Mr Hamilton and his evidence
101 The Administrators read four affidavits of Mr Hamilton, the first two having been filed in the winding up proceeding, and the latter two in the DOCA proceeding.
102 The first affidavit in the winding up proceeding was made in support of an application for the adjournment of the winding up proceeding to allow creditors to consider the Report and to determine at their meeting on 14 February 2006 whether to resolve that Wellnora enter into a DOCA or be wound up (see [7] above).
103 Mr Hamilton deposed in his second affidavit (also in the winding up proceeding), as to the result of the meeting of creditors, and attached a copy of the Supplementary Report. He also discussed the admissibility for voting purposes of the debts claimed by the ATO and related entities (as set out in the table at [42] above), and explained why he adjudicated on the various claims for voting purposes as had been foreshadowed in the Report.
104 It was in Mr Hamilton's third affidavit, made on 14 August 2006 (his first filed in the DOCA proceeding), that he responded to the grounds on which the DCT relied for an order setting aside the DOCA. That affidavit is a lengthy and detailed one (43 pages and a voluminous exhibit).
105 Mr Hamilton referred to his extensive experience over a long period as an official liquidator. He was appointed an official liquidator of the Supreme Court of New South Wales by the Attorney-General in October 1962, as was required under the Companies Act 1961 (NSW) at that time. He was initially the sole official liquidator for New South Wales.
106 On 30 November 1962 he commenced practice with Ian Ferrier as "Hamilton & Ferrier". Since dissolution of that partnership on 30 June 1976, he has practised in partnership under the name "Hamiltons Chartered Accountants" (Hamiltons).
107 Prior to the introduction of Pt 5.3A, Mr Hamilton administered schemes of arrangement as trustee or scheme manager. When Pt 5.3A was introduced into the Corporations Law by the Corporate Law Reform Act 1992 (Cth) (No 210 of 1992) there was, according to Mr Hamilton, a "natural progression" from schemes of arrangement. Mr Hamilton states that much of the experience and knowledge he acquired in respect of the former Pt 5.1 schemes of arrangement has stood him in good stead in relation to DOCAs under Pt 5.3A of the Act.
108 Mr Hamilton has completed in excess of 3,000 official liquidations under court orders.
109 There can be no question concerning Mr Hamilton's considerable experience and knowledge relevant to the responsibilities of a company administrator and a DOCA administrator.
110 Mr Hamilton was contacted about the present appointment in January 2006 by Venus Cassimaty, solicitor. She told him that Melvyn Myers, accountant and financial adviser to the Soong group, would be coming to speak to him about one of the companies in the Soong group that required an administrator to be appointed. Mr Hamilton had previously met Mr Myers. On 17 January 2006 Mr Myers met with Mr Hamilton in his office for about one hour. Mr Hamilton exhibits his file note of the conversation. Mr Myers set out the background to the demise of Wellnora. Mr Hamilton was made aware of the ATO's pending winding up proceeding. Mr Myers told Mr Hamilton that Ms Soong was at that time proposing a DOCA to be funded with a sum of $25,000.
111 Also on 17 January 2006, Mr Hamilton obtained an ASIC computer search of Wellnora and sent to Ms Soong a retainer letter, a draft instrument of appointment, and draft minutes of a meeting of the directors of Wellnora.
112 On 18 January 2006, Mr Hamilton:
(a) received the executed documents from Ms Soong;
(b) caused to be mailed to Ms Soong a notice of demand for books and records, a blank form of RATA and a questionnaire; and
(c) prepared and executed a notice of the first meeting of creditors of Wellnora, to which was attached Mr Hamilton's statement of independence.
113 At some time that the evidence does not identify, Mr Hamilton received the RATA back from Ms Soong completed in handwriting. He had it transcribed into typed form and included some material based on his analysis of the records of Wellnora. This was the document that Ms Soong certified on 24 January 2006. The certified copy was later to be despatched with the notice of the second meeting of creditors.
