GREENWOOD J:
1 These proceedings most recently came before the Court on Friday, 24 May 2019. When originally allocated that date for a hearing, the question to be decided was the plaintiff's application for an order that Canford Property Group Pty Ltd (the "company") be wound up on the just and equitable ground: s 461(1)(k) of the Corporations Act 2001 (Cth) (the "Act"). The plaintiff had also sought a winding-up order on grounds of oppression: s 233 of the Act. The application was originally filed on 5 November 2018.
2 The plaintiff also sought an order in that application that Anne-Marie Jane Barley be appointed Official Liquidator of the company.
3 By the time the application came before the Court on 24 May 2019, the questions in issue had resolved to two matters in controversy. I will return to those matters shortly.
4 As to the making of a winding-up order, the parties all supported the making of an order on the s 461(1)(k) ground. The plaintiff is Gregory John Harris as trustee for the Nedyah Investment Trust. Mr Harris holds 50 ordinary shares and 40 E class shares in the company in his trustee capacity. The first defendant is Roland James Evans. At one point, Mr Evans held shares in the company. Transactions occurred which are not necessary to mention here with the result that he no longer holds shares in the company. I will return to an aspect of the relationship between Mr Harris and Mr Evans later in these reasons. The second defendant is Tracy Lisa Evans as trustee for the Evans Family Trust. Ms Evans is married to the first defendant. Ms Evans holds 75 ordinary shares and 60 D class shares in the company in her trustee capacity. Both Mr Harris and Mr Evans have maintained Director Loan Accounts in accordance with Div 7A of the Income Tax Assessment Act 1936 (Cth).
5 Ms Evans controls the majority of votes that could be cast at a shareholders meeting.
6 In the result, all of these parties supported the making of a winding-up order on the just and equitable ground. However, that consensus needs a little further explanation without descending into any aspects of the merits or otherwise of any claim or contrary position on the facts.
7 The application made by Mr Harris as filed was supported by an affidavit of his also filed on 5 November 2018 as to the foundation facts upon which he relied to make good the contended basis for an order. In that affidavit, Mr Harris says that he and Mr Evans met in 2010. They decided to go into business together to conduct a real estate business. They incorporated the company for that purpose on 1 April 2014. They were the only two directors. They (the company) leased business premises in Surfers Paradise from 20 January 2016. The initial 100 issued shares were held beneficially by the Evans family as to 50 shares and by the Harris family as to 50 shares. The business of the company developed over time. At one point Mr Evans was the trustee of the trust of which the Harris family were beneficiaries. The business relationship between Mr Harris and Mr Evans (and Ms Evans) continued throughout 2017. Things began to change in 2018.
8 The point of this for present purposes is that Mr Harris makes a range of serious allegations about "questionable transactions" of the company identified by reference to a particular spreadsheet. Mr Harris asserts particular conduct in relation to those matters (and other conduct) on the part of Mr Evans. Mr Evans responded to the contentions in his affidavit of 22 November 2018. Evidence was put on by the defendants from Joshua Peter Dimon analysing the transactions reflected in the spreadsheet. That evidence seeks to demonstrate that the relevant transactions are not, in truth, questionable. Mr Dimon is a chartered accountant and a principal of Peregrine Services Pty Ltd ("Peregrine"). Peregrine has provided accountancy services to the company since 1 April 2004.
9 In the context of this adversarial controversy, Mr Harris made an interlocutory application for the appointment of an Official Liquidator, provisionally, pursuant to s 472(2) of the Act. Mr Harris sought and obtained an order for the appointment of Ms Barley as the Provisional Liquidator of the company. That order was made on 23 November 2018 by Collier J: Harris (Trustee for the Nedyah Investment Trust) v Evans, in the matter of Canford Property Group Pty Ltd [2018] FCA 1856.
