Owen, in the matter of RiverCity Motorway Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2014] FCA 1008

Federal Court of Australia|2014-09-18|Before: Greenwood J

Background and the context of the applications 2 On 11 September 2014, the Court made orders in QUD 60 of 2011 and also in QUD 481 of 2014. 3 Those orders in each case are set out in the orders section of this judgment. 4 In these reasons, I propose to address some aspects of the orders made on 11 September 2014 although I do not propose to address the grounds for making each and every order. As will become apparent from these reasons, I have chosen to provide exposed reasons concerning the source of the power, and the basis for exercising the power, in relation to particular matters. 5 The applicants have given notice of the applications to the Australian Securities and Investments Commission ("ASIC"), the creditors of the RCM Group, a company called AECOM Australia Pty Ltd ("AECOM") and the receivers and managers ("Receivers") of eight of the RCM Group companies. The liquidators have not received any notice of any objection from any of those addressees to the orders sought in each application. ASIC has advised the applicants that it has no interest in the applications. 6 The applications are principally supported by an affidavit of Mr Michael Owen sworn 1 September 2014. Mr Owen is a Registered and Official Liquidator and Partner in the firm PPB Advisory. Mr Owen, Mr Stephen Parbery and Mr Christopher Hill are the former joint and several administrators and the current joint and several liquidators of each of the following 10 companies: RiverCity Motorway Pty Ltd; RiverCity Motorway Asset Nominee 2 Pty Ltd; RiverCity Motorway Asset Nominee Pty Ltd; RiverCity Motorway Finance Pty Ltd; RiverCity Motorway Holdings Pty Ltd; RiverCity Motorway Construction Pty Ltd; Flow Tolling Pty Ltd; RiverCity Motorway Services Pty Ltd ("RCM Services"); RiverCity Motorway Management Limited ("RC Management"); RiverCity Motorway RE Holdings Pty Ltd ("RC Holdings"). 7 Receivers and managers have been appointed to each of the first eight companies recited at [6] of these reasons. Each of the 10 companies recited at [6] are in liquidation. Although the last two companies recited at [6] are in liquidation, receivers and managers have not been appointed to them. 8 RC Management is the responsible entity for two managed investment schemes described as the Investment Trust and the Holdings Trust schemes. The units in the two trusts are stapled units listed on the Australian Securities Exchange. Trading in the units has been and remains suspended. RC Management is wholly owned by RC Holdings. The trusts are not presently being wound up. Mr Owen says that until issues relating to tax liabilities and insurance in relation to the trusts are resolved, it is unlikely that the trusts will be wound up. 9 Throughout Mr Owen's affidavit of 1 September 2014 he describes the first eight companies recited at [6] to which receivers and managers have been appointed as the "Obligors". I will also use that term in describing aspects of Mr Owen's evidence. 10 Mr Owen, Mr Parbery and Mr Hill were formerly the administrators of each of the 10 companies recited at [6]. 11 On 28 November 2013 in QUD 60/2011, the Court made orders, put simply, to the following effect: 1. an order extending time for the convening of a second meeting of creditors of RCM Group companies (required by s 439A of the Act) to 1 July 2014; 2. an order determining and fixing the remuneration of the administrators for the period 1 November 2012 to 31 October 2013, and associated indemnities out of, and liens over, the property and assets of those companies; 3. an order determining and fixing the remuneration of the administrators for administering the Investment Trust and the Holdings Trust for the same period, and associated indemnities out of (and the exercise of a lien over), the property and assets of each of the trusts; 4. a direction that it was a proper exercise of the powers and functions of the administrators, as administrators of RC Management, to cause that company to continue to monitor and investigate claims made in the NSW proceedings and to take the steps required by the Court to be taken in those proceedings; 5. a direction that the administrators were entitled to be indemnified directly out of (and exercise a lien over) the property and assets of each of the trusts, unqualified by the operation of Article 19.3 of the Constitution for the Holdings Trust and the Investment Trust, in respect of the remuneration of the administrators (and their costs and expenses) related to the NSW proceedings, and remuneration related to taking steps to identify, preserve and enforce rights under any policy of insurance that might respond to claims made in those proceedings; 6. a direction that the administrators be entitled to satisfy their right of indemnity out of the property and assets of the Holdings Trust or the Investment Trust in proportion to the value of the funds held by the Investment Trust and the Holdings Trust at the time of satisfaction of the indemnity. 12 On 24 June 2014, the administrators issued a report required by s 439A of the Act, and on 8 July 2014 a second meeting of creditors of the companies in the RCM Group was held. 13 In the report, the administrators expressed the opinion that all of the companies in the RCM Group were insolvent. The administrators recommended that the companies be wound up. 14 At the meeting, the creditors of each relevant company (although the meetings were held concurrently) resolved, put simply, that: each company be wound up pursuant to s 439C(c) of the Act and the administrators be appointed joint and several liquidators of each of the companies in the group; the remuneration of the administrators of each company for the period 1 November 2013 to 18 June 2014 and from 18 June 2014 to the end of the administration be approved; the remuneration of the liquidators for each company for the period 8 July 2014 to 30 June 2015 be approved to a maximum amount; and a Committee of Inspection be established for RC Management and RCM Services. 15 Each resolution was unanimously passed with the exception of those resolutions relating to remuneration in respect of which the chairperson of the meeting, Mr Hill, abstained from voting the proxy he held. All creditors present at the meeting and entitled to vote passed the resolutions relating to remuneration. 