114 On 19 January 2006, Mr Hamilton wrote to Mr Ang enclosing a copy of the letter dated 18 January 2006 from the ATO's solicitors, The Argyle Partnership, asserting ATO's claim in amounts totalling $3,730,354.10. Mr Hamilton pointed out that this differed substantially from the figure in the ATO's statutory demand, which was only $566,871.94. Mr Hamilton's letter to Mr Ang included the following paragraphs:
The significance of this is that if the debt [$3,730,354.10] is allowed to stand at that amount for the purposes of voting there is little prospect of any proposal put forward succeeding if the ATO are not in favour of it. Viz, related entities are approximately $3.1(M) who are creditors of the Company. For the purposes of the meeting next Wednesday, this will be of no account as no motion can be passed where there is not a majority in number together with value and therefore the ATO has no means of carrying a motion even with a debt of $3.7(M). However, it will affect the ability to pass a resolution that the Company enter into a Deed of Company Arrangement. It is inconsistent with the Common Law Cases and Best Practice of ASIC and the IPAA [the Insolvency Practitioners Association of Australia] that a casting vote by me as Chairman in such a circumstance should be made in favour of a motion when the major creditor and for all intents and purposes the only creditors that will receive any benefit out of the Deed of Company Arrangement as the related entities, are not ranking for dividend purposes under the proposal, is against the proposal.
Whether the ATO is prepared to accept $25,000 in full satisfaction of $3.7(M), that is highly problematic. Nevertheless, I will proceed with preparing the proposal and investigation and report which I will have completed by the 25 January 2006 so that it can be used for the purposes of the winding up application on the 3 February 2006. You should consult immediately with Melvin Myers.
For the sake of good order a copy of this letter has been sent to Venus Cassimaty [solicitor, Diamond Conway, Lawyers, who acted for Wellnora].
115 On 24 January 2006, Mr Hamilton received Ms Soong's proposal of that date for a DOCA and associated establishment of the Creditors' Fund of $65,000. The proposal was that after payment of all costs and expenses (including remuneration and out of pocket expenses of the Administrators) of implementing the DOCA, the balance remaining would be distributed pari passu to creditors. The proposal stated that if the ATO's debt for dividend purposes was $681,990, the dividend was estimated at 1 cent in the dollar, and if it was $3,235,444, the dividend was estimated at 0.6 cents in the dollar. The proposal stated that Ms Soong was to pay the sum of $65,000 to the Administrators within seven days of the commencement date of the DOCA.
116 In paras 16-24 of his affidavit, Mr Hamilton deals with prior work that he has undertaken concerning the Soongs. He referred to his having been retained by Venus Cassimaty in about May 2005 as an expert to prepare a report in a legal proceeding of Fyna Formwork Pty Ltd (in liq) v James Soong. That report was never filed or served. His work in that matter was disclosed in his statement of independence. Mr Hamilton's affidavit referred to James Soong as Desley Soong's father, rather than as her husband. He knew that she was his wife and the reference to her being his daughter was a slip not picked up by him.
117 When Mr Hamilton prepared his expert's report in that proceeding, he gained knowledge as to the financial positions of Wyreach and its consolidated subsidiaries for the years 1996, 1997, 1998 and 1999. Those consolidated subsidiaries were Parkwind, Fyna Constructions (Hire & Sales) Pty Ltd and Birralee Centre Pty Ltd (now called Ashworth Corporation (Vic) Pty Ltd). The period the subject of Mr Hamilton's expert report did not extend beyond 30 June 1999. For the seven years after that, Mr Hamilton was not directly concerned with any financial matters of the Soong companies. He may have been privy to more recent financial information but it did not concern him. For the purpose of preparing his s 439A report on Wellnora, he did not look at the files and documents he had been given in connection with the preparation of his expert report.
118 In cross examination, Mr Hamilton said that he was aware, as at the time of his appointment by Ms Soong as administrator of Wellnora on 18 January 2006, that Fyna Formwork Pty Ltd, of which Mr Soong had been a director, had gone into liquidation. He became aware, prior to completing the Report on 25 January 2006, that Ms Soong had been a director of Parkwind (subject to a DOCA). He was aware, from an expert consulting role that he had undertaken in late 1995 that Wellnora was part of a much larger group of special purpose companies either associated with or controlled by Mr Soong. Mr Hamilton conceded that he had accepted that Mr Soong was probably a de facto director of Wellnora itself in the sense that his knowledge and experience as a builder and developer would have been essential to its functioning.
