CIP Group Pty Ltd v Watters in his capacity as receiver and manager of GGPG Pty Ltd

CIP 1 PTY LTD ACN 611 408 710 Second Applicant

PYRMONT PORTFOLIO PTY LTD ACN 608 496 617 (and another named in the Schedule) Third Applicant

AND: MARCUS JON WATTERS IN HIS CAPACITY AS RECEIVER AND MANAGER OF GGPG PTY LTD ACN 609 675 505 (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) First Respondent

GGPG PTY LTD ACN 609 675 505 Second Respondent

PARK RIDGE 132 PTY LTD ACN 619 053 735 (and others named in the Schedule) Third Respondent

order made by: HALLEY, GOODMAN AND MCELWAINE JJ DATE OF ORDER: 7 February 2024

1. The application for leave to appeal, as amended on 7 November 2023, is dismissed.
2. The applicants are to pay the respondents' costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A. Introduction 1 The applicants seek leave to appeal from orders made by the primary judge dismissing their application under s 423 of the Corporations Act 2001 (Cth) (Act) for an inquiry into the conduct of Marcus John Watters in his capacity as the receiver of entities in the Golden Gate Property Group (Group): CIP Group Pty Ltd v Watters in his capacity as receiver and manager of GGPG Pty Ltd [2023] FCA 329 (Judgment or J). 2 The principal issue raised in the application for leave to appeal is whether the primary judge applied the wrong test under s 423(1)(b) of the Act in reaching the conclusion that an inquiry should not be ordered into the complaints advanced by the applicants. 3 For the reasons that follow, we have concluded that the conclusion reached by the primary judge that no inquiry should be ordered, is not attended with sufficient doubt to justify the grant of leave to appeal and the applicants cannot point to substantial injustice if leave were otherwise refused.

B. Factual Background 4 The hearing of the proceeding before the primary judge was not conducted as a trial and her Honour made no findings of fact but rather, what appeared in the reasons "reflect[ed] aspects of the evidence which was adduced": at J [24]. In that context, the primary judge summarised the relevant factual background to the proceedings at J [25]-[31]. None of those observations are challenged on this application for leave to appeal. For present purposes, it is sufficient to provide the following summary. 5 The proceeding arose from a dispute between two property developers, Marc Clancy and Shan Ngai So, in relation to a property development at Park Ridge, Queensland called "Carver's Reach" (the Development). Mr Clancy and Mr So own interests in entities belonging to the Group (Carver's Reach Entities) which, in turn, held interests in parcels of land, which either formed part of the Development or were located nearby. The approved Development comprised 11 stages. The land subject to stages 1 to 5 of the Development was sold prior to the receiver's appointment and the remaining lots broadly comprised five categories, including land in stages 6 to 11 of the Development and land intended to form an unofficial stage 12 of the Development: see J [26]. 6 To fund the Development, Ultimate Investment Portfolio Pty Ltd (Ultimate), an entity associated with Mr So, loaned just over $8 million to GGPG Pty Ltd (GGPG), one of the Carver's Reach Entities, pursuant to a loan deed dated 29 November 2019 (Ultimate Deed). The loan was to be repaid by the earlier of 24 months from the date of the deed, or the date the amount owing became repayable as a result of an "Event of Default". GGPG's liability was guaranteed by various other Carver's Reach Entities. Ultimate took security in the form of unregistered mortgages over real property owned by the borrower and guarantors, which were capable of being registered 7 days after notice of a default. 7 Further funding was provided by Makro Finance Pty Ltd as trustee for the Makro Finance Unit Trust (Makro) by an agreement dated 15 October 2021 (Makro Agreement), entered into by Makro and Park Ridge Development Management Pty Ltd (Park Ridge), one of the Carver's Reach Entities. Under the Makro Agreement, Makro agreed to advance $31,373,564 to Park Ridge, repayable on 31 December 2022. The loan was guaranteed by various Carver's Reach Entities and supported by mortgages registered over their properties. 8 On 29 November 2021, GGPG failed to repay the loan amount due under the Ultimate Deed and the respondent received his first substantive briefing about the matter during a meeting with Mr So and Paul Wong of Thynne + Macartney, Mr So's solicitor. 9 On 16 December 2021, Mr Watters, the first respondent, was appointed receiver by Ultimate (Receiver). The Receiver is a partner in the Corporate Insolvency division of Hall Chadwick and a registered liquidator. He has more than 17 years' experience in the field of insolvency, having worked on hundreds of appointments, including hundreds of appointments involving the sale of land. 10 On 25 March 2022, the shareholding entities associated with Mr Clancy commenced oppression proceedings in this Court against Mr So, certain entities associated with Mr So and the Carver's Reach Entities (Shareholder Proceedings). Leave was also sought in the Shareholder Proceedings to commence derivative claims to recover damages, which leave was subsequently granted by Derrington J in CIP Group Pty Ltd v So (2022) 164 ACSR 566; [2022] FCA 1490 (Derivative Proceedings). 11 The Receiver affirmed two affidavits in these proceedings. 12 On 10 January 2023, the applicants served a notice to produce documents referred to in the Receiver's affidavits. 13 On 25 January 2023, the Receiver responded to the notice to produce. The response involved the provision of a USB with a large volume of documents. The documents comprise approximately four large lever arch folders, printed double sided (estimated to be approximately 3,000 pages in total).

