Hall & Ors v Poolman & Ors [2007] NSWSC 1494 | Case summary

Gregory Winfield Hall (First Plaintiff (2032/04, 2685/04)) Philip Patrick Carter (1st Plaintiff (2032/04), 2nd Plaintiff (2685/04)) Reynolds Wines Ltd (R&M Appointed) (in liq) (2nd Plaintiff (2032/04), 2nd Respondent (2685/04), 1st Plaintiff (4870/05)) Reynolds Vineyards Pty Ltd (R&M App) (In liq) (3rd Plaintiff (2032/04), 2nd Plaintiff (4870/05)) Peter Renwick Poolman (1st Defendant (2032/04), 1st Respondent (2685/04)) Malcolm Geoffrey Irving (2nd Defendant/Cross Claimant (2032/04), 2nd Respondent/Applicant (2685/04)) PARTIES : Constance Helen Poolman (3rd Defendant (2032/04), Defendant (4870/05)) Kalivise Pty Ltd (4th Defendant (2032/04)) Sennabeau Pty Ltd (5th Defendant (2032/04)) Morecraft Kitchens & Joinery Pty Ltd (6th Defendant (2032/04)) John Giske Martini (1st Cross Defendant/Cross Claimant (2032/04), 3rd Respondent (2685/04)) Rupert Clifton-Bligh (2nd Cross Defendant (2032/04), 1st Respondent (2685/04)) Sandra Lee Yates (1st Cross Defendant (2032/04), 4th Respondent (2032/04)) Commissioner of Taxation (Defendant/Applicant (2685/04))