119 Mr Hamilton had met James Soong on only two occasions, both at meetings at his office attended by Mr Soong, his son Steven Soong, and Venus Cassimaty. The first meeting had been held on 19 October 2005 and the second on 3 November 2005. They both related to advice from Mr Hamilton concerning a proposed investment by James Soong.
120 Mr Hamilton had also corresponded with Mr Soong concerning the voluntary administration of Marquelex Pty Ltd and Metroform Pty Limited, of which Mr Soong was a director, in the context of their voluntary administrations. Both companies had failed, leaving unpaid tax debts. On 27 August 2003 he and Pino Fiorentino were appointed administrators of those companies, but they were replaced at the first meeting of creditors by a partner of Sims Partners on the exercise of the casting vote by Mr Hamilton. Mr Hamilton explains the reasons for the change, and there is nothing untoward in this.
121 As administrator (of Marquelex Pty Ltd and Metroform Pty Limited), Mr Hamilton sent Mr Soong formal letters of demand for the books and records of those two companies.
122 Mr Hamilton did not meet with Ms Soong or speak to her regarding Wellnora. So far as he can recall, she attended his office only once, and that visit had related to Norton Developments Pty Ltd of which he was one of the DOCA administrators. Mr Hamilton did not disclose in his statement of independence for Wellnora that he had been an administrator of that company. The reason for this was that Norton Developments Pty Ltd was not, in his view, a related body corporate of Wellnora as defined in s 50 of the Act, so that there was no requirement under para 4.2 of the Statement of Best Practice for the Calling and Conducting of Creditors' Meetings issued by the Insolvency Practitioners Association of Australia for him to disclose it.
123 At paras 25 to 61 of his affidavit, Mr Hamilton gives a detailed account of his investigations of Wellnora. I do not think it necessary to summarise in detail the steps he took as some of Mr Hamilton's conduct in relation to Wellnora has already been summarised above. Paragraphs 27 to 30 of his affidavit were as follows:
27. The first step I took was to obtain an understanding about Wellnora's business, how it operated, was it still trading, or was it an historical situation. I wanted to know:
(a) What was the interplay between Wellnora and any other companies who are related entities, either on loan account, shareholdings, or through the appointment of common directors;
(b) Who controlled the day to day affairs of Wellnora;
(c) The broad picture of the assets and liabilities, expected realisable values, classes of creditors, priority and otherwise and a feeling for the causes of Wellnora's failure or cash flow shortage and whether or not this was capable of being corrected by a proposal under a DOCA.
28. I also sought to determine whether or not Wellnora wished to continue to trade and Wellnora be rehabilitated [sic - could be rehabilitated] or whether to wind up Wellnora.
29. I ascertained the matters by asking questions of Herbert Ang, the Controller and Melvyn Myers, accountant and financial advisor to the group.
30. I also sought to ascertain how that would affect creditors and whether there was a basis for giving creditors a better commercial return by using Part 5.3A of the Act than they would obtain in a winding up.
124 Mr Hamilton exhibits to his affidavit all of the documents he obtained during the course of the administration of Wellnora. They number 18, but that number may give a false picture of the extent of them - they include, for example, as single documents, four general ledgers and financial accounts for four years including tax returns, profit and loss statements and balance sheets.
125 Mr Hamilton prepared from Wellnora's general ledger comparative figures showing the yearly assets and liabilities and profit and loss figures for trading and accumulated losses at the date of his appointment. He expressed the opinion that, although Wellnora had recorded trading losses, they were partly prior to the year ended 30 June 2004, the year of the sale of the units (with the exception of Unit 1, the sale of which was completed on 12 August 2005). Carrying charges were written off in the year incurred. Mr Hamilton states that with the use of a different accounting concept, those charges could, and probably should, have been capitalised. The losses were in fact incurred in the years 2004 and 2006 (on Unit 1) on the realisation of the units. He said it was difficult to see how it could be said that at the time of realising the units, Wellnora's director should have suspected that the company was insolvent or that the director had incurred the debts without any expectation that Wellnora would be able to pay them in the future.
