Plaintiff v Defendant

1 By an amended originating process dated 5 May 2020, the plaintiff applies for an order that the Court conduct an investigation into the liquidation of ACN 091 518 302 Pty Ltd ('the Company') pursuant to clause 90-10, 90-15 and 90-20 of Schedule 2 of the Corporations Act 2001 (Cth) ('the Act'). The plaintiff seeks other orders, including that the defendant, Mr Rohrt ('the Liquidator'), pay compensation to the plaintiff and to the Company for his conduct as liquidator.

2 Clause 90-10(1) in Schedule 2 of the Act provides that the Court may inquire into the external administration of a company on the application of a person with a financial interest in the administration of that company. There is no contest that the plaintiff, Mr Djordjevich, is a person with such an interest.

3 In Westpoint Corporation Pty Ltd (in liq) v Yeo,[1] in the context of the predecessor legislation to clause 90-10 of the Act, Sloss J described a three stage process:

1. The first stage is the determination on whether to conduct an inquiry into the conduct of the liquidator;
2. The second stage is the inquiry into the conduct of the liquidator;

1. The third stage is the determination of the appropriate orders.

4 This decision concerns the first stage of the process, whether an inquiry should be ordered into the conduct of the Liquidator.

5 In support of the relief claimed, the plaintiff relied upon the affidavits of:

(a) David Djordjevich, the plaintiff, dated 6 January 2020 ('Djordjevich Affidavit');

(c) Sam Angelatos, solicitor for the plaintiff, dated 24 August 2020.

6 In opposition to the application the Liquidator relied upon his affidavit dated 16 July 2020 ('2020 Rohrt Affidavit') and two affidavits from his solicitor, Hannah Carne, dated 20 October 2020 and 27 January 2021.

7 The first stage hearing took place on 28 January and 12 February 2021. An application by the plaintiff to cross-examine the Liquidator was refused. The issues on the application were the subject of points of claim dated 22 September 2020 and points of defence dated 14 October 2020. Both parties filed written submissions.[2] Oral submissions on behalf of the plaintiff traversed issues going well beyond those raised in the points of claim, the points of defence, and in the affidavit evidence. Counsel for the Liquidator was able to respond to the additional matters. In those circumstances it is appropriate to determine the application on the broader basis which encompasses all issues of which the plaintiff made complaint.

8 In addition to the affidavit evidence, the plaintiff relied upon documents from the Liquidator's files, an earlier affidavit of the Liquidator sworn 31 July 2018 ('2018 Rohrt Affidavit') and a Mills Oakley Lawyers ('MO') trust account statement of account as at 28 January 2021. Some of the documents were the subject of objection on behalf of the Liquidator.

9 The hearing was conducted on the basis that I would rule on the admissibility of those documents as part of the determination of the application. For the most part, the documents in question were relevant, counsel for the Liquidator addressed the Court in relation to them and it is appropriate that the Court have regard to them in determining the application.

10 Having considered all of the evidence and the submissions, I am left in no doubt that the application for an inquiry must be refused. I am not satisfied that the Liquidator has failed to comply with the Act or that he failed to fully and faithfully perform his duties as liquidator. I am not satisfied that there is a sufficient basis in the material to order an inquiry. There is nothing in the evidence to suggest that it is in the public interest to conduct an inquiry such that the jurisdiction of the Court is invoked. Even if I were satisfied there was something that required an inquiry, as a matter of discretion it would be inappropriate to order an inquiry in this case. Considerations against ordering an inquiry include circumstances where what the plaintiff seeks to do is to vindicate asserted private rights using the provisions of the Act, that are not intended to and ought not be permitted to be used for such a purpose.