C.1. Leave to appeal 14 An order refusing an inquiry under s 423 of the Act is interlocutory: Vink v Tuckwell (2008) 68 ACSR 265; [2008] VSCA 204 at [13] (Hargrave AJA, Warren CJ agreeing). It is, therefore, necessary for the applicants to seek leave to appeal. 15 It is well established that an applicant for leave to appeal must show that both: (a) the decision below is attended by sufficient doubt to warrant its reconsideration by an appellate court; and (b) substantial injustice would result if leave were refused, assuming the decision to be appealed from was wrong: see Kitchen v Director of Professional Services Review [2023] FCAFC 160 at [28]-[29] (Charlesworth, S C Derrington and Downes JJ) referring to Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397; [1991] FCA 844 at 398-399 (Sheppard, Burchett and Heerey JJ); Rawson Finances Pty Limited v Deputy Commissioner of Taxation (2010) 81 ATR 36; [2010] FCAFC 139 at [4] (Ryan, Stone and Jagot JJ). 16 Section 423(1) provides that the Court may make an order for an inquiry and thus provides for the making of a discretionary judgment by the Court. 17 There is a strong presumption in favour of the correctness of the exercise of a discretionary power, so that the decision should be affirmed unless the Court is satisfied that it is "clearly wrong": see Hall v Poolman (2009) 75 NSWLR 99; [2009] NSWCA 64 at [112] (Spigelman CJ, Hodgson JA and Austin J). 18 Hence, as the applicants acknowledged in their submissions, it is necessary to show that the discretion exercised by the primary judge not to order an inquiry miscarried in the sense explained in House v The King (1936) 55 CLR 499; [1936] HCA 40 at 504-505 (Dixon, Evatt and McTiernan JJ). Their Honours there stated that it was not sufficient for an appellate court to consider that it would have taken a different course, if it had been in the position of the primary judge. Rather, their Honours explained, the appellate court must be satisfied that the primary judge failed to exercise properly the discretion by acting upon a wrong principle, allowing extraneous or irrelevant matters to guide or affect them, misstating the facts, failing to take into account a material consideration or that the decision, on the facts before them, was unreasonable or plainly unjust. Their Honours concluded that if the appellate court is satisfied that such an error has occurred, then it may exercise its own discretion in substitution for the decision of the primary judge, if it has the materials to do so.