126 In para 35 of his affidavit, Mr Hamilton stated:
The sale of units, half finished, would not have been a commercially good decision. Hence the financing by the related entities and secured creditors insisted I am told, on the GST being paid to them on settlement. Whether this was the correct decision is arguable. A director could have said no, you enter into possession as a controller, sell the units yourself and you will then have to account for the GST to the Plaintiff. However, this in itself is a double edged sword. Such a decision would have meant a greater loss in the sale of the units by a mortgagee in possession hence the problem associated in making such a decision. As a consequence, the Plaintiff has suffered a loss. So have the related entities. The loss was caused by the downturn in the unit retail market.
127 Paragraph 38 of Mr Hamilton's affidavit was as follows:
In doing my investigations, I became aware that Wellnora was a company whose only business had been to construct and sell 5 home units in Double Bay, NSW. It had been funded by loans from unrelated secured creditors and related unsecured party companies. Wellnora's demise had been basically caused by the prices from these unit sales not covering the building costs for the units, given the dramatic fall in the unit market. All those units had been sold by the time of my appointment and the secured creditors' debts had been discharged under real property mortgages and fixed and floating charges. One secured creditor, Stacks Managed Investments Limited (...) had not lodged their discharge of charge form at the time when I was appointed administrator. It was lodges later, during the Wellnora administration.
128 Mr Hamilton stated that the DCT was the only external creditor of Wellnora not paid on the sale of the home units, and that the amount of GST payable had formed part of the settlement funds paid to the secured creditors on the settlement of each unit.
129 He stated that in the past Wellnora had proved its ability to carry on its business and to effect the completion of the units, even in "a disastrous unit market such as in this case", building five units to completion and selling them. He said that this in itself was one positive sign of Wellnora's commercial ability.
130 Mr Hamilton acknowledged that certain matters would have given rise to "a moral issue" which he considered would influence any administrator in deciding whether to recommend a DOCA. The matters to which he referred were:
· commencement of a project that had not been completed;
· purchasers off the plan left suffering as creditors;
· incapacity to complete the project with the capital it employed and assistance from related entities;
· reckless, wilful and unlawful acts and incurring of debts by a director;
· embarking upon projects which were hazardous and unlikely ever to succeed;
· promotion of the units for the benefit of directors and shareholders only.
In cross examination, Mr Hamilton said that if he had known of such matters, he would have sought legal advice and would not have simply exercised his own judgment on "issues of public morality and commercial morality".
131 Mr Hamilton stated that in Wellnora's case, according to what Mr Ang told him and he believed, the debt to the DCT arose because the secured creditor under a debenture charge and real property mortgage had insisted on being paid the GST component of the proceeds of sale on the settlement of each unit, but had failed to pay the amounts to the ATO. He stated that the debts owed to related entities had been incurred in financing the development, and that the loss in trading was capable of explanation by the huge downturn in unit prices that took place in 2003. He pointed out that the DCT and related entities had suffered loss but that the public had not.
132 Mr Hamilton exhibited to his affidavit his handwritten notes made in the course of preparing the Report. He said that when preparing the Report, he had ASIC computer searches carried out in respect of companies of which James Soong or Desley Soong had been directors or shareholders, directly or indirectly. He exhibited those searches to his affidavit. Those that were relevant to the Report related to Wyreach, Ticaart Pty Ltd and Fyna Constructions (Hire & Sales) Pty Ltd. They were relevant because they were seeking to prove as creditors. The debts owed to other related entities or associated companies had been transferred to Wyreach at year's end.
133 In para 46 of his affidavit Mr Hamilton stated:
In the time available I did not consider it my role to investigate every transaction with other companies related to the Soongs other than [the three just mentioned] as the task becomes unreasonably onerous in the time limits.
134 Mr Hamilton did not conduct Land Title Office searches before preparing the Report. All of the settlements had occurred prior to his appointment and he obtained settlement sheets and some contracts of sale, details of which were referred to in the Report. Historical information relating to Wellnora's trading was available to him through Herbert Ang and Melvyn Myers. Desley Soong was not a debtor of Wellnora on any loan account, and so it was not necessary to establish whether she had an interest in any real property.
