was to deprive Redset of all of its assets, leaving it a bare "corporate shell", with its business being reincarnated as the business of AJK. In addition, while AJK was obliged to assume the debt said to be owed to Mr Young's parents-in-law, it was otherwise left to AJK to decide which, if any, other debts owed to creditors by Redset would be taken over by it. Moreover, while the beneficial owners of the shares in AJK are not yet known, Mr Young appears to have assumed the role of manager of the business now undertaken by AJK. On its face, therefore, it is fair to observe, as did the plaintiff, that the transaction has the appearance of a so-called 'phoenix' transaction to which Mr Young 'committed' the company in breach of his fiduciary duties.

2.3 Appointment of voluntary administrators to Redset and proposed deeds of company arrangement 16 Voluntary administrators were appointed to Redset on 26 August 2013 by resolution of Mr Young, as director. The Deed Administrators were appointed as replacement joint and several administrators on 10 September 2013 pursuant to s 449C of the Act, upon the resignation of the original voluntary administrators. The Deed Administrators then undertook a detailed investigation of the history and affairs of Redset. 17 In the course of their investigation, the Deed Administrators received a proposal from Mr Young for a deed of company arrangement. On 1 November 2013, the Deed Administrators circulated a report to creditors pursuant to s 439A of the Act (together with the 11 November 2013 report, the s 439A Reports) recommending that the DOCA not be executed and that the creditors should resolve to wind up the company. In making their recommendations, the Deed Administrators took into account the fact that, in contrast to acceptance of the proposed DOCA, on a winding up, the liquidator could pursue further investigations into the propriety of the asset sale agreement, together with the payment of monies to the Mawson Group and other creditors which appeared to be potentially recoverable as unfair preferences. 18 On 11 November 2013, the Deed Administrators also recommended against acceptance of a revised proposed DOCA received earlier that day. It remained their view that it was in the interests of the creditors that Redset be wound up and a liquidator appointed. The revised DOCA included two key new provisions, namely: a) a cash contribution of $150,000 to be paid to the Deed Administrators within 21 days after selling properties at Subiaco and Claremont, to be secured by a second mortgage over a property in Cottesloe, Western Australia; and b) in the event that the Subiaco and Claremont properties were not sold within 6 months of the execution date of the revised DOCA, the Deed Administrators may convene a meeting of creditors to consider terminating the revised DOCA. 19 Mr Young was the sole registered proprietor of the Subiaco and Claremont properties.

2.4 Approval of the Deed of Company Arrangement 20 Contrary to the Deed Administrators' recommendations, on 14 November 2013 the creditors voted to execute the revised DOCA proposed by Mr Young. The resolution was approved by the creditors on a poll on which the voting was as follows: a) 57 creditors with admitted claims totalling $4,007,303.16 for the resolution; and b) 31 creditors with admitted claims totalling $3,331,787.00 voting against. 21 The Deed Administrators were appointed as administrators of the DOCA pursuant to s 444A(2) of the Act and commenced these proceedings to set aside the DOCA on 6 December 2013.