16 As a result of the passing of these resolutions, each of the companies is now administered by the liquidators in a creditors' voluntary winding up pursuant to s 446A of the Act. 17 In the period between 28 November 2013 and 8 July 2014, the administrators continued to discharge their role having regard to the objects of Pt 5.3A of the Act and in accordance with previous orders made by the Court. Two aspects of those orders were these. First, the Court directed that by reason of their appointment as administrators of RC Management (being the responsible entity for the two trusts), they were not rendered "officers" of RC Management for the purposes of Ch 5C of the Act. Second, the Court directed that, until further order, when performing functions and exercising powers as administrators of RC Management under Pt 5.3A of the Act, the administrators could perform those functions and exercise their relevant powers as if ss 292(1), 298(1), 302, 306(1), 314, 319 and 320 of the Act had no application to RC Management in any capacity in which it acted in relation to the Investment Trust or the Holdings Trust, or otherwise. 18 The Obligor entities formerly conducted a business associated with operating a significant metropolitan road tunnel leased from the Brisbane City Council and the operation and management of facilities for the collection of tolls paid by motorists for the use of the tunnel and other infrastructure called the "Go Between Bridge". The receivers and managers of the eight Obligor companies, appointed by the lenders under relevant securities, controlled all of the significant assets available to the RCM Group companies. 19 A sale agreement of the tunnel business and undertaking was entered into on 27 September 2013 and completion of the agreement occurred on 13 December 2013. 20 The present applications are principally concerned with the position of RC Holdings and RC Management. 21 Both companies are in liquidation. 22 Neither company has receivers or managers appointed to it. 23 Mr Owen says, at para 82 of his affidavit that, as at 1 September 2014, the liquidators retain $3,943,414.03 for RC Management; $9,066,097.55 for the Investment Trust; and, $1,506,810.40 for the Holdings Trust. The liquidators retain no funds belonging to RC Holdings or the Obligors. Mr Owen says that the liquidators have incurred significant costs from counsel in various proceedings which are yet to be drawn from the funds held. 24 The only creditor of RC Holdings is RC Management. 25 The creditors of RC Management both in its own capacity and as trustee for the trusts are trade creditors in a small amount, other companies in the group, and contingently particular parties involved in the proceedings in NSW. 26 Mr Owen sets out in his affidavit a narrative of the developments in the administration of the RCM Group companies since the matter was last before the Court on 28 November 2013 and up to the date of the second creditors meeting on 8 July 2014. It is not necessary to set out in these reasons the content of those steps. I simply note Mr Owen's evidence about those matters. Mr Owen describes aspects of the completion of the sale, reporting steps undertaken in relation to the trusts, steps to ensure continuous disclosure obligations were discharged by the trusts, communications with RCM Group creditors, unit holders and other interested parties, and compliance with statutory reporting obligations. The administrators were required to deal with issues relating to RC Management's Australian Financial Services Licence, and engage with the Australian Securities Exchange in relation to particular conditions which were required to be satisfied concerning the RCM Group's securities. Mr Owen sets out various steps taken by the administrators to monitor the status of the trusts. 27 Mr Owen says that since the second meeting of creditors on 8 July 2014, the liquidators have undertaken work including: monitoring the trusts and considering the need to continue them or wind them up; monitoring and providing instructions in relation to the NSW proceedings; liaising with the receivers and managers for the Obligors; and, dealing with administrative tasks in transitioning from voluntary administration into a creditors' voluntary liquidation. 28 As to the NSW proceedings, Mr Owen sets out the steps taken since the orders of the Court on 28 November 2013. 29 There are three proceedings commenced in the Federal Court of Australia in New South Wales which involve companies in the RCM Group. The proceedings are being case managed by Justice Nicholas and a number of interlocutory applications were heard by his Honour on 28 and 29 April 2014. 30 The three proceedings are these. 31 A class action (NSD 757/2012) has been commenced by unit holders in each trust. The unit holders allege that traffic forecasts made by AECOM concerning projected utilisation of the tunnel were misleading or deceptive and/or made negligently. RC Management as responsible entity for each trust has been joined as a second respondent in the proceeding. RCM Services is the third respondent. The applicants contend that the product disclosure statement for the managed investment schemes issued by RC Management and prepared by RCM Services was defective by reason of the traffic forecasts. During the administration period, the Court granted leave to proceed against RC Management on particular conditions. RC Management has not been required to file a defence or give discovery in the proceedings. 32 The second proceeding (NSD 697/2012) is called the Portigon proceedings. 33 These proceedings are brought by Portigon AG ("Portigon") against AECOM. Portigon is a joint lead arranger and underwriter in respect of the project. Portigon contends that AECOM's traffic forecasts in relation to the tunnel were misleading or deceptive and/or made negligently. 34 The third proceeding (NSD 678/2012) is called the RiverCity Finance proceedings. 35 These proceedings were commenced by the Obligors against AECOM and, like the other proceedings, the contention is that AECOM's traffic forecasts were misleading or deceptive or made negligently. 36 In the Portigon proceedings and in the RiverCity Finance proceedings, AECOM foreshadowed applications to join RC Management and other companies in the RCM Group, by way of cross-claim. AECOM sought leave to proceed against RC Management under s 440D of the Act in 2014. Leave was refused on 18 July 2014 on the ground that the proposed cross-claims lacked utility. As the companies in the RCM Group have been placed in liquidation, the applicants in the class action, and AECOM, have filed applications for leave to proceed against RC Management and RCM Services pursuant to s 500(2) of the Act. 37 The liquidators have been ordered to inform the Court of their attitude to those applications by 12 September 2014. The applications will be heard by Nicholas J on Friday, 10 October 2014. 38 As to the New South Wales proceedings, Mr Owen says that during the course of the administration, the administrators dealt with the day-to-day conduct of the class action, responded to requests for s 440D consent in respect of proposed cross-claims against RC Management and investigated whether any insurance policies would respond to claims made, and claims proposed to be made, against RC Management in the various proceedings.

