Fourteen Consulting Services Pty Ltd (in liquidation) v A.O.B Holding Pty Ltd - [2023] FCA 1684 - FCA 2023 case summary — Zoe

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Fourteen Consulting Services Pty Ltd (in liquidation) v A.O.B Holding Pty Ltd

[2023] FCA 1684

Federal Court of Australia|2023-12-20|Before: Halley J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2023-12-20

Before

Halley J

Catchwords

CORPORATIONS - application for winding up orders, orders permitting liquidator to enter into various agreements, pooling orders and various ancillary orders - orders made

Source

Original judgment source is linked above.

Catchwords

CORPORATIONS - application for winding up orders, orders permitting liquidator to enter into various agreements, pooling orders and various ancillary orders - orders made

Judgment (23 paragraphs)

[1]

Joinder

Pursuant to r 9.05 of the Federal Court Rules 2011 (Cth) (Rules), the following companies be joined as defendants to these proceedings: (a) 152 Investments Pty Limited (ACN 651 524 784) (152 Investments); (b) ACN 643 244 982 Pty Limited (ACN 643 244 982) (formerly NPC Advisory (Australia) Pty Limited) (NPC Aust); (c) FT Finance & Capital Pty Limited (ACN 640 740 594) (de-registered) (FT Finance); (d) MCFE Investments Pty Limited (ACN 639 293 673) (MCFE Investments); (e) MCFE Global Pty Limited (ACN 646 966 127) (MCFE Global); (f) NPC Advisory (NSW) Pty Limited (ACN 643 244 517) (NPC NSW); (g) NPC Advisory Blue Pty Ltd (ACN 666 606 435) (NPC Blue); (h) NPC Blackhead Pty Limited (ACN 647 519 006) (NPC Blackhead); (i) NPC Elizabeth Ave Broadbeach Pty Ltd (ACN 660 351 717) (NPC Elizabeth); (j) NPC Golden Ox Pty Ltd (receiver and manager appointed) (ACN 659 452 650) (NPC Golden Ox); (k) NPC Kingscliff Pty Limited (ACN 651 525 138) (NPC Kingscliff); (l) NPC MacDonnell Rd Pty Ltd (receiver and manager appointed) (ACN 651 525 254) (NPC MacDonnell); (m) NPC McCulloch Ave Pty Limited (ACN 659 452 829) (NPC McCulloch); (n) Progressive People (Australia) Pty Limited (ACN 068 516 343) (Progressive Australia); (o) Simple Life.com Pty Ltd (ACN 668 098 959) (Simple Life); and (p) White Fig Rehabilitation & Recovery Pty Ltd (ACN 661 547 093) (White Fig).

[2]

[3]

Winding up orders MCFE Investments 6. MCFE Investments be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 7. Darren John Vardy be appointed liquidator of MCFE Investments. NPC NSW 8. NPC NSW be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 9. Mr Vardy be appointed liquidator of NPC NSW. NPC Blackhead 10. NPC Blackhead be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 11. Mr Vardy be appointed liquidator of NPC Blackhead. NPC Kingscliff 12. NPC Kingscliff be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 13. Mr Vardy be appointed liquidator of NPC Kingscliff. NPC McCulloch 14. NPC McCulloch be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 15. Mr Vardy be appointed liquidator of NPC McCulloch. NPC Golden Ox 16. NPC Golden Ox be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 17. Mr Vardy be appointed liquidator of NPC Golden Ox. NPC Elizabeth 18. NPC Elizabeth be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 19. Mr Vardy be appointed liquidator of NPC Elizabeth. NPC MacDonnell 20. NPC MacDonnell be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 21. Mr Vardy be appointed liquidator of NPC MacDonnell. NPC Aust 22. NPC Aust be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 23. Mr Vardy be appointed liquidator of NPC Aust. 152 Investments 23A. 152 Investments be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 24. Darren Vardy (Mr Vardy) be appointed liquidator of 152 Investments. FT Finance 25. FT Finance be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 26. Mr Vardy be appointed liquidator of FT Finance. MCFE Global 27. MCFE Global be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 28. Mr Vardy be appointed liquidator of MCFE Global. Simple Life 29. Simple Life be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 30. Mr Vardy be appointed liquidator of Simple Life. Progressive Australia 31. Progressive Australia be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 32. Mr Vardy be appointed liquidator of Progressive Australia. White Fig 33. White Fig be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 34. Mr Vardy be appointed liquidator of White Fig. NPC Blue 35. NPC Blue be wound up on grounds of insolvency and also pursuant to s 461(1)(k) of the Corporations Act. 36. Mr Vardy be appointed liquidator of NPC Blue.

