Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520 199 Pty Ltd

GLEESON J: 1 On 6 April 2017, I made orders pursuant to ss 511(1), 472(1) and 473(8) of the Corporations Act 2001 (Cth) ("Act") for the appointment of special purpose liquidators to undertake specified functions in the liquidation of the first defendant, ACN 154 520 199 Pty Ltd (in liquidation) ("EBS"). The functions comprise, primarily, the conduct of investigations into the restructure of EBS and EBS's dealings with the London Bullion Market Association ("LBMA"). 2 The application was made by the Deputy Commissioner of Taxation ("DCT") and was opposed by the second defendant, the liquidator of EBS ("the liquidator"), appointed pursuant to a resolution of the company in a creditors' voluntary winding up pursuant to s 491(1) of Act. The DCT is the major creditor in the liquidation, albeit based on assessments that are now the subject of an appeal to the Administrative Appeals Tribunal ("AAT"). 3 These are my reasons for making the orders.

Background facts 4 EBS was registered as a company on 29 November 2011 and was then known as Palabc Holdings Pty Ltd. It changed its name to E.B.S. & Associates Pty Ltd on 2 February 2012. 5 The directors of EBS from the date of its registration were Andrew Emanuel Cochineas ("A Cochineas"), Philip George Cochineas ("PG Cochineas"), Francis Alexander Gregg and Jane Margaret Simpson. 6 From February 2012, EBS, trading as "EBS & Associates", carried on a business it described to the Australian Taxation Office ("ATO") as acquiring and refining gold, silver and other valuable materials into fine metal and ultimately the production of "precious metal" within the meaning of s 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("GST Act") for sale to dealers. By that definition, "precious metal" includes gold in an investment form of at least 99.5% fineness. 7 Under s 38-385 of the GST Act, a supply of precious metal is GST-free in certain circumstances. 8 For the tax periods in the period from February 2012 to June 2014 ("relevant period"), EBS lodged business activity statements ("BAS") claiming input tax credits totalling $117,857,426, on the basis that its acquisitions of gold were for the creditable purpose of making GST-free supplies pursuant to s 38-385 of the GST Act.

Audit of EBS and subsequent tax assessments 9 By letter dated 8 July 2014, the ATO notified EBS of an audit into its tax affairs. During the course of the audit, EBS was represented by Andrew Robinson of Robinson Legal Pty Ltd ("Robinson Legal"). 10 After a substantial process during which, among other things, EBS answered questions about EBS's claimed input tax credits for acquisitions from various entities, responded to a position paper prepared by the ATO and made a submission to the General Anti-Avoidance Rule Panel, on 8 April 2016: (1) an Assistant Commissioner of Taxation made declarations under s 165-40 of the GST Act for the purpose of negating GST benefits arising from schemes totalling $72,952,994. The declarations were issued to EBS on the same day. (2) A Deputy Commissioner of Taxation issued notices of assessments and amended assessments of GST net amounts for the relevant period totalling $122,112,065.00 and assessments of administrative penalties totalling $58,059,829.75.