C.2. Discretion to order an inquiry 19 Section 423(1) of the Act relevantly provides: 423 Supervision of controller (1) If: (a) it appears to the Court or to ASIC that a controller of property of a corporation has not faithfully performed, or is not faithfully performing, the controller's functions or has not observed, or is not observing, a requirement of: (i) in the case of a receiver - the order by which, or the instrument under which, the receiver was appointed; or (ii) otherwise - an instrument under which the controller entered into possession, or took control, of that property; or (iii) in any case - the Court; or (iv) in any case - this Act, the regulations or the rules of court; or (b) a person complains to the Court or to ASIC about an act or omission of a controller of property of a corporation in connection with performing or exercising any of the controller's functions and powers; the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit. 20 Section 423 is "virtually identical" to the former s 536 of the Act, which was addressed to conduct of liquidators likely to attract sanctions for "disciplinary reasons" and, therefore, the case law concerning s 536 can apply to s 423: Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd & Ors (1989) 19 NSWLR 434 at 438 (McLelland J) (considering s 420 of the Companies (New South Wales) Code being the predecessor provision to s 536); Re S&D International Pty Ltd (in liquidation)(receiver and manager appointed) [2009] VSC 225 at [210] (Robson J); Australian Securities and Investments Commission v Dunner (2013) 303 ALR 98; [2013] FCA 872 at [8] (Middleton J); Sahab Holdings Pty Ltd v Tonks (2023) 167 ACSR 560; [2023] NSWCA 12 at [11] (Kirk JA, Macfarlan and Meagher JJA agreeing). 21 Section 423(1) authorises either the Court or the Australian Securities and Investments Commission (ASIC) to "inquire into the matter", if persuaded to do so. The "matter" in question is either: (a) if it appears to the Court or to ASIC that a controller has not faithfully performed, or is not faithfully performing, the controller's functions or has not observed, or is not observing, a relevant legal requirement: s 423(1)(a); or (b) a complaint about an act or omission of a controller in connection with performing or exercising any of the controller's functions and powers: s 423(1)(b). 22 The "matters" are alternatives; the former does not confine the latter: Sahab at [12] referring to Poolman at [90]. 23 The only express precondition to the Court's exercise of its discretion, for the purposes of an application made pursuant to s 423(1)(b), is whether a person has complained to the Court (or ASIC) about some relevant act or omission of the controller. However, as relevantly stated by Kirk JA in Sahab at [18]: No doubt it is implicit that there must be something sufficient in the complaint calling for an inquiry. Consideration of what is sufficient can tend to overlap with discretionary considerations… 24 The language of "something sufficient" reflects the approach taken in previous authorities to the threshold required to enliven the discretion whether to order an inquiry under s 423(1) of the Act. 25 The Full Court in Leslie, in the matter of Aboriginal Councils and Associations Act 1976 v Hennesey [2001] FCA 371 at [6] (Ryan, Dowsett and Hely JJ) provided the following explanation of the correct approach to be taken to the threshold test and the factors relevant to any subsequent exercise of discretion: Drummond J found that there was no basis for ordering an inquiry or granting other relief pursuant to s 536. In so doing, his Honour adopted the approach taken by Young J in Burns Philp Investment Pty Ltd v Dickens (No 2). The appellant disputes the correctness of that approach, saying that the requirement that there be a "prima facie case" places an unjustifiable gloss upon the section. If the expression "prima facie case for investigation" used by Drummond J in par 12 of his reasons be taken to have some technical meaning, then there might be some merit in this criticism. The appellant's written submissions conceded that, on current authority, the applicants must show a "prima facie case". See eg the cases referred to in McPherson The Law of Company Liquidation 4th Edition at p 388. However, we believe that both Young J and Drummond J were describing something less formal than a prima facie case according to some evidential burden of proof. Their Honours both meant only that an applicant must show a sufficient basis for making an order, that there is something which requires inquiry. The Court then has a discretion which it must exercise. Many factors will be relevant to that exercise. They include the strength and nature of the allegations, any answers offered by the liquidator, other available remedies, the stage to which the liquidation has progressed, the likely amounts of money involved, the availability of funds to pay for any inquiry, the likely benefit to be derived from it and the legitimate "interest" of the applicant in the outcome. 26 These statements of principle in Leslie were substantially approved by the Court of Appeal of the Supreme Court of New South Wales in Poolman at [58]-[59]; [79] and [104]; Sahab at [19]-[23]. 27 In Poolman, the Court added at [59] a qualification that: we take to be implied in their Honours' remarks, namely that the "sufficient basis" for making the order must relate to the matters concerning faithful performance of duties or observance of requirements that are stated in subpara (1)(a). Of course, the list of relevant factors set out in this passage does not purport to be comprehensive. 28 In Sahab, Kirk JA stated at [23]: As for the nature of what is at issue, the very notion of sufficiency involves some assessment of what is at stake and all the circumstances. Less might be required if there is a suggestion of serious misconduct. 29 In our view, it is now well established that the relevant test to be applied to the threshold to enliven the exercise of discretion under s 423(1) as to whether to order an inquiry, is that an applicant "must show a sufficient basis for making an order, that there is something which requires inquiry": Leslie at [6].

D. Decision of the primary judge 30 The primary judge proceeded at J [16] on the basis that proceedings under s 423 of the Act involved three stages, namely, (a) whether an inquiry is required, (b) the conduct of the inquiry, and (c) the determination of what, if any orders, should be made in relation to the Receiver's conduct. The stages identified at (b) and (c) only arise if it were determined that an inquiry was required at the first stage. 31 The primary judge then referred to the explanation provided by Brereton J in Australian Securities and Investments Commission v Wily & Hurst (2019) 137 ACSR 1; [2019] NSWSC 521 at [35] that the first stage involved two questions, namely: (a) whether there is a complaint with respect to the conduct or performance by the receiver of their duties; and (b) whether as a matter of discretion, an inquiry should be ordered. 32 Next, the primary judge stated that there "may be some artificiality" in seeking to draw a rigid distinction between the two questions in the first stage referring to the following observation by Kirk JA in Sahab at [23]: …The issues can be distinguished, but in many cases they will tend to overlap. The ultimate issue is whether the Court is persuaded that in all the circumstances an inquiry is warranted. 33 Having made those observations, the primary judge then proceeded on the basis that the correct approach was to determine whether each of the alleged acts and omissions of the Receiver "warranted an inquiry" and in each case concluded that no inquiry was warranted. 34 The primary judge provided the following summary at J [33] of the acts and omissions of the Receiver for which the applicants sought an inquiry: (1) the acts of the respondent in causing Park Ridge to pay out approximately $8,000,000 owing on the loan from Makro a year earlier than its expiry by taking a new loan from IJ Financial Pty Ltd for $8,000,000 (the refinancing complaint); (2) the acts of the respondent in notifying purchasers under contracts for the sale of lots in the Carver's Reach development that the respondent would not honour those contracts (the stage 6 contracts complaint); (3) the omission of the respondent to sell certain land and the omission of the respondent to accept an offer made to him by HBL Qld Pty Ltd to buy the balance of the development land (the sales and marketing complaints). (Bolding of text removed.)

E.1. Overview 35 The revised version of the draft notice of appeal handed up by the applicants in the course of the hearing, without objection, included four grounds seeking to identify House v The King errors by the primary judge. These grounds were agreed to be proposed grounds 1(a), 1(b), 2 and 7(a). 36 These are the critical proposed appeal grounds. Unless the applicants can demonstrate the primary judge erred in one or more of the ways alleged in these grounds, their challenge to the exercise of the discretion by the primary judge not to order an inquiry into the conduct of the Receiver, must fail.

