By Amended Originating Process filed today by leave, Messrs Kukulovski and Arnautovic seek certain orders under s 473, 502, 449D and other provisions of the Corporations Act 2001 (Cth) arising from the resignation of Mr Kukulovski as liquidator appointed by the Court, liquidator appointed in a creditor's voluntary liquidation, and administrator of various companies.
The application is supported by affidavits of Messrs Kukulovski, Crisp and Arnautovic, and by a further affidavit of the Plaintiffs' solicitor, Mr Hegarty. The application has been extended, in the course of the hearing to a further entity, Screentech Pty Limited, as to which relevant information is found in Exhibit P3. I have been provided with helpful submissions by Mr Hegarty, which outline the relevant legal principles, which are well established.
By Mr Kukulovski's affidavit dated 10 December 2015, he indicates that he has retired from the firm of which he was formally a partner, effective from 4 December 2015. He notes that he had been appointed as, variously, a liquidator in a court appointed liquidation, a liquidator in a creditors' voluntary winding up or administrator and he seeks to have the various appointments transferred to a continuing partner of his firm. While he notes that that transfer is consistent with his obligations under the partnership agreement of his firm, it seems to me that such a transfer can also be justified, as the affidavits would properly recognise, by the administrative convenience involved in a single firm continuing an insolvency administration, whether a liquidation or an administration, where a particular partner who was appointed as liquidator or administrator resigns. That convenience reflects the common experience that in order to ensure the cost effective conduct of insolvency administration, a substantial part of the work involved in such administrations will often be undertaken by senior staff, and more junior staff working with them, albeit under the supervision of the named appointee in order to seek to minimise the costs of the administration.
Mr Kukulovski also refers to the fact, which the case law has recognised, that, although it would be possible to convene separate meetings of each company the subject of a creditors' voluntary liquidation to consider the appointment of a replacement liquidator, that course is rarely desirable where it will impose additional costs upon the administration, which will deplete the return that would otherwise be available to creditors. Mr Kukulovski also confirms his commitment to assist with a transition to the proposed new appointees, Mr Arnautovic and Mr Crisp, on his resignation from each of the companies.
By his affidavit dated 9 December 2015, Mr Arnautovic confirms that he has signed a consent to act for each of the relevant companies, and sets out a review which he has undertaken of each of the liquidations and administrations, with relevant staff of his firm, to confirm his ability to accept appointment in respect of each engagement. He expresses the view that the interests of creditors will be best served by his appointment as liquidator, or administrator, as the case may be, in order to minimise the duplication of work which would be involved where continuing staff would continue to work on the relevant engagements. Mr Crisp, by his affidavit dated 10 December 2015, gives similar evidence, in respect of engagements being undertaken from the firm's Melbourne office, as to which it is proposed that he would replace Mr Kukulovski as liquidator or administrator as the case may be.
Mr Hegarty in turn notes that the application is not pursued in respect of a number of entities, to which reference is made in the exhibit to his affidavit, either because those engagements will be shortly completed, or because there is a joint appointee in place who can continue those administrations without Mr Kukulovski's involvement. I should note at that point that, where two persons are jointly appointed as liquidators of a company, then, by reason of s 530 of the Corporations Act, a function or power of a liquidator may be performed or exercised by any one of them. That position continues to have effect, even if one of those persons retires or resigns as liquidator, such as to permit the continuing liquidator to exercise his or her powers, as he could have done, without reference to the other liquidator, after his or her retirement or resignation: Condon v Watson [2009] FCA 11; (2009) 69 ACSR 350 at [75]; Re Nixon [2015] FCA 976 at [28]ff. So far as the relevant appointments are court appointments, and it is relevant for the Court to know of Mr Kukulovski's resignation from those appointments, then both this application and the filing of a memorandum of resignation in the Registry in due course will discharge any obligation of Mr Kukulovski in this respect.
Mr Hegarty's helpful submissions in turn draw attention to the applicable legal principles. So far as if Mr Kukulovski resigns or retires as liquidator, then s 473 of the Act provides that a liquidator may, relevantly, resign and a vacancy in the office of a liquidator appointed by the court must be filled by the Court. Rule 7.1 of Supreme Court (Corporations) Rules 1999 (NSW) in turn provides that a liquidator's resignation takes effect on the filing of a memorandum of resignation with the Registrar and its lodgement with the Australian Securities and Investments Commission. The orders proposed by the Plaintiffs proceed on that basis. Mr Hegarty rightly draws attention to the fact that there have now been several decisions which have dealt with the position of replacement of a liquidator and which recognise the desirability, largely for purposes of cost efficiency, of retaining an appointment within the same firm upon such a resignation: for example Re Free [2010] NSWSC 1079 at [6]; Re Porter and Mansfield [2012] NSWSC 220 at [5].
I am satisfied that the orders sought may properly be made in respect of those companies as to which Mr Kukulovski is a liquidator in a court appointed liquidation, such as to provide for the continuance of the liquidation by the designated appointee within his firm. The Plaintiffs also, fairly, seek leave under s 532 of the Corporations Act, to the extent that such leave may be required, for the appointment of the relevant persons, so far as they are potentially creditors of the companies by reason of unpaid fees and costs in the liquidation. The grant of such leave has been commonplace in such situations, and without it being necessary to reach any concluded view as to whether it is required, I am satisfied that it may probably be granted in this case: Re Porter and Mansfield above.
So far as orders are sought in respect of companies in creditors' voluntary liquidation, then Mr Hegarty notes that s 502 of the Corporations Act provides that, if from any cause there is no liquidator acting, the Court may appoint a liquidator. The relevant orders, it seems to me, should be made on the same basis in respect of the companies which are in creditors' voluntary liquidation.
One of the companies, JKC Air Conditioning Services Pty Limited, is subject to a deed of company arrangement. Section 449D of the Corporations Act provides for the Court's powers where, relevantly, the administrator of a deed of company arrangement resigns by notice in writing given to the company, and provides that the court may appoint someone else as administrator of the deed in that case. The operation of that provision was considered in Condon v Watson above by Lindgren J and it seems to me that an order may similarly be made so far as it is proposed that Mr Kukulovski be replaced by Mr Crisp as the administrator of that deed of company arrangement under the same section. Section 448C of the Corporations Act potentially raises a question, in respect of the disqualification from appointment as a deed administrator of a person to whom the company is indebted in an amount exceeding $5,000, but permits such an appointment with the leave of the court. I am satisfied that such leave should be granted, for more abundant caution, on the same basis that leave has been granted under s 532 of the Act in respect of the companies in liquidation.
The Plaintiffs, in this case, have taken the view that they will not seek to make the costs of this application recoverable against the companies. Accordingly, no question as to whether it would be proper to make such an order arises. I make orders in accordance with the short minutes of order initialled by me and placed in the file. I also make a further order that the exhibits be returned.
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Decision last updated: 01 March 2016