Restructure of EBS and transfer of business 11 On 3 November 2014, Pallion Group Pty Ltd ("Pallion Group") was incorporated. The directors of Pallion Group are A Cochineas, PG Cochineas, Mr Gregg, Ms Simpson and Mr Robinson. The ordinary shareholders of Pallion Group include A Cochineas, Mr Gregg, Ms Simpson, Chryso Capital Pty Ltd ("Chryso Capital"), and Paul Glens Pty Ltd ("Paul Glens"). 12 On 24 November 2014, EBS changed its name from "E.B.S. & Associates Pty Ltd" to "ABC Refinery Pty Ltd". 13 On 8 April 2015, EBS applied to the LBMA for accreditation on the Good Delivery List for gold. The LBMA relevantly represents the London market for gold bullion. The LBMA is an entity established by the Bank of England and, among other things, it maintains and publishes the "Good Delivery Lists" for gold and silver, which are internationally recognised registers of quality assured precious metal and also provide accreditation for refiners of those metals. 14 On 29 July 2015, Pallion Equipment Pty Ltd ("Pallion Equipment") was incorporated. The directors of Pallion Equipment are A Cochineas and PG Cochineas. 15 Also on or about 29 July 2015, the directors of EBS passed a resolution that the value of the EBS's assets be written down and that the written down value be used as the basis of valuation in respect of the sale of the assets to any party. 16 On or about 31 July 2015 there was a series of transactions involving: (1) a sale of assets by EBS to Pallion Equipment for the purchase price of $3,600,000 plus GST; (2) a lease of those assets by Pallion Equipment to EBS for rent of $720,000 per annum; (3) a loan agreement between Pallion Group and EBS pursuant to which Pallion Group agreed to advance $4,400,000 to EBS; (4) a loan agreement between Pallion Group and Pallion Equipment pursuant to which Pallion Group agreed to advance $3,600,000 (plus an additional $581,350) to Pallion Equipment; (5) a general security agreement between Pallion Group and Pallion Equipment pursuant to which Pallion Equipment granted Pallion Group a security interest over all of Pallion Equipment's present and after­acquired personal property, as those concepts are defined in the Personal Property Securities Act 2009 (Cth); and (6) a direction by Pallion Group to EBS to "pay part of the dividend owed to [Pallion Group] in the sum of $3,600,000 by offsetting that sum against the purchase price payable to [EBS] by [Pallion Equipment] for the purchase of plant and equipment pursuant to [the asset sale agreement]". 17 Mr Crutchfield QC, senior counsel for the DCT, submitted that Robinson Legal acted in respect of these transactions and the transactions described below. In any event, Mr Robinson was involved in the transactions by virtue of his directorship of Pallion Group. 18 Pallion HR Pty Ltd ("Pallion HR") was incorporated on 4 August 2015. The directors of Pallion HR are A Cochineas and Paul Alexander Cochineas ("PA Cochineas"). 19 ABC Refinery (Australia) Pty Ltd ("ABCRA") was incorporated on 7 August 2015. The directors of ABCRA are A Cochineas, PG Cochineas, Mr Gregg and Ms Simpson. According to ASIC's records, its principal place of business is 12 Meeks Road, Marrickville, NSW, which was the principal place of business of EBS from 1 March 2013 to 22 December 2015. 20 By email dated 12 August 2015, PG Cochineas informed the LBMA that ABCRA was to be substituted for EBS as the applicant for accreditation. In the email PG Cochineas said that, "[t]here are no changes to the ownership structure or net tangible asset position as outlined in the LBMA Application dated 8 April 2015". 21 On or about 1 September 2015 there was a series of transactions involving: (1) a sale of the business of EBS to ABCRA pursuant to which ABCRA agreed to purchase the goodwill of the business of EBS and the assets and liabilities of EBS as listed in a schedule to the agreement; (2) a lease assignment pursuant to which EBS's rights and obligations under a plant and equipment lease were assigned to ABCRA; (3) a loan agreement between Pallion Group and EBS pursuant to which Pallion Group agreed to advance $2,367,500 to EBS; (4) a loan agreement between Australian Bullion Company (NSW) Pty Ltd ("ABCNSW") and ABCRA pursuant to which ABCNSW agreed to advance unspecified sums to ABCRA on request; and (5) a direction by EBS to ABCRA to "pay the sum of $2,267,500 ($1,537,500 for the goodwill and $830,000 for the balance of assets and liabilities …)" as per the business sale agreement to Pallion Group. 22 Shortly after the notices of assessment and amended assessments were issued on 8 April 2016, by letter dated 12 April 2016, Robinson Legal informed the ATO that EBS was dormant, having ceased trading on or about 1 September 2015. 23 By letter dated 23 October 2015, the ATO requested an explanation for the establishment of ABCRA. 24 In response, by letter dated 26 October 2015, Robinson Legal asserted, relevantly, that all restructuring steps involving EBS and ABCRA had taken place at arm's length and in accordance with professional valuations, and that the "damoclean sword of the possibility of the Commissioner issuing a flawed assessment for a business destroying amount meant that our client could not continue to operate per medium of [EBS]. The restructure was not motivated by creditors (of which there are none). It was a simple matter of business survival". Thus, while Mr Crutchfield QC described the transactions as a "phoenix operation", by this letter Robinson Legal asserted that the restructure was not intended to place the assets of EBS beyond the reach of its creditors. At this time, the ATO was not a creditor of EBS because it had not yet issued the assessments. 25 By letter dated 2 December 2015, ABCRA was informed by the LBMA that it was to be listed on the Good Delivery List for gold effective 4 December 2015. 26 On 24 December 2015 EBS was renamed ACN 154 520 199 Pty Ltd and Ms Simpson and Mr Gregg ceased as directors on 23 December 2015. 27 The liquidator did not contest Mr Zafiriou's evidence that it appears that ABCRA is carrying on the same, or a similar, business to that of EBS.

Objection to the assessments 28 On 28 April 2016, EBS lodged an objection against the assessments issued by the ATO on 8 April 2016. 29 By letter dated 21 September 2016, the ATO disallowed the objection.

Liquidation of EBS and appointment of Mr Condon 30 The following day, on 22 September 2016, EBS resolved that it be wound up in a creditors' voluntary winding up and that Mr Condon be appointed liquidator. 31 The liquidator's circular to creditors dated 29 September 2016 noted EBS's creditors as follows: Creditor Value % of Total Creditors Secured Pallion Group $393,800.00 0.19% Robinson Legal $200,000.00 0.10% Total Secured $593,800.00 0.28%

Unsecured A&E Metals Pty Ltd ("A&E") $195,000.00 0.90% Ian Berry Engineering Pty Ltd ("Ian Berry Engineering") $12,500.00 0.01% Phillip Cochineas $187,000.00 0.09% Jane Simpson $187,000.00 0.09% Francis Gregg $187,000.00 0.09% Andrew Cochineas $187,000.00 0.09% William Buck $50,000.00 0.02% Plumbspark Pty Ltd ("Plumbspark") $34,881.00 0.02% UBM Pty Ltd ("UBM") $11,380.00 0.01% Dantek Pty Ltd ("Dantek") $7,634.00 0.00% ATO $208,097,446.00 99.21% Robinson Legal $3,850.00 0.00% Total Unsecured $209,160,691.00 99.72%

