Condon v Watson

JASON GLENN STONE Third Applicant

GLENN JEFFREY FRANKLIN Fourth Applicant

PAUL ANTHONY ALLEN Fifth Applicant

order made by: MCEVOY J DATE OF ORDER: 27 JUNE 2022

THE COURT NOTES THAT: A. The first applicant, Stirling Lindley Horne, proposes to resign as liquidator of the companies listed in Schedules A to D and F to G, proposes to resign as administrator of the company listed in Schedule E, and proposes to resign as trustee in bankruptcy of the bankrupt estates listed in Schedules H to K, with those resignations to take effect from the date of this order. B. The first applicant agrees to undertake actions to implement his resignation and the appointment of the second to fifth applicants in his place. C. The first applicant undertakes that he does not cancel his registration as trustee in bankruptcy until such time as the administrations for Ricci Norman Justice (VIC 3599/5/5) and Robin Leith Goulter (SA 500/19/5) are finalised. D. No person other than the applicants has sought to be heard on the application.

THE COURT ORDERS THAT:

1. Pursuant to s 473A(1) of the Corporations Act 2001 (Cth) ("Corporations Act") and/or s 90-15 of the Insolvency Practice Schedule (Corporations) ("IPSC") in Schedule 2 of the Corporations Act, any vacancy in the office of a liquidator arising by reason of the resignation of Stirling Lindley Horne as liquidator of the companies specified in Schedule A hereto be filled on the same date by the appointment of Petr Vrsecky to hold office as liquidator of each such company.
2. Pursuant to s 473A(1) of the Corporations Act and/or s 90-15 of the IPSC, any vacancy in the office of a liquidator arising by reason of the resignation of Stirling Lindley Horne as liquidator of the company specified in Schedule B hereto be filled on the same date by the appointment of Petr Vrsecky and Glenn Jeffrey Franklin to hold office as joint and several liquidators of the company.
3. Pursuant to s 499(3) of the Corporations Act and/or s 90-15 of the IPSC, a direction that on the resignation of Stirling Lindley Horne as liquidator of the company specified in Schedule C hereto, Petr Vrsecky be entitled to continue as liquidator of the relevant company.
4. Pursuant to s 499(3) of the Corporations Act and/or s 90-15 of the IPSC, any vacancy in the office of a liquidator arising by reason of the resignation of Stirling Lindley Horne as liquidator of the company specified in Schedule D hereto be filled on the same date by the appointment of Jason Glenn Stone to hold office as joint and several liquidator of the company with Petr Vrsecky.
5. Pursuant to s 447A of the Corporations Act and/or s 90-15 of the IPSC, any vacancy in the office of an administrator arising by reason of the resignation of Stirling Lindley Horne as administrator of the company specified in Schedule E hereto, Petr Vrsecky be entitled to continue as administrator of the relevant company.
6. Pursuant to s 499(3) of the Corporations Act and/or s 90-15 of the IPSC, a direction that on the resignation of Stirling Lindley Horne as liquidator of the companies specified in Schedule F hereto, Jason Glenn Stone be entitled to continue as liquidator of the relevant companies.
7. Pursuant to s 499(3) of the Corporations Act and/or s 90-15 of the IPSC, a direction that on the resignation of Stirling Lindley Horne as liquidator of the company specified in Schedule G hereto, Glenn Franklin be entitled to continue as liquidator of the relevant company.
8. Pursuant to s 180 of the Bankruptcy Act 1966 (Cth) ("Bankruptcy Act") and/or s 90-15 of the Insolvency Practice Schedule (Bankruptcy) ("IPSB") in Schedule 2 of the Bankruptcy Act, the court accepts the resignation of Stirling Lindley Horne as trustee of the bankrupt estates specified in Schedules H, I, J and K hereto.
9. Pursuant to s 30(1)(b) of the Bankruptcy Act and/or s 90-15 of the IPSB, any vacancy in the office of trustee in bankruptcy arising by reason of the resignation of Stirling Lindley Horne as trustee of the bankrupt estates specified in Schedule H and I hereto be filled on the same date by the appointment of Paul Allen and Petr Vrsecky to hold office as joint and several trustees of the bankrupt estates.
10. Pursuant to s 30(1)(b) of the Bankruptcy Act and/or s 90-15 of the IPSB, any vacancy in the office of trustee in bankruptcy arising by reason of the resignation of Stirling Lindley Horne as trustee of the bankrupt estates specified in Schedule J and K hereto be filled on the same date by the appointment of Paul Allen to hold office as joint and several trustee of the bankrupt estate with Petr Vrsecky.
11. Pursuant to r 1.34 of the Federal Court Rules 2011 and r 1.04(1) of the Federal Court (Bankruptcy) Rules 2016, compliance with the requirements of r 8.02(4)(b) and (c) of the Federal Court (Bankruptcy) Rules 2016 be dispensed with.