2.5 Circumstances in which the Deed of Company Arrangement was approved 22 There were a number of deeply troubling aspects surrounding the circumstances in which the DOCA came to be approved. 23 First, of the 57 creditors that voted in favour of the resolution, 54 had appointed employees or officers of the Mawson Group as their general proxy. Material produced under subpoena revealed that Mr Young had offered some creditors special deals, either in cash or by discounted terms on future trading, in return for their agreement to the appointment of Mr Young's nominee as proxy and/or their vote in favour of the proposed DOCA. In particular, one creditor, who was admitted in the sum of A$672,898.86 and US$1,432,577.11, received a promise of payment of $200,000 in return for assigning its debt and agreeing to vote in favour of the proposed DOCA as a result of an approach by a solicitor acting for Mr Young. If that company had not voted in favour of the resolution, it would have fallen to be determined by the casting vote of the Deed Administrators. I accept that, if the Deed Administrators had been faced with the situation where they held the casting vote, they would have exercised that vote in favour of the winding up of the company. 24 Secondly, Mr Young's parents-in-law were among the creditors appointing an officer or employee of the Mawson Group as their proxy. They were admitted to vote in the sum of $800,000 as an unsecured debt notwithstanding that, under the asset sales agreement, AJK had agreed to obtain a release of the secured debt owed to Mr and Mrs Rate by 16 September 2013. This meant that, notwithstanding that their debt was intended to have been released and the minimal dividend, if any, likely to be recovered by other creditors, approval of the DOCA would entitle them to recover their debt from AJK. Yet, absent the votes cast by Mr and Mrs Rate, the resolution approving the DOCA would not have been passed - as mentioned, the Deed Administrators would have exercised their casting vote against it. 25 Finally, under the DOCA, any return to creditors would depend upon Mr Young successfully selling the Claremont and Subiaco properties and attributing the amount in question to the deed fund. Clause 6 of the DOCA imposed detailed obligations upon Mr Young to keep the Deed Administrators informed regarding the sale of the two properties and: a) to keep the Deed Administrators informed of any expression of interest and offers by prospective purchasers and of the existence and terms of any authority entered into with a real estate agent; b) to provide copies of any contracts for the sale of the properties; c) to provide documents evidencing the calculation of net proceeds of sale for each property; and d) to direct the purchasers of the properties to deposit the net proceeds of sale in an account held in the name of the company in liquidation or by bank cheque made payable to it. 26 Those properties have subsequently been sold. While no evidence was available as to the date of sale for the Claremont property, the certificate of title for the Subiaco property shows that a new proprietor was registered on 14 March 2014. Contrary to his obligations under the DOCA, Mr Young gave no notice to the Deed Administrators of the sale of either property; nor has he sought to account for the properties' sale or paid any part of the sale proceeds to the Deed Administrators. There is also evidence of the sale of the property given as security for the cash contribution of an additional $150,000 to the Deed Administrators, which Mr Young was liable to pay within 21 days of completion of the sale of the Subiaco and Claremont properties. While the evidence does not disclose whether or not that obligation was triggered at the time of the hearing, it can reasonably be inferred from the failure to account for the sale of the Claremont and Subiaco properties that this additional payment is also unlikely to be forthcoming from Mr Young, as counsel for Canadian Solar submitted.

2.6 Appointment of the Voluntary Liquidators on 17 April 2014 on a creditors' voluntary winding up 27 On 17 April 2014, the members of Redset, namely Ross Young Pty Ltd and R Young Investments Pty Ltd, passed a resolution by their appointed proxy, Mr Young, that the company be wound up voluntarily under s 491(1) of the Act. That resolution specified that Mr Howell and Mr Crisp of Jirsch Sutherland be appointed as joint and several liquidators of the company. On 1 May 2014, Mr Howell lodged with ASIC a form advising of his appointment with Mr Crisp as liquidators in a creditors' voluntary winding up. 28 Neither the notice of the meeting of creditors in a winding up lodged with ASIC on 23 April 2014 nor the attached documents mention that the company was subject to a DOCA at the time and had previously been in administration. The evidence did not, however, establish that either Mr Crisp or Mr Howell had then been advised of these matters. 29 As at the time of the hearing, Redset's books and accounts had not been provided to the Voluntary Liquidators. It follows that any steps undertaken by Mr Howell and Mr Crisp before the hearing were of a preliminary nature.