135 Mr Hamilton analysed Wellnora's transactions with those related entities, as defined in s 9 of the Act, that were creditors of Wellnora at the date of his appointment. He examined those transactions back to 1 July 2001.
136 Mr Hamilton explains how he analysed the five debts claimed by associated entities of Wellnora to be owed by Wellnora to them. He also explained his consideration of the questions of voidable unfair preferences (s 588FA), commercial transactions (s 588FB), insolvent transactions (s 588FC) and insolvent trading (ss 588G and 588M). He also explained his consideration of the questions of any breach of fiduciary duty by Desley Soong under ss 181 and 182, aiding and abetting under s 79, and offences which he might be obliged to report to ASIC under s 438D.
137 In paras 62 to 68 of his affidavit, Mr Hamilton addressed the topic of "Commercial Morality and Proposed DOCA". He stated:
62. Having considered all of the above, I then was of the view that I had to give weight to the commercial advantage to creditors of Wellnora as to what may be available to them in a winding up, as against the proposal that was made by Desley Soong for a DOCA which may give a greater return to creditors. The proposal needed other alternatives to be considered such as a general moratorium for a period to enable Wellnora to recoup its cash flow problems or compounding of creditors debts by an immediate payment or payments over a period of time to participating unsecured creditors or any combination of the beforementioned which will show an advantage to creditors over a winding up, both by way of an immediate return and by continuing ability to deal with Wellnora in the future on a going concern basis.
63. The steps above only touch upon commercial morality and the public interest by considering the effect on a commercial return to creditors which may be achieved by recouping a loss to the corporation by misrepresentation, malfeasance, breach of fiduciary duty, insolvent trading or voidable preference which relates to any officer of Wellnora or director or related entity with which Wellnora has been involved in entering into transactions with that party.
64. I did not consider it necessary to go beyond those matters I have enumerated above, in forming a decision or determination as to what is in the best interest of creditors, either the proposal and DOCA or a winding up.
65. I did not look beyond those matters which I have taken into account and delve into the past history of companies that have been traded by James Soong and Desley Soong and to ascertain:
(a) what was their outcome in so far as are they still trading;
(b) had they been wound up, had they been subject to a DOCA;
(c) what reports had been made by administrators and liquidators under Section 533 and Section 438D of the Act to ASIC;
(d) were there incidences of offences in those companies;
(e) were the DOCAs passed unfairly or improperly;
(f) were there police proceedings against either of the directors or their family;
(g) were they being investigated by any statutory authority and if so, for what possible offences such as the Office of Fair Trading.
I did not consider that it was my task or part of the proper performance of my statutory duties to investigate or consider these matters unless they involved Wellnora's affairs.
66. In undertaking my statutory duties with respect to Wellnora, I did not see an administrator in the role of a policeman or for that matter a liquidator in that role who had to take into account commercial morality in matters outside of the affairs of Wellnora. The speculation into this area was not one which I believed was expected of me as an administrator of Wellnora.
67. In undertaking my statutory duties with respect to Wellnora, it was not commercially possible for me to examine all of the affairs abovementioned in paragraph 65, before forming an opinion. I do now and still see this as a police role or the role of the Office of Fair Trading or the role of ASIC or for that matter the role of the Plaintiff, if the Plaintiff believes that there has been a conspiracy to defeat the Commonwealth in Soong's past dealings in other companies.
68. I say these matters having regard to my experience detailed previously and advice given to me by senior counsel in so far as a liquidator's role. I conducted this administration, as well as my other administrations, on this basis. I did not consider my statutory duties under the Act in acting as a voluntary administrator, required me to take these steps.
138 Mr Hamilton relates what transpired at the first meeting of creditors on 25 January 2006. The four related companies and James Soong were represented by Ron Gorrick and the ATO was represented by Mariza Federico. At the meeting, Mariza Federico said nothing. Mr Hamilton called for motions and none were put. Mr Hamilton was not aware as to what information the DCT had about companies of which James Soong or Desley Soong were directors or shareholders (directly or indirectly) during the Wellnora administration.