Total Creditors $209,754,491.00 100.00%

32 On 3 October 2016, K&L Gates, solicitors for the DCT, sent a letter to the liquidator informing him, relevantly: (1) that EBS is indebted to the ATO in the sum of $208,097,446; (2) of the history of the restructure of EBS and the transfer of assets to ABCRA ("restructure transactions") and the audit and objection processes; (3) that the ATO intended to put forward a resolution for the liquidator to be replaced by Morgan Kelly and Robyn Duggan of Ferrier Hodgson; (4) that the ATO took the view that EBS may have been party to voidable transactions that were uncommercial or otherwise intended to defeat creditors; and (5) that in view of the transactions and the conduct of the directors and former directors of EBS, it was appropriate for Ferrier Hodgson to be appointed and that the liquidator agree to this occurring. 33 On 5 October 2016, K&L Gates received a letter from Robinson Legal stating, relevantly: (1) the directors of EBS had advanced $20,000 to the liquidator with "no fetter to its use", which could be used for the purpose of taking independent advice; (2) raising independence concerns regarding Ferrier Hodgson on the basis of previous consultancy and appointment work provided to the ATO; (3) that their clients, the directors of EBS and the companies comprising the Pallion Group, took issue with the ATO's concerns regarding the restructure transactions; (4) that the ATO had a conflict of interest in seeking to have the liquidator replaced by reason of possible preference claims that may be pursued against the ATO by the liquidator on EBS' behalf; (5) with respect to funding, that the directors would fund the liquidator a further $20,000 for agreed costs and would otherwise: (a) if necessary, fund the liquidator to pursue preference claims against the ATO; and (b) subject to Counsel's advice, procure Federal Court proceedings to be instituted to appeal the ATO's decision to disallow the objection; and (6) that the April 2016 assessments would ultimately be set aside. 34 Also on 5 October 2016, K&L Gates received a letter from Hammond Nguyen Turnbull, solicitors for the liquidator, relevantly stating that the ATO had no grounds for seeking the replacement of the liquidator; stating that the liquidator was independent; and raising independence concerns with respect to the proposed replacement liquidator, citing the 5 October 2016 letter from Robinson Legal to K&L Gates. 35 A meeting of creditors was held on 7 October 2016 at the liquidator's offices. Mr Zafiriou represented the ATO by telephone. Mr Michael Hayter, a senior partner of Gillis Delany Lawyers, chaired the meeting on the liquidator's behalf. 36 At the creditors' meeting, the other creditors were represented as follows: (1) A&E, A Cochineas, Dantek, Mr Gregg, Ian Berry Engineering, Ms Simpson, Pallion Group, Plumbspark and UBM were represented by A Cochineas; (2) PG Cochineas attended in person; (3) William Buck was represented by Mr Robinson; and (4) Robinson Legal was represented by Tatijana Hudap. 37 The liquidator did not dispute the DCT's contention that, of the 12 creditors (other than the ATO) voting at the meeting, the following eight were related to EBS and/or ABCRA by reason of the following matters: (1) A&E was a related entity because Pallion Group was its shareholder and A Cochineas and Ms Simpson were its directors; (2) A Cochineas was a director of EBS, ABCRA and Pallion Group; (3) Mr Gregg was a former director of EBS and a director of ABCRA and Pallion Group; (4) Ms Simpson was a former director of EBS and a director of ABCRA and Pallion Group; (5) PG Cochineas was a director of EBS, ABCRA and Pallion Group; (6) Pallion Group was a shareholder of EBS and ABCRA; (7) Robinson Legal was the legal firm of Mr Robinson, who was a director of Pallion Group and legal representative of EBS; and (8) William Buck was the accountant for EBS and ABCRA. 38 Ian Berry Engineering, Plumbspark and UBM provided a proxy to A Cochineas to vote for them at the meeting despite having representatives present at the meeting as observers. 39 At the meeting, a resolution was put forward for the liquidator to be replaced as liquidator by Morgan Kelly and Robyn Duggan of Ferrier Hodgson. Only the ATO voted in favour of the resolution. The liquidator did not dispute the DCT's contention that, as there was a majority of value in favour, but not a majority in number, the person presiding at the meeting may have exercised a casting vote to pass the resolution. Mr Hayter decided not to do so. 40 There was a subsequent vote to retain Mr Condon as liquidator. The plaintiff voted against the resolution. All other creditors voted in favour. 41 Mr Zafiriou had a meeting with Mr Condon on 1 November 2016 and requested that he investigate the restructure transactions. Mr Zafiriou's evidence was that the liquidator indicated that he did not have sufficient books and records and otherwise failed to indicate whether he was willing to undertake those investigations. 42 For his part, the liquidator gave unchallenged evidence that: (1) Mr Zafiriou foreshadowed that the ATO would be unlikely to fund the liquidator for such an investigation in the event of a tax appeal in relation to the assessments; and (2) the liquidator expressed the hope that "potentially significant preferences" may fund the necessary investigations, thus alleviating the need for funding. 43 On 3 November 2016, the ATO sent a letter to the liquidator indicating, relevantly, that the ATO was prepared to provide him with funding to investigate the restructure transactions, on the basis that he provide, among other things, information about his experience and resources to conduct the investigations and confirmation that any voidable transaction claims would be pursued. 44 On 15 November 2016, the liquidator wrote a letter to the ATO noting that he was still reviewing the matter, that a substantial number of books and records had been provided, and that he would otherwise address the issue of the ATO's offer to fund the investigations "shortly", once his review was complete.

Tax appeal 45 On 18 November 2016, the liquidator, on behalf of EBS, filed an application in the AAT for review of the ATO's decision to disallow EBS's objection ("tax appeal"). 46 Mr Robinson of Robinson Legal is the legal representative of EBS and the liquidator in the tax appeal. 47 The liquidator considers that the tax appeal has reasonable prospects of success. 48 Also on 18 November 2016, the ATO received a letter from William Buck stating, relevantly, that ABCRA and/or EBS and their shareholders, being Pallion Group, would be funding the liquidator to prosecute the tax appeal. 49 The liquidator has entered into a Deed of Agreement and Indemnity with ABCRA dated 18 November 2016 ("ABCRA funding agreement"). The stated purpose of that agreement is to fund investigations into the "legitimacy of the Assessment" (being the assessments dated 8 April 2016 covering the relevant period, and any other relevant assessments and subsequent objections) and the conduct of an appeal against the "Assessment" to the AAT and/or this Court. 50 The liquidator noted the following terms of the ABCRA funding agreement: (a) I would investigate the legitimacy of the Assessment and make a determination whether to appeal the Assessment or not; (b) If the Assessment is appealed, ABC agree to pay all litigation expenses and indemnify me, the First Respondent and my agents from any claims or liabilities (including costs orders) arising from the appeal; (c) I had full control of the investigation and the litigation and I can withdraw the appeal at any time; and (d) ABC would further pay all investigation expenses incurred by me and my agents to a cap of $30,000.00. 51 The ATO, as a creditor in the winding up of EBS, did not receive any request from the liquidator for approval to enter the ABCRA funding agreement. Nor has the liquidator obtained the approval of the Court to enter into the ABCRA funding agreement pursuant to s 477(2B) of the Act. At the hearing on 6 April 2017, counsel for the liquidator sought leave to make such an application.

