Condon v Watson [2017] FCA 1158 | Case summary

DAVIES J: 1 The first plaintiff, Mr Gollant, was a director of the firm Rodgers Reidy until 30 August 2017 when he resigned following his desire to downsize his practice. At the time of his resignation, Mr Gollant was the liquidator of numerous companies and the trustee in bankruptcy of numerous bankrupt estates, and he intends also to resign from those positions. Mr Gollant's resignation from his employment with Rodgers Reidy has been an amicable and cooperative process as between himself and the firm and it is proposed that Mr Gollant be replaced as liquidator and as trustee in bankruptcy by other members of Rodgers Reidy, save with respect to his position as liquidator of one company of which he will remain as liquidator. The other plaintiffs to the proceeding are the members of Rodgers Reidy, who it is proposed will take over the appointments from Mr Gollant. The plaintiffs have accordingly made applications under ss 473, 502 and 532 of the Corporations Act 2001 (Cth) ("the Corporations Act") and ss 30 and 180 of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act"). 2 In respect of the companies subject to a creditors' voluntary winding up that are listed in exhibit "MTG2" to the affidavit of Mr Gollant, it is proposed that Mr McLean, the second plaintiff, be appointed sole liquidator in lieu of Mr Gollant. 3 In respect of the companies subject to a creditors' voluntary winding up that are listed in exhibit "MTG3" to the affidavit of Mr Gollant, it is proposed that Mr McLean and the third plaintiff, Mr Fettes, be appointed as joint and several liquidators in lieu of Mr Gollant. 4 In respect of the court ordered liquidations that are listed in exhibit "MTG6" to the affidavit of Mr Gollant, it is proposed that Mr McLean be appointed as the liquidator in lieu of Mr Gollant. 5 In respect of the companies subject to a members' voluntary winding up that are listed in exhibit "MTG8" to the affidavit of Mr Gollant, it is proposed that Mr McLean be appointed as the liquidator in lieu of Mr Gollant. 6 In respect of the bankrupt estates listed in "MTG10" to the affidavit of Mr Gollant, it is proposed that Mr McLean be appointed as the trustee in bankruptcy in lieu of Mr Gollant. 7 In respect of the bankrupt estates listed in "MTG12" to the affidavit of Mr Gollant, it is proposed that Mr Mclean and the fourth plaintiff, Mr Barnden, be appointed as the joint and several trustees in bankruptcy. 8 Exhibits "MTG2", "MGT3", "MTG6", "MTG8", "MGT10" and "MGT12" are annexed to these reasons. 9 The application is supported by four affidavits, respectively sworn by Mr Gollant, Mr McLean, Mr Fettes and by Mr Kyrou, the plaintiff's solicitor. 10 Mr Gollant has deposed to the circumstances under which it is he intends to resign as liquidator and trustee of the various companies and bankrupt estates. He has also deposed that he has consulted with the management of Rodgers Reidy and considered what is the most efficient and cost-effective manner in which to ensure a smooth transition of all administrations to a new liquidator or trustee in bankruptcy. Mr Gollant's evidence is that he is satisfied, and has no doubt having regard to the familiarity of his team with the conduct of all matters in the liquidations of the companies and bankruptcies from which he seeks to retire, that it is in the interest of creditors of the companies that he be replaced by members of Rodgers Reidy, which will ensure continuity in the conduct of the administrations and avoid the incurring of duplicated costs required in a new practitioner becoming familiar with such administrations. Mr Gollant also deposed that there are several matters in which court proceedings are on foot and in such matters there is an even greater need to ensure continuity of service so as not to prejudice the retained knowledge gained in the conduct of those matters to date. 11 The application and affidavits of Mr Gollant, Mr McLean and Mr Fettes were served on the Australian Securities and Investments Commission ("ASIC") and the Australian Financial Security Authority ("AFSA"). Mr Kyrou has exhibited to his affidavit a letter from the AFSA in which the authority advises that the AFSA has no objections to the application and will not be making an appearance in the matter and a letter from ASIC in which ASIC has advised that it considers that this is a matter properly left for the determination of the Court and will not be intervening in the proceeding, or seek to be heard at the hearing. 