[8]

Orders to give effect to settlement and pooling 50. Direct that the following amounts be paid to Alison Lee Henderson, to the Piper Alderman Law practice trust account: (a) an amount not exceeding $94,160.65 from Simple Life's bank account; and (b) the sum of $297,134.05 held in the account in the name of "Darren John Vardy (Insolvency Options) and Thomas Charles Russell (Piper Alderman)- Controlled Monies Account - Boon & Anor" with account number ending -5012 (Controlled Monies Account). 51. Direct that, subject to payment being made in accordance with order 50(b) above, the balance of the funds held in the Controlled Monies Account and including the funds paid into court in the Supreme Court of New South Wales with proceedings number 2023/00333611 and Perpetual Corporate Trust Limited as plaintiff and proceedings number 2023/00333597 and The Trust Company (PTAL) Limited as plaintiff, be paid to the bank account of the NPC Pooled Group or, pending it being opened, to the trust account of ERA Legal. 52. The following orders: (a) Order 7(b) of the orders made on 7 July 2023 by Lee J (7 July 2023 orders) with respect to the eleventh defendant, Golden Ox Tavern Pty Limited (in liquidation) (ACN 660 304 147); (b) Order 28(b) of the orders made on 23 June 2023 by Jackman J (23 June 2023 orders) with respect to MCFE Investments; (c) Order 28(a) of the 23 June 2023 orders with respect to NPC NSW; (d) Order 7(e) of the 7 July 2023 orders with respect to NPC Blackhead; (e) Order 7(c) of the 7 July 2023 orders with respect to NPC Elizabeth; (f) Order 7(a) of the 7 July 2023 orders with respect to NPC Golden Ox; (g) Order 7(f) of the 7 July 2023 orders with respect to NPC Kingscliff; (h) Order 7(d) of the 7 July 2023 orders with respect to NPC McCulloch; (i) Order 16 of the 23 June 2023 orders with respect to Simple Life and the Fifteen Investments Trust; and (j) Order 29 of the 23 June 2023 orders with respect to Simple Life; as extended and or varied from time to time, being asset preservation orders made pursuant to s 1323 of the Corporations Act, cease to operate at 5.00 pm on Wednesday, 27 December 2023. 53. Mr Vardy be entitled to retire as receiver and manager of the property of NPC MacDonnell. 54. The cost and remuneration of the receivership of NPC MacDonnell pursuant to Orders 31 and 32 of the 23 June 2023 orders be costs in the liquidation of the NPC Pooled Group.

[10]