12. The applicants are to file a copy of these orders on each Court file concerning the company liquidations and concerning each of the bankrupt estates. Schedule A Audirect Group Pty Ltd (in liquidation) (ACN 150 772 900) Beilharz Pty Ltd (in liquidation) (ACN 108 914 352) GNS Trading (Vic) Pty Ltd (in liquidation) (ACN 156 162 480) Doggone Qld Pty Ltd (in liquidation) (ACN 101 422 894) North HQ Pty Ltd (in liquidation) (ACN 615 083 755) Schedule B Extra Travel Pty Ltd (in liquidation) (ACN 152 044 785) Schedule C MH3D Pty Ltd (in liquidation) (ACN 157 870 472) Schedule D Australian Property Custodian Holdings Limited (in liquidation) (ACN 095 474 436) Schedule E Sunshine City Developments Pty Ltd (in liquidation) (ACN 142 386 669) Schedule F International Distributor Australia Pty Ltd (in liquidation) (ACN 617 387 845) J.K. Bourne Pty Ltd (in liquidation) (ACN 125 673 403) Nirodah Pty Ltd (in liquidation) (ACN 138 766 122) Wild K9 Pty Ltd (in liquidation) (ACN 608 471 503) Schedule G Eltrax Pty Ltd (in liquidation) (ACN 070 051 955) Schedule H In the bankrupt estate of Jodi Beecroft (WA 1709 of 2017/2) In the bankrupt estate of Simon Beecroft (WA 1708 of 2017/1) In the bankrupt estate of Mark Brunner (VIC 316 of 2020/6) In the bankrupt estate of Shane Crumpton (QLD 513 of 2009/1) In the bankrupt estate of Gregory Edwards (QLD 2273 of 2019/1) In the bankrupt estate of Gary Hocking (VIC 779 of 2010/9) In the bankrupt estate of Eman Ibrahim (QLD 3115 of 2019/3) In the bankrupt estate of Sheila Laxon (VIC 1232 of 2015/7) In the bankrupt estate of John Symons (VIC 676 of 2015/1) Schedule I In the bankrupt estate of Lyndsay Baczyk (VIC 615 of 2019/8) In the bankrupt estate of Benjamin Carpenter (QLD 2485 of 2019/7) In the bankrupt estate of John Cruickshank (SA 1000 of 2017/3) In the bankrupt estate of Telma Edward (NSW 415 of 2020/1) In the bankrupt estate of Simon Sarkis (NSW 1520 of 2020/6) In the bankrupt estate of Dr Peter Tait (SA 396 of 2019/1) In the bankrupt estate of John Zhang (VIC 3564 of 2015/3) Schedule J In the bankrupt estate of Scott Absolum (VIC 871 of 2021/6) In the bankrupt estate of Nathan Blackledge (VIC 1665 of 2014/3) In the bankrupt estate of Paul Huebner (VIC 3902 of 2009/5) Schedule K In the bankrupt estate of Daniel Custance (VIC 547 of 2021/8) Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MCEVOY J: 1 Mr Stirling Lindley Horne, the first applicant, is the liquidator of 13 companies (set out in Schedules A to G): as the sole liquidator in the case of six companies (set out in Schedules A and B); jointly and severally with Mr Petr Vrsecky, the second applicant, in the case of two companies (set out in Schedules C and D); jointly and severally with Mr Jason Glenn Stone, the third applicant, in the case of four companies (set out in Schedule F); and jointly and severally with Mr Glenn Jeffrey Franklin, the fourth applicant, in the case of one company (set out in Schedule G). Mr Horne is also currently the administrator of one company (set out in Schedule E), jointly and severally with Mr Vrsecky. Mr Horne is currently the trustee in bankruptcy of 20 bankrupt estates (set out in Schedules H to K): as the sole trustee in the case of 16 bankrupt estates (set out in Schedules H and I); and jointly and severally with Mr Vrsecky in the case of four bankrupt estates (set out in Schedules J and K). 2 Mr Horne was previously a partner at accounting firm PKF, but resigned from the partnership on or about 30 June 2012. He currently works as a consultant in the Business Recovery and Insolvency team at PKF. Mr Horne plans to retire, and as a result is resigning from all formal appointments including his position as consultant at PKF. It is intended that his retirement will take effect on 30 June 2022. The second, third, fourth and fifth applicants are all partners at PKF in the Business Recovery and Insolvency team. They all have considerable experience working in insolvency and have worked with Mr Horne for many years. 3 The applicants propose that Mr Vrsecky be appointed as the sole liquidator of the five companies set out in Schedule A; Mr Vrsecky and Mr Franklin be appointed as the joint and several liquidators of the one company set out in Schedule B; Mr Vrsecky continue as the sole liquidator of the one company set out in Schedule C; Mr Stone be appointed as joint and several liquidator of the one company set out in Schedule D in which Mr Vrsecky currently holds office as joint and several liquidator; Mr Vrsecky continue as the sole administrator of the one company set out in Schedule E; Mr Stone continue as the sole liquidator of the four companies set out in Schedule F; and Mr Franklin continue as the sole liquidator of the one company set out in Schedule G. They also propose that Mr Paul Anthony Allen, the fifth applicant, and Mr Vrsecky be appointed as joint and several trustees of the 16 bankrupt estates set out in Schedules H and I; and Mr Allen be appointed as joint and several trustee of the four bankrupt estates set out in Schedules J and K in which Mr Vrsecky currently holds office as joint and several trustee. The applicants seek orders from the Court to give effect to these proposals.