10 Pursuant to that order, Ms Barley embarked upon her duties and responsibilities as liquidator appointed provisionally and undertook a range of steps identified by her in various affidavits and particularly her affidavit of 19 March 2019 and two affidavits of 17 April 2019. On 16 May 2019, the Court approved the remuneration of Ms Barley for the period 23 November 2018 to 8 April 2019 of $87,294.35.
11 By 23 May 2019, Ms Evans, in her trustee capacity, and Mr Evans, adopted the position that they would consent to a winding-up order on the s 461(1)(k) ground under the Act. They say that there is no suggestion and nor is it a fact that the company is insolvent. However, they say that they consent to the order because "as a consequence of the appointment of the provisional liquidator … the business of the company has been significantly detrimentally affected in that previous and potential clients of the Company have been unwilling to appoint the Company to act as their agent in the sale of commercial property (being the business of the Company) while the Company [is] subject to the appointment of a provisional liquidator and following negative media articles regarding the appointment …".
12 They make the point, by their counsel, that although they consent to the order for the reasons given, they "strongly dispute" the allegations of Mr Harris that they were using company funds for expenses unrelated to the company's business and that they removed Mr Harris as a director because he confronted them about such conduct (which they deny).
13 The defendants accept that the company has reached a "volitional dead end" and is no longer "amenable to practical resolution by the shareholders" (French J, Re Narla Prospecting Pty Ltd (1992) 10 ACLC 1,310 at 1,312). It follows, they say, that the company ought to be wound up, and because there is an extant application seeking relief under s 461(1)(k) coupled with a liquidator having been in place, provisionally, since 23 November 2018, it is appropriate to act on that application and make the appointment on that ground.
14 The point of immediate importance is that in no sense do the defendants concede or accept any of the conduct contentions of Mr Harris. In no sense have they "effectively capitulated" or reluctantly agreed to any aspect of the merits of the case made against them. Mr Harris and Mr Evans are adversaries in the litigation. However, events have overtaken the company in such a way, at least in the view of the defendants, that the presence of a liquidator appointed to the company from 23 November 2018 has altered the landscape such that the company now needs to be administered in liquidation at its point of volitional dead end.
15 Since the parties were ad idem by 24 May 2019 as to the appropriateness of a winding-up order being made on the ground of s 461(1)(k), the only two questions alive on the application on 24 May 2019 were, first, whether Ms Barley is to be appointed as liquidator and second, whether Mr Harris ought to have an order that his costs of and incidental to the winding-up application (the proceedings) or at least his costs of the interlocutory application for the appointment of Ms Barley on a provisional basis, be paid out of the assets of the company. An order for the winding-up of the company was not made on 24 May 2019. That order is to be made on the resolution of the two outstanding issues.
16 As to the question of whether Ms Barley ought to be appointed as liquidator, Mr Harris took the unusual position that even though he had sought, by the original application, the appointment of Ms Barley; that he had sought and obtained an order for her appointment as Official Liquidator provisionally; that Ms Barley had been so acting since 23 November 2018; that Ms Barley had taken many steps, filed reports, become familiar with the company and its activities and had undertaken work and incurred costs and expenses resulting in an approval by the Court of her remuneration in an amount of $87,294.35 to 8 April 2019, nevertheless, Ms Barley should not now be appointed. Rather, the contention of Mr Harris is that Ms Barley should be displaced in favour of a new appointee, Mr Glenn O'Kearney.
17 That proposition was said to be in the best interests of creditors essentially for two reasons.
18 First, Mr Harris relied upon his affidavit affirmed on 24 May 2019 in which he says that he does "not currently have the means to fund any action commenced by a liquidator". Thus, he would not be able to indemnify the liquidator for the costs of any investigations nor the expenses of retaining a law firm to pursue any claims that a liquidator would recommend be brought.