Some aspects of the orders sought by the applicants in both proceedings

Directions related to the NSW proceedings 39 As earlier mentioned, the Court on 28 November 2013 made a series of directions under s 447D of the Act to the effect that it would be a proper exercise of the powers and functions of the administrators to cause RC Management to engage in a number of steps including, continuing to monitor and investigate the claims made in the NSW proceedings and taking such steps as might be ordered by the Court; taking steps to identify, preserve and enforce rights under any policy of insurance that might respond to the claims made in those proceedings; taking legal and other advice as the administrators might require from time to time; taking other or incidental steps as may be necessary; and, incurring costs in so engaging. 40 Now that the administrators are joint and several liquidators, they seek like directions under s 511(1) of the Act, to those obtained under s 447D. 41 By this application, the liquidators by seeking directions are not asking the Court to authorise or approve (or direct the liquidators as to) the making or implementation of a business or commercial decision. As Goldberg J said in Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409 at [65]: There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. [emphasis added] 42 See also the observations of Davies J in Re Willmott Forests Ltd (recs and mgrs apptd) (in liq) (No 2) (2012) 88 ACSR 18 at [58]. 43 Section 511 provides that a liquidator may apply to the Court to determine any question arising in the winding up of a company, or apply to the Court to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court. Section 511 falls within Div 4 of Pt 5.5 of the Act which deals with provisions relating to voluntary winding up generally. Section 511(2) provides that, if satisfied that the determination of the question or the exercise of the power will be just and beneficial, the Court may accede, wholly or partially, to any such application on such terms and conditions as it thinks fit, or may make such other order on the application as it thinks just. 44 Part 5.4B of the Act addresses the winding up of companies in insolvency or by the Court. Part 5.4B confers a range of powers on the Court to make particular orders in particular circumstances. Section 511(1)(b) is framed in terms which confer a power on the Court to exercise those powers the Court might exercise if the company were being wound up by the Court (the counter-factual) rather than simply the powers arising upon the company being "taken to be" transitioned to a creditors' voluntary winding up by operation of s 446A(2) (the factual). Section 479(3) confers power on the liquidator to apply to the Court for directions in relation to any particular matter arising under the winding up. All of the authorities which apply to the exercise of power under that section apply to the exercise of power under s 511(1) of the Act. The principles to be applied, fundamentally, are those principles identified by Goldberg J as quoted above. 45 The applicants say that in the present case a question of propriety and reasonableness arises because two possible courses of action are open to the liquidator concerning the NSW proceedings. On the one hand, the liquidators could take no further role in those proceedings nor attempt to obtain indemnity under any policy of insurance that might be thought to respond to a claim or liability in respect of a claim. Such a course would limit the costs and expenses the liquidator would otherwise incur which would have the effect of preserving the available cash balances, at least in the interim. 46 However, the claims are substantial. In my view, it is in the interests of the creditors, for the liquidators to investigate whether any policy of insurance responds, and to continue to monitor, investigate and respond to the NSW proceedings and seek to preserve and enforce any rights under any policy of insurance and, in consequence, incur the costs of doing so. 47 I accept that it is proper and reasonable for the liquidators to take this course. 48 I accept that it is proper and reasonable for the liquidators to monitor the NSW proceedings and ensure that they are properly appraised of, and advised about, any developments which might affect RC Management or the trusts. 49 Moreover, the liquidators now face applications for leave to proceed under s 500(2) of the Act to which the liquidators must respond. 50 It follows that it is appropriate for the Court to give a direction to the liquidators to continue to monitor and respond to the NSW proceedings and act in terms of the orders set out at Order 2(a) to (e) in QUD 481 of 2014.

