Hayes (Liquidator) v 5G Developments Pty Ltd, in the matter of 5G Developments Pty Ltd

Federal Court of Australia|2019-09-20|Before: Stewart J

Introduction 1 On 20 September 2019, I made orders in this matter with reasons to be given later. These are my reasons. 2 The first plaintiff, Mr Hayes, is the liquidator of the second plaintiff, Denham Constructions Pty Ltd (DC). 3 The first defendant is 5G Developments Pty Ltd, which was formerly known as Denham Wyndham Pty Ltd (DW). Although it is cited as the first defendant, it was deregistered as a company on 1 August 2018. As will be seen, a critical part of the relief sought by the plaintiffs is the reinstatement of the registration of DW. 4 The second defendant is 5G Capital Investments Pty Ltd (5GCI), which was the sole shareholder of DW at the time that it was deregistered. The sole director of DW at that time, the person who applied for its deregistration, and the shareholder and director of 5GCI is Mr Massie. 5 The third defendant is the Australian Securities and Investments Commission (ASIC). It took no part in the proceeding but is a necessary party. 6 The proceeding was commenced by originating process filed on 14 August 2019 when orders for short service and, in effect, expedition were sought and made. At least one claim which the plaintiffs contend should be brought by a liquidator of DW if it is reinstated and a liquidator appointed, must be commenced by 20 September 2019 because of an impending time-bar. On this basis the proceeding was given considerable expedition in its case management, 5GCI was required to put on evidence in a period of about two weeks and both sides of the case were required to file submissions and conduct the hearing under considerable time pressure. The expedition also required a judgment in a far shorter time than would normally be expected in a matter of this complexity. 7 The relief sought by the plaintiffs can be summarised as follows: (1) an order that DW be restored to the register; (2) an order that DW then be wound up, either on the basis that it is insolvent or because it would be just and equitable to do so; (3) an order that Mr Hayes be appointed as liquidator of DW; and, if necessary, (4) an order that an additional liquidator also be appointed to DW, as a special purpose liquidator to determine whether a proof of debt which would be submitted in the liquidation of DW by Mr Hayes as liquidator of DC for an amount of approximately $12 million should be admitted in whole or in part. 8 Mr Hayes's case, briefly stated, is that in the course of executing his duties as liquidator of DC he made various investigations including by the examination of witnesses and the production of documents from which he has concluded that DC has a clear claim against DW in the sum of approximately $12 million, and that DW has clear claims against other parties, in particular 5GCI and related companies and Mr Massie. Those claims are based on contentions that various transactions entered into by DW were uncommercial transactions, insolvent transactions or voidable transactions within the meaning of the relevant provisions of the Corporations Act 2001 (Cth), and that Mr Massie was in breach of his duties as director. 9 In a separate proceeding commenced at the same time, Mr Hayes as liquidator of DC seeks to set aside some of the transactions which are also the subject of the prospective claims by DC against DW. 10 Mr Hayes says that he should be appointed liquidator of DW because, having conducted the investigations of DC, and, given the limited time available, he is in the best position to bring the claims on behalf of DW and no one else is presently in a position to do so. However, recognising the potential conflict of interest position that he will be in being both the liquidator of DC and DW in circumstances where DC asserts a very substantial claim against DW, he seeks the appointment of a special purpose liquidator - if deemed necessary - to deal with the narrow question of assessing DC's intended proof of debt in the liquidation of DW.

Reinstatement - principles 11 The relief for the reinstatement of the registration of DW is sought under s 601AH(2) of the Corporations Act. That sub-section provides that the court may make an order that ASIC reinstate the registration of a company if an application for reinstatement is made to the court by, relevantly, "a person aggrieved by the deregistration", and the court is satisfied that it is just that the company's registration be reinstated. 12 It is settled that, in addition to the requirements that the plaintiff is a "person aggrieved" by the deregistration of the company and that it is "just" to restore the company to the register, there is a residual discretion in the court to refuse to make an order that the company be restored to the register: Deputy Commissioner of Taxation; in the matter of James Hardie Australia Finance Pty Ltd (deregistered) [2008] FCA 1181; 170 FCR 545 at [13] per Lindgren J. 13 Insofar as the requirement that the applicant is "a person aggrieved" is concerned, the threshold is low; the assessment needs to be dealt with in a summary way; as long as the claim is not plainly hopeless and bound to fail, it should, subject to other relevant matters, proceed: Re Brockweir Pty Ltd [2012] VSC 225 at [22] per Sifris J. 14 In determining whether or not a party is "a person aggrieved", it is merely necessary to distinguish them from "an officious bystander or mere busybody": Partners v Sampson [2002] NSWSC 383 at [8] per Barrett J. The expression is of wide import and is to be construed liberally: Boys, in the matter of 38 Akuna Pty Ltd (Deregistered) v ASIC [2019] FCA 320 at [26] per Lee J. The expression includes a person who has a right of some value or potential value, including a right to bring proceedings against the company: In the matter of Likehart Pty Ltd (deregistered) [2017] NSWSC 884 at [18] per Black J. 15 Insofar as whether it is "just" to restore the company to the register, the court is concerned with the justice of reinstating the company, not the justice of any proceedings which it is proposed that the reinstated company might institute: In the matter of ERB International Pty Ltd (deregistered) [2014] NSWSC 200; 98 ACSR 124 at [10] per Brereton J; Yeo v Australian Securities & Investments Commission, in the matter of Jo Woo International Education Centre Pty Ltd (deregistered) [2017] FCA 1480 at [12] per Gleeson J. 16 On the application for reinstatement, it is generally not appropriate to seek to resolve factual matters which may be in dispute other than in the clearest of cases; if it were clear that the prospective action would be stayed as an abuse of process, then the reinstatement would be futile and the court would not order it, either because it was not just to do so or in the exercise of the court's residual discretion: AMP General Insurance Limited v Victorian WorkCover Authority [2006] VSCA 236; 15 VR 176 at [35] per Maxwell P and Neave JA; Deputy Commissioner of Taxation v Australian Securities & Investment Commission; re Civic Finance Pty Ltd (deregistered) [2010] FCA 1411; 81 ATR 456 at [14] per Jagot J. 17 Insofar as the discretion is concerned, if "positive findings are made on the first two matters, then in the ordinary course an order for reinstatement will be made"; Re Newfront Pty Ltd (deregistered) [2008] SASC 127 at [9] per Gray J; Yeo at [25]. Further, questions of delay in bringing the proceedings and prejudice that such delay causes other parties may be relevant to the exercise of the discretion: James Hardie at [60] and [64].