Appointment of liquidators 4 Section 473A of the Corporations Act 2001 (Cth) ("Corporations Act") provides that a vacancy in the office of a liquidator appointed by the Court may be filled by the Court. Section 499(3)(a) of the Corporations Act provides that a vacancy in the office of a liquidator, caused by the resignation of the liquidator, who was not appointed by the Court, may be filled by the Court. The word "vacancy" in s 473A is to be taken to encompass a pending vacancy as well as an extant vacancy: In the matter of Lock [2021] FCA 682 at [4] (White J). Further, s 90-15(3)(c) of the Insolvency Practice Schedule (Corporations) ("IPSC") in Schedule 2 to the Corporations Act, provides that the Court may make an order that another registered liquidator be appointed as the external administrator of a company. 5 The second to fourth applicants are all registered liquidators with a considerable number of years specialising in corporate insolvency. Their respective curricula vitae have been provided in support of their individual ability and capacity to undertake and discharge properly the functions of liquidator with respect to the various companies to which they propose to be appointed as liquidators (as previously set out). There is no reason for the Court to doubt their ability properly to carry out their functions as liquidator. There are obvious benefits to having multiple liquidations continuing with the sole remaining liquidator, and/or continuing by liquidators of the same firm, PKF. It will save the time and expense of a replacement liquidator having to familiarise himself or herself with the liquidations before continuing the work in the liquidations. Mr Horne has deposed that he intends to remain available to the second to fourth applicants to assist where requested with any issues that may arise in the liquidations. 6 The second to fourth applicants consent to the Court appointing them as liquidators of the various companies set out previously. Again, there is evidence of their respective abilities and capacity to undertake and to discharge properly the functions of liquidator of each of those companies. The proposed liquidators are already familiar with the circumstances and issues of each liquidation. 7 It would seem that r 2.8(3) of the Federal Court (Corporations) Rules 2000, requiring a person to serve copies of various documents in a proceeding on the Australian Securities and Investments Commission ("ASIC") in certain circumstances does not apply in the present circumstances. Nevertheless, the applicants served such documents on ASIC on 20 June 2022, the day the matter first came before the Court. I am informed by the applicants that ASIC has advised them that it does not propose to intervene in the proceedings. No other party has sought to be heard in today's application. 8 On the basis of the powers of the Court set out above and the requirements having been met, I am satisfied with the proposal to appoint the proposed liquidators to the companies set out in Schedules A to D and F to G.

Appointment of administrators 9 In the case of the continuation of Mr Vrsecky as sole administrator of one company as set out in Schedule E, s 447A of the Corporations Act provides that the Court may make such order as it thinks appropriate with regard to the administration of a company. Again, s 90-15(3)(c) of the IPSC provides that the Court may make an order that another registered liquidator be appointed as the external administrator of a company. On this basis, and for the reasons already mentioned in relation to the liquidations, I am satisfied with the proposal to allow Mr Vrsecky to continue as the sole administrator of the company set out in Schedule E.