11 The statutory predecessor of Clause 90-10(1) is s 536 of the Act. The inquiry jurisdiction conferred by that section was described by the New South Wales Court of Appeal in Hall v Poolman[3] as:

... a broadly expressed supervisory jurisdiction over the conduct of persons in control of the affairs of a corporation, in circumstances where normal market forces and the exercise by shareholders of their rights to control are attenuated or non-existent.[4]

1. In Westpoint,[5] Sloss J referred with approval to earlier observations concerning the purpose of the inquiry power and the interest that such an inquiry is intended to serve:
   1. In BL & GY International Co Ltd v Hypec Electronics Pty Ltd[6] Barrett J, after tracing through the history of s 536, said that the process is one directed to the 'regulation, supervision, discipline and correction of liquidators in the interests of honest and efficient administration of the estates of companies subject to winding-up'.[7] Importantly, his Honour emphasised, the 'interest to be served is a public interest' and s 536 'is not concerned in any direct way with vindication of private rights'.[8] Nor, he said, should a s 536 inquiry 'be the occasion for trying what is really an action for negligence or other breach of duty by a liquidator'.[9][10]

13 In ASIC v Edge,[11] Dodds-Streeton J described the essential functions of a liquidator:

... to identify, take possession of and realise the company's assets, to investigate and determine the claims against the company and to apply the assets to the satisfaction of those claims in accordance with the statutory scheme of priority.[12]

The liquidator is a fiduciary on whom high standards of honesty, impartiality and probity are imposed both by the Act and the general law. As an officer of the company, the liquidator has a statutory duty of care, diligence and good faith.[13]

14 In Edge, Dodds-Streeton J held that all that is needed to justify an inquiry is that the liquidator either failed to comply with the Act or that there has been a sufficient failure to faithfully perform his duties.[14] In Hall,[15] the Court of Appeal said that an inquiry should be ordered as long as the liquidator has not been fully and faithfully performing his duties; it is not necessary that there be a finding of impropriety.[16]

15 Clause 90-10 does not say how a Court should go about determining whether an inquiry should be conducted on the application by an interested person. Clause 90-5, which provides that a Court may on its own initiative inquire into the external administration of a company, similarly does not say how a Court should proceed.

16 The parties were in agreement both as to the three stage process described by Sloss J in Westpoint[17] and as to the task to be undertaken at the first stage as described by Brereton J in ASIC v Wily and Hurst:[18]

1. The present application involves the first of those three stages, which involves two questions: first, whether the jurisdiction is invoked, in that there is a "complaint" to the Court with respect to the conduct of a liquidator in connection with the performance of his or her duties; and secondly, whether as a matter of discretion an inquiry should be conducted. ...
2. ... Nonetheless, an inquiry is not a roving commission of inquiry at large: it is an inquiry into the subject matter of a complaint, and there must be at least a "well-based suspicion indicating a need for further investigation", in which context the notion of "suspicion" involves a "positive feeling of actual apprehension or mistrust, as distinct from mere wondering".[19]
3. ... It is for the applicant for an inquiry to persuade the Court that its discretion should be exercised to order an inquiry. That discretion is exercised having regard to the purpose of such an inquiry; namely, the regulation, supervision, discipline and correction of liquidators in the interests of honest and efficient administration of the estates of companies subject to winding-up. The section serves a public interest and is not concerned, at least directly, with the vindication of private rights.[20] ...
4. Thus, although to obtain an order for an inquiry a complainant does not necessarily have to establish a prima facie case in the strict sense, and the relevant considerations are broader, the "first stage" nonetheless serves functions somewhat similar to a preliminary hearing or a committal hearing, in deciding whether there is sufficient cause to conduct an inquiry into the complaint.[21]

17 It is the applicant for the inquiry who bears the burden of persuading the Court that there is a 'complaint' such that the jurisdiction of the Court is invoked. In Burns Philp Investment Pty Ltd v Dickins,[22] Young J said 'the court must be given some material to suggest that it would be in the public interest to conduct an enquiry'.[23] This means that the party seeking an inquiry 'must put forward material which prima facie satisfies the court of that matter'. What is necessary is that the plaintiff show there is a prima facie case that something needs to be investigated.[24]