19 Second, Mr O'Kearney would be willing to accept an appointment by the Court as Official Liquidator of the company on the basis set out in a letter dated 29 April 2019 addressed to Mr Daniel Wignall, the solicitor for Mr Harris (Macpherson Kelley). In that letter, Mr O'Kearney sets out a schedule of hourly rates which would apply for work undertaken by individuals at a range of levels, retained or employed by him: for example, Mr O'Kearney as appointee, $585/hr; manager, $505/hr; supervisor $435/hr; and rates for positions described as Senior, Associate 1, Associate 2, Junior Associate, Administration, Junior Accountant and Filing Clerk/Secretary. However, Mr O'Kearney also said this in his letter of 29 April 2019:
Whilst my remuneration will be subject to approval by creditors or the Court, I confirm that if appointed, myself or my staff will not charge any remuneration for time spent in dealing with the initial transitioning of the appointment from the incumbent liquidator to myself as the potential incoming liquidator. This would include not charging time for the initial review of the incumbent liquidators file and company records.
In addition to this, I will agree to seek approval for remuneration incurred on this engagement at a 15% discount to the standard GT Advisory & Consulting Standard Hourly Rates (copy *attached).
I also understand that the liquidation may be unfunded. I confirm that I will not require any upfront payment and/or funding in this matter, either to provide my consent, or to conduct my statutory investigations and undertake recovery action (if appointed, and if any commercial recovery action is identified in the course of the investigation).
20 Counsel for Mr Harris says that the average cost of the fees charged for the four most senior employees of Ms Barley's firm is $448/hr, whereas the comparative number for Mr O'Kearney's firm is $475/hr. However, counsel for Mr Harris says that Mr O'Kearney is willing to discount his fees by 15% which results in an amount of $403/hr as the average hourly rate for the four most senior employees he would deploy on the liquidation. Counsel for Mr Harris says that this is a substantial saving.
21 Counsel for Mr Harris also says that the material includes evidence which he characterises as "likely to ground significant recovery proceedings, particularly against the [Defendants]". Counsel for Mr Harris says that Ms Barley has not indicated how any investigations conducted by her might be funded nor how proceedings might be funded. Since Mr Harris does not have funds, the proposal for Mr O'Kearney to accept an appointment on the basis that he will not require any "upfront payment and/or funding in the matter" in the conduct of statutory investigations or in undertaking recovery action as might be recommended by a liquidator, serves, it is said, the best interests of the creditors. Counsel for Mr Harris says that it is of considerable concern to Mr Harris that Ms Barley will not have the financial resources to "pursue extensive investigations or recovery proceedings if they are warranted". The proposition then is that the orderly liquidation of the company could be "stifled". Counsel for Mr Harris also says that this consideration is a factor which "no doubt, is influencing the [Defendants'] insistence on her appointment".
22 As to the last matter, I am not at all willing to draw an inference that such a consideration is informing the position adopted by the defendants. Their position is that Ms Barley was the person Mr Harris urged the Court to appoint from the very outset of the filing of the application. Ms Barley was the person Mr Harris sought to have appointed as Official Liquidator of the company provisionally. Such order was made on 23 November 2018, and since then, Ms Barley has been professionally discharging her role and undertaking a considerable body of work. She has become familiar with the business of the company and a range of matters related to its transactional activity. As a matter of principle, it would be an odd thing to displace a professional liquidator from the role as Official Liquidator on the making of the winding-up order in those circumstances absent any criticism of the conduct of Ms Barley or any evidence of any question about her conduct in the relevant period.
23 There is no claim made by Mr Harris or his advisers that Ms Barley has done anything other than act professionally throughout.
24 The real point is that Mr O'Kearney is willing, according to the letter of 29 April 2019, it seems, without funding, to undertake statutory activities and incur and carry the cost of taking and conducting legal proceedings to pursue any matter he determines ought to be pursued as a result of judgements he makes based upon his inquiries and investigations.