E.2. Proposed grounds 1(a) and (b) 37 The applicants allege in proposed grounds 1(a) and 1(b) that the primary judge applied the wrong test under s 423(1)(b) of the Act by: a. failing to recognise that the scope of an inquiry into conduct which "might broadly be described as disciplinary reasons" under that section includes: i. "[q]uestions of skill and diligence, as well as questions of improper conduct or improper purpose" such as the duties in sections 180, 181, 182 and 183 of the Corporations Act; and ii. failures by the receiver faithfully to perform his duties or functions; and b. therefore, misunderstanding the significance of the evidence of Mr Hutson and so failing to take it properly into account. 38 Proposed grounds 1(a) and 1(b), as framed by the applicants, are necessarily interrelated. The prefatory word to proposed ground 1(b), namely, "therefore", makes clear that the ground is alleged to be consequential upon the error alleged in proposed ground 1(a). 39 They submit in support of proposed ground 1(a), that the primary judge's reasoning proceeded on the basis that conduct that was liable to attract sanctions or control for "disciplinary reasons", did not comprehend conduct that would be a breach of duty by the Receiver. They contend that the three complaints that they had raised were directed at possible breaches of duty by the Receiver and thus, could be liable to attract sanctions or control for what could be broadly described as "disciplinary reasons". 40 The applicants submit that the primary judge failed to recognise that the scope of an inquiry under s 423(1)(b) into conduct which "might broadly be described as disciplinary reasons" extended to breaches of statutory and general law duties owed by a receiver, including duties of care and skill. The applicants seek to make good that submission by pointing to the primary judge's reasoning at J [8], [10]-[12], [36], [38] and [136(2)]. 41 They submit in support of proposed ground 1(b), that the narrow approach adopted by the primary judge to "disciplinary reasons" was an error of principle that caused her Honour not to take into account the "true import of the applicants' expert evidence" and ultimately led to a failure to take into account a material consideration. 42 We do not accept these submissions for the following reasons. 43 First, the paragraphs relied upon by the applicants to demonstrate the alleged error by the primary judge have been quoted selectively and out of context. The paragraphs must be read in the context of the judgment as a whole and, in particular, the paragraphs that immediately precede or follow them. 44 In our view, the primary judge's reasons, read as a whole, make clear that her Honour recognised that conduct that "might broadly be described as disciplinary reasons" extended to breaches of statutory and general law duties. 45 So much is made plain from the following paragraphs of the Judgment: 5 Section 423 sits within the broader regulatory system established under the Corporations Act, which exists to ensure the lawful, orderly and efficient conduct of the affairs of corporations due to the central significance of corporate conduct for the economic and social life of the nation: Hall v Poolman (2009) 75 NSWLR 99; [2009] NSWCA 64 at [53] (Spigelman CJ, Hodgson JA and Austin J). 6 Section 423 is not to be narrowly construed or confined by fine distinctions. Instead, like s 536, it is a broadly expressed supervisory jurisdiction over the conduct of persons in control of the affairs of a corporation, in circumstances where normal market forces and the exercise by shareholders of their rights to control are attenuated or non-existent: Dunner at [10], citing Hall v Poolman at [53]-[54]. 7 The interest to be served is a public interest: BL & GY International Co Ltd v Hypec Electronics Pty Ltd (2010) 79 ACSR 558; [2010] NSWSC 959 at [41] (Barrett J). … 9 In Naxatu at [17], Dowsett J cited the following passage from Hall v Poolman: 67 The court's supervisory role is recognised in the frequently cited observations of McLelland J in Northbourne Developments (at 438), where his Honour said of the predecessor to s 536 that it "is concerned with aspects of the conduct of liquidators which are liable to attract sanctions or control for what might broadly be described as disciplinary reasons". … 68 The characterisation of the basis for intervention as "disciplinary reasons" is, as McLelland J said, "broadly" apt. Particularly with respect to the unfettered power in s 536(3), it is not appropriate to limit the power to a concept of impropriety. It extends at least to the full range of "duties" referred to in s 536(1)(a). Questions of skill and diligence, as well as questions of improper conduct or improper purpose, can give rise to "disciplinary reasons" in the sense that McLelland J was applying the concept (see, for example, the duties in ss 180, 181, 182 and 183 of the Corporations Act (Cth)). … 46 Second, the applicants' reliance on the following statement by the primary judge at J [136(2)] is misplaced: The following are additional overarching reasons for refusing to order an inquiry: … (2) the conduct of the respondent which is the subject of the complaints is not such as to be liable to attract sanctions or control for what might broadly be described as "disciplinary reasons": Naxatu at [16]-[17]; 47 The primary judge's reference to "disciplinary reasons" must be understood in the context of the use of that terminology in Poolman at [68] (which is set out by the primary judge at J [9]), as endorsed in Naxatu Pty Ltd v Perpetual Trustee Co Ltd (2012) 207 FCR 502; [2012] FCAFC 163 at [17]. The Court in Poolman adopted a very broad and inclusive approach to the concept of "disciplinary reasons". In context, not least the express reference to the duties in s 180, s 181, s 182 and s 183 of the Act, it was using the concept as a convenient label, rather than to establish any bright line demarcation between "disciplinary reasons" and "non-disciplinary reasons". 