The right of indemnity out of the trust assets and apportionment 51 As earlier mentioned, the liquidators will necessarily incur costs and expenses in dealing with those matters the subject of Order 2(a) to (e). They will also incur a right to remuneration in respect of work done by them in connection with those matters. Under s 556 of the Act which addresses the priority of payments in a liquidation, the liquidators of RC Management enjoy priority in the payment of their costs and expenses and remuneration in connection with the conduct of the liquidation of the entity. RC Management, of course, is the trustee of the two identified trusts and in the ordinary course, a trustee would be entitled to indemnity out of the trust assets so long as the trustee is properly performing the trusts and properly discharging his or her (or its) duties as trustee. 52 Section 601GA(1) of the Act provides that the Constitution of a registered scheme must make adequate provision for four things including the power of the responsible entity to deal with scheme property. 53 Section 601GA(2) is in these terms: If the responsible entity is to have any rights to be paid fees out of scheme property, or to be indemnified out of scheme property for liabilities or expenses incurred in relation to the performance of its duties, those rights: (a) must be specified in the scheme's constitution; and (b) must be available only in relation to the proper performance of those duties; and any other agreement or arrangement has no effect to the extent that it purports to confer such a right. 54 Article 19.3 of the Constitution for each scheme, relevantly, is in these terms: 19.3 Expenses (a) subject to this article, all expenses incurred by the Manager in relation to the proper performance of its duties in respect of the Trust are payable or reimbursable out of the Assets to the extent that such reimbursement is not pre-empted by the Corporations Act. (b) Manager expenses include expenses connected with: … (xv) any court proceedings, arbitration or other dispute concerning the Trust including proceedings against the manager, except to the extent that the manager is found by a court to be in breach of trust or to have been negligent, in which case any expenses paid or reimbursed under this article 19.3(b)(xv) must be repaid. [emphasis added] 55 The applicants say that Article 19.3(b)(xv) raises the prospect of a future contention that if RC Management is found in any of the NSW proceedings to have acted negligently or in breach of trust, it may be obliged to repay all of the costs associated with responding to the various proceedings paid out of trust funds, including the payment to the liquidators of their costs and expenses concerning the steps as directed under these orders and remuneration payable in taking steps in conformity with these orders. 56 In consequence, a question would arise about repayments by the liquidators themselves to RC Management in order to reinstate the trust funds. 57 The liquidators say that if RC Management is found to have been negligent and does not have sufficient funds (in its own right to reinstate the trust fund), then the liquidators would either have to repay RC Management from their personal funds to put the entity in a position to reinstate the trust assets or, alternatively, if the liquidators did not repay RC Management, the liquidators would simply "deliberately leave [RC Management] in breach of its obligations under the Trusts' constitutions". 58 In the context of these concerns, the liquidators seek an order that they are entitled to be indemnified directly out of the assets of each trust for their costs and expenses and their remuneration (as approved from time to time) rather than relying upon RC Management's right of indemnity under the Constitution for each trust, with the associated limitations set out in Article 19.3 as described and the risks associated for the liquidators in being put in a position where they may have to repay RC Management in order to put the trustee in a position to reinstate the trusts. 59 This precise question also arose during the course of the administration and Logan J made orders under s 447A of the Act entitling the administrators to a direct indemnity out of the trust assets for the relevant activities. 60 As to the position of a liquidator, Young CJ in Re Lord (as liq of Maureen Michael Management Pty Ltd (in liq)) (2005) 55 ACSR 539 at [28] accepted the proposition that where a liquidator finds himself in charge of a trust fund and administers it, the Court will normally, as a general proposition, exercise its discretion to allow the liquidator remuneration and expenses out of the trust fund. At [29], Young CJ observed that whilst this is a general proposition, the "exact analysis" will differ between cases where the liquidator is administering a trading trust and has a right of indemnity in equity over the trust assets and cases where there is no trading trust. In this case, RC Management is the responsible entity for two managed investment schemes. 61 Although the observations of Young CJ invite an exact analysis of particular circumstances in the two cases identified, Finkelstein J in 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 at 385, in the context of a debate in the authorities about characterisation of the work undertaken by the liquidators of a trust company (as either work related to the administration of the trust assets on the one hand, or work related to the winding up of the trust company on the other hand), said this: The importance of the distinction is that work that is solely concerned with the winding up and not with the administration of trust assets can not ordinarily be charged against those assets. These cases establish, clearly enough in my opinion, that provided a liquidator is acting reasonably he is entitled to be indemnified out of trust assets for his costs and expenses in carrying out the following activities: identifying or attempting to identify trust assets; recovering or attempting to recover trust assets; realising or attempting to realise trust assets; protecting or attempting to protect trust assets; distributing trust assets to the persons beneficially entitled to them. [emphasis added] 62 As to the exercise of the Court's power to allow a trustee recourse to trust assets, Palmer J said this in Parbery v ACT Superannuation Management Pty Ltd (2010) 79 ACSR 425 at [26] - [29]: [26] I start from the position that the court's power to allow a trustee - or the administrator or liquidator of a corporate trustee - recourse to trust assets for remuneration and expenses is sparingly exercised [Palmer J makes reference to authorities for that proposition]. This is particularly so where the trust instrument itself provides the extent to which the trustee is to be remunerated and reimbursed from trust assets. [27] Such was the case in Re Berkeley Applegate [Re Berkeley Applegate (Investment Consultants) Ltd (in liq) [1989] Ch 32]. There, the contract between the trustee and the investors which constituted the trust expressly provided that, after payment of the trustee's stipulated remuneration from trust assets, the investors would have no further liability for the expenses of administration. However, the collapse of the investment scheme required the liquidator of the corporate trustee to carry out far more work in investigation and administering the trust assets than could have been envisaged at the conception of the scheme. The assets of the trustee, derived from its remuneration under the trust instrument, were insufficient to meet the liquidator's fees and expenses. The trust beneficiaries argued that, because of the terms of the trust instrument, the court had no power to permit the liquidator to have recourse to trust assets for the shortfall. [28] The court, however, held that the court's inherent jurisdiction to allow recourse to trust assets for further remuneration and reimbursement could be exercised even though the terms of the trust instrument prevented it [Re Berkeley Applegate at p 52G to p 53B]. In this regard, the court relied upon the decision of the Court of Appeal in Re Duke of Norfolk's Settlement Trusts [1982] Ch 61 … (Re Duke of Norfolk). [29] That was a case of an inter vivos settlement, in which express provision had been made for the remuneration and expenses of the trustees. The beneficiaries argued, and the trial judge accepted, that the court had no power to authorise further remuneration or reimbursement from trust assets. The Court of Appeal disagreed. 63 His Honour then quoted the observations of Fox LJ in Re Duke of Norfolk's Settlement Trusts [1982] Ch 61. At p 78G-H, Fox LJ said this: As to principle, it seems to me that if the court has jurisdiction, as it has, on the appointment of a trustee to authorise remuneration though no such power exists in the trust instrument, there is no logical reason why the court should not have power to increase the remuneration given by the instrument. 64 At p 79F-G, Fox LJ said this: In exercising that jurisdiction the court has to balance two influences which are to some extent in conflict. The first is that the office of trustee is, as such, gratuitous; the court will accordingly be careful to protect the interests of the beneficiaries against claims by the trustees. The second is that it is of great importance to the beneficiaries that the trust should be well administered. If therefore the court concludes, having regard to the nature of the trust, the experience and skill of a particular trustee and to the amounts which he seeks to charge when compared with what other trustees might require to be paid for their services and to all the other circumstances of the case, that it would be in the interests of the beneficiaries to increase the remuneration, then the court may properly do so. 65 The applicants contend that it is appropriate to allow the liquidator direct recourse to the assets of the trusts for these reasons. 66 First, the work in responding to the various claims in the NSW proceedings and pursuing any policy of insurance that might respond to such claims is work for the benefit of the trusts and the contingent creditors of those trusts. 67 Second, such work realistically needs to be undertaken on behalf of the trusts and the liquidators are best placed to continue to carry out that work. 68 Third, confirming a direct right of indemnity in the liquidators avoids any risk that the interests of the trusts and their members might be subordinated to any concern the liquidators might have as they undertake particular tasks concerning any personal liability. 69 I am satisfied that the work required of the liquidators is work which will benefit the trusts and their beneficiaries, and the liquidators are in the best position to efficiently, and particularly cost efficiently, undertake that beneficial work. 70 Accordingly, I am satisfied that Order 3(e) in QUD 481 of 2014 ought be made. 71 As to the apportionment between the two trusts the position is this. 72 As earlier mentioned, the liquidators hold $9,066,097.55 on behalf of the Investment Trust and $1,506,810.40 on behalf of the Holdings Trust. If the liquidators apportion their costs between the two trusts on a 50/50 basis, one fund will be exhausted prior to the other and the liquidators might run the risk that they will be out of pocket as to one half of their costs, expenses and remuneration after exercising the right of direct indemnity in respect of the relevant trust. 73 I am satisfied that the proper course is to direct that the costs, expenses and remuneration of the liquidators be satisfied from each trust in proportion to the value of funds held by each trust at the moment in time when the liquidators exercise a right of direct indemnity. This approach brings about the result that each trust shares the burden of the costs, expenses and remuneration of the liquidators in pursuing the interests of each trust in proportion to the available assets of each trust. 74 These considerations are also material to the making of an order as to apportionment. First, the unit holders in both trusts are the same. The units are "stapled" and thus a person cannot transfer a unit in one scheme without transferring the "stapled" unit in the other trust. Second, in relation to the costs of the NSW proceedings and the insurance issues, it is not practically possible to identify particular costs which relate to the Investment Trust and those which relate to the Holdings Trust. The work in relation to the NSW proceedings and investigation of the insurance position benefits both trusts. Third, the unit holders are contingent creditors of both trusts by reason of their claims in the class action proceedings. Fourth, AECOM, through its proposed cross-claim, is possibly a contingent creditor of both trusts. 75 Accordingly, Order 3(f) of the orders in QUD 481 of 2014 ought be made.