Appointment of trustees in bankruptcy 10 In the case of the bankruptcy trustee appointments, s 180 of the Bankruptcy Act 1966 (Cth) ("Bankruptcy Act") provides that the Court may, subject to such terms and conditions as it thinks just, accept the resignation of a registered trustee from the office of trustee of an estate. Section 30(1)(b) of the Bankruptcy Act further provides that the Court may make any such orders as it considers necessary for the purposes of carrying out or giving effect to the Bankruptcy Act. Section 90-15(3)(c) of the Insolvency Practice Schedule (Bankruptcy) ("IPSB") in Schedule 2 to the Bankruptcy Act provides that the Court may make an order that another person be appointed as the trustee of a bankrupt estate. 11 The applicants seek an order of the Court accepting Mr Horne's resignation as trustee in bankruptcy of several bankrupt estates, and the appointment of Mr Allen and Mr Vrsecky to hold office as joint and several trustees of these bankrupt estates. The second and fifth applicants have considerable experience working in personal insolvency and have provided their respective curricula vitae in support of this. Once again, there is no reason for the Court to doubt their ability and capacity properly to carry out such functions as joint trustees in bankruptcy. Additionally, Mr Horne asserts that Mr Allen and Mr Vrsecky are familiar with the bankrupt estates and their appointment will result in minimal disruption to the administration of any of the bankrupt estates. For the same reasons provided earlier, there are practical reasons making it appropriate that Mr Allen and Mr Vrsecky either continue or are appointed as joint trustees in bankruptcy. Particularly significant is the saving of the time and expenses involved in a replacement trustee familiarising himself or herself with the circumstances of each trusteeship. 12 Rule 8.02(4) of the Federal Court (Bankruptcy) Rules 2016 requires an application for the resignation or release of a trustee to be served, together with the supporting affidavit, on the Official Receiver, the bankrupt and anyone else as ordered by the Court. The applicants served such documents on the Australian Financial Security Authority ("AFSA") on 20 June 2022 and seek dispensation from the requirement to serve such documents on the bankrupts or anyone else. They contend that such a requirement would be inconvenient and expensive and may cause prejudice to the bankrupts. I am informed by the applicants that AFSA has advised that it does not propose to intervene in the proceedings subject to two conditions which I am satisfied the applicants will meet. No other party has sought to be heard in this application. Having regard to the fact that AFSA has been put on notice of the application I am prepared to dispense with the requirement to serve the relevant documents on the various bankrupts. I am satisfied that it would be unduly expensive and inconvenient for such documents to be required to be served. 13 For the reasons set out above I am satisfied that it is appropriate to make the orders broadly as sought by the applicants.

Costs 14 Insofar as the issue of costs is concerned, the applicants seek to have their costs of the proceeding paid pro rata as expenses of the winding up of each of the relevant companies or bankrupt estates. They submit that a liquidator and trustee has the right to be indemnified from the assets of the company or bankrupt estate for costs properly incurred in the administration of the liquidation and the bankrupt estate, including, in circumstances where the liquidator or trustee retires, becomes incapacitated, or dies. The costs associated with their replacement, it is contended, would ordinarily be payable out of the relevant company and/or bankrupt estate. In this respect, the applicants refer to the decisions in Condon v Watson [2009] FCA 11 and in Re Porter v Mansfield [2012] NSWSC 220 which is said to adopt the position of Barrett J in Re Equiticorp Australia Ltd (in liq) [2011] NSWSC 1368. 15 The applicants submit that their application is reasonably necessary given Mr Horne's age and his imminent retirement. It is said that Mr Horne has attempted to finalise as many of his appointments prior to his retirement as possible, however the impacts of COVID-19 have caused significant delays, including an inability to travel given that he presently resides in Adelaide. The applicants contend that it was open for them to convene creditors' meetings to deal with the transfer of each of the appointments, however they say that given the number of companies and bankrupt estates, they considered that the costs of the present application would be far less than the costs that would have been incurred had separate creditors' meetings been convened. 16 I do not regard these submissions as compelling, and I am not prepared to make the order for costs sought by the applicants. I do not consider that Mr Horne's unilateral decision to retire and the costs resulting therefrom are appropriately to be regarded as costs properly incurred in the administration of the liquidations, the administration and the bankrupt estates. There will accordingly be no order as to costs. 17 The orders I will make are as set out at the commencement of these reasons. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McEvoy.