Winding up - is DC a creditor of DW? 18 Because Mr Hayes seeks, simultaneously with the order reinstating DW, the winding up of DW, he must also establish the basis to wind up DW. In that regard, he relies on s 459A of the Corporations Act on the basis that on being reinstated DW is or will be "insolvent" and, alternatively, on s 461(1)(k) of the Corporations Act on the basis that "it is just and equitable that the company be wound up". 19 With regard to his reliance on s 459A, Mr Hayes accepts that he must establish that DC is "a creditor (even if … only a contingent or prospective creditor)" of DW within the meaning of s 459P. Similarly, with regard to his reliance on s 461, Mr Hayes accepts that he must establish that DC is "a creditor (including a contingent or prospective creditor)" of DW within the meaning of s 462(2)(b). 20 Thus, Mr Hayes seeks to establish that DC is a creditor of DW for two different purposes, each of which requires a different standard. The one purpose is to show that DC is a person "aggrieved" by the deregistration of DW which, as dealt with above, needs to be established at only a low level. The other purpose is to show that DC is a creditor of DW in order that it has standing to seek the winding up of DW which needs to be established at a higher level. I understood Mr Hayes to accept that if I am not satisfied to the required standard that DC is a creditor of DW and on that basis would not make an order for the winding up of DW, then even if I am satisfied that DC is a person aggrieved by the deregistration of DW there will be no point in restoring DW to the register - it would not be "just" to do so and the application should be dismissed. 21 From that analysis it is apparent that the critical issue in the case is whether it is established to the requisite standard that DC is a creditor of DW. If that is established, then it must follow that DC is a person aggrieved. On the question of restoring DW to the register, there will still be other issues to address including whether it is just that DW be restored to the register, whether the court should in any event exercise its discretion against restoring DW to the register, whether Mr Hayes should be appointed as liquidator and whether a special purpose liquidator should be appointed. 22 Although the applicable principles on whether DC is "aggrieved" by the deregistration of DW were essentially common ground, competing submissions were made with regard to the applicable test as to whether DC is a creditor of DW such as to give it standing to seek the winding up of DW. Some passages in the authorities to which I was referred deal expressly with unliquidated damages claims, but since DC's claim is a claim for a liquidated debt those authorities are apt to mislead and I put them to one side. 23 In Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 39 NSWLR 311 (at 317-323), Santow J set out a number of legal principles with regard to the standing of a party to apply for the winding up of a company. Relevantly, his Honour said (at 317G) that such an applicant is required to establish a debt and that where there is a bona fide dispute of substance as to the existence of the debt, it cannot be said that the claimant is a creditor who has the right to bring proceedings. His Honour expressly (at 318B) dissented from the view that "an arguable claim" against the company is sufficient to give a petitioning creditor standing to seek the liquidation of the company. That was on the basis that the potentially fatal power to trigger winding up was not intended to be vested in those with merely arguable claims. Such claims might well turn out eventually to be without foundation, yet the company may have been destroyed or injured with no redress. 24 In Treadtel International Pty Ltd v Cocco [2016] NSWCA 360; 117 ACSR 176 at [57] per Barrett AJA (with whom Gleeson and Leeming JJA agreed), it was said that it is a well-established rule of practice that a person who claims to be a creditor but his debt is disputed on genuine grounds will not be permitted to initiate or pursue a winding up application. Reference was made to Mann v Goldstein [1968] 1 WLR 1091 at 1098-9; [1968] 2 All ER 769 at 775 where Ungoed-Thomas J stated that "the winding up jurisdiction is not for the purpose of deciding a disputed debt (that is, disputed on substantial and not insubstantial grounds)". 25 The position thus resolves to this. The petitioner for winding up must establish that it is a creditor of the company that is sought to be wound up. If there is a genuine dispute with regard to the debt, in the sense that it is disputed on substantial and not insubstantial grounds, or if there is a bona fide dispute of substance, then the petitioner will have failed to establish that it is a creditor.

The evidence 26 The plaintiffs relied on two affidavits of Mr Hayes and a number of documents in two substantial exhibits, as well as further tendered documents. As is to be expected from a liquidator, Mr Hayes does not have personal knowledge of the relevant events underlying the transactions in issue. His personal knowledge is restricted to what he did in the course of his investigations, and what was produced or said to him. In respect of the latter, the rule against hearsay is an obstacle to him. In essence, he was an investigator and can give admissible evidence only of his investigations and not of the underlying facts. 27 In a manner not uncommon to liquidators, Mr Hayes's affidavits set out the conclusions and opinions that he reached as a consequence of his investigations. Objection was justifiably taken to that approach, and I accordingly restricted all such conclusions and opinions under s 136 of the Evidence Act 1995 (Cth) to be treated as his submissions and not to be evidence of the truth of the facts or opinions asserted. The consequence was that the plaintiffs' case was for the most part a documentary case. In critical respects it relies on inferences. 28 Mr Hayes also sought to rely on the transcripts of examinations that he had conducted under s 596A of the Corporations Act. 5GCI objected to the tender of the transcripts on the basis that they are inadmissible hearsay under s 59 of the Evidence Act. Ultimately, Mr Hayes sought to rely on only one transcript, being the transcript of the evidence given on examination by Stephen McGrath on 16 November 2018. As will be seen, Mr McGrath was the sole director of DC and DW in the period in which Mr Hayes says that DW's debt to DC arose. 29 On the basis that a ruling on the admission of the transcript was not necessary during the hearing, I provisionally admitted the transcript on the basis that I would make a ruling in due course. It is that ruling to which I now turn. 30 Within the transcript of the examination of Mr McGrath, Mr Hayes sought to rely on three particular extracts which were said to be admissions by Mr McGrath either for himself or on behalf of DW and are therefore admissible under s 81 of the Evidence Act as exceptions to the rule against hearsay. It was accepted that in the event that one or more of the particular extracts was admitted, then the whole transcript should be admitted in order to provide context to the particular extract or extracts which was admitted. This approach is provided for in s 81(2) of the Evidence Act. 31 Section 59(1) of the Evidence Act is the provision against the admission of hearsay evidence. It provides that evidence of a previous representation made by a person is not admissible to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation. The passages in the transcript on which Mr Hayes seeks to rely are evidence of previous representations made by Mr McGrath and they are sought to be relied on to prove the existence of facts that Mr McGrath asserted. Those extracts therefore constitute hearsay evidence and are prima facie not admissible. 32 Section 81(1) of the Evidence Act provides that the hearsay rule does not apply to evidence of an admission. "Admission" is defined in Part 1 of the dictionary in the Act as being a previous representation that is: (a) made by a person who is or becomes a party to a proceeding; and (b) adverse to the person's interest in the outcome of the proceeding. 33 As Mr McGrath is not a party to the proceeding, anything that he stated adverse to his interests will not constitute an admission within this definition. However, s 87(1) provides that for the purpose of determining whether a previous representation made by a person is also taken to be an admission by a party, the court is to admit the representation if it is reasonably open to find that, relevantly, when the representation was made, the person had authority to make statements on behalf of the party in relation to the matter with respect to which the representation was made. On this basis, Mr Hayes submitted that the statements by Mr McGrath recorded in the transcript that are adverse to the interests of DW were made by Mr McGrath with the authority of DW and, since DW is the first defendant in this proceeding, they are therefore representations of a party to the proceeding. On that basis it was submitted that the statements by Mr McGrath qualify as admissions within the definition and are therefore to be admitted under s 81. 34 The difficulty with this is that DW was the deregistered on 1 August 2018 and the statements by Mr McGrath were made some months later on 16 November 2018. In any event, Mr McGrath had ceased being a director of DW on 26 April 2017. Therefore, the temporal requirement in s 87(1) that "when the representation was made" Mr McGrath had authority to make the statements on behalf of DW cannot be fulfilled. 35 In response to this difficulty, Mr Hayes submitted that the statements made by Mr McGrath in November 2018 were with regard to events that occurred at an earlier time when he was a director of DW with the consequence that the temporal requirement of s 87(1) was established. I do not think that this can be correct. The wording of the provision is quite clear. It refers to the time when the representation is made, not the time when the events occurred. It cannot be said that Mr McGrath had the authority of DW to make representations on its behalf, albeit with regard to events that occurred when he was the director of DW, at a time when DW did not exist and Mr McGrath and long ceased being a director of DW. 36 There is the additional difficulty that although DW is cited as a party to the proceeding, since it does not exist it cannot readily be regarded as a party to the proceeding within the requirement of the definition of admission. I do not, however, need to decide that point in view of the inability of the statements to qualify as being on behalf of DW within the meaning of s 87(1). 37 In the result, I rule that the transcript of the examination of Mr McGrath is not admissible. 38 For completeness, it can be noted that Mr Hayes did not seek to rely on s 597(14) of the Corporations Act on the question of the admissibility of the transcript. That was presumably because that provision requires that the proceeding in which the transcript is sought to be adduced is a proceeding "against the person" who was examined. The present proceeding is not a proceeding against Mr McGrath, and since it was he who was examined and not DW the fact of the proceeding being against DW - if indeed it can be said that it is - does not assist. See Harmon v Hartford [2019] NSWSC 413; 136 ACSR 94 at [2]-[6] per Rees J. 39 With leave, Mr Hayes supplemented his affidavit evidence with brief oral evidence on the origin of a particular document that he tendered and on why the proceeding was commenced at such a short time before the time-bar in respect of some of the prospective claims by DW. He was cross-examined briefly. 40 5GCI relied on an affidavit by Mr Massie as well as a substantial number of documents. Mr Massie was not required for cross-examination.