A. INTRODUCTION 1 By an interlocutory process dated 30 November 2023 (interlocutory process), Darren John Vardy sought orders in relation to the winding up of various companies, entry into certain agreements and various ancillary or related matters. 2 Mr Vardy is the liquidator of the first plaintiff, Fourteen Consulting Services Pty Ltd (in liquidation) (ACN 626 923 297) (Fourteen), the second plaintiff, Boon Business Consultants Pty Ltd (in liquidation) (ACN 634 124 315) (Boon) and each of the defendants (together with Fourteen and Boon, the Current Group). 3 The interlocutory process was supported by extensive affidavit evidence from Mr Vardy. In addition, Mr Vardy relied on affidavits from Alexander Dennis Blackie and David Wilkinson, solicitors employed by ERA Legal, proving service of material on and communications with interested parties, including the Australian Taxation Office (ATO), other creditors and the Australian Securities and Investments Commission (ASIC). 4 On 20 December 2023, I made orders substantially in the terms of the relief sought in the interlocutory process. By way of summary, those orders comprised: (a) an order pursuant to r 9.05 of the Federal Court Rules 2011 (Cth) (Rules) that 16 additional companies be joined as defendants to these proceedings (Further Companies); (b) an order pursuant to s 601AH of the Corporations Act 2001 (Cth) (Corporations Act) that ASIC reinstate the registration of one of the Further Companies, FT Finance & Capital Pty Limited (ACN 640 740 594) (FT Finance), with effect from the date of deregistration; (c) orders pursuant to s 459A or s 461(1)(k) of the Corporations Act that each of the Further Companies be wound up and Mr Vardy be appointed liquidator of each of them; (d) orders for the appointment of Mr Vardy as receiver and manager of the Armour Henderson Family Trust, which one of the Further Companies is the corporate trustee of; (e) an order pursuant to s 579E of the Corporations Act that the Current Group and the Further Companies are a pooled group for the purposes of s 579E of the Corporations Act (Proposed Pooled Group); (f) ancillary orders pursuant to s 579G of the Corporations Act that Mr Vardy is only required to lodge one annual administration return, and one end of administration return, for each company in the Pooled Group; (g) orders pursuant to s 477(2B) of the Corporations Act granting leave to Mr Vardy to enter into: (i) a Deed of Settlement and Release with Alison Lee Henderson (Settlement Deed); (ii) a funding and indemnity agreement with the Commonwealth of Australia (Funding Agreement); and (iii) a costs agreement with Gallande Pty Limited (ACN 139 775 867) trading as ERA Legal (Costs Agreement); and (h) suppression orders with respect to the contents of the Settlement Deed, Funding Agreement and Costs Agreement. 5 These are my reasons for making those orders. 6 In my view, this is a matter in which it is appropriate to deliver short form reasons. The relief sought was extensive but was largely consensual, the relevant legal principles are well established, the application was supported by comprehensive written submissions from experienced counsel, the relevant context and explanation for the relief sought was the subject of detailed evidence, and interested parties were notified of the hearing in which the orders were made.

[11]

B. BACKGROUND 7 For present purposes it is sufficient to provide the following background to the relief sought in the interlocutory process. 8 On 15 March 2023, Fourteen was wound up by an order of the Supreme Court of New South Wales and Mr Vardy was appointed liquidator. 9 On 19 May 2023, Boon was wound up by an order of this Court and Mr Vardy was appointed as liquidator. 10 On 23 June 2023, four companies of the Current Group were wound up by an order of this Court and Mr Vardy was appointed liquidator. 11 Mr Vardy conducted public examination of various persons before Registrar O'Connor between 6 November 2023 to 10 November 2023. 12 Mr Vardy has also carried out a series of informal examinations and received a large number of documents pursuant to orders for production. 13 As a result of his investigations to date, Mr Vardy has formed the view that: (a) the Proposed Pooled Group was involved in a scheme (Scheme) which sought to benefit Samuel Henderson and/or his family by using the proceeds of a complex tax avoidance scheme involving Titan Cranes & Rigging Pty Ltd (Titan Cranes); (b) the Scheme involved the Proposed Pooled Group: (i) providing labour hire and payroll services to, predominantly, Titan Cranes (Labour Hire Business); (ii) as part of the Labour Hire Business, receiving revenues or fruits from a broader scheme with Titan Cranes designed to avoid the payment of statutory liabilities, such as Pay As You Go (PAYG) withholding, in respect of the labour force employed as part of the Labour Hire Business, primarily for the benefit of Titan Cranes; (iii) using the tainted gains to purchase real property and make investments through one or more of the companies in the Proposed Pooled Group, often with those funds being recorded through multiple inter-company transactions and loans; (c) each of the companies in the Proposed Pooled Group (other than Simple Life.com Pty Limited (Simple Life)) were effectively controlled by Mr Henderson prior to his death on or about 4 April 2023; and (d) a number of the companies in the Proposed Pooled Group continue to hold or own assets from or comprising those illegally obtained gains, including monies from recent sales of real properties, choses in action and investments. 14 The elements of the Scheme were more comprehensively outlined by Jackman J in Fourteen Consulting Services Pty Ltd (in liq) v A.O.B. Holdings Pty Ltd [2023] FCA 704 at [3]-[5]. For present purposes, the explanation of the Scheme at [13] above is sufficient. 15 The major creditor of the Proposed Pooled Group is the ATO, which currently claims to be owed more than $40 million. 16 Mr Vardy anticipates shortly commencing proceedings against Titan Cranes.