18 In Leslie, Re Aboriginal Councils and Associations Act 1976 v Hennessey,[25] the Full Federal Court said:

[W]e believe that both Young J and Drummond J[26] were describing something less formal than a prima facie case according to some evidential burden of proof. Their Honours meant only that an applicant must show a sufficient basis for making an order, that there is something which requires inquiry. The court then has a discretion which it must exercise.[27]

19 Clause 90-15 of Schedule 2 lists amongst the matters which the court may take into account when making orders in relation to the external administration of a company, whether the liquidator has faithfully performed his or her duties and, separately, whether an action or failure to act by the liquidator is in compliance with the Act and the Insolvency Practice Rules (Corporations) 2016 (Cth) ('the IPR').

20 In BL & GY International[28] Barrett J emphasised the importance of context in exercising the discretion to order an inquiry, once the jurisdiction is invoked:

The task of the court at the second stage is to make a judgment about the liquidator's conduct, viewed in the light of the whole of the requirements applying to liquidators and taking account, of necessity, of the circumstances of the particular winding up. What the liquidator ought properly to have done will be conditioned by circumstances. Thus, for example, a liquidator without funds will not be expected to act in the same way as an adequately funded liquidator. In the same way, a liquidator has a degree of freedom in allocating available resources and prioritizing work. Leaving to one side matters of dishonesty, lack of due care and obvious failure to address the decision at hand, it can never be said in the abstract that a liquidator who fails to take a certain step (or, for that matter, one who takes a certain step) thereby engages in misconduct. Context is all-important.[29]

C. The grounds relied upon by the plaintiff in support of an order for an inquiry

21 The plaintiff contends that the Liquidator has not faithfully performed his duty as liquidator. He has assembled and seeks to rely upon a raft of complaints concerning the conduct of the liquidation of the Company in support of his application. The points of claim list 34 separate complaints. Further areas of complaint were advanced in oral submissions. The Liquidator denied each of the complaints in the points of claim. He also contested each of the additional complaints advanced at the hearing.

22 In his points of defence, the Liquidator contended first, that the allegations against him do not raise any matter that constitutes a sufficient basis for ordering an inquiry. Second, that there are no matters which demonstrate the due administration of the winding up or that the public interest would be served by an inquiry. Third, that in any event, the Court ought not exercise its discretion to order an inquiry when the complaints made do not raise any proper matter of controversy requiring the regulation, supervision, discipline and/or correction of the conduct of the Liquidator in the interests of the honest and efficient administration of the Company.

23 Given the number of individual allegations and the breadth of matters of which complaint is made, it is convenient to group the subject matter of the complaints and to address them on that basis. By reference to the Djordjevich Affidavit, the points of claim and the written and oral submissions, the following areas of complaint emerge:

(a) failure by the Liquidator to comply with the reporting obligations in s 533 of the Act;

(b) the alleged improper delegation by the Liquidator of his work and functions to his solicitors, MO;

(c) complaints concerning allegedly unnecessary and excessive costs and expenses of MO and of the Liquidator's remuneration, together with complaints concerning the alleged failure to provide details of costs, and failure by MO to comply with the Legal Profession Uniform Law ('LPUL'),[30] and various complaints concerning the sum of $23,200 paid by the plaintiff to MO;

(d) the Liquidator's failure to report to, or meet with, creditors;

(e) failure by the Liquidator to learn at an earlier point in time of the existence of Westpac Banking Corporation Limited ('Westpac') as a secured creditor to whom the Company remained indebted;

(f) failure by the Liquidator to take appropriate steps to preserve the Company's assets by refusing to prosecute proceeding S CI 2017 03318 ('2017 Proceeding');

(g) failure by the Liquidator to act in good faith in relation to the plaintiff's application for derivative leave in proceeding SCI 2018 02277 ('the Derivative Leave Proceeding);

(h) failure by the Liquidator to act in good faith to assign the cause of action in the 2017 Proceeding.