12 Although this application has been heard after the commencement of the Insolvency Law Reform Act 2016 (Cth), the application was filed before 1 September 2017 and therefore the law that is enforced at the time that the application was filed is the applicable law: s 1617 of schedule 2, part 3 of the Insolvency Law Reform Act and reg 10.25.01 of Sch 2 to the Corporation and Other Legislation Amendment (Insolvency Law Reform) Regulations 2016 (Cth). Sections 30 and 180 of the Bankruptcy Act have not been affected by the enactment of the Insolvency Law Reform Act and remain in operation. 13 The power of the Court to appoint liquidators in replacement of Mr Gollant in relation to those companies placed into court-ordered liquidation is contained in s 473(7) of the Corporations Act (as it was at the time that the application was filed). Pursuant to s 473(1) of the Corporations Act (as it was at the time that the application was filed), a liquidator appointed by the Court may resign, and pursuant to s 473(7), a vacancy in the office of a liquidator appointed by the Court must be filled by the Court. The Court has the power to replace a court-appointed liquidator in anticipation of the pending resignation of the incumbent liquidator: In the matter of Richard James Porter and David Ian Mansfield [2012] NSWSC 220 ("Porter and Mansfield") at [6] and the cases referred to therein. The appropriate process is for this to occur on the application of the existing liquidator to the Court in conjunction with the consenting liquidator, and Mr McLean and Mr Fettes have both given their consents to act as liquidators of the respective companies in respect of which it is proposed they be appointed as liquidator in replacement of Mr Gollant. Notwithstanding that some of the court appointments of Mr Gollant were made by the Supreme Court, the Federal Court has the power to hear the application in respect of those appointments and to make the appointments that are sought: Condon v Watson (2009) 174 FCR 314. I am, therefore, satisfied that I have the power to make orders for the appointment of Mr McLean and Mr Fettes as sought. I am also satisfied that it is appropriate to do so in the circumstances as their appointments will facilitate continuity and efficiency in the conduct of the liquidations: Porter and Mansfield at [5]. 14 The plaintiffs also seek the leave of the Court for the appointments pursuant to s 532(2) of the Corporations Act. That leave is sought because s 532(2) prohibits a person seeking to be appointed liquidator of a company where the person is a creditor of the company in an amount of more than $5,000. Mr Gollant has deposed that in respect of the creditors' voluntary winding ups referred to in exhibits marked "MTG2" and "MTG3", Rodgers Reidy has an entitlement by way of undrawn remuneration payable in excess of $5,000 and, given that the claims for remuneration arise by virtue of the conduct of those liquidations, there is concern that without the leave of the Court Mr McLean and Mr Fettes may be disqualified from appointment. It is appropriate that the leave be granted in the circumstances, out of an abundance of caution. 15 The next category relates to the companies the subject of creditors' voluntary winding up. Pursuant to s 499(5) of the Corporations Act, if a liquidator of a creditors' voluntary liquidation resigns, the creditors may fill the vacancy and, for the purpose of doing so, a meeting of the creditors may be convened by any two of their number. Pursuant to s 502 of the Corporations Act, the Court also has the power to replace a liquidator notwithstanding the creditors' power to appoint. Mr Gollant estimated that the cost of convening a meeting of creditors, including preparing the necessary reports and the giving of notice to creditors, would cost in each instance not less than $6,000. Mr