Are the liquidators of RC Management "officers" in its capacity as responsible entity for the trusts under Chapter 5C of the Act 76 Section 601FD(1) provides that an officer of a responsible entity of a registered scheme must, among other things, act in the best interests of the members and, if there is a conflict between the members' interests and the interests of the responsible entity, the officer must give priority to the members' interests: s 601FD(1)(c). 77 Section 9 of the Act (the Dictionary) which opens with the words "Unless the contrary intention appears:", defines an officer of a corporation to mean an administrator of the corporation or, relevantly here, a liquidator of the corporation. Thus, a liquidator on the face of s 601FD(1)(c), must act in the best interests of the scheme members, and in any conflict between their interests and the interests of the responsible entity, the liquidator must give priority to the interests of the scheme members. 78 The liquidator, of course, owes duties to the general body of creditors and those duties are not subordinated to the interests of scheme members: see the observations of Finkelstein J at [11] and [8] to [11] in Timbercorp Securities Ltd (in liq) v WA Chip & Pulp Co Pty Ltd [2009] FCA 901. 79 I am satisfied that for the purposes of Pt 5C of the Act, a "contrary intention" is manifest such that a liquidator of a responsible entity is not an officer of the corporation for the purposes of the Act. Accordingly, I am satisfied that Order 5 in QUD 481 of 2014 ought be made.