ATO's withdrawal of offer to fund liquidator 52 By letter dated 15 December 2016, the ATO withdrew its offer to fund the liquidator to undertake investigations of the restructure transactions. 53 Mr Zafiriou gave the following evidence: 56. The Commissioner takes the view that it would be inappropriate to fund Condon in circumstances where: (a) he was selected by the directors of EBS, ABCRA and Pallion Group, the persons involved in the Restructure Transactions; (b) his replacement by the Commissioner's nominee for liquidator was defeated at the creditors' meeting principally by reason of the votes cast by the said directors, other related parties and the casting vote of his representative; (c) he is being funded by ABCRA, Pallion Group and/or the said directors and represented by one of the directors to prosecute the AAT Appeal; and (d) both Mr Robinson and Hammond Nguyen Turnbull, solicitors that have previously acted for Condon, have foreshadowed possible claims against the Commissioner for unfair preferences... 57. Further, the Commissioner also takes the view that: (a) given the scale of the Assessments and the nature of the investigations sought by the Commissioner, whilst Condon has indicated an ability to engage additional contractors, it may not be feasible or practical for Condon Associates Group to adequately undertake those investigations; and (b) Condon's responses to the Commissioner to date indicate that the investigations would not be carried out with due rigour if Condon were funded to undertake the same.

Alleged unfair preferences 54 The liquidator gave evidence that he has assessed that unfair preferences were paid to the ATO in the amount of $382,563.48 comprised of three payments made in March, May and June 2016. 55 By letter dated 25 November 2016, the liquidator wrote to the ATO requesting payment of $382,563.48 within 14 days. 56 The DCT denies there was any such unfair preference, arguing that the first payment was made by ABCRA (i.e. a third party), not EBS and the second and third payments were made pursuant to a garnishee notice issued by the ATO to the Commonwealth Bank of Australia, pursuant to s 260-5 of Sch 1 of the Taxation Administration Act 1953 (Cth) on 25 May 2016. 57 It is reasonable to anticipate that the liquidator may commence proceedings against the ATO for recovery of the alleged unfair preferences.

Proposed special purpose liquidators 58 The DCT tendered a consent from Rahul Goyal and Jennifer Anne Nettleton to act as special purpose liquidators. 59 The ATO will fund the special purpose liquidators in full. The DCT provided the Court with a draft funding deed, by way of a confidential affidavit pursuant to para 3(b) of the orders of the Court made 8 January 2017.