24 Due to the multiplicity of complaints, it is necessary to set out in some detail the events that happened concerning the liquidation. In addition, to refer to some of the very many communications that took place between the plaintiff's solicitors, Marcel Pizzorno & Co ('MPC') and counsel on his behalf, and MO on behalf of the Liquidator. This context is needed to determine whether there is a proper jurisdictional basis to order an inquiry and, if so, whether it is appropriate in the exercise of the discretion to do so.

25 Mr Rohrt is not the original liquidator of the Company. He was appointed liquidator on 14 October 2016 following a successful application by Mr Djordjevich reinstating the registration of the Company pursuant to s 601AH(2) of the Act.[31]

26 The Company had been placed into external administration in 2003. That external administration ended in 2010 and the Company was deregistered:

(a) on 19 February 2003, Ian Carson and Nicholas Martin were appointed receivers and managers ('Receivers');

(b) on 30 July 2003, the creditors resolved to wind up the Company and to appoint Paul Vartelas ('Former Liquidator') as liquidator pursuant to s 439C of the Act;

(c) between 30 July 2003 and 19 November 2009, the Former Liquidator conducted the liquidation of the Company ('First Liquidation');

(d) on 1 December 2005, the Receivers ceased as receivers & managers;

(e) on 16 November 2009, the Former Liquidator retired as liquidator;

(f) on 24 November 2009, the Former Liquidator lodged a statement of presentation of final accounts of creditors' voluntary winding up with the Australian Securities and Investments Commission ('ASIC') ('Form 524');

(g) on 17 February 2010, the Company was deregistered pursuant to s 509 of the Act, on the basis that the affairs of the Company had been fully wound up.

27 The 2016 application for reinstatement was supported by evidence from the plaintiff that he was aggrieved and that the Company owed him money. The purpose of the reinstatement was recorded in 'other matters' in the 14 October 2016 Orders as 'to fund an action by the Company'. That action was an action that the plaintiff believed the Company had against St George Bank Limited (now Westpac).

28 The unchallenged evidence of the Liquidator is that an initial meeting took place shortly before 26 August 2016 with the plaintiff's counsel Mr Levine, the plaintiff's solicitor Mr Anamoulis and the plaintiff, Mr Djordjevich. No documents were provided at that meeting. The Liquidator:

(a) was asked to consent to be appointed as liquidator of the Company should the proposed Reinstatement Application be successful;

(b) was told the Company had a potential cause of action against Westpac (the 'Westpac Claim') that, if he were appointed as liquidator, Mr Djordjevich wanted assigned to him;

(c) said that based on initial discussions it was not likely that he, as liquidator, would pursue the Westpac Claim as he would not have funding to do so;

(d) said that given his statutory duties and obligations to the creditors, he would need to obtain independent legal advice about the Westpac Claim, and that if appointed he would engage MO to provide advice as they had previously advised him regarding valuing an assignment;

(e) estimated, on the basis of the information provided and on the basis that the assignment of the Westpac Claim would be straight forward, that his remuneration as liquidator would not exceed $20,000 (not including disbursements such as legal costs of advice as to the value of the assignment) ('Remuneration Estimate').[32]

29 The 'other matters' in the 14 October 2016 Orders referred only to the Company pursuing the Westpac Claim. However, as is the evidence of the Liquidator, it is clear that, at the August meeting, he was told the intention was to reinstate the Company and then have him assign the Westpac Claim to the plaintiff. None of the other persons present at the August 2018 meeting, the plaintiff, his solicitor and his counsel, has given evidence to contradict the Liquidator's account of that meeting in the 2020 Rohrt Affidavit.

30 Following his appointment, the Liquidator contacted the Former Liquidator and the Receivers requesting books and records of the Company, but they had none.[33] The Liquidator completed a risk management assessment dated 13 October 2016, which included a handwritten note that the Company was not trading and had no assets. A creditor's checklist, which included amongst the items listed the requirement to undertake a company search and to convene a meeting of creditors within 11 days of appointment, was tendered on behalf of the plaintiff during the hearing.