3.1 Should the DOCA be terminated? 30 As earlier explained, it remains necessary for me to determine whether the DOCA should be terminated, notwithstanding that none of the parties to this proceeding oppose the making of that order: see, eg, Re Streetscape Projects (Australia) Pty Limited (Subject to a Deed of Company Arrangement) [2013] NSWSC 1289. The appropriateness of that course is manifest in a case where, as here, not all of the creditors are parties. 31 Canadian Solar contended that the DOCA should be terminated under s 445D of the Act or, in the alternative, under s 600A. The former course was said to be the more appropriate because it dealt specifically with the circumstances of this case. As I consider that the case for terminating the deed under s 445D has been established, there is no need for me to consider s 600A. 32 Canadian Solar is entitled to apply for the DOCA to be terminated under s 445D(2) because it is a creditor. Section 445D sets out the circumstances in which a DOCA may be terminated, providing that: (1) Power of Court to terminate deed The Court may make an order terminating a deed of company arrangement if satisfied that: (a) information about the company's business, property, affairs or financial circumstances that: (i) was false or misleading; and (ii) can reasonably be expected to have been material to creditors of the company in deciding whether to vote in favour of the resolution that the company execute the deed; was given to the administrator of the company or to such creditors; or (b) such information was contained in a report or statement under subsection 439A(4) that accompanied a notice of the meeting at which the resolution was passed; or (c) there was an omission from such a report or statement and the omission can reasonably be expected to have been material to such creditors in so deciding; or (d) there has been a material contravention of the deed by a person bound by the deed; or (e) effect cannot be given to the deed without injustice or undue delay; or (f) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be: (i) oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; or (ii) contrary to the interests of the creditors of the company as a whole; or (g) the deed should be terminated for some other reason. 33 In the end, Canadian Solar contended that the DOCA should be terminated under s 445D(1)(d), (f) and/or (g) of the Act. 34 In all of the circumstances, I have no hesitation in concluding that the DOCA should be set aside. 35 First, the evidence discloses material contraventions of the DOCA by Mr Young. Notwithstanding his obligations, the Claremont and Subiaco properties were sold without notice to the Deed Administrators. Further, the net proceeds of sale of the Subiaco property were not conveyed to the Deed Administrators. When these matters were drawn to the attention of Mr Young's (then) solicitors and the company, no response was received. These breaches of the DOCA are material and in themselves sufficient to warrant an order terminating the DOCA under s 445D(1)(d) of the Act. 36 Secondly, I consider that the criterion in s 445D(1)(f) is satisfied. The deed is clearly contrary to the interests of the creditors as a whole, aside from those creditors, including Mr Young's parents-in-law, who were given preferential treatment under the asset agreement. The effect of the DOCA is to preclude further investigation into suspect and potentially voidable transactions which may result in a considerably better outcome for creditors, as the administrators advised in their s 439A Reports: see at [17] above. It leaves many creditors with their claims recoverable only against an empty shell and any dividend that might be received under the DOCA would be very small indeed. On the other hand, Mr Young is left free to continue to conduct the same business he previously operated and to choose which, if any, of the "old" creditors he needs to pay to keep the new business operating. These are circumstances that call for a proper investigation by a liquidator. 37 It is not necessary in this regard for me to be satisfied that a winding up would, on the balance of probabilities, produce greater dividends being returned to creditors. It is the loss of the investigation into those transactions themselves and the opportunity for greater returns that renders the DOCA contrary to the creditors' interests. Furthermore, the DOCA is likely to prejudice the interests of those creditors who voted against the resolution and discriminate against them. In particular, some creditors received benefits not afforded to other creditors given the arrangements with respect to debts owed to Mr Young's parents-in-law and the secret deals done with some creditors in order to obtain their proxy votes. 38 Thirdly and in any event, I am satisfied that the deed should be terminated "for some other reason" under s 444D(1)(g) given the evidence of secret deals between Mr Young and certain creditors to obtain their proxy votes and the admission of Mr and Mrs Rate to vote in the sum of $800,000 without whose vote the resolution approving the DOCA would not have been passed: see [23]-[24] above. As Canadian Solar submitted at [16] of its submissions, with respect to the documents obtained under subpoena: [T]hat material reveals a concerted, and successful, effort on behalf of [Mr Young], and those advising him, to procure the support of individual creditors by the making of secret side deals with individual creditors. The effect of these arrangements was to substantially corrupt the voting process. The making of secret side deals is, and has always been treated by the courts, as deeply inimical to the spirit and objectives of statutory regimes such as Part 5.3A and its equivalents in the bankruptcy laws. 39 Such deception in the voting process is a species of equitable fraud (see, eg, Grocon Constructors Pty Limited v Kimberley Securities Limited (2009) 72 ACSR 305 at 318-319 (Barrett J)) and cannot be left without remedy. 40 In short, a deed of company arrangement which would preclude further investigation into serious questions regarding director misconduct, colourable transactions and preferable arrangements, and was produced through a corrupt voting process, is contrary to Part 5.3A of the Act and is properly to be set aside under s 445D(1).