Reporting obligations under ss 292, 298, 302, 306, 314, 319 and 320 of the Act 80 In Mr Owen's affidavit sworn 1 September 2014 he sets out at [102] the reasons he identifies warranting an extension of the time for compliance by RC Management with reporting obligations arising under ss 292, 298, 302, 306, 314, 319 and 320 of the Act. Mr Owen also identifies why, in his view, no substantial injustice is likely to be caused to any person by extending time. The applicants do not suggest that the liquidators ought to be exempted from the reporting obligations under the Act. Rather, they simply seek to extend the time for doing so. 81 The liquidators contend that the preparation of reports contemplated by these sections of the Act would be expensive and would involve engaging two external accounting firms to prepare and audit the reports. Further, Mr Owen contends that the trusts are presently in a dormant state with the result that there is no prospect of any material financial changes occurring for which reporting would be required. Mr Owen observes that no creditor or other party has objected to the making of an order extending time for reporting. In any event, the liquidators remain obliged to comply with record-keeping and reporting provisions in ss 508, 531 and 539 of the Act in respect of RC Management and thus there remains a mechanism to ensure that appropriate accountability and oversight is maintained. 82 An order of this kind was made by Logan J in favour of the administrators. However, the source of the power to make such an order lies in s 447A of the Act. That section deals with the powers of the Court to make particular orders. The section identifies those persons who have standing to apply. 83 The liquidators do not have the benefit of s 447A and therefore they apply under s 1322(4)(d) of the Act. That section provides, relevantly, that subject to particular sections of the Act, the Court may, on application by any interested person, make all or any of the orders identified in that subsection, either unconditionally or subject to such conditions as the Court imposes. One such class of order is: … (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit. 84 Section 1322(6) contains a number of pre-conditions to the making of an order under s 1322 and one of those pre-conditions is that the Court must not make an order under s 1322 unless it is satisfied, in every case, that no substantial injustice has been or is likely to be caused to any person. 85 I accept that the discretion conferred upon the Court by s 1322 is remedial in nature and I also accept that the construction to be given to the section is one of liberal interpretation: see Re Insurance Australia Group Ltd (2003) 128 FCR 581 at [27], Lindgren J, citing Re Australian Koyo Ltd (1984) 8 ACLR 928 at 930 and Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157 at 160; Re Golden Gate Petroleum Ltd (2004) 50 ACSR 659 at [35], Lee J. The power to extend time properly applies to provisions which impose an absolute positive obligation subject only to a plain contrary intention: see Re Insurance Australia Group Ltd, Lindgren J at [28], and David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, Gummow J at pp 275-280, Brennan CJ, Dawson J, Gaudron J and McHugh J all separately agreeing at p 269. 86 Accordingly, I am satisfied that Order 6 in QUD 481 of 2014 ought be made.