The events 41 There are two principal periods of time in the relevant events. The first commenced in July 2005 when DW purchased land at Bowral for the development of what is referred to as a lifestyle retirement resort. That period ended and the second period began in about March 2015 when DW and associated companies were in financial difficulties and Mr Massie and his group of companies, the 5G Group, became involved to assist. The second period of time can be regarded as having ended in August 2018 when DW was deregistered. 42 In the first period of time, the central figure involved in the events was Mr McGrath. Once the 5G Group became involved in about March 2015, Mr Massie and Mr McGrath were both involved in the relevant events. 43 The first period of time is principally relevant to the question whether DC is a creditor of DW as the claimed debt is said to have arisen in that period. 44 The second period of time is principally relevant to the issue of whether it would be just to restore DW to the register, to issues of discretion and to whether, if restored to the register, DW should be wound up. That is because it is in the second period of time that DW entered into various transactions which Mr Hayes says are liable to be made void and in relation to which compensation claims are asserted. If there is no reasonable case in that regard, then there is no purpose to be served in restoring DW to the register and it would therefore not be "just" to do so. It is also in the second period of time that the question of DW's solvency is to be addressed for the purpose of deciding whether DW should be wound up if restored to the register, and alternatively whether it would be just and equitable to wind up DW.

The first period and DW's alleged debts to DC 45 DC was registered in March 1999. Mr McGrath was a director of that company from its inception until April 2018. Mr Hayes was appointed liquidator of the company in September 2016 when DC was wound up. 46 DW was registered in May 2005. Mr McGrath was a director of that company from that date until April 2017. Mr Massie was appointed as a director in November 2015, although that appointment was not recorded by ASIC until 15 August 2016. When Mr McGrath ceased being a director in April 2017, Mr Massie continued as the sole director until August 2018 when the company was deregistered. 47 At all relevant times until November 2015, Mr McGrath was the sole shareholder of DW and he was the sole shareholder of DC. From November 2015 a company that Mr Massie and his associates controlled, Level 10 Nominees Pty Ltd, represented the majority shareholding in DW. Mr McGrath's shareholding in DW ended in June 2017. 48 Thus, until Mr Massie became a director of DW in November 2015, both companies had the same sole director, Mr McGrath, both were controlled by Mr McGrath, and both conducted business from the same offices, had the same external accountants and advisors and were administered or monitored by the same people. 49 At all relevant times, DW acted as the trustee of the Wyndham Estate Discretionary Trust, which was also known as the Denham Wyndham Discretionary Trust. The beneficiaries of the Trust included Stephen McGrath and various members of his family and, later in mid-2017, additional beneficiaries were added who were associates or relatives of Mr Massie. DW thus apparently conducted its business in the development of the resort as trustee of the Trust.

MBL facility 50 On 29 July 2005, DW and Macquarie Bank Ltd (MBL) concluded an Investment Facility and Guarantee Agreement by which MBL provided a loan to DW for the construction of the resort. The Facility is not in evidence, but it was subsequently varied on three occasions and each variation is in evidence. 51 The First Deed of Variation of the Facility was concluded on 24 May 2006. The Facility limit was the lesser of $29.179 million at the commencement of Stage 1 and $13.884 million at the commencement of Stage 2. The First Deed of Variation records that one of the securities for the loan by MBL to DW is a registered second ranking Fixed and Floating Charge by DC in favour of MBL over all DC's assets and undertaking. Thus, DC became a guarantor of DW's debt to MBL. 52 The Second Deed of Variation is undated, save for an indication that it may have been concluded in 2007. Its terms are not presently relevant. 53 The Third Deed of Variation of the Facility was concluded on 6 May 2010. Its recitals record that sales of the constituent parts of the resort had not proceeded as envisaged and various events of default under the Facility had occurred, including a failure to repay the Facility upon the due date for repayment. They also record that it is in the interests of all parties, and as a more commercially acceptable outcome than MBL exercising some or all of its securities, that they agree to further vary the Facility as set out in the Third Deed. 54 Clause 3(a) records that as at the date of the Third Deed, the total amount owing under the Facility is $31,963,000 which will be divided into two tranches, being Tranche 1 of $6,700,000 and Tranche 2 of $25,263,000. Clause 4.1(a) provides that in consideration of MBL entering into the Third Deed, DC agrees to pay MBL the sum of $6,700,000 (plus interest) by equal calendar monthly instalments of not less than $100,000 per calendar month with the first payment being due on 28 February 2010. Under clause 4.3, MBL agreed to release some guarantors including DC if DC meets its obligations to MBL under clause 4.1(a) and no other events of default take place. Clause 2.1(a)(ii) provides that the liability of DC is limited to a total sum of $6,200,000 and its interests in Denmac Property Group Pty Ltd. 55 It is thus apparent that in return for the reduction of its exposure to MBL under its guarantee and fixed and floating charge provided pursuant to the original Facility (or the First Variation), and potentially its complete release from the guarantee, DC undertook to make the payments provided for in clause 4.1(a). 56 Mr Hayes says that the monthly payments that DC subsequently paid to MBL under the Third Deed were made on behalf of DW, or to discharge the debt of DW, such that they now amount to a debt owed by DW to DC. The payments made in this way amount to about $3.65 million. 57 Mr Hayes fortifies that position with reference to a DC ledger account which shows monthly payments of $100,000 by DC between 30 July 2010 and 1 June 2012 amounting to the sum of $3.65 million referred to. The description given in respect of each such payment is "DW Business Loan". Curiously, however, those payments are not reflected in the inter-company loan accounts in the general ledgers referred to below. I will refer to this as the first transaction detail ledger account. 58 Mr Hayes also refers to a DC ledger account reflecting similar monthly payments of $100,000 from 11 July 2012 to 1 December 2014 amounting to $2.45 million. The first seven of those payments, amounting to $700,000, also have the description "DW Business Loan". They also do not appear in the inter-company loan general ledger accounts referred to below. I shall refer to this as the second transaction detail ledger account. 59 I will return to the $100,000 monthly payments below.