Gollant deposed that in view of the cost, and because application had to be made to the Court in any event for the Court to appoint new liquidators in respect of the court-ordered liquidations, he was firmly of the opinion that it was far more cost-effective to retain lawyers to apply for orders on the account of all the companies. Rodgers Reidy will pay the costs associated with the application and its preparation and the steps necessary to procure the replacement liquidator on his resignation. In view of the evidence given by Mr Gollant concerning the cost and expense involved in convening meetings of creditors, I accept that it is appropriate for the Court to exercise its power under s 502 of the Corporations Act and make the appointments without leaving it to the creditors pursuant to s 499(5). Other authorities in similar circumstances have held that it has been appropriate for a court to exercise its power and make the appointment: Application of Vouris and Godfrey (2004) 49 ACSR 543 where at [11], Barrett J said: In circumstances of the kind with which I am dealing here, it would be unduly expensive and inconvenient to have to convene meetings to put to members or creditors of every relevant company the question of appointment of a successor or replacement liquidator. The incumbent liquidator finds it necessary to relinquish office and has taken the step of asking the Court to ensure continuity of administration in a way that avoids that expense and inconvenience for members and creditors. The Court can, and should in this case, exercise the overarching power under s.502 and I note that, in the Wily case, Palmer J made an order under that section following s.459(3) resignation (there were apparently no instances involving members voluntary winding up before Palmer J). In the most unlikely event that the new appointee is for some reason not favoured by the members or creditors of a relevant company, they can, of course, approach the Court under s.503 with a view to some other appointment being substituted. See also Condon v Watson at [15]. 16 These considerations equally apply to the Court exercising its power under s 502 of the Corporations Act in respect of those companies that are the subject of members' voluntary winding up, although pursuant to s 495(2) of the Corporations Act the company in general meeting may fill the vacancy by the appointment of a liquidator. 17 In relation to the bankrupt estates of which Mr Gollant is the trustee in bankruptcy, there are some 104 appointments and 711 creditors. Pursuant to s 180 of the Bankruptcy Act, the Court may, pursuant to such terms and conditions as it thinks fit, accept the resignation of a registered trustee from the office of a trustee of an estate. Section 181A of the Bankruptcy Act provides that the current trustee may, with the written consent of another trustee, nominate the other trustee as the new trustee. The current trustee must give notice to all creditors entitled to receive notice of a meeting of creditors and creditors have two days before the specified date to object in writing. 18 In Coshott v Burke [2013] FCA 155 at [9], Buchanan J held that the Court has the power to appoint another trustee under s 180 of the Bankruptcy Act as a condition of the resignation of the incumbent trustee and the Court would not be obliged to leave the matter in the hands of the creditors. In Re Nixon [2015] FCA 976 at [24], Edelman J referred to Coshott v Burke and was prepared to make an order under s 180 and not require the applicants to give notice to all the relevant parties. In that case, notice had been given to ASIC, the AFSA and the Official Receiver, none of whom opposed the application. In view of the attitude of the AFSA to the application, I am satisfied that it is also appropriate in this case for the Court to make an order under s 180 without the need for the plaintiffs to give notice to all the relevant parties. 19 Although application was also made under s 30 of the Bankruptcy Act there is no need to consider whether the Court also has the power under that section. 20 Accordingly, the orders sought will be made. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.