[16]

G. WINDING UP OF FURTHER COMPANIES 34 A creditor (including a contingent or prospective creditor) and a contributory can apply for an order under s 459A of the Corporations Act that a company be wound up in insolvency, or an order under s 462 that a company be wound up if the Court is of the opinion that it is just and equitable that such an order be made. 35 Based on his review of financial records that he has obtained to date, Mr Vardy concluded that each of the Further Companies, other than Simple Life, Progressive People, White Fig and NPC Blue owes money to one or more of the other Further Companies. 36 Simple Life replaced Fifteen as the trustee of the Fifteen Investments Trust. Fifteen thus has a right of indemnity out of the assets of the Fifteen Investments Trust. Fifteen is therefore a contingent or prospective creditor of Simple Life in its capacity as trustee of the Fifteen Investments Trust. 37 Henpark is the sole shareholder of Progressive People and therefore has standing to apply for an order under s 459A or s 462 of the Corporations Act to wind up Progressive People. 38 MCFE Investments is a shareholder of White Fig. Accordingly, MCFE Investments would have standing to apply for an order under s 459A or s 462 of the Corporations Act, which Mr Vardy can cause it to do if MCFE Investments is wound up and Mr Vardy is appointed liquidator. Alternatively, Mr Vardy has determined one or more companies in the Current Group are prospective creditors of White Fig. 39 Similarly, for the same reasons, one or more companies in the Current Group are prospective creditors of NPC Blue. 40 A conclusion that a company is insolvent is usually an inference drawn from multiple matters including a failure to pay a debt that is not the subject of any genuine dispute: In the matter of Plutus Payroll Pty Limited & Others [2017] NSWSC 1360 at [30]-[31] (Brereton J). 41 A company may be wound up on just and equitable grounds where there is a justifiable lack of confidence in the conduct and management of the company's affairs and thus a risk to the public interest that warrants protection: Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) (2013) 93 ASCR 189; [2013] FCA 234 at [20]-[24] (Gordon J). 42 I was satisfied that each of Further Companies should be wound up on the grounds of insolvency or alternatively on just and equitable grounds, and Mr Vardy should be appointed as liquidator because of: (a) the undisputed debts owed by each of the Further Companies (other than Simple Life, Progressive People, White Fig and NPC Blue) to one or more of the Current Group; (b) the evidence given by Mr Vardy that each of the Further Companies was a party to or benefitted from transactions conducted under the Scheme, or was potentially a party to or benefitted from transactions conducted under the Scheme, or were associated with or controlled by the late Mr Henderson; and (c) the consent or lack of opposition by the directors of each of the Further Companies to the orders sought.

