Parkinson v Morkaya [2008] NSWSC 1183 | Case summary

2945/08 David Anthony Parkinson v Aydan Morkaya JUDGMENT (ex tempore) 1 HIS HONOUR: On 2 October 2008, and for reasons subsequently published on 10 October 2008 [Morkaya v Parkinson [2008] NSWSC 1050], I made orders inter alia that, upon Mr David Anthony Parkinson by his counsel giving to the Court the usual undertaking as to damages, Mr Brian Patrick Dunphy be appointed liquidator of Ativa Pty Ltd ("Ativa") provisionally, conferring on the provisional liquidator the usual powers and making some additional provisions. It has since transpired that Mr Dunphy - although he is a registered liquidator and although there had been tendered a consent by him "to act as a receiver and/or manager and/or liquidator on a provisional or final basis of the corporate and business interests the subject of these proceedings" - was not an official liquidator, and thus was not eligible to be appointed by the Court as a provisional liquidator. Upon Notice of Motion filed in Court today, Mr Dunphy tendered his resignation and moved for ancillary orders, and without opposition by either Ms Morkaya or Mr Parkinson, I earlier today declared that the acts of Mr Dunphy from 2 October 2008 until today were valid notwithstanding any defect of his qualification for appointment as provisional liquidator of Ativa, fixed his remuneration at $13,274.25, ordered that he be entitled to be reimbursed his reasonable expenses incurred in the course of his administration of Ativa, and accepted his resignation as provisional liquidator. The question then remains as to what appointment should be made in place of Mr Dunphy. 2 At the time of the original application there were tendered consents also of Mr Peter Paul Krejci and of Mr Michael John Morris Smith to act inter alia as liquidator or provisional liquidator. Mr Smith expressly certifies that he is an official liquidator, and the Court is aware from other matters that Mr Krejci is an official liquidator. For Mr Parkinson, Mr Martin submits that one or other of them should be appointed. By Notice of Motion also filed in Court today, Ms Morkaya seeks an order that Mr Bradd Morelli, a partner in Jirsch Sutherland Insolvency, Turnaround and Forensic Accounting Specialists, be appointed provisional liquidator in place of Mr Dunphy. It is clear that the Court can appoint only a provisional liquidator who has consented to such appointment [Supreme Court (Corporation) Rules, r 6.1(1)]. It is, therefore, not open to me simply to select an official liquidator who has not given a consent and to make such an appointment. The question, therefore, is which of Mr Krejci, Mr Smith or Mr Morelli should be appointed. 3 In the related context of the appointment of receivers, the usual practice is for the applicant to file an affidavit of fitness. The opponent may file an affidavit in opposition as to the unfitness of the proposed receiver, and may also file a consent verified by affidavit and an affidavit of fitness proposing an alternative person for appointment. Where both parties nominate a receiver and nothing can be suggested to reflect adversely on the fitness of either of them, the rule is that the person nominated by the applicant should be appointed [Barclay v Barclay (NSWSC (ED3888/78) Kearney J, 22 December 1978, unreported)]. 4 So far as the various candidates here are concerned, on the evidence before me there is nothing to separate any of the three in terms of competence or experience. 5 One potential factor that might be considered is the respective cost of an appointment. Indeed, my original preference for Mr Dunphy was based exclusively on the question of cost, he being the least expensive of the three from whom consents had been obtained. Mr Krejci would appear to be the most expensive, Mr Morelli the next and Mr Smith the least expensive. That suggests some advantage in the appointment of Mr Smith, although that advantage is largely if not entirely eroded by Ms Morkaya's acknowledgment that the difference in cost could be taken into account against her on any ultimate division of property. 6 Although it was suggested that it may afford greater comfort to the employees of the business, its customers - and, inferentially, Ms Morkaya - were her choice, Mr Morelli, be appointed, it is not logically apparent why that is so. It is said that there would be "comfort" that a "proper" provisional liquidator had been appointed, but I am unable to see why Mr Smith, or Mr Krejci for that matter, would not equally be "proper" provisional liquidators. It was suggested that it might be inferred - from the circumstance that Mr Dunphy turned out not to be qualified to act and, so it is asserted, has acted inappropriately (but on the present evidence, I am quite unable to make any finding to that effect) - that Mr Krejci and Mr Smith, their consents having also been obtained on behalf of Mr Parkinson, might also not be appropriately qualified or might also not act appropriately in respect of the business. It is quite impossible to draw any such inference in the circumstances. Part of the reason that the difficulty arose with Mr Dunphy is that, until judgment was delivered, the parties would not have apprehended that I would appoint a provisional liquidator rather than a receiver and manager, for which appointment Mr Dunphy was qualified. Although it might be said that Mr Parkinson's lawyers were less than zealous in following up Mr Dunphy's requests for clarification as to his qualification, I do not think that warrants any inference that Mr Smith or Mr Krejci would not act appropriately if appointed, let alone that they are not qualified to be appointed. 