Schedule 3 No: VID 947 of 2017 Federal Court of Australia District Registry: Victoria Division: General SCHEDULE OF BANKRUPT ESTATES BANKRUPT ESTATE BANKRUPTCY NUMBER Simeon Amor VIC 797/16/7 David Arnold VIC 148/17/9 Giulian AshtonLomax VIC 1076/17/3 Abouseifein Ayad VIC 848/17/5 Ronald Barker VIC 283/16/9 Tanya Basu VIC 1733/17/4 Paul Beaumont VIC 3020/2/3 Grant Bevan VIC 620/15/9 Lynn Bills VIC 728/17/5 Matthew Bird VIC 1411/15/0 Andrew Birkenfelds VIC 1471/15/0 Amanda Boraine VIC 1624/15/3 Euclid Boraine VIC 1666/15/5 Georgette Brown VIC 1520/17/7 Anthony Bruno VIC 3082/15/1 Colin Bulmer VIC 2927/16/7 John Burns VIC 1087/17/4 Christine Cairns VIC 1161/16/1 Jeffrey Cairns VIC 1177/16/7 Alan Churchill VIC 592/17/9 Michael Condon VIC 631/17/8 Michael Cordes VIC 1323/17/0 Gino D'Augello VIC 199/17/6 Sam Di Virgilio VIC 639/17/6 Anthony Doring VIC 1935/16/1 Christopher Dunning NSW 2414/15/5 Claire Duse VIC 3032/16/8 Anthony Dwyer VIC 2704/15/9 Harry Economou VIC 3413/16/9 Nikita Eglezos VIC 3441/15/0 Frederick Ferguson VIC 333/16/9 Rami Fibishenko VIC 233/17/0 Paul Galea VIC 2384/15/9 Nathan Gaul VIC 1680/16/6 Gary Gazelle VIC 1096/17/3 John Gilleland NSW 4744/14/4 James and Susie Gizdimidis QLD 1363/17/9 Ross Gorlick VIC 1097/17/4 Branislav Grujicic VIC 627/17/4 Hardev Gurm VIC 1823/17/4 Dale Harrison VIC 1751/17/2 Lesley Hawkins VIC 1331/15/6 Kristina Hess VIC 3480/13/3 Adam Holland VIC 1076/15/5 Anthony Hutchins VIC 3152/11/3 Julie Jensen VIC 1318/17/5 Norman Paul Johnson VIC 1515/17/2 John Jowsey VIC 1371/16/7 Peter Katsigiannis VIC 3063/16/9 Evan Kneebone VIC 762/16/2 Kane Kopsidas VIC 360/16/6 Constantine Koutsoheras VIC 774/17/1 Ashok Krishnamurthy VIC 2061/17/8 Faimafili Kurene VIC 2155/16/1 Glenda Lorensene VIC 2439/16/5 Stephen Mackenzie VIC 3035/16/1 Pradeep Madhavaram VIC 132/17/3 Terence Mahoney VIC 886/17/3 Errol Malkocer VIC 2008/15/3 Mario Maziotis VIC 278/17/9 Mark McNair VIC 3251/14/9 Travis Melotte VIC 1153/16/3 Lovey Morunga VIC 285/16/1 Abdul Nachar VIC 1199/16/5 Paul Nagel VIC 1093/15/2 Marc Natoli VIC 318/15/8 Lesley Negri VIC 2557/13/4 Thi Le Hang Nguyen VIC 131/17/2 Peter O'Connor VIC 2244/16/0 David Panetta VIC 2913/14/1 John Peran VIC 711/16/7 Benjamin Pettit VIC 3427/15/6 Simion Pirvu VIC 2836/15/1 Andrew Quin VIC 213/17/4 Casey Quin VIC 242/17/9 Darren Radusic VIC 239/17/6 John Raeside VIC 2722/16/8 Jodi Randall VIC 2890/16/6 Alan Reid VIC 3102/16/2 Rodney Riddell VIC 1974/15/9 Paul Rossiter VIC 1739/16/5 Barry Santoro VIC 3031/15/6 Colin Schelfhout NSW 4088/16/6 Peter Scott VIC 2706/15/1 Carlos and Jeanette Seguel VIC 1345/16/1 Greg Sendecki VIC 915/15/4 Zvi Shachar NSW 4266/16/4 Wiendwosen Shetu VIC 702/16/2 Melissa Skidmore VIC 1198/16/4 Andrew Skuse VIC 849/17/5 Louay Soliman VIC 708/16/8 Shane Spratling VIC 1014/15/3 Brett Stringer VIC 1822/16/8 Gavin Stround VIC 2339/16/5 Michael Taylor VIC 309/15/8 Edward Tenberge VIC 1029/15/8 Frank Van Der Worm WA 1288/16/4 Tuoi Thi Hong Vuong VIC 861/17/8 Peter Wakelam VIC 403/17/4 Graeme White VIC 641/16/7 Angela Woods Vic 3880/16/6 Andrea Yannas VIC 1935/15/4 Dean Young VIC 418/16/4 Sherman Yuen VIC 2436/16/2

Condon v Watson

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