139 Mr Hamilton states that he and Mr Fiorentino had previously received legal advice in relation to the exercise of the casting vote by an administrator to approve a DOCA. They received that advice in connection with the Norton Developments Pty Ltd administration. Mr Hamilton relates the nature of that advice as follows:
76. The opinion of Counsel in that matter in conference was that from the point of view of the Administrator's report to creditors, he had to consider any breaches of fiduciary duty related to the company the subject of his report which may have the effect of an officer of the company being liable for any loss to the corporation. Also the administrators had to consider their ability to recover such a loss and the overall effect that that has on any distribution that would be available to creditors in a winding up. The broader aspect of the unjust treatment of the Plaintiff in the conduct of the company's affairs unless that led to a commercial result emanating from an action against a director, or an incidence of an offence which should be reported to ASIC, were not matters which an administrator should concern himself with in making a determination of what was in the best interest to creditors as a whole. The Plaintiff had its own remedies under taxation legislation and criminal legislation if criminal offences were involved. The Plaintiff was not in a special or preferred position over other outstanding unsecured creditors.
77. This accorded with my understanding of the duties and role of an administrator under the Act.
140 In cross examination Mr Hamilton elaborated on the understanding that he had of his duties in exercising a casting vote at a creditors' meeting as follows:
... at the end of the day my determination is a commercial one and it's not based on public interest or commercial morality. It's simply on the commercial interest of what I think shows a better return. Even though, as you say, it's a peppercorn, that's what the duties laid down are. If they want to change that, they should change the legislation.
141 He further explained his position during cross examination:
Counsel: Well, did you ever say anything to those proposing the deed, I cannot possibly support a deed of company arrangement that offers less than a cent in the dollar over $6 million worth of debt?
Mr Hamilton: No because according to my legal advice it can be a peppercorn providing it shows a better return than the winding up.
Counsel: So that is the sole determinant in your mind?
Mr Hamilton: That is the statute. If you want to change it, change it. And frankly I would be very happy to see it changed. At the moment administrators are put in the position that having done an investigation if the offer shows a better return they have to recommend it.
Counsel: So even if your investigation discovered the most heinous breaches of the Corporations Act if the directors' proposal offered one cent more than you could be confidently predicting in a winding up that would pass muster as a deed proposal, would it?
Mr Hamilton: No, if it is heinous and it is capable of being a loss to the corporation, then there is a chance of recoupment of an asset in a winding up, so there wouldn't be the proposition that you put forward. It would never arise.
142 Finally, he said:
My view was that the role of an administrator is to work out after an investigation what he considers the likely recovery in the winding up would be. He has to match that against what is offered, [carry out] a balancing act ... as to which is the better. He then recommends that which gives the better commercial return. At the same time he has to make the creditors [aware] of all the instances of offences, anything that's - all of the facts and evidence that's influencing his decision that moneys won't be recovered in a winding up or will be and of course if there is any instance of offences in the course of his investigations which have to be reported to ASIC he should make that report. At that stage I don't believe an administrator has any duty to consider ... commercial morality or [the] public interest. On the other hand if he comes across ... instances of both he should put it in his report, so that even if he doesn't have to consider it creditors can weigh it up in their own minds and that should be done and of course he should report to ASIC the instances of offences that he may have come across during the course of his investigations. He is not a policeman. He is not put in there to investigate this company with a view to finding offences, with a view to prosecutions of directors and this type of thing. It's quite clear that he's put in there to establish what are the best realisable values of assets both from the point of view of the tangible assets and voidable dispositions or antecedent transactions.
143 Mr Hamilton states that he formed the opinion and made the recommendation in the Report that Wellnora's creditors should support the proposed DOCA having regard to:
(a) his investigation and analysis of Wellnora's affairs, the nature of its business activities, his understanding of the nature and duties of the office of administrator, and the matters he was required to investigate and form opinions and make recommendations about under Pt 5.3A of the Act; and
(b) the advice he had previously received from counsel and other legal advice as to how to exercise the casting vote and the nature and duties of the functions of his office.
