In the matter of Signature Pacific Pty Limited (Subject to Deed of Company Arrangement) (ACN 003 250 495) [2010] NSWSC 1160

CATCHWORDS : CORPORATIONS - application by plaintiff for removal as liquidator and as deed administrator and for appointment of replacement liquidator and deed administrator - where plaintiff is incumbent liquidator and deed administrator - where application made due to plaintiff's inadequate professional indemnity and fidelity insurance and lack of resources and infrastructure to assist in discharge of duties - sufficient cause shown to order plaintiff's removal as liquidator under Corporations Act 2001 (Cth), s 473(1) - need for orders under s 447A to modify Part 5.3A of Corporations Act to authorise plaintiff's removal as deed administrator on own application - appropriate to make orders under s 447A in circumstances - plaintiff undertakes to bear costs of application personally - no evidence of orders adversely affecting other parties with interest in application

PARTIES : Plaintiff: Kevin Richard Shirlaw

SOLICITORS : Plaintiff: HWL Ebsworth Lawyers

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2010/315373 In the matter of Signature Pacific Pty Limited (Subject to Deed of Company Arrangement) (ACN 003 250 495)

JUDGMENT 1 HIS HONOUR: The plaintiff was appointed the official liquidator of Signature Corporation Australia Ltd (in liquidation) ("Signature Corporation") on 1 February 1991. On 23 September 2003 he was appointed the sole administrator of a deed of company arrangement entered into by Signature Pacific Pty Limited (subject to Deed of Company Arrangement) ("Signature Pacific"). At the time of those appointments he was a partner of Horwath Sydney Partnership and had the benefit of resources and infrastructure of that firm to assist in the discharge of his duties. 2 The plaintiff has ceased to be a partner with and a consultant to the Horwath Sydney Partnership. He currently holds no position as an external administrator otherwise than as being liquidator of Signature Corporation and deed administrator of Signature Pacific. He does not wish to accept any further appointments. He deposes that he wishes to resign his appointments as liquidator of Signature Corporation and as deed administrator of Signature Pacific. 3 On 4 August 2010 the plaintiff met with Mr Geoffrey Trent Hancock, a former partner at Horwath Sydney Partnership, and explained his position. Mr Hancock has consented to being appointed as liquidator of Signature Corporation and deed administrator of Signature Pacific in the plaintiff's place. 4 The plaintiff deposes that he no longer has adequate professional indemnity and fidelity insurance. The evidence as to his insurance is not clear but the plaintiff has put before the court correspondence with the Australian Securities and Investments Commission ("ASIC") on the basis that I should accept as correct statements made by ASIC concerning the adequacy of that insurance. 5 ASIC raised issues as to the extent of cover and whether the insurer is an APRA-approved insurer or is exempt under the Insurance Act 1973 (Cth) or associated regulations. The plaintiff accepts that he does not now have adequate professional indemnity and fidelity insurance. 6 Unusually the plaintiff seeks an order under s 473(1) of the Corporations Act 2001 (Cth) that he be removed as liquidator of Signature Corporation. I say unusually, because a liquidator may only be removed under the section for cause shown. A liquidator can resign and the resignation will be effective upon the filing with the Registrar and lodgment with ASIC of the memorandum of resignation (Corporations Act, s 473(1); Supreme Court (Corporations) Rules 1999, r 7.1; and Re Free [2010] NSWSC 1079 at [8]-[11]). 7 Whilst the plaintiff has deposed that he wishes to resign his appointment as liquidator, he has not signed, filed and lodged a memorandum of resignation in accordance with r 7.1. 8 In my view cause has been shown as to why the order sought for the plaintiff's own removal should be made. The admitted inadequacy of the plaintiff's current insurance, coupled with his evidence that he does not have the benefit of resources and infrastructure to enable him properly to discharge his duties as liquidator of Signature Corporation, is sufficient cause for removal. 9 Whilst it would not be necessary to make an order for his removal if the plaintiff had undertaken to give notice of resignation in accordance with the Act and the Supreme Court (Corporations) Rules, no such undertaking is proffered. I will therefore make the orders sought. 10 Pursuant to s 473(7) the vacancy in the office of liquidator is to be filled by the court. Mr Hancock is an official liquidator and an appropriate person to be appointed to fill the vacancy. 11 Section 449B of the Corporations Act empowers the court to remove an administrator of a deed of company arrangement from that office and appoint someone else as administrator of the deed, where application is made by ASIC, a creditor, liquidator or provisional liquidator of the company concerned. That section does not authorise the plaintiff's removal as deed administrator of Signature Pacific unless an order modifying the operation of Part 5.3A is made pursuant to s 447A. The plaintiff seeks an order under s 447A to bring about the result that he be removed as deed administrator of Signature Pacific and that Mr Hancock be appointed in his place as deed administrator. 12 A deed administrator may resign by notice in writing given to the company (s 449D(1)(c)). Where a deed administrator resigns, then the court may appoint someone else as administrator of the deed pursuant to s 449D(1). Such an appointment may be made under s 449D on the application of ASIC or an officer, member or creditor of the company. 