48 The use of the phrase "what might broadly be described", the quotation marks around "disciplinary reasons" and the express reference to Naxatu, demonstrates that the primary judge was not seeking to limit the inquiry to any narrow conception of conduct that might give rise to express disciplinary sanctions. Rather, in context, it is readily apparent that it encompassed and extended to conduct giving rise to contraventions of broader duties, including duties imposed on directors and officers pursuant to s 180, s 181, s 182 and s 183 of the Act. 49 Third, and relatedly, the primary judge did not qualify or limit the scope or nature of the "duties" of the Receiver in making the following findings in response to complaints advanced by the applicant: (a) the allegations directed to the refinancing complaint did no more than "raise the possibility" that the Receiver had breached his duties and a "mere possibility of a breach of duty" did not provide a compelling justification for an inquiry: at J [61(9)]; (b) even if the Receiver's failure to explain why he argued in proceedings in the Supreme Court of Queensland that a property would be more valuable if it could be sold in one line with other properties under his control but did not in fact do so in the subsequent sale process, gave rise to "a breach of his duties (which is questionable)", an inquiry would not be ordered because of the "apparent inconsistency": at J [132]; and (c) the Receiver's awareness of the exact quantum owing to Ultimate did not speak to the "performance of his duties as a receiver", and this information could also be obtained by other means: at J [135]. 50 Fourth, contrary to the applicants' submissions, any suggestion that the primary judge's references to the following principles at the commencement of the Judgment might have led the primary judge to make any error of principle, cannot be accepted, because of the primary judge's contextual explanations of those principles at J [5]-[7] and [9], subsequent approach to the scope and content of "duties" and the use of the terminology of "disciplinary reasons" as outlined above: 8 The provision is designed for "disciplinary" purposes, that is, as mechanisms for supervision by the Court of persons involved in the administration of insolvent estates: Naxatu Pty Ltd v Perpetual Trustee Co Ltd (2012) 207 FCR 502; [2012] FCAFC 163 at [16] (Dowsett J, with whom Yates J agreed), citing the decision of McLelland J in Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 at 438. … 10 In conducting an inquiry, the court is performing a regulatory role in the sense that its function, like the function of ASIC under the section, is supervisory: see Sahab Holdings Pty Ltd v Tonks [2023] NSWCA 12 at [25] (Kirk JA, with whom Macfarlan and Meagher JJA agreed). 11 Given the supervisory and disciplinary nature of the power of inquiry, it is generally not appropriately employed, for example, for the purpose of vindicating private legal rights: Sahab at [25]. 12 In Hypec at [35], Barrett J observed that, "by analogy with the approach taken in bankruptcy, a s 536 inquiry should not be the occasion for trying what is really an action for negligence or other breach of duty by a liquidator." 51 Fifth, nor, contrary to the applicants' submissions, do we discern any error of principle in the following references by the primary judge to "disciplinary reasons": 36 The critical issues that must be determined on this application are whether there is conduct "liable to attract sanctions or control for what might broadly be described as disciplinary reasons": Northbourne Developments at 438. Mr Hutson's reports do not contain opinions about whether the concerns he identifies rise to the level of being described as "disciplinary reasons" for attracting sanctions or control. … 38 Views expressed by Mr Hutson about "orthodox practice" or what is "usual, market standard" in this context are therefore of limited utility for the purposes of this application. That is because every receivership is unique. There can be no 'one size fits all' approach to conducting receiverships. Receivers (and all external controllers) have to make difficult commercial decisions by reference to the particular circumstances. Even if there is an arguable basis to contend that an alternative and better decision should have been made by a receiver, it does not follow that an inquiry is appropriate or in the public interest. 52 There is nothing to indicate in these paragraphs that the primary judge was intending to adopt or employ a narrower concept of "disciplinary reasons" than her Honour had explained in her summary of the relevant principles at J [5]-[7], [9] and [136(2)]. 53 Finally, we do not accept that the primary judge's assessment that an expert's evidence of "orthodox practice", or what is "usual, market standard" is only of "limited utility", discloses any error of principle in approaching the scope of the duties of a receiver that may be the subject of a s 423 inquiry. Her Honour was not rejecting the evidence on that ground but rather making an observation that evidence of "orthodox practice" is of limited utility because "every receivership is unique": at J [38]. The degree of utility of such evidence would invariably turn on the specific circumstances confronting the receiver and the extent to which those circumstances gave rise to particular or unusual considerations that might then relevantly inform an assessment of whether there had been a breach of duty by a receiver. 54 For these reasons, we have concluded that proposed ground 1(a) is not reasonably arguable. 55 Given that proposed ground 1(b) is dependent on the establishment of proposed ground 1(a), it follows that proposed ground 1(b) is also not reasonably arguable.

