Nikitins, In the matter of The Managed Investment Schemes [2010] FCA 207

Federal Court of Australia|2010-03-10|Before: Gordon J

Pursuant to s 601EE(2) of the Corporations Act 2001 (Cth), upon the resignation of Mr John Georgakis as liquidator of each of the schemes listed in schedule A to this order, Mr Adams Pauls Nikitins be appointed liquidator of each of the schemes listed in schedule A to this order.
Pursuant to s 473(7) of the Corporations Act 2001 (Cth), upon the resignation of Mr John Georgakis as liquidator of each of the companies listed in schedules B and C to this order, Mr Adams Pauls Nikitins be appointed liquidator of the companies listed in schedules B and C to this order.
The costs of and incidental to this application be borne by the first plaintiff. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

SCHEDULE A

Eatons 2 Scheme The Eatons 2 Scheme means the managed investment scheme conducted by SalaryPackaging.com.au Pty Ltd (ACN 101 766 330), Earning Pty Ltd (ACN 118 746 599), ACN 128 854 820 Pty Ltd (ACN 128 854 820) and Ian Douglas Bristow whereby investors paid money into a pooled fund and were issued or transferred interests which offered them the return of their capital plus an additional amount of capital gain by way of either profit, interest or bonus. The Eatons 2 Scheme also comprises the following legal entities: • Eatons Hill Project No. 2 Unit Trust; • ACN 128 854 820 Pty Ltd and its assets; and • Earning Pty Ltd. The Eatons 2 Scheme is defined in paragraph 1 of and the schedule to the order made 27 March 2008 and paragraph 1 of the order made 9 April 2008 in proceeding number VID1172 of 2007 (the Orders).

SCHEDULE B

Earning Pty Ltd (ACN 118 746 599)
ACN 128 854 820 Pty Ltd (ACN 128 854 820)
ACN 128 854 759 Pty Ltd (ACN 128 854 759)
ACN 128 854 768 Pty Ltd (ACN 128 854 768)
ACN 127 567 373 Pty Ltd (ACN 127 567 373)

IN THE MATTER OF THE MANAGED INVESTMENT SCHEMES AND COMPANIES LISTED IN THE ATTACHED SCHEDULES A, B AND C BETWEEN: ADAMS PAULS NIKITINS

INTRODUCTION 1 John Georgakis (Mr Georgakis) was appointed by the Court as liquidator of five unregistered managed investment schemes (the Schemes) on 27 March 2008 under s 601EE(2) of the Corporations Act 2001 (Cth) (the Act). He was appointed liquidator of one of the five companies that managed those investments schemes (the Scheme Companies) on 27 March 2008, and of the remaining four Scheme Companies on 9 April 2008. Separately, he was also appointed as liquidator of another company W Span Pty Ltd (ACN 006 768 494) (Span) by the Court on 28 May 2007 under s 459A of the Act. Mr Georgakis is a partner in Ernst & Young (EY) in the insolvency and restructuring team of EY. 2 On 18 December 2009, Mr Georgakis tendered his resignation from the EY Partnership and has indicated his intention to resign as liquidator of the Schemes, the Scheme Companies and Span. Mr Georgakis applies to the Court for orders that upon his resignation as liquidator taking effect, Adams Pauls Nikitins (Mr Nikitins), a registered liquidator and official liquidator and an Executive Director in the insolvency and restructuring team of EY, be appointed as liquidator of the Schemes, the Scheme Companies and Span. The Australian Securities and Investments Commission (ASIC) was served with a copy of the application and does not oppose the orders sought so long as the investors in the Schemes do not bear the cost of the application. 3 On 9 March 2010, upon: 1. Mr Georgakis' resignation as liquidator of the Schemes, the Scheme Companies and Span taking place on 10 March 2010; and 2. Mr Georgakis undertaking, by his counsel, that by 10 March 2010 he shall cause to be filed with the Registrar and with ASIC notice of his resignation from the Scheme Companies and Span, I made the following Orders: 1. Pursuant to s 601EE(2) of the Act, upon the resignation of Mr Georgakis as liquidator of each of the Schemes, Mr Nikitins be appointed liquidator of each of the Schemes. 2. Pursuant to s 473(7) of the Act, upon the resignation of Mr Georgakis as liquidator of each of the Scheme Companies and Span, Mr Nikitins be appointed liquidator of those companies. 3. The costs of and incidental to the application be borne by the first plaintiff. 4 These short reasons for decision record why those orders were made. It is necessary to deal with the Schemes separately from the Scheme Companies and Span. The power of the Court is different. I will deal with the Scheme Companies and Span first.

SCHEME COMPANIES AND SPAN 5 Two issues arise - does the Court have the power to make the appointment and, if so, how does the Court ensure that the transition is seamless. Both those issues were addressed by Palmer J in Re Wily (2003) 49 ACSR 94: see also Re Application by Vouris (2004) 49 ACSR 543 at [11] and Re McGrath (as liquidator of HIH Insurance Ltd (in liq) (2005) 54 ACRS 55 at [5]ff. 6 The Court has power to make the appointment: see s 473 of the Act and Re Wily (2003) 49 ACSR 94 at [6]. Section 473(1) of the Act provides that a liquidator appointed by the Court may resign or, on cause shown, be removed by the Court. Section 473(7) provides that a vacancy in the office of liquidator must be filled by the Court. The Court not only has the power but must make the appointment if there is a vacancy. In my view, the appointment of Mr Nitikins is appropriate in the circumstances as it ensures that the work undertaken by, and the knowledge of, EY staff in the liquidation of the Scheme Companies and Span is not lost or duplicated. However, as noted by Barrett J in Re Vouris, this appointment is made subject to any application to the Court for Mr Nitikins' removal on cause being shown: s 473(1) of the Act and cf Re Greight Pty Ltd (in liq); Re Stafford Services Pty Ltd (in liq); Handberg v Cant (2006) 56 ACSR 334 at [3]. 7 As the Orders also provide, Mr Georgakis intends to resign as liquidator of the Scheme Companies and Span effective 10 March 2010. There will then be a vacancy in the office of liquidator of those companies. The orders then go on to provide that effective on and from that date, Mr Nikitins be appointed liquidator of the Scheme Companies and Span: see Palmer J in Re Wily. This form of orders will ensure that the transition is seamless.

SCHEMES 8 On 27 March 2008, under s 601EE of the Act, Goldberg J made orders winding up each of the Schemes and appointing Mr Georgakis as liquidator to the Schemes. 9 The Plaintiffs submitted, and I accept, that the Court's power to deal with Mr Georgakis' resignation and the appointment of Mr Nitikins is in s 601EE(2) of the Act. The powers conferred upon the Court are broad. Under s 601EE(2), the Court has jurisdiction throughout the course of the winding up to make orders to resolve issues that arise in the course of that winding up: see Re GDK Financial Solutions Pty Ltd; Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (2006) 236 ALR 699 at [42] and the authorities cited; see also Australian Securities and Investments Commission v Atlantic 3 Financial (Aust) Pty Ltd (No.3) [2004] 1 Qd R 591 at [28] and the authorities there cited. This is one of those times. The liquidator of the Schemes has indicated his intention to resign. The winding up of the Schemes must be completed and, in the circumstances, the appointment of Mr Nitikins is appropriate as it ensures that the work undertaken by, and the knowledge of, EY staff in the liquidation of the Schemes is not lost or duplicated. The form of the Orders protects, so far as possible, the position of the investors. And any appointment is subject to the supervision of the Court: s 601EE(2) of the Act and paragraph 4 of the Orders of Goldberg J of 27 March 2008. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

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