3.2 The application for a court winding up in insolvency 41 Absent an order to the contrary, the effect of making an order terminating the DOCA under s 445D of the Act will be to deem Redset to have passed a resolution under s 491 that it be voluntarily wound up: see s 446B and Corporations Regulations 2001 (Cth) reg 5.3A.07(1)(a). 42 However, as I have indicated, the parties who appeared on the hearing are agreed that the appropriate course is for there to be a court winding up in insolvency. I agree that this is the preferable course: see, eg, by analogy Deputy Commissioner of Taxation v TMPL Pty Ltd (subject to a Deed of Company Arrangement) (No 3) (2011) 289 ALR 69. 43 I am confirmed in this view by the desirability of avoiding any doubt about the validity of the appointment of the Voluntary Liquidators, notwithstanding that the challenge made to the validity of their appointment by the Deed Administrators was ultimately not pressed. Specifically, s 490(1) of the Act provides that, save with leave of the Court, a company cannot resolve that it be wound up voluntarily if, relevantly, an application for the company to be wound up in insolvency has been filed. The resolution appointing the Voluntary Liquidators in this case was passed when this proceeding was already on foot. While there was argument initially as to whether this proceeding sought a winding up in terms at the relevant time, it would be undesirable to leave the issue unresolved with the consequence, for example, that it might later be raised in opposition to a claim by the liquidator under s 588FF of the Act for relief for losses suffered by the company by reason of a voidable transaction under s 588FE. 44 Moreover, the orders sought by the plaintiff will ensure that the commencement date for the winding up will be the earliest available date, namely, 26 August 2013. This will maximise the period of time in respect of which company transactions which may have operated to the detriment of the company and its creditors, may be investigated and challenged by the liquidator: see s 513A(d) of the Act.

3.3 Who should be appointed as the court appointed liquidators? 45 Canadian Solar submitted that it is appropriate to appoint the existing Deed Administrators as the court appointed liquidators. The plaintiff was careful to make it clear that the submission was not made because of any complaint about the conduct of the Voluntary Liquidators, even though the plaintiff was rightly critical of Mr Young's decision in seeking to appoint Mr Howell and Mr Crisp without, apparently, disclosing to them the existence of these proceedings.