144 In a matter that was taken up with Mr Hamilton in cross examination, he states that he travelled overseas on 26 January 2006 (the day after the first meeting of creditors) and returned to his office on 14 February 2006 (the date of the second meeting of creditors). Before leaving for overseas, he was aware that there was a real possibility that he may need to exercise the casting vote at the second meeting to be held on 14 February because the creditors of Wellnora that were related entities might well vote in support of the proposed DOCA because they would benefit from it and Ms Soong may have ascertained the prospect of this occurring before putting up the funding proposal which formed the basis of the proposed DOCA; and the DCT might well vote against the proposed DOCA as she had already commenced a proceeding to wind up Wellnora. Accordingly, Mr Hamilton contacted the solicitor who had settled the Supplementary Report and was in possession of a copy of the Report. The solicitor advised him that he (Mr Hamilton) had no particular duty of care to the DCT and that his duty of care as administrator was owed to all creditors of Wellnora; that there was no need for him to give greater weight or emphasis to the DCT's position; and that there was no broader public interest or commercial morality that he had to consider. The solicitor advised him that he should exercise his casting vote in accordance with the recommendation he had made in the Report. That advice, according to Mr Hamilton, was consistent with his understanding of his statutory duties as administrator and the advice that he had previously received from counsel.
145 Between the date of the Report (25 January 2006) and the date of the second meeting of creditors (14 February 2006), Jocelyn Williams of Mr Hamilton's office obtained information from Giles Woodgate, the administrator of Parkwind. This led to the preparation of the Supplementary Report addressing the transaction with Parkwind involving the two amounts totalling $300,000 (see [84] above). No other information was made known or available to Mr Hamilton, including by the DCT, prior to the Supplementary Report being despatched.
146 The second meeting of creditors lasted no more than about five minutes. Mr Hamilton describes the meeting as being "in substance, mechanical in nature". As noted above, Leisa Kelly who attended on behalf of the DCT did not raise any concerns she had about the matters now raised in the DCT's points of claim, either prior to or at the meeting.
147 Because there was no discussion by any of the creditors of the Report, the Supplementary Report or Mr Hamilton's recommendation, he understood that each creditor was satisfied with the content of the documents and accepted or rejected his recommendation, having formed their own opinions and views about whether or not Wellnora should enter into the proposed DOCA.
148 The passing of the resolution on Mr Hamilton's casting vote was not the only decision taken at the meeting on 14 February 2006. A resolution approving the Administrators' remuneration from 18 January 2006 to 14 February 2006 in a sum of $18,672 ex GST was passed unanimously. Thus, Leisa Kelly, representing the DCT, did not take the opportunity of expressing any misgivings about the quality of Mr Hamilton's work or about the Report. A further resolution approving the hourly rates for Mr Hamilton and his staff of administering the DOCA, the approval being capped at $10,000 ex GST was passed with Ms Kelly abstaining. On the basis that this cap would be reached, we can see that Mr Hamilton's fees would total $28,672 ex GST.
149 In his affidavit Mr Hamilton responds to the individual allegations made in the DCT's points of claim. For example, he states that he did not know and was not told by any person on behalf of the DCT that the DCT had formed the view that the proposed DOCA, if approved, would be an example of a "pattern" of behaviour by Ms Soong or Mr Soong undertaken in respect of a large group of companies designed to avoid liabilities, including, in particular, taxation liabilities. He states that his own investigation and analysis of the affairs of Wellnora did not lead him to conclude that Wellnora had been established for the purpose of avoiding tax or that there had been a deliberate avoidance of tax. He states that it would have been "particularly significant" for him to have been told this by a creditor because it could go to "the very purpose [for] which the proposed DOCA was to be entered into".