Court's power to appoint a special purpose liquidator 60 Sections 472 and 473 were amended by the Insolvency Law Reform Act 2016 (Cth) ("ILR Act"), with the amendments coming into force on 1 September 2017. Section 511 of the Act has been repealed and replaced by the ILR Act, with the repeal also being effective on 1 September 2017. Given that these proceedings were commenced on 20 January 2017, before these changes come into effect, ss 472, 473 and 511 continue to apply to the proceeding in the form that they were in force on that date: s 1617 of the Act. 61 Section 472(1) of the Act states: On an order being made for the winding up of a company, the Court may appoint a registered liquidator to be liquidator of the company. 62 Section 473(8) of the Act, as it was in force when the proceedings were commenced, stated: If more than one liquidator is appointed by the Court, the Court must declare whether anything that is required or authorised by this Act to be done by the liquidator is to be done by all or any one or more of the persons appointed. 63 Section 511 of the Act relevantly stated: (1) The liquidator, or any contributory or creditor, may apply to the Court: (a) to determine any question arising in the winding up of a company; or (b) to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court. … (2) The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just. 64 Section 511(1)(b) of the Act empowered the Court to appoint a special purpose liquidator in a creditors' voluntary winding up or a winding up following a voluntary administration if it would be "just and beneficial" to do so: Gusdote Pty Ltd v North Queensland Land Development Pty Ltd (No 4) [2012] FCA 759 ("Gusdote") at [6]-[8]; Lo v Nielsen & Moller Autoglass (NSW) Pty Ltd [2008] NSWSC 407; (2008) 26 ACLC 497 ("Lo") at [29]-[31], citing Re Cobar Mines Pty Ltd (unreported, NSWSC, Santow J, 22 June 1998). 65 In Gusdote at [8], Emmett J explained that the Court should approach an order under s 511 on the assumption that the liquidator of a company in a voluntary winding up is to be regarded as having been appointed by the Court for the purposes of the operation of a provision such as s 473(8). Under s 472(1), on an order being made for the winding up of a company, the Court may appoint an official liquidator to be liquidator of the company. Thus, a creditor of a company may apply under s 511(1)(b) to the Court asking it to appoint a liquidator to the company pursuant to s 472(1). If more than one liquidator is appointed, s 473(8) required the Court to declare the functions and powers of the liquidators. In any event, Emmett J noted that a liquidator appointed by the Court under s 511 would be an officer of the Court and the Court's inherent jurisdiction would extend to conferring specific powers on such a liquidator. 66 There is no dispute that the Court has jurisdiction to give the conduct of any particular matter arising in the course of a liquidation to one or more of several liquidators: cf. Re Obie Pty Ltd (in liq) (No 4) (1984) 8 ACLR 967. 67 As a creditor of EBS, the DCT has standing to apply to the Court for the appointment of a special purpose liquidator. 68 In Re Obie Pty Ltd (in liq) (No 4), Thomas J considered whether a special purpose liquidator should be appointed in respect of possible proceedings by the company against a firm of accountants. One of the liquidators was a partner in the firm and the other a former partner. Thomas J held that a special purpose liquidator should be appointed because of the nexus between the liquidators and the firm of accountants. 69 In Onefone Australia Pty Ltd v One.Tel Ltd (in liq) [2003] NSWSC 1228; (2003) 48 ACSR 562, two creditors sought the appointment of a special purpose liquidator in the winding up of One.Tel Limited to investigate the cancellation of a renounceable rights issue and to make recommendations to the creditors as to whether any rights of action exist against any party(s) and whether any action should be commenced in relation thereto, including an uncommercial transaction claim. There were already existing proceedings brought by ASIC on foot. Those proceedings were expected to consider, inter alia, the question of the company's solvency, which would have had a consequential impact on the merits of any potential claim in relation to the cancellation of the rights issue. However, the ASIC proceedings were due to conclude after the expiry of the limitation period for pursuing an uncommercial transaction claim. The primary liquidator had indicated that, rather than expend resources on investigating issues that would be dealt with as part of the ASIC proceedings, he was minded to wait for the conclusion of those proceedings before further exploring action in respect of the cancellation of the rights issue. Windeyer J inferred that the primary liquidator would not seek to have the limitation period extended. 70 Windeyer J accepted that there was a reasonable apprehension of conflict in the position of the liquidator in connection with the cancellation of the rights issue. His Honour considered that there was a basis for ordering the appointment of a special purpose liquidator for the purpose of conducting investigations and making recommendations to the creditors on the uncommercial transaction question. 71 In Lo, Ms Lo, a creditor, applied for the appointment of special purpose liquidators for the purpose of, inter alia: (1) investigating whether any uncommercial transactions were entered into by the company; (2) investigating the incorporation of a new entity with the same directorship and the transfer of the company's assets and undertakings to that new entity; and (3) taking steps, including legal proceedings, to ensure the preservation and protection of assets of the company, whether they be in the possession of the company or the new entity. 72 Ms Lo had sought, but failed, to have the existing liquidator (who was the former administrator) removed at the first creditors' meeting. 73 Ms Lo was willing to fund investigations only if the liquidator was someone other than the existing liquidator, primarily because: (1) she believed that the existing liquidator had secured his role by reason of the support of the former director and creditors related to the former director (at [16]); and (2) she lacked confidence in his ability to "objectively and dispassionately investigate the matters of concern to her" (at [20]). 74 None of the other creditors appeared willing to fund the investigations. Barrett J was satisfied that it would be beneficial to the administration of the winding up and the interest of the general body of creditors for the work envisaged for the special purpose liquidators to be undertaken. His Honour noted (at [22]) that any recoveries would benefit creditors as a whole. 75 In Hughes as Administrator of Westgem Investments Pty Ltd (Recs and Mgrs Apptd) v The Receivers and Managers of Westgem Investments Pty Ltd (Recs and Mgrs Appointed) (Admin Apptd) [No 3] [2012] WASC 360, Corboy J refused to appoint an additional administrator to Westgem Investments Pty Ltd (in liq) ("Westgem"). Corboy J found that there was no matter presently requiring investigation, and he was not satisfied that there was a reasonable apprehension that the administrator was in a position of conflict. His Honour noted (at [19]) that the mere fact that the administrator was funded by one creditor or a group of creditors would not, in itself, provide a basis for finding that there was a reasonable apprehension that the administrator was in a position of conflict. 76 In Mentha v Hughes [2014] WASC 478, Martin CJ refused an application for the appointment of a special purpose liquidator. At the time, the principal activity in the liquidation was a claim for damages in proceedings in which Mr Saraceni, the sole director of Westgem and a shareholder in Westgem, was also a plaintiff. The appointment of a special purpose liquidator was sought for the purpose of investigating any voidable transactions and insolvent trading by Westgem which may have given rise to claims against Mr Saraceni. The damages claim was said to depend, at least to some extent, upon the acceptance of Mr Saraceni's evidence. 77 The liquidator had decided to defer the further investigation of voidable transactions and insolvent trading (thereby obviating the complaint that the investigations would be conducted in a partisan way). Martin CJ concluded that this decision was commercially realistic and caused no significant disadvantage, in part because of the extent to which evidence relevant to the investigations would be canvassed in the course of preparation for the damages claim. The Chief Justice also concluded that there was a real risk that the appointment of a special purpose liquidator could interfere with the ordinary course of the liquidation which was then focussed upon the prosecution of the damages claim. Martin CJ was also not satisfied that there was a present basis for a public examination of Mr Saraceni, having regard to the issues in the damages claim, other proceedings on foot and the fact that Mr Saraceni's capacity to meet any claim would be very doubtful unless the damages claim succeeded. 78 In relation to the conflict of interest said to support the appointment of a special purpose liquidator, Martin CJ said: 28 This is a case in which the most that could be said is that while the damages claim is on foot there may be a tension, between the liquidator's interest in pursuing the damages claimed and a robust publication examination of Mr Saraceni. However, it has not been established that there is a pressing need for the conduct of any investigations other than those that have already been conducted by the liquidator to date. Nor has it been established that there are any investigations which ought to be undertaken prior to the further exploration of relevant issues through the course of preparation of the damages claim for trial. 29 I would also observe in this context that it is commonplace in insolvency situations for conflicts of interest of a general character to arise. It is commonplace for one person to be both creditor and debtor of the company, and it is commonplace for liquidators acting in the interests of all creditors to have to rely upon the testimony and assistance of former officers in order to collect debts and recover assets that were properly belonging to the company, while at the same time investigating the role of those former officers in relation to the insolvency of the company. 30 That general situation is not uncommon and does not, in the ordinary course, give rise to a need for a special purpose liquidator. The situation would be different in this case if it were credibly established that there were matters that required immediate investigation and in respect of which the failure to conduct such an investigation might prejudice the interests of creditors or the public interest, but for the reasons I have given I do not consider this is such a case. (footnotes omitted) 79 In Re Ambient Advertising Pty Ltd (in liq) [2015] NSWSC 1079, an application was brought by a substantial creditor of the company seeking the appointment of a special purpose liquidator (funded by the sole director/shareholder of the creditor) to investigate, relevantly, transactions with related entities that may have involved the transfer or disposition of assets. The directors and shareholders of the related entities were the same as the directors and shareholders of the company and it was alleged the transferee may be a "phoenix" company. As in Lo, the creditor was only prepared to fund the special purpose liquidator to conduct the investigations, not the existing liquidators. Robb J noted, at [33], that the creditor believed that members of the liquidator's firm had some association with parties related to the parties who managed the company and the creditor was discontented with the level of energy with which the liquidators had to date pursued the matters in question. 80 At [40], Robb J was satisfied that it would be beneficial to the administration of the winding up, and in the interest of the general body of creditors, for a special purpose liquidator to be appointed. 81 Robb J considered (at [41]) that an additional reason for the court to make the order appointing a special purpose liquidator was that there was a possibility that the liquidators would institute proceedings against the creditor for the recovery of a preference. 82 In Victoria v Goulburn Administration Services (in liq) [2016] VSC 654 ("Goulburn Administration Services"), Sifris J considered an application by the applicant creditor, being the Victorian Government, to appoint special purpose liquidators to two insolvent vocational training providers, "GAS" and "FACTS". The Government had funded the insolvent companies in the amount of approximately $26.5 million in the period before the winding up. The Government had concerns that the sudden insolvency of GAS and FACTS was precipitated by the Government's decision to instigate quality reviews pursuant to its contractual rights. The Government undertook to fund the special purpose liquidators in full and was not willing to fund the existing liquidators, given they were appointed by the directors on the recommendation of the solicitor for the insolvent companies. 83 At [29], Sifris J considered that it would be beneficial to the administration of the winding up and the interests of the general body of creditors for the work envisaged for the special purpose liquidators to be undertaken. Any recoveries would benefit creditors as a whole. The two administrations, by the existing liquidators and the special purpose liquidators, were financially independent of one another. 84 Victoria v CTM Training Solutions Pty Ltd (in liq) [2017] VSC 47 is another relevant decision of Sifris J. As in Goulburn Administration Services, the Victorian Government was the applicant for the appointment of special purpose liquidators. Again, the Victorian Government was willing to fund the investigations, but only if liquidators other than the existing liquidators were appointed to conduct the investigations. That was, in part, because the liquidators were selected by the directors of the insolvent companies. The Government proposed to enter into a confidential funding deed with the special purpose liquidators. 85 Sifris J decided, at [41]-[42], that the proposed special purpose liquidators, rather than the existing liquidators, should undertake the investigations. His Honour made no adverse findings against the liquidators, but stressed, at [43], that it was of the first importance that liquidators are totally independent and are seen to be so. His Honour noted the importance of maintaining confidence in the integrity, objectivity and impartiality of an administration. At [44]-[46], his Honour took into account the following factors: (1) it is preferable that the investigations be properly and fully funded; (2) his Honour was a little concerned about the past engagement of the existing liquidators' firm by a former director and secretary of one of the insolvent companies in other creditors voluntary liquidations before the appointment of the liquidators; and (3) it appeared that work in the nature of the investigations only started after the application for the appointment of special purpose liquidators was commenced.