7 Thus, in terms of qualification, competence, experience, and propriety, I can see nothing to distinguish any of the three candidates. 8 However, I do think that there is at least one matter that points against appointing Mr Morelli, namely that - unlike Mr Smith and Mr Krejci who, other than giving a consent, have had no prior connection with either of the parties - Mr Morelli was first approached by Ms Morkaya, according to her affidavit of today, because she was alarmed at what she perceived Mr Dunphy was doing, approached him for advice as to how a provisional liquidator should properly behave, and had him contact Mr Dunphy on her behalf, as a result of which Mr Morelli indeed spoke to Mr Dunphy and subsequently reported to Ms Morkaya. In those circumstances, although I do not for a moment suggest that if appointed Mr Morelli would act other than properly, he is more vulnerable to an allegation of bias than the other candidates. 9 Even without that factor, in circumstances where there is otherwise nothing to separate the various candidates, the principle to which I have referred, as enunciated by Kearney J in Barclay v Barclay, indicates that in the case of competition between potential appointees, where there is nothing to distinguish them, the rule is the person nominated by the applicant be appointed. It follows that, tempting as it is to take the approach that Mr Parkinson having had the initial nomination, Ms Morkaya should have the next choice, that is not the law, and I should appoint Mr Parkinson's nominee. That conclusion is reinforced by Mr Morelli's greater vulnerability to an allegation of bias. As between Mr Smith and Mr Krejci, considerations of relative cost favour the former. 10 I therefore order that in lieu of Mr Dunphy, Mr Michael John Morris Smith be appointed liquidator of Ativa Pty Ltd ACN 106985479 provisionally, with the powers referred to in and otherwise subject to the orders made on 2 October 2008. 11 Mr Martin applies on behalf of Mr Parkinson for costs for the period since 12.20pm today (when, in effect, Mr Dunphy's application was disposed of) for the balance of today, on the basis that that has been solely attributable to Ms Morkaya's unsuccessful motion for the appointment of Mr Morelli. 12 The order I made on 2 October in respect of the interlocutory application then before the Court, on which the provisional liquidator was appointed and other interlocutory issues resolved, was that the costs of the interlocutory application be costs in the proceedings. In respect of Mr Dunphy's motion this morning, I (by consent) made no order as to costs, to the intent that each party bear its own costs. 13 On the one hand, it is correct that Ms Morkaya's application has been wholly unsuccessful, in that I have not acceded to it and instead appointed Mr Smith. I do not see any basis upon which Ms Morkaya, whose application has been unsuccessful, should recover her costs. 14 On the other, I do not think it can be said that Mr Parkinson does not bear at least some responsibility for today's costs. It was on his behalf that the consent of Mr Dunphy to act inter alia pursuant to ss 90 and 461 of the (CTH) Corporations Act 2001, was filed - s 461 referring to a court-ordered winding up. In those circumstances, I think there has been at least some contribution to the costs incurred this afternoon on Mr Parkinson's side of the record; had the defect in Mr Dunphy's qualification been ascertained, none of them would have been necessary. 15 Bearing in mind that the costs of the application which resulted in the appointment in the first place are costs in the proceedings, and will therefore abide the outcome of the proceedings, it is not inevitable that ultimately Mr Parkinson will be entitled to a costs order in respect of the interlocutory application let alone the proceedings generally. If he is not so entitled, he should not recover the costs of this application. The appropriate course is one that deprives Ms Morkaya in any event of her costs of the present application, but does not inevitably give them to Mr Parkinson. 16 My order is that the costs of Ms Morkaya's application filed today be Mr Parkinson's costs in the proceedings, to the intent that if an order is ultimately made in his favour for the costs of the proceedings, he will recover costs of today; if no such order is made, he will not. 17 I direct that the orders made today be entered forthwith. **********

Parkinson v Morkaya

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