Questions concerning the validity of the appointment of Committees of Inspection 87 At the second meeting of creditors held on 8 July 2014, a Committee of Inspection was elected by creditors for both RC Management and RCM Services. The applicants rely upon the affidavit of Ms Antonietta Vozzo sworn 28 August 2014 and filed in QUD 481 of 2014. Ms Vozzo is a partner in the firm of solicitors representing the applicants. Ms Vozzo exhibits the Minutes of the concurrent meetings of creditors held pursuant to s 439A of the Act on 8 July 2014. The Chairperson of the meeting was Mr Christopher Hill. 88 Relevantly for present purposes, the Minutes contain these matters concerning the Committee of Inspection: The Chairperson informed the creditors that a Committee of Inspection (COI) could be formed for any of the companies for the purpose of representing the creditors and liaising with the Liquidators during the period of the liquidation. The Chairperson informed the meeting that a COI has a number of powers, including approving the remuneration of the Liquidators. The Chairperson proposed a Committee of Inspection be formed for RCMML [RC Management] and RCMS [RCM Services] to ease the liquidation process given the present litigation for both companies. RCMML

"A Committee of Inspection be formed comprising: • Cassandra Mathews of KordaMentha, representing RiverCity Motorway Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) • Richard Ryan of Maurice Blackburn, representing Stephen Anthony Hopkins as trustee for the Hopkins Superannuation Fund."

The Chairperson abstained from voting the proxy he held. The motion was carried by all creditors present and entitled to vote (except for the Chairperson's proxy).

It was noted that Richard Ryan might be excluded from some discussions in the COI meetings for RCMML and RCMS regarding the present litigation. There were no objections.

89 The liquidators seek an order under s 511 that each Committee of Inspection was validly appointed. 90 Section 548(1) of the Act is in these terms: The liquidator of a company must, if so requested by a creditor or contributory, convene separate meetings of the creditors and contributories for the purpose of determining: (a) whether a committee of inspection should be appointed; (b) where a committee of inspection is to be appointed: (i) the numbers of members to represent the creditors and the contributories, respectively; and (ii) the persons who are to be members of the committee representing creditors and contributories, respectively. [emphasis added] 91 Section 548(2) provides that if there is a difference between the determination of the meeting of creditors and that of the meeting of contributories, the Court may resolve the difference and make such order as it thinks proper. 92 In Jindal Transworld PVT Ltd v Scottsdale Homes No 10 Pty Ltd (No 2) [2010] SASC 210 ("Jindal"), Judge Lunn, a Master of the Supreme Court of South Australia, considered the construction to be attributed to s 548(1). In that case, the liquidator applied to the Court for an order that his remuneration be set at a certain amount for a particular period. Section 473(3) of the Act provides that a liquidator is entitled to receive such remuneration as is determined by agreement between the liquidator and the Committee of Inspection if there be one, or if there is no such committee (or no agreement can be reached) the Court is to determine the remuneration. In Jindal, a Committee of Inspection was appointed. No meeting of contributories had ever been convened or held. 93 On the question of the validity of the appointment of the Committee of Inspection, Judge Lunn observed: In my view, the proper interpretation of s 548(1) is that no COI is established under it until both the meetings of the creditors and the contributories have been held, and, if they differ, that the Court has made an order under sub-s (2). 94 Judge Lunn also observed that under s 548(1) "it would appear that the plaintiff [a creditor] had to request the liquidator to convene separate meetings of the creditors and contributories". In Jindal, there was no evidence that the plaintiff had requested the liquidator to convene a meeting of contributories. 95 I would respectfully disagree with Judge Lunn as to the appropriate construction to be attributed to s 548(1) especially in the circumstances of the companies the subject of the present application. Section 548(1) casts a mandatory obligation upon the liquidator only in the circumstances upon which that obligation is pre-conditioned. In other words, the liquidator must convene separate meetings of the creditors and contributories if requested by a creditor or a contributory to convene such meetings. Had such a request been made, the liquidator would have fallen under a mandatory obligation to comply with s 548(1). No such request was made. The question of whether a Committee of Inspection might or might not be formed was raised at the concurrent meeting of creditors for the relevant companies by the Chairperson. That suggestion was, in any event, confined to establishing a Committee of Inspection "for the purpose of representing the creditors" in liaising with the liquidators. A resolution was moved and passed in respect of both entities. The appointment of a Committee of Inspection in each case is not rendered invalid because no separate meeting of contributories was held. 96 There was no request to hold separate meetings of creditors and contributories. 97 Further, the applicants correctly point out that they are liquidators of companies being administered in a creditors' voluntary winding up rather than a Court ordered winding up under Pt 5.4 of the Act (which was the case in Jindal). Section 497(10) of the Act, which falls within Div 3 of Pt 5.5 of the Act in relation to creditors' voluntary winding up, provides that at a meeting of creditors held under s 497, the creditors may determine the matters referred to in para 548(1)(a) and (b) and, where the creditors so determine those matters, a meeting of the creditors for the purposes of s 548 is taken to have been held and the determinations are taken to have been made under that section. 98 I am satisfied that a declaration or order ought to be made as to the validity of the appointment of the Committees of Inspection. 99 However, quite apart from the matter of construction, if it be the case that a failure to convene a separate meeting of contributories renders the appointment of the Committee of Inspection in each case invalid, I am satisfied that the proposed order is properly supported by an order under s 1322(4)(a) notwithstanding that a meeting of contributories was not held. Section 1322(4)(a) confers power on the Court to make an order declaring that any act, matter or thing purporting to have been done, under the Act is not invalid by reason of any contravention of a provision of the Act. Accordingly, having regard to the affidavit of Mr Owen sworn 1 September 2014 and the affidavit of Ms Vozzo, I am satisfied that it is a proper exercise of the discretion under s 1322(4)(a) to make a declaration or order as to the validity of the appointment of the Committee of Inspection in each case, notwithstanding that no meeting of contributories was held. 100 Having regard to all of these matters, I am satisfied that it is appropriate to make a declaration of validity as to the appointment of the Committees of Inspection in terms of Order 7 of the orders made in QUD 481 of 2014.