[18]

I. POOLING ORDER 47 Mr Vardy sought an order that the Current Group and the Further Companies constituted a "pooled group" for the purposes of s 579E of the Corporations Act. Such an order is stated in s 9 of the Corporations Act to be a "pooling order". 48 I am satisfied that each of the six preconditions for the making of a pooling order identified in In the matter of Kirby Street (Holding) Pty Limited (2011) 87 ASCR 84; [2011] NSWSC 1536 at [7] (Barrett J), is satisfied. 49 First, the Proposed Pooled Group comprises 36 companies and thus constitutes a group of two or more companies. 50 Second, each of the companies in the Proposed Pooled Group is in the process of being wound up. I note that as a result of the orders that were made on 20 December 2023, this includes each of the Further Companies. 51 Third, at least one of the conditions in subparagraphs (i) to (iv) of s 579E(1)(b) was satisfied, namely, subparagraph (iv) in that: (a) there is "particular property" that is owned by "one or more" of the companies in the Proposed Pooled Group being the funds received from Titan Cranes in respect of the Labour Hire Business that was transferred by way of inter-company payments. The applicants also submitted that several entities owned "particular property", being a chose in action, in the form of the right to sue against Titan Cranes for amounts outstanding in respect of labour hire and ancillary services provided to Titan Cranes; (b) that property was used, or was for use, by any or all of the companies in the Proposed Pooled Group; and (c) each of the members of the Proposed Pooled Group contributed to the Scheme, carried on jointly by all of them, as "Invoicing Entities", "Employing Entities" or as entities holding funds from the Scheme or entities using Scheme funds to purchase real property and make investments. 52 Fourth, as to s 579E(12) of the Corporations Act, Mr Vardy gave evidence that: (a) the members of the Proposed Pooled Group were involved in the operations of other members of the Proposed Pooled Group, including by reason of the large number of inter-company loan accounts; (b) the controlling mind of each of the members of the Proposed Pooled Group was the late Mr Henderson; (c) the largest unrelated creditor of the Proposed Pooled Group is the ATO, followed by state revenue offices; (d) the winding up of each of the members in the Proposed Pooled Group is directly or indirectly attributable to the winding up of Fourteen and Boon, as that resulted in Mr Vardy uncovering the Scheme; (e) the activities and business of the members of the Proposed Pooled Group were intermingled; (f) the ATO is by far the largest unsecured creditor of the members of the Proposed Pooled Group and the only unsecured creditor that would be potentially disadvantaged by the making of the pooling order. The other unrelated creditors would generally be advantaged by the making of the pooling order; and (g) there are administrative advantages and savings from the making of the Proposed Pooling Order, including that Mr Vardy would not need to obtain private litigation funding to pursue certain claims in the hands of one or more of the entities, and that Mr Vardy would not need to split time recording and disbursements between each of the entities in the proposed group. 53 Fifth, having regard to the matters set out above, in my view, it was "just and equitable" that the pooling order be made. 54 Sixth, the Court was not precluded by s 579E(10) from making the Proposed Pooling Order because no eligible unsecured creditor would be materially disadvantaged and the only eligible unsecured creditor that could potentially be said to be materially disadvantaged, being the ATO, had consented to the making of the order. For present purposes the only eligible unsecured creditors are, in summary terms, unsecured creditors of one or more members of the Proposed Pooled Group where those creditors are not themselves members of the Proposed Pooled Group: s 579(1)(a) of the Corporations Act. 55 Further, Mr Vardy has given notice of these proceedings and the hearing date to creditors of each the members of the Proposed Pooled Group under s 579J of the Corporations Act. Creditors have thus been given an opportunity to make their views known. Mr Vardy did not receive any objection to a pooling order being made from any creditor of any of the members of the Proposed Pooled Group and no creditor appeared at the hearing to oppose the making of the orders sought in the interlocutory process. 56 For the reasons set out above, I was satisfied that I should make an order determining that the Proposed Pooled Group constitute a "pooled group" for the purposes of s 579E of the Corporations Act.

Fourteen Consulting Services Pty Ltd (in liquidation) v A.O.B Holding Pty Ltd

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