Inter-company loan 60 About five years before the Third Deed of Variation, on 30 July 2005, Mr McGrath signed a document which records a loan from DC to DW for the purpose of developing the property. The document, which is titled "loan agreement", provides for DC to be paid a capitalised rate of interest of 7.2% on completion of the development and the return of the development profit to DW. The loan was recorded as being on an unsecured basis. The loan is not stated to be in any particular amount, the implication being that sums would be advanced from time to time. 61 It is the loan between the companies, which has its origin in that document, that Mr Hayes asserts gives rise to the debts that DC wishes to claim from DW. 62 The fact of the money being advanced by DC to DW under the loan is evidenced by books of account of both companies. 63 The DC general ledger (showing up to 30 June 2012) had an account named "Loan to Denham Wyndham Pty Ltd". That account showed regular debits against the account and occasional credits. The outstanding balance owing constantly grew from 2005 through to 30 June 2011 when it reached its zenith at $8,319,252. The balance was reduced slightly by some entries earlier in the following financial year before it was cleared by way of two entries on 30 June 2012. At that time the outstanding debt was $8,274,252. The first entry is a general journal entry cryptically described as "clear COA SPV Float fee" in the form of a credit in the sum of $1,274,252. The second is a deposit described as "repay loan as per SM" (SM, apparently being a reference to Mr McGrath) in the form of a credit of $7 million. The two credits match the existing balance such that the balance then became nil. 64 In the DW general ledger (showing up to 30 June 2014), there is an account titled "Loan-Denham Constructions". It commences in 2005 and reflects the mirror-entries to those in the DC ledger DW loan account. Those entries include reflecting a balance at 30 June 2011 of $8,319,252 owing to DC, which is the same as in the DC ledger. However, contrary to the DC general ledger account, there is only one entry thereafter in the DW ledger, which is on 30 June 2012, being a debit in the sum of $8,319,252 (i.e. reducing the balance to nil) which is described as "July 11 Interest on $6m (missed june 11)" and "Capitalise Int paid y/e 30/6/12". 65 It is immediately apparent that although the balance on the loan account in the general ledger of both companies was reflected as nil on 30 June 2012 following the entries on that date, the entries in each of the ledgers is different and, on the face of it, inconsistent. That certainly raises questions as to what happened to the inter-company debt as at 30 June 2012. There are legitimate doubts as to whether the books of account correctly reflect position as at 30 June 2012. 66 The position can also be traced with reference to the companies' balance sheets in their financial statements. In that regard, the DC financial statements for the year ended 30 June 2012, which were signed by Mr McGrath as director, reflect that as at 30 June 2011 there was a receivable from DW of $8,319,252, whereas a year later, on 30 June 2012, that receivable is nil. 67 The DW financial statements, in the form of financial statements for the Trust, as at 30 June 2012, which were also signed by Mr McGrath as director, reflect a non-current liability to DC in the sum of $8,319,252 as at 30 June 2011 but nil as at 30 June 2012. 68 The balance sheets of both companies are thus consistent in showing the eradication of the inter-company loan in the 2012 financial year, but it is not apparent from the financial statements what exactly occurred. As I have shown, reference to the companies' general ledgers produces incomplete and inconsistent answers. 69 In dealing above (at [57]-[58]) with the DC transaction detail ledger accounts showing the monthly payments of $100,000, I observed that those payments are not reflected in the DC and DW ledger inter-company loan accounts. However, the DC first transaction detail ledger account showing the $100,000 monthly payments up to 30 June 2012 includes a credit of $1.1 million on 30 June 2011 reflected as "General Journal" and "Jnl as PAM". PAM is apparently a reference to the companies' accountants, Pinker Arnold McLoughlin. 70 The corresponding entry is a debit in the same amount on the same day with the same notation in the DC ledger account for the loan to DW. There is also a corresponding entry in the DW loan account ledger. Thus, 11 months' worth of monthly payments were debited to the inter-company loan account in the books of both companies. Thus the $100,000 monthly payments by DC were treated as loans to DW at least up until 30 June 2011, noting that the Third Variation Deed by which DC undertook that liability to MBL was on 6 May 2010 and the first payment was due retrospectively on 28 February 2010. 71 However, as I have indicated, the loan account was reduced to nil in the ledgers and balance sheets of both companies on 30 June 2012. The subsequent monthly payments reflected in the transaction detail ledger accounts were not transferred to the loan account despite the notation "DW Business Loan" in respect of seven of them (as there was for the preceding 22). Instead the payment totalling $1.2 million (i.e. 12 payments of $100,000) for the 2012 financial year was transferred out of the transaction detail ledger accounts on 30 June 2012 by an entry to the general ledger reflected as "clear COA" and "move to COGS as SM". Just what COA is meant to denote is not apparent, although COGS is apparently cost of goods sold and, as before, SM is Mr McGrath, or so I infer. 72 Mr Hayes submits that it is to be inferred that the "disappearance" of the DC loan to DW at the end of the 2012 financial year is to be explained by it having been inexplicably, or illegitimately, transferred to Mr McGrath with the result that the records incorrectly showed that DW owed the various sums to Mr McGrath rather than to DC. As Mr McGrath was in control of both companies, the inference is that he was able to do this. The question though is whether it is the most reasonable inference to draw. 73 In that regard, it will be recalled that the DW debt to DC as at 30 June 2011 as reflected in the balance sheets of both companies was $8,319,252. It was then nil one year later. However, in the DW balance sheet between those years DW's debt to Mr McGrath increased from $2.4 million to $12,799,252, being an increase of $10,399,252. Mr Hayes submits that it is to be inferred that of that amount, $8,319,252 is the debt owed to DC from the previous year and $1.2 million is the amount paid by DC to MBL in the current year. That would leave a further $880,000 unaccounted for. In particular, in submitting that the inference is to be made that the debt to DC was transferred in the books as a debt to Mr McGrath reliance is placed on what would otherwise be the extraordinary coincidence of the last four digits of the respective figures being identical. 74 Mr Hayes then draws attention to the DW balance sheet for 30 June 2013 which reflects a debt to Mr McGrath of $13,999,252. That is an increase of $1.2 million over the previous year, which is the same amount that is shown in the second transaction detail ledger account to have been paid by DC to MBL. So, it was submitted, that once again what is properly the debt of DW to DC has been recorded in the balance sheet of DW as being a debt owed to Mr McGrath. 75 Next, Mr Hayes draws attention to DW's balance sheet as at 30 June 2014 which reflects the debt to Mr McGrath as $14,899,252, which is an increase of $900,000 over the previous year. That is the same amount that DC paid to MBL in that year. 76 The figures are not quite as neat for the following year. The DW balance sheet as at 30 June 2015 reflects the debt to Mr McGrath as $15,316,309, an increase of $417,057. However, the payments made by DC to MBL as reflected in the second transaction detail ledger account during that financial year amount to $350,000, leaving an unexplained difference of $67,057. That must have come from somewhere else. 77 In view of the ruling I have made upholding 5GCI's objection to the admissibility of the transcript of the examination of Mr McGrath, no evidence from Mr McGrath is available to explain what occurred in the accounts and whether they reflect the true position. There is, however, some limited evidence from Mr Hayes that goes to the question of whether there is a debt owed by DW to DC. He testified to the investigations undertaken by him and the documents sought and examined. Although the full details of those investigations were not given, it is quite apparent from the documents produced in this proceeding and the case that he advances that Mr Hayes undertook extensive investigations. He gave evidence of the large number of documents that were obtained from a number of different parties. 78 In that context, Mr Hayes says that he has not found a written agreement or deed of assignment or other document in the books of DC which would explain or justify the adjustments that were made in the 30 June 2012 balance sheets of DC and DW which had the effect of eliminating the debt of more than $8 million previously owed by DW to DC, or which would demonstrate that that debt was now owed to Mr McGrath. What I draw from that is that from the books of account available to Mr Hayes, no explanation for the inconsistent entries that I have referred to is apparent. That contributes, albeit only marginally, to a conclusion that in the absence of any evidence to the contrary that the general ledger loan accounts and balance sheets do not reflect the true position and that DW is indebted to DC. 79 Mr Massie was not involved with DW at the time of the events dealt with above, so he has offered no explanation. 5GCI has also not adduced any evidence from anyone else, such as Mr McGrath or a bookkeeper or accountant, to explain what occurred. 80 5GCI disputes the debt not on the basis that it does not exist, but that there are many possible explanations for what occurred in the accounts that do not support there being any existing indebtedness of DW to DC. Counsel for 5GCI pointed to other substantial changes in the balance sheet of DC between the 2011 and 2012 financial years. For example, it is not only the debt of DW that was reduced to nil, but also the debts of 11 other companies most or all of which are related. There was also an increase in trade debtors of approximately $7 million and a decrease of about $7.4 million of DC's liability on bank overdraft. The result is that although total assets reduced by approximately $8.4 million, total liabilities reduced by approximately $8.7 million with the result that the balance sheet improved by more than $300,000. It was submitted that that position overall is inconsistent with the theory that a substantial asset, being DW's debt to DC, was somehow spirited away by being improperly transferred to Mr McGrath. 81 The fact that the position overall did not change is unsurprising given that the debt was apparently transferred to Mr McGrath, i.e. it was still reflected as an asset in the balance sheet of DC. It also does not explain what occurred in respect of the sums paid by DC in the following years, even though some of those were recorded in the second transaction detail ledger account as being on loan to DW. The fact that DC was at that time itself liable to pay the sums to MBL on account of the Third Deed of Variation also does not adequately detract from the inference that those payments were made by way of loan to DW. That is because of the entries in the ledger accounts to which I have referred, and because DC became liable to MBL only because it was a guarantor of DW's loan from MBL. The most probable inference is that in discharging its liability to MBL, and hence also DW's liability to MBL, DC was making payments on DW's loan account with it. 82 5GCI also points to a payment admittedly made by Mr McGrath to DC of $7.2m in July 2013 from the proceeds of the sale of a property of his. It was submitted that since DC utilised an accrual system of accounting, that payment that was received by DC in the 2013/14 financial year could nevertheless have been properly credited in DC's books the previous year as a payment towards substantially reducing DW's debt to DC and correspondingly increasing DW's debt to Mr McGrath. Although that is of course possible, I am by no means satisfied that that is the most likely scenario. It is also possible that Mr McGrath was discharging his indebtedness to DC arising from payments amounting to approximately $8.1m as reflected in DC's "Job 50" ledger account which includes items that are apparently school fees, personal credit card repayments and various expenses arising from keeping horses. 83 The point is that there is nothing to show that the possibility identified by 5GCI actually occurred, and given the circumstances that I have identified above it is more likely that payments made by DC to MBL were merely recorded in the books of DW as owing to Mr McGrath rather than to DC. By expensing those payments in the books of DC (as indicated by the notation 'cost of goods sold') a tax advantage was derived, and by crediting them to Mr McGrath's loan account in DW, Mr McGrath got the benefit of them - at least on their then assumption that DW would be able to repay them one day. 84 The real question is whether any of the possible explanations offered on behalf of 5GCI gives rise to a genuine and substantial dispute with regard to the debt in the sense explained above (at [23]-[25]) , or whether it is merely speculation. In my view, 5GCI has not raised a genuine and substantial dispute with regard to the debt up to 30 June 2012. All that it has done is to speculate as to a variety of possibilities, some more plausible than others, but none enjoys any basis for an inference in its favour, or even to count against the most probable inference on the current evidence which is that DW's debt to DC was transferred to Mr McGrath without consideration to DC. 85 But I need not rest my decision on the debt as at 30 June 2012. The position in relation to the seven payments of $100,000 by DC to MBL between 11 July 2012 and 9 January 2013 which are expressly recorded as being "DW Business Loan" is even clearer. Those payments post-date the journal entries that reduced the inter-company loan account to nil at the end of the previous financial year, and are thus not possibly explained by the speculation with regard to the restructuring of intra-group debt that was offered in respect of that financial year. On the face of the books of account of DC, those payments were made on loan to DW and there is at this stage no genuine, credible or substantial explanation to the contrary. 86 In those circumstances, I am satisfied to the requisite standard that DC is a creditor of DW, at least in the amount of $700,000 but likely in the whole amount claimed. That is not a final finding of fact given the legal context in which, and the limited evidence on which, it is made. DC will still have to prove a debt in due course. 87 It follows from the finding that DC is a creditor of DW and, as dealt with further below, there is a reasonable basis to assert that DW has claims for compensation against third parties such that there is a prospect that DC's debt will be paid at least in part from DW's estate, that DC is also a person aggrieved by the deregistration of DW within the meaning of s 601AH(2) of the Corporations Act. 88 For completeness I should mention that 5GCI sought to rely on s 1305 of the Corporations Act which provides that a book kept by a company is admissible as evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book. It submitted that the general ledger loan accounts and balance sheets of DC and DW, which do not reflect the debt now claimed by the plaintiffs, should be taken as evidence that there is no such debt. It is, however, clear that that provision does not make the company's books of account conclusive evidence of what is stated in them. If the court is satisfied, as I am in this case in particular on account of inconsistent and conflicting entries in the books of account, that what is reflected in the books of account is not correct then the court can make contrary findings: Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; 75 ACSR 1 at [396]-[400] per Austin J.

The second period: the involvement of Mr Massie and the 5G Group 89 On 11 March 2015, MBL wrote to DW setting out that both the Tranche 1 and the Tranche 2 components of the Facility (referred to at [54] above) were in default. MBL also set out an ultimatum with regard to remedying the defaults against a threat to call in the whole debt with the implication that the securities would then also be called on. It was in those circumstances of financial distress that 5G Group and Mr Massie came into the picture. 90 Mr Massie is a director of 5GCI and 5G Capital Pty Ltd, both of which are part of a corporate group which he refers to as the 5G Group. It includes other companies with 5G in their name, and special purpose vehicle companies. The business of the 5G Group is to provide short-term funding to borrowers with short-term liquidity issues or who require additional funds beyond their existing finance facilities. In appropriate cases, the 5G Group uses a special purpose vehicle company (SPV) to enter into the loan agreement with the borrower, with the primary source of funds being 5G Capital. 91 It was in that context that the 5G Group was introduced to Mr McGrath with a view to it providing funding to Mr McGrath's group to overcome its liquidity problems with MBL (and another institutional lender) so as to enable the development to be completed. Up until October 2015 when Mr Massie personally became involved, the engagement from the side of 5G was by a Mr Dewhurst and solicitors acting for 5G Group. 92 On 31 March 2015, 5G Capital offered to acquire all the debt and the securities of the Denham group from MBL for $6.5 million. The offer included the payment of a holding deposit of 10% and the stated aim of settling the transaction within 42 days. 93 Mr Massie formed SPV28 Pty Ltd, and was a director of it. It was one of the special purpose vehicle companies in the 5G Group. Its business was to lend money to DW. That was achieved by way of an Assignment and Novation Deed (Assignment Deed) dated 1 May 2015 that was concluded between MBL, SPV28 and various entities in the Denham group, including DW, DC and Mr McGrath himself. 94 The recitals to the Assignment Deed record that MBL had advanced money to DW (referred to as the Borrower) and that SPV28 had requested that MBL assign to it all of MBL's estate and interest in the facilities and the securities. The facilities were defined to mean the facilities afforded by MBL to DW and the securities included the various securities provided to MBL to secure the facilities, including the registered fixed and floating charge by DC in favour of MBL. The securities also included the registered first mortgage by DW in favour of MBL over the land in the development and a registered first ranking fixed and floating charge by DW in favour of MBL. 95 The Assignment Deed provided for a settlement sum of $6,500,000 to be paid to MBL, of which a deposit of 10% ($650,000) had to be paid immediately. On the settlement date, SPV28 had to pay the settlement sum less the deposit to MBL. With effect from the receipt by MBL of the settlement sum (i.e. on the settlement date) MBL assigned to SPV28 all of MBL's estate and interest in the facilities and the securities. 96 Although the settlement date in the Assignment Deed was provided to be 42 days after the date of the deed, i.e. 12 June 2015, it was subsequently extended by agreement to 3 July 2015. 97 On the same day as the Assignment Deed, SPV28, DW, DC, Mr McGrath and others concluded a Deed of Variation which recorded that as a result of the assignment (under the Assignment Deed) DW's outstanding debt to SPV28 as lender was $6,500,000. That is a curious recordal because at that stage the MBL account statements to DW show that the debt to MBL which was the subject of the assignment was more than $20 million. Mr Hayes seizes on the recordal as evidence that the debt at that time was only $6.5 million which he then relies on to say that the benefit that DW received in the forgiveness of that debt was only $6.5 million rather than more than $20 million. That is a key component of his uncommercial transaction claims. 98 Counsel for 5GCI says that the assigned debt being reflected at $6.5 million rather than more than $20 million is to be explained on the basis that as at 1 May 2015 the assignment of the debt by MBL had not yet occurred - it was due to take place only on the settlement date. So, on the date of the Deed of Variation the only claim by SPV28 against DW that had to be provided for was in respect of SPV28's liability to MBL to pay the settlement amount of $6.5 million under the Assignment Deed in case for any reason the assignment did not occur. 99 That explanation is unpersuasive. There was no apparent risk that the assignment would not occur, and if it did not then there would not be the liability of SPV28 to MBL of $6.5 million. Perhaps the recordal of the debt at $6.5 million was just an error. It remains an unexplained oddity. 100 Also on or about 1 May 2015, DW and Pepperfield Holdings Pty Ltd (PH) as trustee for the Pepperfield Investment Trust (PIT) concluded a contract for the sale of land, the land being that on which the resort was developed. The purchase price was reflected as $6.5 million, and the special conditions of contract (at clause 42) recorded that DW retained all rights, title and interest to the business conducted on the land being the resort. 101 Before getting to what occurred on settlement, in the meantime on 15 May 2015 property consultants provided a valuation of the resort to DC. The "as is" market value of the land and the business as a going concern at that time was given as $4.98 million. An indicative hypothetical value of stages 1 and 2 "as if complete" was given as $6.41 million. 102 On 3 July 2015, the settlement date, the Tranche 1 debt owed to MBL was $3,461,018 and the debt owed on Tranche 2 was $17,190,547. The total debt at that time was thus $20,651,565. Thus, by the Assignment Deed MBL gave up its claim against DW (and its securities) in the sum of more than $20 million in return for a payment of $6,500,000. 103 Also at 3 July 2015, the land was transferred from DW to PH as trustee for PIT. 104 Apparently as payment of the purchase price for the land, DW was issued 12 shares in PH. Thereafter, PH as trustee for the Pepperfield Investment Trust (PIT) held the land on trust for DW and Sapsford Financial Services Pty Ltd (SFS) in equal shares. The transaction thus had the effect of reducing DW's interest in the land by half. 105 Minutes of a meeting of the directors of DW on 11 August 2016 attended by Messrs Massie, McGrath and Dewhurst record a number of matters. Of significance, the first is that Mr Massie was appointed a director of DW and as secretary on 23 November 2015. Secondly, the minute records that SFS was brought in as a 50% partner in the resort to help complete the development. The parties had agreed to establish the PIT and DW and SFS were each issued 60 units in the PIT. Finally, it was recorded that DW agreed to transfer the right to operate the resort to PH for $6.5 million. DW was given a receivable of $6.5 million by PH in return, as reflected in the PIT financial statements as at 30 June 2016. 106 The following day, on 12 August 2016, a memorandum of understanding between Mr Massie and Mr Sapsford of SFS confirmed the acquisition of the right to operate the resort for $6.5 million which had been independently valued at $6.4 million. The memorandum also recorded that PH would hold security over the business until construction was completed or a bank facility had been obtained. 107 On 1 September 2016, DC was wound up and Mr Hayes appointed liquidator. 108 On 26 April 2017, Mr McGrath resigned as a director of DW. 109 On 20 June 2017, a number of things occurred. DW transferred its shares in PH and its units in PIT to 5GCI. It therefore had no remaining interest in the property or the business. SPV28 assigned its loan to DW to 5GCI. DW's receivable from PH by then totalling $9.549 million was assigned to 5GCI for book value. 110 On 30 May 2018, Mr Massie applied to ASIC to have DW deregistered. In the application for voluntary deregistration that was signed by Mr Massie he declared that the company's assets were worth less than $1,000 and that the company had no outstanding liabilities. However, Mr Massie in his affidavit refers to DW balance sheets prepared by him as at June 2017 and as at June 2018. Both those balance sheets show considerable assets and liabilities, including liabilities on loan accounts to Stephen McGrath of $15,316,309.

The plaintiffs' contentions 111 Mr Hayes submits that the transactions outlined above had the effect that DW ceased, without having received consideration, to have any interest in the resort land or the business whereas 5GCI became the owner of one half interest in PH without having paid any purchase price. He submits that the transactions are to be analysed in three groups. 112 The first group of transactions ends with the settlement of the Assignment Deed and Deed of Variation in July 2015. Mr Hayes submits that at the conclusion of those transactions: DW had gone from being the sole owner of the land to owning a one half share of it through PH and the PIT, but had received no payment for the reduction in the value of its interest in the land; DW continued to have a debt of $6.5 million, but now owed that to SPV28 instead of MBL, and under terms which were significantly more onerous than they had been when the money had been owed to MBL; and SPV28 contributed no money but was now owed the $6.5 million which DW had originally owed MBL. 113 The second group of transactions occurred in August 2016. They have the result that DW transferred the business of the resort to PIT for $6.5 million, but never received that value. 114 The third group of transactions occurred on 20 June 2017 when DW's 12 shares in PH and its 60 units in PIT were transferred to 5GCI for no consideration. Under these transactions, it was submitted, DW ceased to own the remaining 50% interest in PIT which owned the land and the business, and again for no consideration. 115 The draft originating process by Mr Hayes as liquidator of DW is aimed at undoing, amongst other things, the Assignment Deed and the Deed of Variation. 116 In response, 5GCI submitted that restoring DW to the register and winding it up will be pointless because SPV28 assigned its interest in the facility and the securities to 5GCI with the result that DC would recover nothing in the DW insolvent estate. However, that overlooks that the assignment by which SPV28 acquired those interests is sought to be set aside. So, if there is an arguable case in favour of what Mr Hayes submits then the fact of the assignment of the securities first to SPV28 and then to 5GCI will make no difference to the question of the utility of the winding up. 117 5GCI accepted in its submissions that reinstatement applications are generally not the occasion to consider the merits of the applicant's proposed proceeding after reinstatement, but submitted that the Court may conclude that reinstatement is unjust if it is affirmatively satisfied that the proposed proceeding is doomed to fail and that it would thus be unjust to allow reinstatement for the purpose of such proceeding being instituted given the harm caused to prospective defendants: ERB International at [13]. As identified at [16] above, it is generally not appropriate to seek to resolve factual matters which may be in dispute other than in the clearest of cases. 118 5GCI submitted that the challenge to the various alleged uncommercial transactions are doomed to failure because DW received benefit for the $13 million ($6.5 million for the land and at $6.5 million for the business) in the following way. 119 First, 5GCI submitted that DW received consideration for the sale of the land by way of a reduction of $6.5 million on the debt it owed to SPV28. 120 Second, 5GCI submitted that DW received consideration in the amount of $6.5 million by way of a receivable from PH in exchange for the sale of the business. 121 Third, 5GCI submitted that there was an assignment from SPV28 to 5GCI of DW's obligations under the facility on 20 June 2017, there was a transfer of the burden of the receivable owed by PH to DW on to 5GCI, and that after those transfers 5GCI was owed more by DW than DW owed 5GCI. 122 In support of those submissions, 5GCI referred to the affidavit of Mr Massie where he explains that the contract and settlement sheet for the sale of the land do not reflect the series of transactions which took place at the time. He then explains at some length the complexity of various undocumented transactions which he says took place behind the documents. 123 Mr Massie may be correct in all of that, but the difficulty is that he may not be. This is not an appropriate place to seek to resolve the considerable complexity in the transactions and the different relationships. There is some evidential basis to Mr Hayes's submissions, and there are many unanswered questions and unexplained curiosities, such that I cannot at this stage be confident that his prospective claims will fail. This is not "the clearest of cases".

Conclusion on reinstatement 124 I have already concluded that DC is a person "aggrieved" by the deregistration of DW. 125 If I am satisfied that DW should also be wound up and that there may be some benefit to DC by doing that, then I would be satisfied that it is "just" that DW be reinstated to the register. That is simply on the basis that there would be sufficient reason to restore DW to the register; it would not be without point or purpose; it would not be futile. 126 With regard to the exercise of my discretion on the question of reinstatement, 5GCI submitted that Mr Hayes has waited until the last minute before bringing these proceedings which has caused the court and 5GCI considerable inconvenience, and even caused 5GCI prejudice because of the short time in which it had to meet the case. 5GCI pointed in particular to the long time between Mr Hayes's appointment as liquidator of DC and the examinations in November last year, and the long period of time between then and commencing this proceeding. It was submitted that on the basis of those considerations the Court should exercise its discretion against granting the relief sought. 127 I am also troubled by the delay. The first period of delay, i.e. prior to the examinations, is of less concern because at that stage Mr Hayes presumably did not know that it was likely that he would bring the present proceeding. It was however the examinations and documents that were obtained at about that time and into January 2019, that revealed to Mr Hayes the case that he has now brought. 128 Mr Hayes explained in evidence some of the reasons for the delay between then and commencing the proceeding. That included understandable delays with regard to funding, and the requirement from the funder that an advice on the prospects of success must first be obtained. 129 Whilst I am not satisfied that the plaintiffs have moved with all the diligence and speed that they might have done, I am also not persuaded that they have been delinquent in their approach. I do not regard the circumstances of the delay in this case to be such as to justify the exercise of my discretion against the plaintiffs.

Winding up 130 I have already concluded that DC is a creditor of DW within the meaning of the relevant provisions. It is then necessary to consider whether either of the bases for winding up, i.e. insolvency or just and equitable, is established.

Insolvent? 131 Winding up under s 459A of the Corporations Act requires a finding that the company is "insolvent". Section 95A(2) provides that a person who is not solvent is insolvent, and s 95(1) provides that a person is solvent if, and only if, the person is able to pay all the person's debts as and when they become due and payable. 132 Generally, the determination of solvency is to be done primarily with reference to the company's cash flows rather than according to its balance sheet. That led counsel for 5GCI to submit that even if I was to reinstate DW to the register I would not be able to conclude that it is insolvent because it may be that it could achieve an injection of cash with the result that even if its liabilities exceed its assets it is not insolvent. 133 That seems to me to be doubtful: an immediately resurrected company that apparently has a substantial debt, being that of the petitioning creditor, and no assets other that the unsure claims that the liquidator intends to bring against other parties, can hardly be said to be able to pay its debts as and when they fall due. Be that as it may, I prefer to rest my decision on the just and equitable ground so it is to that that I now turn.

Just and equitable? 134 Section 461(1)(k) of the Corporations Act provides that the Court may order the winding up of a company if the Court is of opinion that it is just and equitable that the company be wound up. 135 In ASIC v ABC Fund Managers [2001] VSC 383; 39 ACSR 443, Warren J identified three fundamental principles applied by the courts with respect to a winding up application on the just and equitable ground. First, there needs to be a lack of confidence in the conduct and management of the affairs of the company. Second, it needs to be demonstrated that there is a risk to the public interest that warrants protection. Third, there is a reluctance on the part of the courts to wind up a solvent company. 136 With regard to lack of confidence in the management of the company being relevant, see also Loch v John Blackwood Ltd [1924] AC 783 at 788 and Australian Securities Commission v AS Nominees Ltd [1995] FCA 1663; 62 FCR 502 at 533G per Finn J. 137 I consider the following factors to weigh in favour of a conclusion that it is just and equitable that DW be wound up on its reinstatement. 138 First, there is a concern with regard to the management of the company. That arises in particular from the declaration by Mr Massie dated 30 May 2018 on applying for the deregistration of DW that its assets were worth less than $1,000 and it had no outstanding liabilities in circumstances where he himself has produced balance sheets for DW showing that it had very considerable assets and liabilities as at the end of June 2017 and 2018. It also arises from the unexplained accounts which give rise to DC's credible claim to being a creditor of DW. 139 Second, there is some public interest in the inconsistent accounts and the circumstances of the deregistration of DW being investigated by a liquidator. 140 Third, as I have indicated, I am not satisfied that DW is solvent. Certainly, its liabilities would seem to exceed its assets, and the latter are constituted only by claims that are intended to be brought against third parties. I therefore do not have a reluctance to wind up DW arising from it being a solvent company. 141 Fourth, it is relevant that DW has no operations and no employees. Thus, these factors that might in the ordinary course weigh heavily against a winding up on this ground are not present and are not an obstacle to winding up DW. 142 Fifth, 5GCI's submissions to the effect that winding up is a serious remedy that leads to the death of the company are not particularly to the point in circumstances where the company has not existed for some period of time. Also, the notion that there is prejudice to DW in being wound up has no practical meaning in the circumstances. 143 On the basis of those factors, I am satisfied that it is just and equitable within the meaning of s 461(1)(k) of the Corporations Act that DW be wound up.

Appointment of a liquidator and special purpose liquidators 144 Given the extensive investigations already undertaken by Mr Hayes which has led to this proceeding, there would be a considerable saving of time, work and costs if Mr Hayes were appointed as liquidator of DW and was able to pursue the proposed proceeding. The appointment as liquidator of a person who had had no previous involvement with DC and DW would cause significant additional costs and delay to be incurred while that person, and their staff, develop the level of knowledge which Mr Hayes has acquired. 145 The only real point that 5GCI raises against the appointment of Mr Hayes is that he will be in an inherent conflict of interest position by being the liquidator of both the DC and DW when DC has a significant claim against DW. 146 In my view that objection is met by the appointment of a special purpose liquidator to deal specifically with considering and determining whether DC's claim against DW should be admitted to proof. Also, as DC and DW were part of the same group of companies and subject to the same control, the conflict of interest that Mr Hayes would be in should not be overstated. That is particularly so where that conflict, such as it is, would not adversely affect the interests of external creditors or other external interests: Australian Securities and Investments Commission v Westpoint Corporation Pty Ltd [2006] FCA 135; 227 ALR 623 at [32]-[34] per Siopis J. 147 A common liquidator to both companies may be in the best position to properly investigate and understand the transactions between them. It might be regarded as "generally conducive to efficiency" to appoint the same person as a liquidator of related companies: Willow Court Retirement Village Pty Ltd v ASIC [2007] NSWSC 76 at [11] per Barrett J. 148 I am accordingly satisfied that it is most appropriate that Mr Hayes be appointed as liquidator of DW. Also, and in order to protect against any conflict of interest, I accept the plaintiffs' proposal that a special purpose liquidator be appointed specifically to receive service of DC's proof of debt and to assess, take any steps necessary to determine, and to determine whether that proof of debt ought to be admitted or rejected. 149 As observed by Farrell J in GDK Products Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 at [32], s 90-15(1) of Sch 2 of the Corporations Act, the Insolvency Practice Schedule, confers power on the Court to "make such orders as it thinks fit in relation to the external administration of a company". A company is taken to be under "external administration" if a liquidator has been appointed: s 5-15(c) of the Insolvency Practice Schedule. This provision largely tracks s 511 of the Corporations Act as enacted immediately before its repeal took substantive effect on 1 September 2017. As noted by Gleeson JA in In the matter of 77738930144 Pty Limited (in liq) (formerly Commercial Indemnity Pty Ltd) [2017] NSWSC 452 at [17], the Court's powers conferred by s 511 included the power to appoint an additional liquidator. 150 Section 90-20 of the Insolvency Practice Schedule requires that a person applying for an order under s 90-15 be "a person with a financial interest in the external administration of the company". Under s 5-30(a) of the Insolvency Practice Schedule a person with a financial interest in the external administration of a company can be, among other things, either a creditor of the company or an external administrator of the company. Given that I have found above (at [86]) that DC is a creditor of DW, it follows that it is a person with a financial interest in the external administration of DW. Upon the winding up of DW following reinstatement, Mr Hayes will also become an external administrator as liquidator of DW under s 5-20(c) of the Insolvency Practice Schedule, and so is also a person with a financial interest in the external administration of the company. I am satisfied that this is an appropriate case for the appointment of a special purpose liquidator, specifically in order to avoid any conflict of interest that Mr Hayes might otherwise be regarded as having. 151 The plaintiffs proposed that Glenn Livingstone of KPMG or John Melluish and Stephen John Michell of PCI Partners Pty Ltd be appointed as special purpose liquidator or special purpose liquidators, respectively. Consents to appointment were signed by all three of these prospective special purpose liquidators. No submissions were made with regard to which appointment would be more or less appropriate. 152 In my view, the confined tasks envisaged for the special purpose liquidator do not require two liquidators. Moreover, it would seem that in the circumstances it would be more cost effective to appoint only one liquidator - his rates are lower and there will not be the costs, on a time basis, of two liquidators liaising and coordinating with each other. I am satisfied that Mr Livingstone is well qualified to be appointed. In those circumstances, I resolved that the appointment of Mr Livingstone would be most appropriate. 153 Mr Hayes has offered undertakings that he will indemnify the special purpose liquidator for reasonable costs and fees incurred by him in carrying out his tasks and that he, Mr Hayes, will resign his appointment as liquidator in the event that DC's claim is not admitted. The first of those undertakings is necessary to ensure the funding of the special purpose liquidator. In the urgency in which the orders were made, I also required the second undertaking but in hindsight that does not seem to have been necessary. Depending on the circumstances at the time, it may be better that Mr Hayes continues as the liquidator of DW even if DC's claim is not admitted. If that is the case, then Mr Hayes might seek to be released from his undertaking to resign at that point.

Costs 154 The plaintiffs originating application sought an order that the costs be costs in the liquidation of DW. After I had indicated the substantive orders that I intended to make, the plaintiffs submitted that the 5GCI should pay their costs. I was not prepared to do that, in part because by their originating application they had signalled to 5GCI what costs order they would seek and should not be able to resile from that unless I was satisfied that that had no influence on 5GCI's attitude to and conduct of the proceeding. I could not be so satisfied. It was also in part because the justice of the case is better served by the costs being costs in the liquidation.

I certify that the preceding one hundred and fifty-four (154) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stewart.

Corporations Act 2001(Cth)ss 95A(2), 95(1), 459A, 459P, 461(1)(k), 462(2)(b), 596A, 597(14), 601AH, 1305, Sch

Evidence Act 1995(Cth)ss 59, 81, 87, 136

n v Goldstein [1968] 1 WLR 1091; [1968] 2 All ER 769 Partners v Sampson [2002] NSWSC 383 Re Brockweir Pty Ltd [2012] VSC 225 Re Newfront Pty Ltd (deregistered) [2008] SASC 127 Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 39 NSWLR 311 Treadtel International Pty Ltd v Cocco [2016] NSWCA 360; 117 ACSR 176 Willow Court Retirement Village Pty Ltd v ASIC [2007] NSWSC 76 Yeo v Australian Securities & Investments Commission, in the matter of Jo Woo International Education Centre Pty Ltd (deregistered) [2017] FCA 1480

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