25 On 24 May 2019, I indicated that, as a matter of principle, I would be willing to consider an appointment of Mr O'Kearney as Official Liquidator on the footing that there seemed to be the possibility of some advantage to the creditors of the steps Mr O'Kearney says he is willing to take in the administration, without funding. However, I advised the parties that I would not be prepared to act upon the basis of the statements made by Mr O'Kearney in his letter of 29 April 2019. Rather, I said that I would wish to see an affidavit from Mr O'Kearney in which he sets out with some precision exactly what he is prepared to do as Official Liquidator in a way which might provide advantage to the creditors should he be appointed so as to outweigh the consideration that Ms Barley be appointed as Official Liquidator on the winding-up order having regard to the natural advantage she has of having become familiar with the company, its undertaking and related matters.
26 On 28 May 2019, the solicitors for Mr Harris filed an affidavit of Mr O'Kearney sworn that day. In that affidavit, Mr O'Kearney affirms that he will not charge any remuneration for work related to transitioning a handover of files from Ms Barley and reviewing work completed to date. Mr O'Kearney identifies at para 8(a) to (ff) a range of steps he would undertake as Official Liquidator. Many of these steps are steps required to be taken under the Act in discharge of the duties and responsibilities of the liquidator. Apart from those matters which I would describe as in the nature of administrative and regulatory obligations of the liquidator, Mr O'Kearney says he would undertake the following work:
(z) Conducting investigations into the solvency of the Company including any potential insolvent trading by director/s;
(aa) Conducting investigations into the existence of potential voidable transactions such as unfair preference payments, uncommercial transactions and unreasonable director related transactions;
(bb) Conducting investigations as to whether:
i. a past or present officer, or member of the Company may be guilty of an offence in relation to the Company; and/or
ii. a person who has taken part in the formation, promotion, administration, management or winding up of the Company has misapplied money or property of the Company or may be guilty of negligence, default, breach of duty or trust in relation to the Company;
(cc) If breaches are identified:
i. preparing and lodging a report with ASIC pursuant to section 533 of the Act;
ii. using my best endeavours and available resources, including approaching solicitors who may agree to take on any recovery matters on a speculative basis, to pursue the action further.
(dd) Conducting investigations of the Company's historical records including financial data, director loan accounts, related party transactions and trust account transactions;
(ee) Preparing a statutory report to creditors outlining the results of the investigations undertaken, assets and liabilities of the Company based on information to be obtained, listing investigations still to be conducted, outlining any director breaches and potential recovery actions;
(ff) Receiving, considering and responding to any requests for information from creditors.
27 These aspects of Mr O'Kearney's affidavit suggest that Mr O'Kearney is willing to conduct the investigations at paras 8(z) to 8 (ff) and should those investigations reveal matters which cause Mr O'Kearney to conclude that there is a proper basis for pursuing proceedings against any person, Mr O'Kearney would be willing to use his "best endeavours" and "available resources" to pursue such actions including "approaching solicitors who may agree to take on recovery matters on a speculative basis".
28 As to the reference to "available resources", it is not clear whether that is simply a reference to the resources of the company available to a liquidator to pursue a proceeding should any investigation reveal a basis for any relevant claim. In that sense, Ms Barley is in the same position as Mr O'Kearney. Mr O'Kearney is not now saying that he will not require any "upfront payment/or funding" to "undertake recovery action" which seemed previously to suggest that he would be willing to conduct such actions without funding, but rather his position now is that he will approach solicitors to determine whether any firm might accept instructions on a speculative basis. Ms Barley would be in precisely the same position as Mr O'Kearney in that regard. If her investigations reveal a basis for action against any person and the available resources are insufficient to fund an action, Ms Barley might also investigate whether a firm of solicitors might act in any matter on a speculative basis. Although I was willing to consider, in principle, the possibility of appointing Mr O'Kearney as Official Liquidator on the making of the winding-up order, subject to an affidavit from him identifying the precise content of the steps he says he would be willing to take without funding, I am not satisfied that these considerations outweigh the highly material consideration that Ms Barley has been acting provisionally for a considerable period of time. She is familiar with the scope of the undertaking and has undertaken much work to date. I am satisfied that Ms Barley ought to be appointed as Official Liquidator.