E.3. Proposed ground 2 56 The applicants allege in proposed ground 2 that the primary judge erred by: 2. going beyond an assessment of whether there was "a sufficient basis to warrant an inquiry" or that there is "something that requires inquiry", being "something less formal than a prima facie case", in giving limited or no weight to the opinions of Mr Hutson, and in uncritically accepting the respondent receiver's explanations for his conduct the subject of the application despite: a. the appellants not being able to challenge that evidence on an application for an inquiry; and b. inferences against the respondent receiver being open to be drawn on the respondent receiver's evidence. 57 Proposed ground 2 seeks to raise two distinct errors. The first alleged error is "going beyond" what was permissible in determining whether there was a "sufficient basis to warrant an inquiry". The second alleged error is "uncritically accepting" the Receiver's explanations for his conduct in circumstances where the applicants could not challenge that evidence and where inferences were able to be drawn against the Receiver on his own evidence. 58 The applicants submit that a "sufficient basis" means that the Court only needs to be satisfied that there is "something which requires inquiry", in order to engage the question of whether to exercise the Court's discretion. They submit, by reference to statements made by Kirk JA in Sahab at [18]-[19], that there is no requirement for them to establish that "…the complaint has foundation", or that "on the face of it there has likely been some misconduct of a relevant kind". The applicants submit that the "low bar" to ordering an inquiry explains why cross-examination of the relevant controller is not available at the first stage and to allow that to occur would defeat the purpose of the procedure provided for in s 423. 59 The applicants submit that the primary judge did not apply this threshold test to determine whether the discretion to inquire is engaged and that this was an error of principle. They submit that the approach adopted by the primary judge was to analyse whether the complaints were justified, at least, on a prima facie level, rather than to determine whether there was "something that needs investigation". More specifically, they point to what they characterise as: (a) conclusions about the correctness of the applicants' contentions: at J [61(7)]; (b) a rejection of a possibility of a breach of duty as something that might justify an inquiry: at J [61(9)]; (c) in places, an apparent acceptance of the Receiver's explanations: at J [61(8)], [80], [127]; (d) weighing of the impact of Mr Hutson's evidence against the Receiver's explanations: at J [130]-[131]; and (e) a rejection of the notion that the asserted inadequacy of the Receiver's explanations might justify making an order for an inquiry: at J [61(3)], [134]. 60 The fundamental difficulty with proposed ground 2 is that the matters that the applicants seek to advance in support of this ground were statements made by the primary judge in the context of her Honour's consideration of "the ultimate issue" of whether "an inquiry was warranted", adopting the language employed by Kirk JA in Sahab at [23]. The question of whether an "inquiry was warranted" cannot be equated with the question of whether "the threshold for an exercise of the discretion" to order an inquiry had been enlivened. Necessarily, addressing the question of whether an inquiry was warranted assumes that the threshold for the exercise of the discretion whether to order an inquiry had been enlivened. 61 In our view, an approach of first considering whether, as a factual matter, there was something which required inquiry and then, if necessary, considering whether the discretion to order an inquiry should be exercised, would more closely reflect the approach taken in previous authorities, including in Wily, Poolman, Naxatu and Leslie. 62 We agree with the observations by Kirk JA in Sahab that: [22] The notion of there being a sufficient basis to warrant an inquiry both acknowledges room for uncertainty, and takes some account of the nature of what is at issue in all the circumstances. There may be uncertainty as to the facts themselves, or as to whether those facts should be characterised as involving some relevant kind of misconduct. In Hall v Poolman, for example, it appeared that the facts themselves were relatively clear (see at [44] and [82]). [23] As for the nature of what is at issue, the very notion of sufficiency involves some assessment of what is at stake and all the circumstances. Less might be required if there is a suggestion of serious misconduct. Yet the "strength and nature of the allegations" were, appropriately, listed by the Full Court in Leslie as matters potentially relevant to the exercise of the discretion. Thus there can be some artificiality in seeking to draw a rigid distinction between the issue of whether there is a sufficient basis to consider that there is something which requires inquiry and the question of whether the Court should order an inquiry in its discretion. The issues can be distinguished, but in many cases they will tend to overlap. The ultimate issue is whether the Court is persuaded that in all the circumstances an inquiry is warranted. 63 We do not understand, however, that Kirk JA was suggesting by those observations that it was desirable or appropriate to proceed to determine an application for an inquiry under s 423 of the Act by focusing exclusively on whether "in all the circumstances an inquiry is warranted". In our view, it is important to distinguish between the question of whether there is a sufficient basis to consider that there is something which requires inquiry and whether the Court should order an inquiry, in its discretion. Textually, s 423 makes clear that the two inquiries are distinct. We agree that in many cases, matters relevant to the two issues will overlap but they are different inquiries, the first involving an objective determination of whether there is a sufficient basis to consider that there is something requiring inquiry and the second involving an exercise of discretion, by reference to factors relevant to that exercise, including those identified by the Full Court in Leslie at [6]. 64 The approach taken by the primary judge, however, does not assist the applicants' submissions in support of proposed ground 2. By considering, in each case, whether the complaint advanced by the applicants warranted an inquiry (see J [56]-[61], [76]-[86], [124]-[135]), the primary judge implicitly concluded or approached the question on the basis that the discretion to determine whether to order an inquiry had been engaged. Unless such an implicit conclusion had been made or approach had been taken, there would be no occasion to consider whether, in all the circumstances, an inquiry was warranted, a question that necessarily involved an exercise of discretion by the Court. 65 Further, and in any event, each of the matters relied upon by the applicants to demonstrate that the primary judge applied the wrong test on the threshold question, was relevant to whether the Court should exercise its discretion to order an inquiry. The factors identified in Leslie relevantly included the strength and nature of the allegations advanced and any answers offered by the "liquidator" (here, the relevant controller is a receiver). Hence, it follows that conclusions about the correctness of the applicants' contentions, determining that a "mere possibility" of a breach of duty does not provide a compelling justification for an inquiry, accepting explanations provided by the Receiver, weighing the impact of the applicant's expert against the Receiver's explanations and concluding that the alleged inadequacy of the Receiver's explanations did not justify an order for an inquiry, are all matters that fall comfortably within a consideration of the strength and nature of both the allegations advanced and the answers offered by the Receiver.

