Patakas v Bevan

Affidavit evidence

1. Mr Hinson reads his affidavit dated 27 August 2021, which sets out correspondence with Mr Hayes, through the parties' respective solicitors, and refers to Mr Hinson no longer believing that it is appropriate for Mr Hayes to be appointed liquidator and to his withdrawing his consent to his being appointed as liquidator. Ultimately, it is of course unnecessary for Mr Hinson to consent to Mr Hayes' appointment as the liquidator, because the identity of a liquidator is a matter for the Court. Putting that aside, Mr Hinson indicates the reasons why he believes that a liquidator other than Mr Hayes should be appointed.
2. The first of those reasons is that the tasks remaining for a liquidator are relatively limited, and do not require knowledge acquired by the receiver in relation to the Company's business. That may be a matter that mitigates any wasted costs by appointment of a liquidator other than Mr Hayes, but it is not a matter that affirmatively supports the appointment of a liquidator other than Mr Hayes. Mr Hinson there refers to one of those matters being the assessment and payment of employee entitlements, and a further issue was raised in submissions in that respect.
3. Mr Hinson also refers to having raised concerns on a number of occasions regarding Mr Hayes' conduct in the sale process and that appears, at least in large part, to refer to the concern that Mr Hinson agitated before the Court, which was dealt with in the judgment to which I referred above.
4. Mr Hinson also notes that it will be necessary for Mr Hayes to apply to the Court for the approval of his fees and, he suggests, it would likely be necessary for the Company to be represented, and Mr Hayes' fees should be independently considered and Mr Hayes would be conflicted from doing so. I am not persuaded that it would likely be necessary for the Company to be represented in such an application where, it seems to me, the persons with the ultimate economic interest in the disposition of such an application are the Company's shareholders, including Mr Hinson who stand to benefit from the distribution of a surplus, after the payment of the receiver's and liquidator's fees and disbursements.
5. In those circumstances, it is obvious enough that Mr Hayes, as liquidator, could not express a view as to the amount of fees that he claimed as receiver; but it is not apparent to me why a liquidator would wish to do so, where all that would result would be to duplicate any costs incurred by the contributories in expressing such views, or to shift the cost of Mr Hinson's expressing views in opposition to the claim for remuneration from him to other shareholders in the Company. That is, it appears, an advantage which Mr Hinson apprehends from that course, understandably from his perspective, but it does not seem to me to be an advantage that extends to the other shareholders in the Company, or a reason to expose the parties to additional costs in respect of a change of liquidator at this point.
6. Mr Hinson then returns to his concerns regarding Mr Hayes' conduct in the sale process, and addresses, in particular, information which he provided in respect of that sale process. He refers to an email dated 11 June 2021 from an estate agent to Mr Hinson, which referred to two "offers" for the property, which appear on the face of them to be more akin to expressions of interest subject to conditions including lengthy settlement periods and due diligence periods. Those "offers" were in any event not consistent with the consent orders agreed by the parties, which the Court had declined to vary, for sale of the property in one line. I will return to that question below.
7. Mr Hinson also refers to a letter from Mr Hayes dated 30 July 2021, which expressly reserved his position as to whether Mr Hinson was an employee of the Company, and referred to previous correspondence in which it appears that Mr Hayes had sought information to support Mr Hinson's claim as an employee of the Company, to which he had not received a response. Mr Newton, who appears for Mr Hinson, submits that that position is, on the face of it, inconsistent with earlier references in the information memorandum relating to the sale of the Company's land and business to the existence of one non-executive director as an employee of the Company, and inconsistent with a document headed "Entitlement Balance", which appears to record amounts due to Mr Hinson by way of annual leave loading, in a negative amount, and holiday leave and personal leave in positive amounts. Having said that, the letter dated 30 July 2021 from Mr Hayes merely reserved his position, indicating that that letter should not be regarded as either an acceptance or a rejection by the receiver or the Company of Mr Hinson's claim to any employment status.
8. Mr Hayes was granted leave to appear as an interested person under r 2.13 of the Supreme Court (Corporation) Rules, where the application appeared to raise the "concerns" expressed by Mr Hinson in respect of his conduct. He addressed, by his affidavit dated 20 May 2021, the conduct of the receivership to date and the treatment of valuation issues. That affidavit was read in respect of the earlier proceedings concerning the sale of the Company's land and business. By a further affidavit dated 1 June 2021, also read in respect of those proceedings, Mr Hayes addressed recent correspondence, valuation issues and costs of the receivership. By a third affidavit dated 6 September 2021, read only in this application, Mr Hayes addressed the circumstances in which he had been appointed as receiver, noted the orders made by the Court by consent to which I had referred above, and referred to the earlier application brought by Mr Hinson, the sale of the Company's assets, and his intent to apply to the Court for remuneration in acting as receiver and manager. He indicated that he was prepared to accept an appointment as liquidator of the Company, if so appointed by the Court.