Liquidator's evidence and submissions 86 The liquidator agreed that it would be beneficial for the liquidation to conduct an investigation into the restructure transactions. 87 The liquidator gave evidence that he has been a registered liquidator for approximately 30 years. He is an associate of the Australia Restructuring, Insolvency and Turnaround Association ("ARITA"). The liquidator gave evidence was that he has the experience and resources to conduct complex liquidations, as well as the following evidence: (1) he has the capacity to investigate adequately "the voidable transactions" and the DCT has not put forward any reason why he is unable to do that; (2) he will carry out the investigation of "the voidable transactions" thoroughly; (3) he does not believe that there is a need to appoint a special purpose liquidator as he is able to carry out the investigation provided he receives funding and/or receives payment of "the unfair preferences"; and (4) it is his view that the proposed functions of the special purpose liquidators are unnecessarily far-reaching and inappropriately extensive. 88 The liquidator's written submissions stated that, to date, ABCRA has made upfront payments to the liquidator in respect of his services and that ABCRA proposed to do so. 89 On behalf of the liquidator, Mr Eardley of counsel submitted that there was no suggestion that there would not be an investigation into the restructure transactions. However, Mr Eardley acknowledged that there was no detailed evidence about how the investigation would be funded. Mr Eardley suggested that the liquidator may choose not to call for additional funding for the investigation, depending upon what information he procures. 90 Mr Eardley submitted that there was no conflict of interest that would prevent the liquidator from conducting the necessary investigation and no evidence to suggest why the liquidator could not do so. Mr Eardley also suggested that the ATO could conduct investigations into the restructure transactions, using its "broad powers" but did not develop the submission. 91 Finally, Mr Eardley submitted that the investigation does not need to be conducted before the tax appeal is concluded. 92 In written submissions, the liquidator submitted that the Court would not appoint a special purpose liquidator to investigate the conduct of the incumbent liquidator. That submission is not to the point: the proposed functions of the special purpose liquidators do not include an investigation of Mr Condon.