1 I delivered reasons for judgment in these matters on 23 November: [2007] NSWSC 1330. The parties disagree as to certain aspects of the orders to be made. 2 The Liquidators submit that the Commissioner and Mr Irving, Ms Yates and Mr Martini ("the Directors") should be ordered to pay the costs of the Undue Preference Proceedings. The Liquidators say that, although the Commissioner did not dispute liability at the trial, he did not submit to judgment because he took the position that he should not be ordered to repay the preferential payments before he had secured his indemnity from the Directors pursuant to Corporations Act 2001 (Cth) ("CA") s 588FGA. The Liquidators say that the Commissioner could have submitted to judgment, paid the judgment debt and pursued his claim to indemnity against the Directors in separate proceedings. 3 The Liquidators are correct in their submission as to what course the Commissioner could have taken. However, the Liquidators' costs of the Unfair Preference Proceedings have not been increased since the Commissioner admitted liability by the course which the Commissioner has pursued. The only issue in the Unfair Preference Proceedings at trial was whether Wines and Vineyards were insolvent at any time during the Period. That was an issue raised by the Directors in the Insolvent Trading Proceedings and it would have been fully contested in those proceedings whether or not it was raised in the Unfair Preference Proceedings. The facts of this case are very different from those with which Hammerschlag J had to deal in Sims v Commissioner of Taxation [2007] NSWSC 1359. 4 I do not think that it is just that the Commissioner should be ordered to pay any costs relating to the issue of insolvency as from the time that he conceded that issue to the Liquidators and admitted liability. If he were ordered to pay the costs of the Unfair Preference Proceedings after his admission of liability, it is possible that there could be some apportionment of costs relating to the issue of insolvency as between the Insolvent Trading Proceedings and the Unfair Preference Proceedings, and the Commissioner would be unfairly burdened with that proportion of those costs attributed to the Unfair Preference Proceedings. 5 I think that the better course is to order that the Commissioner pay the Liquidators' of the Unfair Preference Proceedings up to the date upon which he conceded liability, and that the Directors pay the Liquidators' costs of those proceedings from the date of their joinder to the proceedings. 6 The Directors have informed me that they propose to appeal in the Insolvent Trading Proceedings and the Unfair Preference Proceedings and they seek a stay of the orders against them, in particular, a stay of the order that the amount to which the Liquidators will be entitled in the Insolvent Trading Proceedings be referred out for assessment. No grounds of appeal have yet been formulated but I am informed that one ground will be that I erred in finding that Wines and Vineyards were insolvent at any time during the Period. If the appeal succeeds on this point, a reference for assessment of compensation would be futile. 7 The Liquidators submit that I should not stay the conduct of the reference to ascertain compensation. It is clear that the conduct of that reference will be costly. If an appeal succeeds on the question of insolvency, then the parties' expenditure on costs of the reference will have been wasted. I think that a stay of the reference should be ordered, upon the terms appearing below. 8 The Liquidators say that, in any event, I should not order a stay of the judgment against the Commissioner because he did not contest insolvency and because there will be no difficulty about the Liquidators repaying the judgment if the Directors' appeal on insolvency succeeds. 9 Further, the Liquidators say that as Mr Poolman did not appear and did not contest insolvency, there should be no stay as against him because the Liquidators have recourse to a guarantee given by Mrs Poolman which they could now seek to enforce. 10 However, to recover judgment against Mr Poolman, the Liquidators will have to have the quantum determined by a reference. The other directors would wish to participate in that reference but it would not be right to compel them to do so pending the determination of their appeal on the question of insolvency. Likewise, if the Directors succeed in the appeal on insolvency, the judgment against the Commissioner could not stand. I do not think it wise to fragment the administration of this case. To permit some judgments to proceed to execution while appeals affecting the foundation of those judgments are pending could well give rise to later complications. This case is complicated enough as it is. In my view, there should be a stay of all orders which depend upon a finding that the companies were insolvent. 11 As I have noted, the Directors have not yet formulated grounds of appeal. In that circumstance, I do not think that I should order an indefinite stay pending determination of any appeal. When the grounds of appeal are known it will be appropriate to consider whether any further stay should be ordered. I will order a stay of the orders which depend upon a finding of insolvency up to and including 29 February 2008. If insolvency is a ground of appeal, the appellants can seek an extension of the stay from the Court of Appeal. 12 The Liquidators submit that I should not order any further investigation into their conduct, as foreshadowed in paragraph 396 of my judgment. Mr Bathurst QC, who appears for the Liquidators on this issue alone, submits that there is no foundation for an enquiry under CA s 536(1)(a) because I cannot yet be satisfied that the Liquidators have not faithfully performed, or are not faithfully performing, their duties. 13 I do not think that CA s 536(1)(a) requires that the Court be satisfied to some particular degree of certainty of improper conduct by a liquidator before it enters into an enquiry under the section. The power may be exercised where "appears" that the liquidator has not performed his or her duties faithfully - i.e. there must be some factual basis to suggest improper conduct and the circumstances generally must be sufficiently serious to justify putting the liquidator to the expense and trouble of an enquiry. 14 In the present case, I have indicated at some length in the judgment the factual basis which suggests improper conduct by the Liquidators. As I have said in the judgment, the enquiry may dispel the appearance of improper conduct. However, as matters presently stand, I would not be prepared to ignore what has happened. As I have noted in the judgment, it seems to me that the Court should know more about how the Liquidators could have let costs of the proceedings run up to some $2M, although feeling some disquiet about it and not seeking directions. In my view, a sufficient basis is made out for an enquiry under CA s 536(1)(a). 15 The Court is not circumscribed in its supervisory power over liquidators. An enquiry under CA s 326(1)(b) could be conducted where a complaint has been made. A complaint is not required to be in any particular format. In my opinion, the submissions of Mr Irving as to the Liquidators' conduct, as I have summarised in my reasons for judgment, amount to a complaint for the purposes of s 536(1)(b). 16 I should add that the Court has a general power to require answers by a liquidator under s 536(3) and that power does not depend upon the existence of circumstances falling within s 536(1) or (2). I would exercise the power under s 536(3) in the present case. 17 I have made it clear to the parties that I do not propose myself to conduct the enquiry under s 536. In view of the comments which I have made in the judgment, I think it is wiser that the enquiry proceed before another Judge, and that I consider that Judge's report when making final costs orders in these proceedings. 18 Mr Bathurst has indicated that if I do not accept his submissions, the Liquidators will appeal on this point. I will stay any further step in an enquiry under s 536 until 29 February 2008. When grounds of appeal generally have been formulated, an extension of the stay can be sought from the Court of Appeal. 19 I make the following orders:

Hall & Ors v Poolman & Ors

At a glance

Court

Decision date

Before

Source

Judgment (19 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (2)

Cited By (3)