The parties' submissions

1. Turning now to the parties' submissions, Mr Newton addressed a question whether Mr Hinson should be permitted to change his position, from that noted in the earlier consent orders made by Williams J. He refers to Patakas v Bevan [2017] NSWSC 1592 at [57]-[62], where Ward CJ Eq noted that a notation made by the Court did not have operative effect as an order of the Court and it was not necessary to give leave to withdraw a statement made in an notation to Court orders, so far as that notation recorded what happened at that time. No party contended to the contrary. In those circumstances, Mr Hinson can, without leave, reverse the position which he previously took as noted in the consent orders made by Williams J.
2. The position that Mr Hinson previously adopted remains relevant and, as Ms McEwen who appears for Mr Morrison and Mr Quoyle points out, can be taken into account as the approach then adopted by the parties which supported a resolution of the proceedings at that time, rather than the matter then going to hearing. It also it seems to me to provide evidence that that position was not irrational, not least because all parties were then represented by competent legal advisors, and consented to it, having apparently devoted their minds to the question who should be appointed as liquidator after the sale of the Company's assets by the receiver, and concluded that, all things being equal, it was preferable that Mr Hayes as receiver be appointed to that position. At one level, Mr Hinson's submissions are not inconsistent with that proposition, so far as Mr Newton characterises the position as that he now wishes to oppose what he previously did not oppose, in the orders made by consent.
3. Mr Newton, in submissions, refers to the history of the sale process in respect of the Company's land and business, and submits that that is reason why leave should not be granted under s 532 of the Act. He refers, in written submissions, to the approach to s 532 of the Act, which reflects the legislative intention that a liquidator should generally be free from potentially conflicting allegiances unless the Court sees that independent judgment will nevertheless be available: Re McGrath (2010) 266 ALR 642; (2010) 78 ACSR 405; [2010] NSWSC 404 at [50]. I bear in mind that applications under s 532 of the Act are commonplace and occur, for example, whenever a liquidator retires and another liquidator from the same firm is appointed in his or her place, where the Court will regularly grant leave under s 532 of the Act, although the newly appointed liquidator's firm will generally have a claim in respect of remuneration due to the previous liquidator: see, for example, Re OGL Resources Limited [2015] NSWSC 58; Re FGM Print Pty Limited [2018] NSWSC 1478.
4. In oral submissions, Mr Newton expands the basis on which he contends that leave under s 532 of the Act should not be granted. He submits that Mr Hayes is not independent, first, because he has been acting as a receiver for ten months. It seems to me that that submission, in itself, does not establish any lack of independence, and the fact that a potential liquidator has previously been a receiver appointed by the Court is no less likely to create a lack of independence than the fact that he or she has, for example, previously been a voluntary administrator of a company. In each position, the insolvency practitioner would be required to maintain an independent role, and the fact that the capacity in which he or she is appointed changes, relevantly, from Court-appointed receiver to liquidator does not in itself give rise to any difficulty as to independence.
5. Second, and more substantively, Mr Newton refers to the question as to the sale of business and sale of land in one line, and refers to Mr Hinson's discontent with that course, although I note that it was mandated by the orders made by consent by Williams J and continued by my judgment in June 2021. Mr Hinson has also foreshadowed a claim for breach of statutory duty under s 420A of the Act, which identifies a controller's obligation to take all reasonable care to sell a property if, when it is sold, it has a market value, for not less than market value or otherwise the best price that is reasonably obtainable. I noted the scope of that obligation in Re Australasian Barrister Chambers Pty Ltd (in liq) [2017] NSWSC 597 and subsequently in Re Austral Alloys Pty Ltd above. It may be accepted that it is open to Mr Hinson to bring a claim under s 420A of the Act, if so advised, or possibly to cause the Company to do so, with leave of the Court. Mr Harris, who appeared for Mr Hayes, drew attention to several matters which may be perceived as difficulties with such a claim, but it is not necessary or appropriate to express any view as to the merits of that claim at this point.
6. The premise of Mr Newton's submission was that such a claim would be brought by the Company rather than by Mr Hinson. I will assume, without deciding, that that is at least a possibility. Even if that is the case, it is open to Mr Hinson to bring such a claim, by seeking leave in equity to bring a derivative action on behalf of the Company in liquidation. He would have a strong case that, if the other elements for the grant of leave can be satisfied, there would be reason to grant that leave where Mr Hayes as liquidator plainly could not assess the merits of a claim under s 420A of the Act against himself as receiver. That, however, does not seem to me to be reason not to grant leave under s 532 of the Act, where there are efficiencies and costs savings in doing so, as I will note below, since any difficulty arising in Mr Hayes forming a view as to his own conduct in respect of the sale process can readily be addressed by an application by Mr Hinson for leave of that character. That may be unattractive to Mr Hinson, so far as it requires that he pay the costs of such an application, rather than burden other shareholders with those costs, but that does not seem to me a disadvantage from the point of view of public policy.
7. Next, Mr Hinson refers to Mr Hayes' suggested change of position when dealing with his employee entitlements. Again, it does not seem to me to be necessary to address the merits of that matter, where Mr Hayes' ultimate position was one of neutrality as to whether Mr Hinson was or was not an employee. Mr Newton draws attention to Mr Hayes' foreshadowing that a decision as to that matter will need to be made by a liquidator, but there is nothing to suggest that Mr Hayes cannot bring an independent mind to doing so, where the position of which Mr Hinson complains is one of his neutrality, not one that is adverse to Mr Hinson.
8. Next, Mr Hinson submits that there is a difficulty with independence, because Mr Hayes will be required to address, as liquidator, his claim for remuneration as receiver. I do not accept that submission because it does not seem to me here that the natural contradictor to any claim for remuneration by the receiver is the Company, as distinct from the individual shareholders, if they are discontent with the amount of remuneration claimed. There is no doubt that Mr Hinson would be given leave to appear under r 2.13 of the Supreme Court (Corporations) Rules to oppose any claim for remuneration by Mr Hayes, where he, as one of the contributories, would ultimately bear the economic cost of that remuneration. Where each of the shareholders has the ability to appear in that respect, that matter does not seem to me to call for any consideration by the liquidator, or to be capable of giving rise to any lack of independence in respect of Mr Hayes in that respect. If I were wrong in that finding, then the Court could, in an appropriate case, appoint a special-purpose liquidator to address that question, which would be less costly than appointing a new liquidator in the relevant circumstances, although it seems to me unlikely that it would do so where it is open to the shareholders to represent their own interests in that respect.
9. For all these reasons, I am not satisfied that any issue has arisen which takes this matter out of the usual position, where there will be a transition of status of an insolvency practitioner, here from receiver appointed by the Court to liquidator, or that the Court should do otherwise than what was originally contemplated by the parties' consent orders, and now appoint Mr Hayes as liquidator, granting the necessary leave under s 532 of the Act. It seems to me that, in the circumstances, Mr Hinson should pay the costs of this application, so far as he has unsuccessfully contested what would otherwise have followed from the consent orders, and could have been done without incurring those costs. However, I will hear the parties in that respect.
10. For these reasons, I make the following orders:
11. Order that Austral Alloys Pty Ltd be wound up under s 461(1)(k) of the Corporations Act 2001 (Cth).
12. Order that Mr Alan Hayes be appointed as liquidator for the purposes of the winding up of Austral Alloys Pty Ltd.
13. Grant leave, under s 532 of the Corporations Act, for Mr Hayes to be appointed and act as liquidator of Austral Alloys Pty Ltd.