3.3.1 Submissions by the Voluntary Liquidators in support of their appointment or the appointment of an alternative liquidator selected from the court list 46 Messrs Howell and Crisp contend that the best interests of the creditors would be served by their appointment by this Court as liquidators, or by appointment of an alternative liquidator selected from the Court list. 47 In support of their submission, the Voluntary Liquidators' relied upon the alleged existence of what was described as a potential dispute about the level of fees charged by the Deed Administrators to date. Ultimately, however, that submission was not supported by any independent expert evidence or any other evidence to which any weight could be given. 48 The Voluntary Liquidators relied on affidavit evidence given by Bruce Simmons, a partner of Nelson Wheeler, setting out concerns said to have been expressed by Mr Young to him over the course of "numerous discussions". That evidence was admitted subject to an order under s 136 of the Evidence Act 1995 (Cth) limiting its use to non-hearsay purposes. Mr Simmons deposed that Mr Young had expressed concerns that the Deed Administrators had charged a lot of money in fees and expenses despite the company not trading during the administration and having no assets. He further deposed to Mr Young expressing concern that he did not understand how it was so expensive, and, if the Deed Administrators were appointed as liquidators of the company, their fees and conduct would not be investigated. 49 As to the last point, I note that if any creditor holds genuine concerns about the remuneration of the Deed Administrators at any time, the Court has power to review the remuneration under s 449E(2) of the Act, and on such review to confirm, increase or reduce it. 50 In any event, I do not consider that any weight can be given to Mr Simmons' evidence. Mr Young was not prepared to give evidence, the statements attributed to him by Mr Simmons were in the nature of bare assertions without any reasons given for the concerns, and no information is provided as to when the conversations took place and the context in which the statements were made. Nor is Mr Simmons independent. He has been engaged as an adviser to Mr Young even though he was less than forthright in his affidavit about the nature of his retainer and the form and extent of his involvement in the appointment of the Voluntary Liquidators and otherwise in advising Mr Young. His firm is also identified as a creditor in the meeting attendance register for the meeting on 1 May 2014, albeit not admitted to vote in any amount. 51 Moreover, Mr Young's motives in expressing such concerns must be open to question. The fees of which he complains were incurred by the Deed Administrators in undertaking their initial investigations and preparing the s 439A Reports identifying highly suspicious transactions engaged in by him and his company Redset, and recommending against the adoption of the DOCA proposed by Mr Young in order to ensure that those transactions could be properly investigated by a liquidator. Mr Young's dissatisfaction with the proper discharge by the Deed Administrators of their duties in these respects would seem to underlie his reported comments to Mr Simmons that "I think the Deed Administrators are behind the current court proceedings because they recommended the company be placed into liquidation at the creditors['] meeting" and that "Canadian Solar pressured me to appoint them after the last ones resigned." 52 Nor do I consider that any weight can be given Mr Simmons' evidence of statements made by him to the creditors at the creditors' meeting on 1 May 2014 which he attended and at which he supported the nomination of Messrs Howell and Crisp as voluntary liquidators (albeit that precisely on whose behalf, aside from his firm, is not disclosed). In an apparently incomplete record of what he said to the creditors, Mr Simmons deposed that: At that meeting, I said to the creditors inter alia words to the following effect: "the creditors I represent are concerned with the fees and costs incurred by the Deed Administrators" "the Company has incurred additional expenses after the DOCA was executed and the director and members cannot satisfy those creditor's [sic] debts" "the Deed Administrators costs have blown out of proportion" "the creditors do not consider the Deed Administrators are independent and they do not have faith in them" "we want the meeting to proceed". 53 Those statements roughly accord with sentiments attributed to him in the minutes of the creditors' meeting on 1 May 2014 as to the reasons why he argued that the meeting should not be adjourned by reason of the present proceedings. 54 While there is some ambiguity in his affidavit, I am prepared to read Mr Simmons' affidavit as deposing that he held the concerns that he expressed and continues to do so, and not merely that he expressed certain concerns to the meeting. Nonetheless, Mr Simmons does not identify the creditors who he said he represents. My concerns in this regard are heightened by the evidence, to which I have already referred, of secret deals with major creditors in the resolution approving the DOCA at the earlier creditors' meeting and by the fact that Mr Simmons purportedly held proxies at the meeting on 1 May 2014 for, among other alleged creditors, Mr Young who is recorded as admitted to vote in the amounts of $60,000 and $20,000 (although how that could be the case is unclear) and for Mr and Mrs Rate in the amount of $800,000 (and Mrs Rate for a further $250,000). Furthermore, Mr Simmons does not identify any grounds for his concerns about the Deed Administrators' fees or capacity to undertake their tasks independently. Given these matters, Mr Simmons' lack of independence and the other concerns that I hold about the inadequacy of the information he has disclosed about his involvement, I cannot give the statements any weight. 55 There was also a suggestion that the Deed Administrators would have a potential conflict of interest in the event that they were appointed as liquidators by reason of their interest in recovering their fees. To the extent that the submission was put separately from the submission as to alleged creditors' concerns about their fees, the submission cannot succeed. As counsel for the Deed Administrators stated, "[e]very insolvency practitioner has a vested self interest in an appointment because the appointment results in fees to them… that's a submission that really cuts either way because they're both [the Liquidators and the Deed Administrators] in the same basket." Further, insofar as the Deed Administrators' fees had not yet been paid, they had a right in any event to prove in the liquidation. As such, it is difficult to see how the mere fact that fees had been incurred could give rise to a perceived conflict. 56 In short, there is no evidence which lends credence to the contention that the Deed Administrators should not be appointed as the liquidators because there are genuine creditors holding bona fide concerns as to overcharging by them.