29 The second matter concerns the question of the costs incurred by Mr Harris in bringing the winding-up application and in making the interlocutory application for the appointment of Ms Barley, provisionally, on 23 November 2018. On 24 May 2019, I determined the question of costs and I do not propose to re-open the matter. I determined that Mr Harris ought not to have his costs out of the property of the company. Mr Harris did not seek an order for the costs of the principal application or the interlocutory application against the defendants. That approach was clearly the sensible and correct course as there is simply no basis for an order in favour of Mr Harris against the defendants in circumstances where none of the claims made by him have been established by judicial proceedings and none are conceded. The merits of each and every allegation of fact remained on 24 May 2019 (and remains) in controversy. There is an adversarial contest where everything remains in issue.
30 The determination of whether a party is to be ordered to pay the costs of and incidental to such a proceeding can only be determined upon the quelling of the controversy according to a judgment on the merits. That position is clear: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622. That proposition has been approved many times in the High Court: Plaintiff M40/2015 v Minister for Immigration and Border Protection and Another; Plaintiff M41/2015 v Minister for Immigration and Border Protection & Anor [2015] HCATrans 97 (22 April 2015), Hayne J; Plaintiff S193/2018 v The Judges of the Federal Court of Australia & Anor [2019] HCATrans 65 (9 April 2019), Gordon J; Woollahra Municipal Council v Minister for Local Government & Ors [2017] HCATrans 244 (29 November 2017), Gageler J; Plaintiff M150 of 2013 by his Litigation Guardian Sister Brigid Marie Arthur v Minister for Immigration and Border Protection and Anor; Plaintiff S297/2013 v Minister for Immigration and Border Protection and Anor [2014] HCATrans 147 (3 July 2014), French CJ.
31 Mr Harris, however, sought an order that his costs of the winding-up proceeding or at least the costs of the interlocutory application for the appointment of Ms Barley as Provisional Liquidator be paid out of the property of the company pursuant to s 466(2) of the Act. Section 466(2) falls within Div 1 of Pt 5.4B of the Act which addresses the topic of winding up in insolvency or by the Court. In relation to applications made under s 462 of the Act in reliance upon a ground under s 461(1), s 466(1) provides that persons (other than the company itself or the liquidator), on whose application any winding-up order is made, must, at their own cost, prosecute all proceedings in the winding-up until a liquidator has been appointed (under Pt 5.4B). Section 466(2) provides that the liquidator must, unless the Court orders otherwise, reimburse the plaintiff out of the property of the company, the taxed costs incurred by the plaintiff in any such proceedings (which is a reference to proceedings contemplated by s 466(1)).
32 The statutory starting point is that the liquidator must reimburse the plaintiff out of the property of the company, unless the Court orders otherwise. A discretion has, no doubt, been conferred on the Court in relation to such costs because s 461(1) recites grounds which engage objectively straightforward matters such as those at grounds (a), (c) and (d) on the one hand and matters of greater complexity and controversy between members and others at grounds (e), (f), (g) and (k), on the other hand. In this case, the principal ground relied upon by Mr Harris is the just and equitable ground under s 461(1)(k). Ultimately, a winding-up order is to be made because events in the life of the company by reason of the winding-up proceeding and particularly the intervention of the appointment of a provisional liquidator, have, in the opinion of the defendants, brought the company to an end as a vehicle of any utility for its undertaking. As a result, the defendants now consent to a winding-up order. The plaintiff presses the making of an order as well. There is no need to now determine any aspect of the anterior controversy with its various point and counterpoint contentions.
33 There seems to me to be no good reason why the costs of the plaintiff (or for that matter, the costs of the defendants) incurred in engaging in this contested inter se adversarial set of questions should be paid out of the property of the company. Events have overtaken the proceedings. The costs should lie where they fall with each side bearing their own costs. I so determined on 24 May 2019 and the final orders are to reflect that position.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.