Costs

1. I have now heard further submissions as to costs. I did not consider it necessary to hear Ms McEwen in that respect. Mr Newton opposes an order for costs against Mr Hinson, on the basis that he was entitled to change his position and it was not inappropriate to do so, and it was necessary to bring this application in any event. An order for costs does not, of course, depend upon any finding that it was inappropriate for Mr Hinson to change his position, where it is compensatory and not punitive in nature. I accept that an application would have been necessary in any event, but it would also have been straightforward if it was not opposed by Mr Hinson. In that case, it would have simply amounted to implementing the position agreed between the parties and reflected in the orders made by Williams J in October 2020, and an order made under s 532 of the Act on a basis that the Court frequently makes such orders without controversy. Here, the application has taken some hour and three-quarters, not because it was complex, but because it was opposed by Mr Hinson. For these reasons, Mr Hinson should pay the costs of the application, so far as the Second and Third Respondents are concerned.
2. I raised with the parties the fact that Mr Hayes appears under r 2.13 of the Corporations Rules, and the ordinary position is that a party who appears in that manner neither receives, nor is liable for, the costs of the application. Mr Harris submits that the position here differs because these matters flow from earlier activities in which Mr Hayes was a proper party. I accept that there is a logical connection between those matters. However, it seems to me that Mr Hayes' costs are here properly treated as within the indemnity available to him as Court-appointed receiver as against the assets of the Company, for costs properly incurred as a receiver, rather than as an order for costs against Mr Hinson, where Mr Hayes was not party to the proceedings. Little turns on that difference so far as Mr Hayes is concerned, although there may be a modest advantage to Mr Hinson and a modest disadvantage to Mr Morrison and Mr Quoyle so far as those costs are treated as within the scope of the receiver's indemnity and not as the subject of a costs order in this application.
3. For these reasons, I make a further order that Mr Hinson pay the costs of Mr Morrison and Mr Quoyle of and incidental to his opposition to the application. I make no order as to Mr Hayes' costs of the application, without prejudice to his right of indemnity as receiver of Austral Alloys Pty Ltd in respect of his remuneration, costs and disbursements of the application.

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