Other creditors 93 In further opposition to the appointment of the special purpose liquidators, the liquidator read affidavits made by, or on behalf of, other creditors of EBS.

A Cochineas 94 A Cochineas is "prepared, if necessary, to assist with funding Mr Condon to the extent required to complete his investigation". He does not see the need for the appointment of special purpose liquidators and he opposes their appointment. 95 A Cochineas is a director of EBS and would therefore be the subject of investigations carried out by the proposed special purpose liquidators. The liquidator did not dispute the DCT's submission that A Cochineas has a clear interest in opposing the appointment of the special purpose liquidators.

PA Cochineas 96 PA Cochineas states that he is an unsecured creditor of EBS (although he is not listed as a creditor on the circular to creditors dated 29 September 2016), is happy with Mr Condon's appointment as liquidator, and does not see the need for special purpose liquidators to be appointed in addition to Mr Condon. He opposes the ATO's application. 97 PA Cochineas is: (1) a former director of ABCRA (for 7 August 2015 only, being the date of its incorporation); (2) as noted above, a director of Pallion HR; (3) a director of Chryso Capital, a company holding a non-beneficial interest in the share capital of Pallion Group (the 100% shareholder of ABCRA and former shareholder of EBS); and (4) a director and 100% shareholder of Paul Glens, a company holding a non-beneficial interest in the share capital of Pallion Group.

PG Cochineas 98 PG Cochineas supports Mr Condon in his duties as liquidator and is satisfied with his conduct to date. If further funding is required to assist with the liquidator's investigations, then he is willing to assist with providing this funding. Mr Cochineas does not see how any benefit would accrue to the creditors of EBS by having special purpose liquidators appointed who would merely duplicate the work of the liquidator and he opposes their appointment. 99 As well as being a director of EBS, PG Cochineas is also a director of ABCRA and Pallion Group. Thus, PG Cochineas is relevantly in the same position as A Cochineas. The liquidator did not dispute the DCT's submission that he also has a clear interest in opposing the appointment of the special purpose liquidators.

Mr Gregg 100 Mr Gregg, on his own behalf and as a director of Pallion Group, opposes the appointment of special purpose liquidators. He is happy with Mr Condon's conduct as a liquidator and both he and Pallion Group are willing to provide funding to Mr Condon as required for him to fulfil his role. 101 Mr Gregg was a director of EBS until 23 December 2015. For that reason, Mr Gregg had an interest in opposing the appointment of the special purpose liquidators.

Ms Simpson 102 Ms Simpson expressed confidence in Mr Condon's ability to properly fulfil his duties as liquidator and her preference that Mr Condon continues as the sole liquidator. Ms Simpson is prepared if necessary to assist with funding Mr Condon to complete his investigations. 103 Ms Simpson is a former director of EBS and a director of ABCRA and Pallion Group. She is relevantly in the same position as Mr Gregg.

Dantek 104 Klaus Mogenson is the director of Dantek. He is satisfied with Mr Condon's performance as liquidator and he opposes the appointment of special performance liquidators. Mr Mogenson did not give any reason for his opposition. 105 Dantek continues to trade with ABCRA.

Ian Berry Engineering 106 Ian Berry of Ian Berry Engineering opposes the appointment of special purpose liquidators in this case and expressed his preference that Mr Condon be allowed to continue in his role as liquidator. As for Mr Mogenson, Mr Berry did not explain his opposition. 107 Ian Berry Engineering continues to trade with ABCRA.

Plumbspark 108 Mr Dallal, the director of Plumbspark, considers that it would be in the best interests of Plumbspark for Mr Condon to continue as liquidator and he does not support the appointment of special purpose liquidators in addition to Mr Condon. Mr Dallal did not explain the reasons why he does not support the appointment of special purpose liquidators. 109 Plumbspark continues to trade with ABCRA.

UBM 110 Mr Raim, the director of UBM, is happy with the liquidator's performance to date and opposes the appointment of special purpose liquidators. Again, no reason for the opposition was given. 111 UBM continues to trade with ABCRA.

Robinson Legal 112 Ms Dominque Robinson, a director of Robinson Legal, is satisfied that Mr Condon has been investigating the affairs of EBS properly to achieve a return to Robinson Legal. In her view, the appointment of special purpose liquidators would unnecessarily duplicate Mr Condon's work and reduce the funds available to be distributed to creditors and she opposes their appointment. Ms Robinson did not provide evidence to support her stated view.

DCT's submissions 113 The DCT believes that the liquidator's entry into the ABCRA funding agreement gives rise to a perception of a lack of independence on the part of the liquidator. That submission is supported by the following statement of ARITA, made on 12 September 2016 under the title "The Risk of Indemnities from Related Parties": ARITA has become aware of a concerning trend of insolvency practitioners accepting indemnities for their remuneration and expenses from: • a related party of the company, or • a party that is involved in a transaction with the company they have been requested to take an appointment to. Notwithstanding that the Code does not specifically exclude indemnities in these circumstances, it does require Members to both be, and be seen to be, independent, when accepting or retaining an appointment. The acceptance of an indemnity may, depending on the circumstances, result in the appointee no longer being seen to be independent. Where the provider of the indemnity is involved in a transaction that the appointee would need to investigate, the indemnity would create a perception of a lack of independence - even if the indemnity is unconditional. In ARITA's view, indemnities from related parties, or parties involved in transactions with the company, create a risk to independence due to the reliance of the practitioner on the future satisfaction of the indemnity and the perception that the practitioner may not take action which would put that future payment at risk. Upfront payments do not, in ARITA's view, generally hold the same independence risks, as payment is not at risk if the appointee's actions do not align with the provider's expectations. 114 The DCT is not willing to fund the liquidator to investigate the restructure transaction for the following reasons: (1) he was selected by the directors of EBS, ABCRA and Pallion Group - the persons involved in the restructure transactions; (2) his replacement by the ATO's nominee for liquidator was defeated at the creditors' meeting principally by reason of the votes cast by the said directors, other related parties and the failure of the liquidator's representative to exercise the casting vote in favour of the resolution; (3) he has entered into the ABCRA funding agreement with the entity that is the focal point of the proposed investigations into the restructure transactions in order to fund the tax appeal; (4) he is pursuing the tax appeal; (5) he continues to assert a liability of the ATO to EBS for unfair preferences and has foreshadowed possible proceedings against the ATO; (6) he has opposed this application with funds apparently provided by ABCRA and/or its controllers, whose conduct will be examined in the proposed investigation into the restructure transactions; (7) given the scale of the assessments and the nature of the investigations sought by the ATO, whilst the liquidator has indicated an ability to engage additional contractors, it may not be feasible or practical for a firm of the size of Condon Associates Group to adequately undertake those investigations; and (8) the liquidator's responses to the ATO indicate that the investigations would not be carried out with due rigour or with appropriate thoroughness if Mr Condon were funded to undertake them.