Remuneration of the former administrators and the remuneration of the liquidators 101 Having regard to the affidavit of Mr Owen sworn 1 September 2014 and the affidavit material read in support of the application, I am satisfied that orders ought to be made in favour of the former administrators confirming their remuneration in relation to RC Management and the trusts under s 449E(2) for the purposes of orders made by Logan J on 28 November 2013 and fixing remuneration in relation to RC Holdings under s 449E(1)(c). 102 For the reasons identified in the affidavit material, the Court confirms the former administrators' remuneration for the purposes of para 12(e) of the orders of Logan J on 28 November 2012 in the sum of $20,871.00 (plus GST) as to the administration of RC Management in its own right, and remuneration of $105,739.00 (plus GST) as to the administrators' role in administering the trusts. 103 As to the administrators' remuneration for RC Holdings, no resolution was passed at the meeting of creditors on 8 July 2014 because the only creditor was a related party who had given a proxy in favour of the Chairperson, Mr Hill, and he abstained from voting that proxy. 104 By this application, the administrators seek orders for the fixing of their remuneration in the sum of $16,737.00 (plus GST) for the period 1 November 2013 to 8 July 2014 under s 449E(1)(c). 105 The principles to be applied in fixing an administrators' remuneration are set out in Owen, in the matter of RiverCity Motorway Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) v Madden (No 2) [2012] FCA 312. 106 I apply those principles. 107 I am satisfied that the orders sought by the administrators ought be made. 108 I am also satisfied that the same principles apply in fixing the remuneration of the liquidators in relation to RC Holdings for the period 9 July 2014 to 30 June 2015. No resolution was passed at the meeting on 8 July 2014 either fixing the remuneration of the liquidators or appointing a Committee of Inspection for RC Holdings because the only creditor was a related party who had given a proxy in favour of the Chairperson and the Chairperson abstained from voting that proxy. Thus, the remuneration must be fixed by an order of the Court. The affidavit material identifies the nature of the work undertaken and I am satisfied that it is appropriate to make the orders sought. 109 Accordingly, Orders 2 and 3 in QUD 60 of 2011 ought be made. 110 Order 4 ought be made in QUD 481 of 2014.

Confidentiality 111 I am satisfied that certain parts of the affidavit material and particular paragraphs of the submissions relied upon by the applicants contain confidential information. I am satisfied that it is appropriate to make a non-publication order restricting particular information that comprises evidence in the proceeding or information (submissions) about that evidence as contemplated by s 37AF(1)(b) of the Federal Court of Australia Act 1976 (Cth), on the ground that the order is necessary to prevent prejudice to the proper administration of justice: s 37AG(1)(a). The proper administration of justice is served by the order as the interests of the beneficiaries of the trusts (and the creditors) are protected by preventing disclosure of matters which may be prejudicial to any right of indemnity that might arise under the relevant policies of insurance. The non-publication order relates to limited paragraphs of affidavit material and limited paragraphs of the written submissions. 112 I am satisfied that all of the orders ought to be made. 113 Notwithstanding that some aspects of the orders have not been discussed in these reasons, the content of each and every order was considered leading up to and at the hearing by the Court on 11 September 2014. As to all of the matters the subject of the orders, the Court is satisfied that each order ought be made. I certify that the preceding one-hundred and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.

Cases cited: Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409 - cited and quoted Re Willmott Forests Ltd (recs and mgrs apptd) (in liq) (No 2) (2012) 88 ACSR 18 - cited Re Lord (as liq of Maureen Michael Management Pty Ltd (in liq)) (2005) 55 ACSR 539 - cited 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 - cited and quoted Parbery v ACT Superannuation (2010) 79 ACSR 425 - cited and quoted Re Duke of Norfolk's Settlement Trusts [1982] Ch 61 - cited and quoted Timbercorp Securities Ltd (in liq) v WA Chip & Pulp Co Pty Ltd [2009] FCA 901 - cited Re Insurance Australia Group Ltd (2003) 128 FCR 581 - cited Re Australian Koyo Ltd (1984) 8 ACLR 928 - cited Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157 - cited Re Golden Gate Petroleum Ltd (2004) 50 ACSR 659 - cited David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 - cited Jindal Transworld PVT Ltd v Scottsdale Homes No 10 Pty Ltd (No 2) [2010] SASC 210 - not followed Owen, in the matter of RiverCity Motorway Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) v Madden (No 2) [2012] FCA 312 - cited

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