E.4. Proposed ground 7 66 The applicants allege in proposed ground 7 that the primary judge erred in finding the complaints the subject of their application were: a. made primarily to vindicate private rights, which rights could be, and were being, pursued in other proceedings; b. not in the public interest to pursue because they concerned the conduct of a particular receivership; c. matters for the respondent receiver's discretionary commercial judgments made in circumstances which were factually and legally complicated and which were, as a result, not matters disclosing a sufficient basis to warrant an inquiry; d. matters which lacked utility for the court to inquire into. 67 In the course of the hearing, Mr Beecham KC, who appeared for the applicants, accepted that the House v The King error alleged in proposed ground 7 was limited to the ground advanced in paragraph (a). 68 The applicants' principal contention in support of proposed ground 7(a), is that the emphasised words in the primary judge's conclusion at J [136(5)] that "the inquiry is sought primarily to vindicate private rights, which is not what s 423 is concerned with", was an error of principle because: (a) the concept of vindication of private rights does not encompass any connection that the proposed inquiry might have with possible claims by the company, shareholders or others: see Naxatu at [22]; (b) there is no suggestion in the present case that the inquiry was sought to enforce individual legal or equitable rights; (c) the vindication of private rights may well be in the public interest in the circumstances of a particular case; (d) private rights and the supervisory function of the inquiry are not mutually exclusive; (e) the co-existence of private rights, with a public interest and supervisory function can also be demonstrated by the fact that compensation can be awarded at the conclusion of an inquiry process: citing BL & GY International Co Ltd v Hypec Electronics Pty Ltd (2010) 79 ACSR 558; [2010] NSWSC 959 at [34] (Barrett J); Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 689 (Marks J); Duggan v Thomas, in the matter of William Joseph Duggan [2002] FCA 830 at [35] (Stone J); (f) bankruptcy cases concerning analogous provisions have also long recognised that an inquiry is available where "there is reasonable cause to believe that a trustee may have failed to act in relation to a bankruptcy in the manner required by the Act or the general law": citing Wilson v Commonwealth of Australia [1999] FCA 219 at [44] (Branson J); and (g) in addition, if a "case of misfeasance, negligence or wilful default on the part of a trustee" emerges from the conduct of the estate an inquiry may lead to orders requiring the trustee to make good any loss sustained: citing Macchia v Nilant (2001) 110 FCR 101; [2001] FCA 7 at [48] (French J). (together, the Propositions). 69 In our view, proposed ground 7(a) has no reasonable prospects of success for the following reasons. 70 First, we do not discern any error of principle in a statement to the effect that s 423 is not concerned with inquiries which are sought primarily to vindicate private rights. None of the Propositions is inconsistent with a statement to that effect. Rather, the Propositions make clear that there may be an overlap in the supervisory function of an inquiry and the vindication of private rights. The two functions are not mutually exclusive. 71 Nevertheless, as numerous authorities make clear, the Court's supervisory jurisdiction over external administrators is directed at the "regulation, supervision, discipline and correction" of external administrators "with a view to upholding the public interest in the honest and efficient administration" of companies in external administration: Lewis v Battery Mineral Resources Ltd (in liq) (2021) 156 ACSR 162; [2021] FCA 963 at [94] (Griffiths J). Section 423 is an integral element of the Court's supervisory jurisdiction over external administrators: Sahab at [24]. 72 As Barrett J explained in Hypec at [41], in the context of conduct of a liquidator and the former s 536 of the Act: As the several judicial statements about s 536 make clear, the emphasis is on regulation, supervision, discipline and correction of liquidators in the interests of honest and efficient administration of the estates of companies subject to winding- up. The interest to be served is a public interest. The section is not concerned in any direct way with vindication of private rights. Rather and as Steytler J said in GIS Electrical Pty Ltd v Melsom ... at [49] echoing an observation of McLelland CJ in Eq in Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 at 438…, it "is concerned with aspects of the conduct of liquidators which are liable to attract sanctions or control for what might be broadly described as disciplinary reasons". The preoccupation is, as I put it in Re Bauhaus Pyrmont Pty Ltd [2006] NSWSC 742 at [4], with "the broader question of due administration of the winding up in the public interest". 73 This passage has been cited with approval in subsequent cases, including Sahab at [25]; Djordjevich v Rohrt (2022) 67 VR 161; [2022] VSCA 84 at [22] (Kennedy and Whelan JJA); Lewis at [94]; Australian Securities and Investments Commission v Macks (No 2) (2019) 133 SASR 251; [2019] SASC 17 at [50], [57] (Doyle J); Deputy Commissioner of Taxation v Starpicket Pty Ltd (No 2) [2013] FCA 699 at [20] (Gordon J). 74 Second, we do not accept the proposition advanced by the applicants that there is no suggestion in the present case that the inquiry was sought to enforce individual legal or equitable rights. As the Receiver submitted, the applicants sought to contend that an inquiry had utility, notwithstanding the advanced stage of the receivership, because the Court had the ability to make compensation orders at the conclusion of the inquiry. 75 Third, as explained above at [64], the primary judge must have implicitly assumed or was otherwise proceeding on the basis that the first step of the first question had been satisfied. Hence, the applicants would need to establish that the alleged error of principle occurred in the exercise of the primary judge's discretion in determining whether an inquiry was warranted in all the circumstances. 76 The complaint advanced in proposed ground 7(a) was a matter that fell within established categories of matters that can be taken into account in the exercise of the Court's discretion. It fell within one of the categories of matters identified in Leslie at [6], namely the existence of other available remedies. We are, therefore, satisfied that the primary judge did not err in finding that the complaint was primarily directed at the vindication of primary rights.

