James, in the matter of Liquor National Pty Ltd (in liq) v Liquor National Pty Ltd

1. Within seven days, the plaintiff file and serve proposed orders reflecting these reasons for judgment. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JAGOT J: 1 The remaining substantial issue in this matter is whether a special purpose liquidator should be appointed to a group of companies under s 511 of the Corporations Act 2001 (Cth), now repealed but applicable for the purposes of this matter. 2 The companies are referred to as the Rabobank companies because Rabobank funded these companies and appointed receivers and mangers to them following default under the funding arrangements. The companies are part of a group in which other companies were funded by the ANZ Bank. The ANZ Bank appointed receivers and mangers to those other companies, referred to as the ANZ companies. 3 The purpose of the appointment of a special purpose liquidator to the Rabobank companies is to examine affairs relating to the conduct of the ANZ receivers and ANZ Bank which the plaintiff, Mr James who is the former principal of the companies and asserts rights as a creditor of them, claims caused loss and damage to the companies. 4 Rabobank, the Rabobank managers and receivers, ANZ and the ANZ managers and receivers oppose the appointment proposed by Mr James, principally on the basis that the Rabobank managers and receivers, if funded, could have carried out the investigations. 5 These reasons for judgment should be read in conjunction with the reasons in James, in the matter of Liquor National Pty Ltd (in liq) v Liquor National Pty Ltd (in liq) [2017] FCA 721 in which I made orders deferring the deregistration of the Rabobank companies which had not yet been deregistered and ordered the reinstatement of another such company which had been deregistered before the application for deferral was heard. 6 I have decided that orders generally as sought by the plaintiff should be made on the basis that it is just and beneficial to do so as provided for in s 511(2) because there are aspects of the affairs of the Rabobank companies which should be investigated and the only way in which those affairs will be investigated is by the appointment of a liquidator for that purpose other than the Rabobank liquidators as those willing to fund the investigation (in particular, the mother of Mr James), rightly or wrongly, have no confidence in the Rabobank liquidators. 7 I do not accept the submissions to the contrary. 8 First, it remains the case that Mr James contends that he is a creditor of the Rabobank companies. 9 Second, it remains the case that Mr James contends that the claims against the ANZ Bank and ANZ receivers and managers for conduct said to have caused loss and damage to the Rabobank companies materially exceeds the amount which Rabobank contends it is owed. 10 Third, while the substance of these contentions cannot be tested on this application, it is apparent that they are genuinely made and cannot be dismissed as mere fancy. 11 Fourth, it is the fact that there has been no investigation of the matters the subject of these contentions. The reason for this appears to be that the liquidators have not been funded for any such purpose. It is not difficult to infer that given that Rabobank adopted the submissions of ANZ and the ANZ receivers and mangers in this proceeding, Rabobank has no interest in providing funding for this purpose. 12 Fifth, none of the criticism of Mrs James, Mr James' mother, who is willing to fund a special purpose liquidator but not the Rabobank liquidators carry weight. Mrs James has undertaken to provide initial funding of $50,000 Mr Hurst, who has consented to act as a special purpose liquidator to conduct the proposed investigations, as well as a further $50,000 should it appear that further investigation is warranted. It may be accepted that the plaintiff has not pursued his application for removal of the Rabobank liquidators and that they may be presumed to be familiar with the Rabobank companies. However, it is also the fact that the Rabobank liquidators completed the liquidations so that the companies could be deregistered on the basis that their work was finalised and Mr Hurst is not unfamiliar with the context given that he is already the liquidator of other related companies. More pertinently, it cannot be doubted from Mrs James' evidence that she will not fund the Rabobank liquidators to conduct the investigations. Her perception of the Rabobank liquidators not being appropriate to conduct the investigations are genuinely held and not irrational even if others might not share her perception or would analyse the facts relating to the entry into the deed of release which is sought to be the subject of investigation differently. 13 Sixth, and as a consequence, the fact that Mrs James' perceptions might not reflect the true situation is not the determinative factor. The determinative factor is that there are matters which on their face are rationally able to be characterised as justifying investigation (whatever their true substance) and the only way in which such investigation will be funded and thus occur is for a special purpose liquidator, not being the Rabobank liquidators, to be appointed. Mr Hurst is qualified and willing to be appointed. 14 Seventh, while I accept that the ANZ Bank and ANZ receivers and managers (and Rabobank) have an interest in the investigations being conducted as efficiently as possible, the practical choice is not between such investigations by the Rabobank liquidators and Mr Hurst because it is apparent that the Rabobank liquidators will not be funded to conduct the investigations. The choice is thus between no investigation and the appointment of Mr Hurst, whose appointment is proposed by the plaintiff, whom the plaintiff's mother is willing to fund, who has consented to an act and is already the liquidator of related companies, or the appointment of another special purpose liquidator who will know nothing of the matter. 15 Eighth, the fact that Mr Hurst is the subject of proceedings in which the Australian Securities and Investments Commission (ASIC) seeks an order that he cease to be registered as a liquidator cannot be a proper reason to reject his appointment in this case. For one thing, as far as I am aware, all of the allegations against him are untested. For another, it is not suggested that he is the subject of any restraint which would prevent him from acting as a special purpose liquidator. It would be wrong for me to reject his appointment in the present case merely because of the fact of proceedings against him, the result of which is unknown. If relevant circumstances change or matters arise in his conduct as special purpose liquidator then no doubt the supervisory function of the Court may be called in aid. But to give untested allegations weight would be the equivalent of deciding the ASIC case against Mr Hurst knowing nothing of the true position. 16 Ninth, it cannot be overlooked that the ANZ Bank and ANZ receivers and managers are the subject of the proposed investigations. As such, it can be expected that their submissions will reflect their own interests. There is nothing improper in this. But it is a context which suggests their submissions about potential inefficiency and the terms of the orders ought not to be given too much weight. It is also the fact that they have no discernible interest in the proposed winding up of James Estate Wine Pty Ltd which was reinstated only for the purpose of being wound up, with Mr Hurst appointed as liquidator. In the circumstances I am satisfied that it is just and equitable James Estate Wines be wound up on the ground that it is just and equitable to do so. 17 Tenth, the submissions of the other parties about the scope of the affairs to be examined are also unpersuasive. I do not accept that the plaintiff has sought to expand the scope of the affairs sought to be examined. Nor do I accept that Rabobank might have taken a different course from adopting the submissions for ANZ and the ANZ receivers and managers if the plaintiff, contrary to my view, has done so. Further, the fact that the accounting issues identified in sub paragraphs C and D of the schedule to the most recent version of the orders proposed by the plaintiff should be able to be resolved other than through a process of examination is not a good reason to exclude these matters from the scope of the proposed investigations. The structure of the orders leaves it to the special purpose liquidator to determine the best way in which to conduct the investigations including the conduct of examinations. No doubt the accounting issues should be able to be resolved by means other than examinations but that is a matter best left to the special purpose liquidator. Otherwise, I consider that the version of the orders ultimately as proposed by the plaintiff on 17 August 2017 should be made. 18 Given that there were competing versions of the proposed orders the best course is for the plaintiff to file and serve the final proposed orders including all agreed amendments but otherwise on the basis that the arguments of the other parties about the form of those orders are rejected. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.