Consideration 115 There was no dispute that the restructure transactions should be investigated as part of the liquidation. The allegation that the transactions are in the nature of a "phoenix transaction" is a serious one, particularly where it entails the suggestion that the transactions were intended to defeat the interests of the ATO. In making this observation, I am conscious that the allegation is hotly disputed. I was satisfied that it will be beneficial to the administration of the winding up and in the interests of the general body of creditors for the work proposed by the DCT to be undertaken. The scope of the proposed functions of the special purpose liquidators was refined to address the liquidator's contention that they were unnecessarily far-reaching and inappropriately extensive. At the hearing of the application, the liquidator did not raise any particular concern about the scope of the amended proposed functions. 116 Unless special purpose liquidators are appointed, it is unlikely that the restructure transactions will be investigated. The ATO will not fund the liquidator to conduct the investigations. No other creditor has expressed a willingness to fund the investigations. The evidence of A Cochineas, PG Cochineas, Mr Gregg and Ms Simpson concerning possible funding of the liquidation does not demonstrate a willingness to fund the investigations. That is unsurprising, given that the proposed investigations concern the propriety of their conduct. 117 On the evidence of the liquidator, his most likely source of funding is recoveries from unfair preference claims. However, there was no evidence about when the liquidator intends to bring such claims and I was not in a position to assess the prospects of success of those claims. 118 The position taken by the ATO, that it will not fund the liquidator to conduct the investigations, is not irrational, unreasonable or inappropriate. In particular, I accepted that, despite its general terms, the ABCRA funding agreement creates a perception of a lack of independence of the liquidator from ABCRA, which is centrally involved in the restructure transactions. Otherwise, I accepted that the reasons given by Mr Zafiriou (at para 56 of his affidavit) for the DCT's view that it would be inappropriate to fund the liquidator to investigate the restructure transactions provide a legitimate basis for that view. 119 I also accepted Mr Crutchfield QC's submission that the liquidator's choice of Robinson Legal as EBS's lawyers on the tax appeal provides a further reason why a special purpose liquidator should be appointed. In saying this, I do not intend to criticise the liquidator's choice, which no doubt reflects the substantial knowledge that Robinson Legal must have concerning issues in the tax appeal, having acted for the company during the audit and objection processes. However, the consequence is that the liquidator will have an ongoing relationship with the lawyers who apparently advised EBS in connection with the restructure transactions, the propriety of which is in question. I accepted that this is a factor that legitimately informs the DCT's unwillingness to fund the liquidator to conduct investigations into the restructure transactions. 120 Although I accepted that the liquidator genuinely holds the view that he can competently and independently investigate the restructure transactions, I did not accept that this view is a realistic one. It is unrealistic to expect the ATO to fund the liquidator to conduct the proposed investigations into matters concerning the propriety of the conduct of the directors at the same time as the liquidator will be asserting the propriety of the directors' conduct in the tax appeal, funded by a company whose directors are the current or former directors or EBS and legally assisted by lawyers who appear to have advised on the restructure transactions. The position is not simply an example of the general situation described by Martin CJ in Mentha v Hughes [2014] WASC 478. In my view, it is also unrealistic to expect that the liquidator could conduct both the tax appeal and an investigation into the restructure transactions without compromising confidence in the liquidation whether on the part of the ATO or on the part of the directors and former directors of EBS. In this regard, I note that the directors and former directors did not give evidence about their attitude towards the prospect of the liquidator conducting an investigation into the restructure transactions. 121 The liquidator submitted that the investigation of the restructure transactions should abide the outcome of the tax appeal on the basis that, if the appeal succeeds, then the investigations of the restructure transactions will be unnecessary. The liquidator's evidence was that he holds all of the books and records which the ATO stated would assist him in investigating the transactions. However, it is not clear from the relevant correspondence that the ATO considers that the books and records which it identified are all of the books and records that would be necessary for the proposed investigation. I also considered that it is preferable that the restructure transactions be investigated sooner rather than later, and not attend the outcome of the tax appeal, having regard to the fact that the issues include whether the transactions may have taken place to put assets out of reach of the creditors of EBS. It may be important to minimise any risk that relevant information becomes unavailable due to the passage of time. 122 Finally, I did not place significant weight on the evidence of the other creditors which is expressed at a very high level of generality. In particular, the evidence did not enable me to conclude that any of them has a good reason for opposing the appointment of the special purpose liquidators or any understanding of the basis for the application for their appointment. 123 For these reasons, I considered that it was just and beneficial to make the orders sought on behalf of the DCT. I certify that the preceding one hundred and twenty-three (123) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.