E.5. Other Proposed Grounds 77 Given our conclusions with respect to proposed grounds 1(a), 1(b), 2 and 7(a), it is not necessary to consider the other proposed grounds. Proposed grounds 3 to 6 would only arise if we were satisfied that the primary judge's exercise of discretion not to order an inquiry had miscarried. We have concluded that it did not miscarry.

F. Substantial injustice 78 Given our conclusion that the decision below is not attended by sufficient doubt to warrant its reconsideration by an appellate court, it is not necessary for us to consider whether the applicants might suffer any substantial injustice if leave to appeal is not granted. Nevertheless, if we are mistaken in that conclusion, we would otherwise not have granted leave on the basis that the applicants would not suffer any substantial injustice by reason of that decision. 79 The applicants submit that the failure to order an inquiry into conduct that justified an inquiry demonstrates substantial injustice because there would be no inquiry into matters that might constitute breaches of duty that effected the company's interests and might reflect a problematic approach by the Receiver. 80 In our view, the applicants have not established that they would suffer any substantial injustice if leave to appeal were not granted for the following reasons. 81 First, the substantial injustice identified by the applicants is largely a derivative alleged injustice that would have arisen for all members and creditors of the company. As submitted by the Receiver, if the applicants wished to pursue their complaints for public interest purposes, they could seek to pursue this course though ASIC under s 423 or by a liquidator in a public examination. 82 Second, the applicants accept that their claims for loss alleged to be attributable to the conduct of the Receiver could be advanced in the Derivative Proceedings. 83 Third, the receivership is nearly completed. The Receiver is no longer a receiver of any property, other than one property that is the subject of proceedings and cannot be dealt with because its title is in dispute. This was not a case in which the applicants' interests might be affected by decisions made by the Receiver in the substantive conduct of the receivership. To the extent that breaches of duty by the Receiver might not be uncovered because of the absence of any inquiry, any substantial injustice would potentially fall on the creditors and members of other companies to which the Receiver might be subsequently appointed. 84 Fourth, and relatedly, the Receiver has provided substantial explanations for his conduct the subject of the complaints in his two affidavits that he has filed in the proceeding. The applicants have the benefit of a comprehensive explanation, on oath, of the decisions that the Receiver has taken in the course of the receivership. It could reasonably be expected that these explanations would materially assist the applicants in deciding, what, if any, further potential causes of action they might have against the Receiver, beyond those already advanced in the Derivative Proceedings.

G. Disposition 85 The application for leave to appeal is to be dismissed and the applicants are to pay the Receiver's costs. I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Halley, Goodman and McElwaine.

SCHEDULE OF PARTIES QUD 188 of 2023 Applicants Fourth Applicant: MARC ANDREW CLANCY Respondents Fourth Respondent: GGPG DEVELOPMENTS (NO. 48) PTY LTD ACN 608 771 857 Fifth Respondent: PARK RIDGE 94 PTY LTD ACN 616 893 924 Sixth Respondent: ROCHEDALE HOLDINGS NO. 1 PTY LTD ACN 610 550 199 Seventh Respondent: PARK RIDGE 96 AND 98 PTY LTD ACN 618 802 618 Eighth Respondent: PARK RIDGE 180 PTY LTD ACN 616 431 157 Ninth Respondent: 168 PARK RIDGE PTY LTD ACN 619 549 334 Tenth Respondent: ROCHEDALE HOLDINGS PTY LTD ACN 610 535 076 Eleventh Respondent: COORPAROO HOLDINGS PTY LTD ACN 609 979 446 Twelfth Respondent: PARK RIDGE DEVELOPMENT MANAGEMENT PTY LTD ACN 627 401 094