3.3.2 Other considerations relevant to determining whether the Deed Administrators should be appointed as the court appointed liquidators 57 That being so, in my view the preferable course is to appoint the Deed Administrators as the court appointed liquidators. 58 First, in the normal course the practice is to appoint the plaintiff's nominee which is, in this case, the Deed Administrators: see, eg, Workers Compensation Nominal Insurer v Perfume Empire Pty Ltd [2011] NSWSC 380 (Barrett J) (Perfume Empire). 59 Secondly, it is apparent that the immediate task for the court appointed liquidator will be to investigate and pursue the suspect transactions to which I have referred. The Deed Administrators have already undertaken a substantial amount of work in investigating those transactions, including the asset sale agreement, as is apparent from their detailed report to creditors given on 1 November 2013. This is a legitimate matter to take into account: see, eg, Perfume Empire at [9] (Barrett J). As a consequence, it is likely to be advantageous to creditors for the Deed Administrators to continue their investigations, building upon their knowledge of Redset's activities and those of Mr Young, with likely time and costs savings. The Voluntary Liquidators, on the other hand, have not yet seen the company's books and accounts and have been in a position only to undertake steps of a preliminary nature. 60 Thirdly, I reject the submission that there is any other basis on which the Deed Administrators' previous appointment by Mr Young as voluntary administrators gives rise to any apprehension that they may be unable to undertake the role of court appointed liquidators independently and dispassionately. Their conduct, including in recommending against the adoption of the DOCA, their reasons for making those recommendations, and indeed their conduct in instituting these proceedings, are more than adequate to dispel any such apprehension. 61 Finally, I should emphasise that in reaching this conclusion, I do not suggest that Messrs Howell and Crisp would not have been suitable appointees but rather that, in all of the circumstances, the best interests of the creditors would be better served by the appointment of the Deed Administrators for the reasons given above.

3.4 Termination of the voluntary winding up 62 As I have earlier explained, the making of the winding up order in this case is complicated by the fact that there is presently a voluntary winding up. 63 Section 482(1) of the Act provides power to stay or terminate a winding up in the following terms: At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order. 64 Such an order may be made on the application of, relevantly, a creditor or a liquidator: s 482(1A)(a) of the Act. 65 While the discretion in s 482 is ordinarily exercised on proof that the company is solvent or the winding up order was made in error, the circumstances in which it may be exercised are not limited to such cases: see, eg, Re Euco Ltd (ACN 102 448 055) (in liq); Forrest Nursery Pty Ltd (ACN 081 654 346) v Lopez and Verge as Joint and Several Liquidators of Euco Ltd (2006) 233 ALR 442 at 449-450 [32]-[34] (French J, as his Honour then was). 66 In the present case, I am satisfied that it is appropriate to make the order. In this regard, I note that both the creditor and the Voluntary Liquidators agree that the order should be made in order to enable a court appointed liquidator to be appointed and to put to rest any doubts that might otherwise exist over the validity of appointment of the liquidators: see paragraph [4] above.

4. CONCLUSION 67 Upon my deciding who should be appointed as liquidator, the parties are agreed as to the terms of the orders and their sequence subject to one caveat. Those orders are contained in draft minutes of orders provided by the parties following the conclusion of the hearing. The caveat relates to whether an order should be made that the company in liquidation pay the costs of the Voluntary Liquidators and the Deed Administrators, for which the Voluntary Liquidators contended (Order 8, of the draft minutes of order). While neither the Deed Administrators nor the plaintiff considered such an order was necessary, they did not take issue with the substance of the order. In those circumstances I consider that the order should be made. 68 For the reasons set out above, I consider that it is appropriate to make orders that: a) terminate the voluntary winding up of the first defendant pursuant to s 482 of the Corporations Act; b) provide pursuant to s 447A of the Act that Part 5.3A of the Act is to operate in relation to Redset, such that the plaintiff is not prevented from applying for an order that Redset be wound up in insolvency notwithstanding s 444E of the Act; c) wind Redset up in insolvency pursuant to s 459P of the Act; d) appoint the previous Deed Administrators as the joint and several liquidators of Redset; e) provide that the DOCA is terminated pursuant to s 445D of the Act; and f) provide pursuant to s 447A of the Act that Part 5.3A of the Act is to operate in relation to Redset such that reg 5.3A.07 of the Corporations Regulations 2001 (Cth) does not operate with any effect as regards Redset. 69 As to costs, Reset and Mr Young are to pay Canadian Solar's costs as agreed or taxed, and Reset is to pay the costs of the Voluntary Liquidators and the Deed Administrators. I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry.