By Originating Process filed on 14 December 2018, the Plaintiffs, Mr Bradd Morelli and others, seek relief primarily directed to appointing several persons who are partners within the firm of Jirsch Sutherland as liquidator of several companies upon the resignation, or proposed resignation, of Ms Amanda Young as liquidator of those companies. The Court is also asked to note a form of undertaking that is given by Ms Young, and a cross-undertaking in that respect.
The Plaintiffs are represented by Mr Newton of Counsel in the application and Ms Young is represented by Mr McDonald of Counsel. The Court is grateful for the fact that the Australian Securities and Investments Commission ("ASIC") has appeared, and has indicated its views as to the application, which are plainly relevant to the way in which the Court should exercise its discretion in the circumstances.
The application is supported by an affidavit of Mr Morelli sworn 13 December 2018. It appears that, in early December 2018, matters were raised which gave rise to concern as to certain transactions that had taken place in liquidations as to which Ms Young was liquidator. Those transactions prompted internal investigations and inquiries within Jirsch Sutherland, which have culminated in a decision by that firm to report relevant matters to ASIC; to seek orders for the replacement of Ms Young as liquidator by other liquidators within the firm, on the footing that she resigns as liquidator from the relevant appointments; and to reimburse liquidation accounts of two companies in respect of dealings with moneys from those accounts. The firm has also taken steps to suspend Ms Young, and it anticipates the possibility that further steps will be taken. There is ongoing dialogue between the firm and ASIC in respect of these matters.
In these circumstances, Ms Young has resigned, or indicated that she is prepared to resign, as liquidator from several companies to which she is presently appointed. The application raises two questions. The first is a question which commonly arises in applications of this kind, as to whether it will be in the interests of creditors of the companies to appoint a liquidator within the same firm, upon the resignation of Ms Young as liquidator of the companies. The second is whether there is anything in the particular circumstances of this application which would alter the common approach to the resignation of a liquidator.
I will first deal with those matters, before turning to the position in respect of the particular orders sought. Mr Newton draws attention to the matters which are commonly recognised by the Courts in applications of this kind, including the advantages to creditors of seeking to reduce costs involved in the transition from one liquidator to another. Such costs will generally be reduced where, as here, another liquidator from the same firm is appointed, who will have access to existing files maintained in respect of the liquidation and employees with familiarity with the matters raised in that liquidation. I am satisfied that, in these circumstances, there is an advantage to creditors in appointing a liquidator from the same firm for these reasons. I am reinforced in that view by the fact that ASIC takes the same view, in the context of this application.
The second question is whether there is, in this case, any reason to take a different approach with respect to the resignation and replacement of Ms Young. I am satisfied that there is no reason to take a different approach, at least at this point and on the evidence as it now stands. While a question has arisen as to the propriety of several transactions and those transactions are under investigation, I have regard to the fact that ASIC recognises that, at least as the evidence stands, no question has arisen that this matter extends beyond Ms Young. It is proposed that there be an independent review of other liquidation files, in respect of the liquidations in which Ms Young has been involved. It is also proposed that creditors be notified of the matters which have given rise to this application and these orders, and the form of that notification will be made available to ASIC for review before it is made. It seems to me that the case for appointing a liquidator from another firm is not established, as matters stand, where that would expose creditors to significant additional costs and where there may be no reason to do so. I am reinforced in that view by the fact that there is no doubt, in the relevant circumstances, that these matters will be the subject of regulatory scrutiny. For that reason, I am not satisfied that the Court should depart from the common practice, where a liquidator resigns, of appointing another liquidator within the same firm.
So far as the particular orders sought are concerned, I have regard to the helpful submissions of Mr Newton. Order 1 of the Originating Process deals with the appointment of Mr Spring as a replacement liquidator of a company that is subject to a Court-appointed liquidation. I am satisfied, for the reasons that Mr Newton indicates, that Ms Young may resign as liquidator, adopting the process set out in s 473 of the Act and r 7.1 of the Supreme Court (Corporations) Rules 1999 (NSW) and that the Court may appoint a replacement to fill a vacancy in that liquidation, and may do so prior to the resignation taking effect: Re Free [2010] NSWSC 1079 at [11]; Re Bridgewater Investments Pty Ltd (in liq) [2013] NSWSC 426 at [4].
The second, third and fourth orders seek the appointment of alternative liquidators in respect of creditors' voluntary liquidations. I am satisfied that the Court may make such an order under s 499(3) of the Act in the relevant circumstances. Order 5 deals with the appointment of a replacement liquidator in a members' voluntary liquidation, where there is no specific statutory power in the Corporations Act itself dealing with that question. I am satisfied that, as Mr Newton submits, the Court has power to make that appointment under s 90-15 of the Insolvency Practice Schedule (Corporations), which identifies an order for the appointment of another registered liquidator as external liquidator as an order that can be made under that section. That section has been used in that way, for example, in Re Equiticorp Australia Ltd (in liq) [2017] NSWSC 1456.
Orders are sought under s 532(2) of the Act for leave for the relevant persons to act as liquidator, in circumstances where Jirsch Sutherland may be owed amounts exceeding $5000 by the companies in liquidation. As Mr Newton points out, such orders are regularly made in circumstances where a liquidator from the same firm is appointed, and I am satisfied that such an order should be made in this case: see, for example, Re FGM Print Pty Ltd [2018] NSWSC 1478.
Finally, as I have noted, an order will be made that will provide for creditors to be notified of these orders, and to be provided such information as is necessary to give a fair explanation of the circumstances in which they were made, and the order provides for the form of notification first to be provided to ASIC for its review. The Court can be satisfied that creditors will be properly informed of these matters, and that, as Mr Newton recognises, means that creditors will also have the opportunity to exercise such rights as they may have under the Insolvency Practice Schedule (Corporations) in respect of any question whether the newly appointed liquidators should remain in office in the relevant companies. These orders should be entered forthwith.
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Decision last updated: 18 December 2018