13 It would be open to the plaintiff to resign by giving notice in writing to Signature Pacific. In that event, on an application being made by ASIC or by an officer, member or creditor of Signature Pacific, the court could and presumably would appoint someone else as administrator of the deed. In that event the party applying for an order under s 449D would nominate the person to be appointed as deed administrator. The difference in the present application is that the plaintiff, being the outgoing deed administrator, is nominating his own replacement, rather than such a nomination being made by a person with standing under s 449D. 14 That having been said, there are advantages in the course taken by the plaintiff. He proffers an undertaking to the court to bear the costs of this application and not to claim the costs of this application against the assets of either of the companies. If any creditor takes issue with the appointment of Mr Hancock as the replacement deed administrator, it would be open to a creditor to apply under s 449B for an order removing Mr Hancock as deed administrator and appointing someone else to that office. If no-one takes issue with the appointment of Mr Hancock, then the course taken by the plaintiff has the advantage of relieving others of the task of making application under s 449D and relieves the company from the burden of the costs of such an application. 15 In Re Free, Barrett J dealt with an application by an insolvency practitioner, who held several insolvency appointments as liquidator and as administrator of a deed of company arrangement, who had resigned from his firm. On the application of that practitioner, orders were made to appoint another partner of the firm from which the practitioner had resigned to the office of liquidator upon that office becoming vacant. Barrett J also made orders under s 447A to create an express power to replace the outgoing practitioner with his partner as deed administrator. I assume that Barrett J acted under s 447A because the application for the appointment of someone else as administrator of the deed was not made by a person with standing to apply under s 449D. That is the present position as well. 16 There is no evidence that creditors or other persons with an interest in the successful operation of the deed of company arrangement have been consulted upon the proposed appointment of Mr Hancock as deed administrator. There is no evidence as to whether any such person might object to his appointment or have a preference for the appointment of somebody else. But there is no reason to assume that anyone would object to his appointment or have a preference for the appointment of someone else. The evidence is silent on the question. 17 I do not think that the creditors would be adversely affected by the orders sought. It would be open to them to apply under s 449B for the removal of Mr Hancock and the appointment of someone else as deed administrator. No doubt there would be costs of such an application but so would there be costs if the plaintiff had resigned and it was left to a creditor to apply under s 449D. 18 There is a possible objection that officers or members who would have standing to apply under s 449D, were the plaintiff to resign as deed administrator, would not have standing under s 449B to seek the removal of Mr Hancock and the appointment of somebody else as deed administrator. However, that possibility, which may be purely theoretical, can be addressed by an order to be made under s 447A. 19 I should add that ASIC has been given notice of the application and has advised that it does not propose to intervene in the proceedings or to seek leave to appear. Its position would not be adversely affected by the orders sought. 20 In these circumstances I propose to follow the course taken by Barrett J in Re Free and to make the appropriate orders under s 447A to permit the removal of the plaintiff on his own application from office as deed administrator and to appoint Mr Hancock in his place. 21 For these reasons I make the following orders:

1. Make order 3 in the originating process. 2. Make order 4 in the originating process. 3. Order pursuant to s 447A of the Corporations Act that Part 5.3A of the Corporations Act 2001 (Cth) ("the Act") is to operate in relation to Signature Pacific Pty Limited (subject to Deed of Company Arrangement) (ACN 003 250 495) (in this order called "the Company") as if: (a) it empowers the court, on the application of the plaintiff, to remove the plaintiff from office as administrator of the Deed of Company Arrangement to which the Company is subject and to appoint someone else as administrator of the Deed; and (b) any officer or member of the Company were able to apply for orders under s 449B of the Act in respect of the appointment of the new administrator of the Deed to be made by order 5 below.

4. Order that Kevin Richard Shirlaw be removed as deed administrator of Signature Pacific Pty Limited (subject to Deed of Company Arrangement) (ACN 003 250 495).

5. Order that Geoffrey Trent Hancock be appointed deed administrator of Signature Pacific Pty Limited (subject to Deed of Company Arrangement) (ACN 003 250 495).

7. Note the undertaking of the plaintiff to the court in para 25 of the plaintiff's affidavit sworn 31 August 2010.

8. These orders may be entered forthwith and are to be entered forthwith if the plaintiff so requests.

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