150 Mr Hamilton was cross examined in relation to this last statement. It was put to him that it amounted to an acknowledgment by him that considerations of commercial morality might properly influence the way in which he voted. His explanation emerges in the following passage:
… All right. What I'm saying is this. I've already taken legal advice and been told that Part 5.3A is really a matter of balancing on a set of scales what's in the best interest of creditors: the winding up or the proposal in the DOCA. I've already been told that I have no special duty to the Australian Taxation Office as distinct from other creditors. I have a duty to creditors as a whole, not just one creditor. If at that meeting, it had been brought to my attention that there was a likelihood that Mr Soong, through misuse of Part 5.3A and liquidations and other means of external administration, was taking advantage of the law by appointing administrators and liquidators to defeat the Tax Department being paid its debt and that there were 36 instances of this in the past, I would not have used the casting vote but I would have adjourned that meeting to get further legal advice as to my position because it's not a position I've ever been in before.
Counsel: So in some circumstances, matters beyond the direct commercial return might be relevant?
Mr Hamilton: Yes, but it's a matter of law more than - it's something I need legal advice - as an administrator, I'm not confident to take on a semi-judicial function.
151 I do not think it necessary to address all of Mr Hamilton's responses to all of the allegations made in the DCT's points of claim. The substance of Mr Hamilton's response is set out at [51]-[60] above.
152 Mr Hamilton states that the ATO is frequently a creditor of companies that go into administration who votes upon whether a proposed DOCA should be approved. He states that he has been involved in well over 100 administrations where this has occurred, yet he has never previously been in a situation in which the ATO has adopted the course it has adopted in relation to the administration of Wellnora. Mr Hamilton states that on at least two occasions, he has exercised a casting vote in relation to a proposed DOCA where the ATO has voted against it. He states that when he exercised his casting vote in the present administration, he had an expectation that, if the ATO possessed material information or views relevant to the exercise of the casting vote, the ATO representative would have informed him of them before casting her vote. He states that he acted on this basis.
153 Mr Hamilton states that he is now faced with a situation in which, by reason of the allegations made in the DCT's point of claim, his good standing and reputation as an administrator is to be investigated in respect of his conduct of the administration of Wellnora and his exercise of the casting vote. Mr Hamilton asserts that he is being placed in this position because the DCT did not inform him of the matters which the DCT now alleges, thereby precluding him from considering those matters in deciding how to exercise his casting vote.
154 Mr Hamilton exhibits to his affidavit time sheets showing that a total sum of $38,525 is owing based on the hourly rates for himself and his staff in connection with the defence of this proceeding. He refers to counsel's advice to him that if the DOCA is set aside and the DCT is not required to reimburse the full amount of the Creditors' Fund, he (Mr Hamilton) may face a liability in that amount ($65,000). Finally, he notes that the DCT seeks an order for costs against himself and Mr Fiorentino personally.
155 I do not think it necessary to summarise paras 150 - 184 of Mr Hamilton's affidavit, in which he addresses the various subparagraphs of para 31 of the DCT's points of claim outlined above at [49].
156 Time sheets are exhibited to Mr Hamilton's affidavit in respect of work done by him and his staff on the Wellnora administration. Those covering the period 18 January 2006 to 14 February 2006 show remuneration and out of pocket expenses totalling $26,259, of which $18,672 (excluding GST) was approved by creditors at the meeting on 14 February 2006. Those covering the period from 17 February 2006 to 28 June 2006 show work done pursuant to the DOCA and remuneration in a sum of $26,797. That amount still requires approval by creditors or by the Court.
157 Mr Hamilton refers to cl 14.1(a) of the DOCA which provides to the effect that the DOCA terminates on the completion of the distribution of the Creditors' Fund. In paras 189 - 196, he explains how and when the amounts were paid constituting the Creditors' Fund and how and when the Creditors' Fund was disbursed. Mr Hamilton states that on or about 21 June 2006, the Creditors' Fund was exhausted.
158 In Mr Hamilton's fourth affidavit (the second one filed in the DOCA proceeding) he deals with the DOCA relating to Parkwind, the subject of the Supplementary Report. As noted at [84] above, on or about 12 August 2005, two payments totalling $300,000 were made out of the settlement proceeds of Unit 1, 51-53 Carlotta Road, Double Bay to the Parkwind Pty Ltd DOCA administrator. Mr Hamilton explains in some detail why, in his view, these amounts would not be recoverable by a liquidator of Wellnora.