31 During the hearing, the plaintiff also tendered and relied upon an undated file note from the Liquidator's files of a meeting, inferred to be made in late 2016 or early 2017, which noted that the cause of action proposed against Westpac was a fraud claim.

32 The plaintiff placed reliance upon an email chain dated 13 February 2017 which included confirmation on the part of the Liquidator that he had read three folders of material concerning the proposed cause of action against Westpac. In the course of those emails, the Liquidator said 'It is difficult for me to form an opinion as to the likelihood of success should your client seek to commence an action ... I am still prepared to support your client and seek to meet again to discuss what arrangements can be put in place to cover the obvious risks associated with any proposed action'.

33 On 23 June 2017, Mr Levine, counsel for the plaintiff, informed a solicitor at MO engaged by the Liquidator to advise on the proposed assignment of the Westpac Claim, that he, Mr Levine, considered that a limitations date of 17 August 2017 applied to the claim. Mr Levine also informed the solicitor that he expected the draft Westpac Claim pleading to be provided to MO for review in the next couple of weeks, after it had been settled by silk.[34]

34 On 25 July 2017, as MO had not been provided with a draft pleading, a solicitor from that firm contacted Mr Levine seeking an update. The email drew attention to the following:

(a) the limitations date, thought to be 17 August 2017, MO being conscious of the time required for the steps that need to be taken;

(b) a planned cost estimate that would be provided to the Liquidator by MO once the draft pleading was provided, for MO's fees for advice concerning the proposed assignment of the claim (including advice as to the value of the claim);

(c) the next steps, comprising:

(i) arrangements between the respective clients in relation to the costs of the advice;

(ii) preparation and the provision of the advice to the Liquidator; and

(iii) the terms of any assignment of the claim to be agreed and documented.[35]

35 The draft pleading, 'not yet settled by silk' but prepared by Mr Levine, was provided to MO on 4 August 2017, 13 days before the expected limitation date.[36] The Westpac Claim concerned a loan of $1.88 million made to the Company by St George Bank in November 2001 for a period of 12 months. The claim alleged that the loan transaction was authorised by only one of two directors of the Company, was not for the benefit of the Company and was entered into by that director in breach of fiduciary duties owed to the Company. The loan was alleged to be part of a dishonest and fraudulent design on the part of that director. The proposed proceeding named Westpac and two solicitors, Mr Gaylard and Mr Flory, as defendants. The solicitors were alleged to have been acting for the Company in connection with the November 2001 loan and related transactions. The draft pleading, which included claims against each of the defendants including Westpac for the tort of deceit and Barnes v Addy[37] causes of action, was long and complex.[38]

36 On 10 August 2017, MO sent an email to MPC referring to the need for the Liquidator to seek advice as to the merits of the Westpac Claim,[39] specifically as to whether there was a proper basis for the claim, as to his ability to assign it, what value the claim should be given for the purposes of any assignment, and ongoing risks to the Liquidator arising from any assignment. Those risks included, by way of example, exposure to adverse costs orders and any further involvement required of the Liquidator in the proceeding. The letter stated that MO had provided the Liquidator with an estimate of $12,000 plus GST for the provision of such advice. It noted the Liquidator was without funds and that the plaintiff had indicated his preparedness to fund the Liquidator to have the claim assigned to him.

37 The email advised that the Liquidator had so far incurred almost $10,000 in costs and disbursements for which he required funding. If the plaintiff was not prepared to provide such funding then the Liquidator could not continue to undertake work on the liquidation (other than to comply with his bare statutory duties). The letter asked for $23,200 to be transferred to the MO trust account as soon as possible. It advised that upon receipt MO would be in a position to commence preparing the advice for the Liquidator.

38 On 11 August 2017 $23,200 was paid into MO's trust account by or on behalf of the plaintiff.

39 There was insufficient time between 11 and 17 August 2017 for the Liquidator to obtain advice, both in relation to the merits of the draft pleading and whether the claim had a proper basis, but also in relation to the assignment for which his consent had been sought.

40 On 16 August 2017, so as to preserve the Westpac Claim from becoming statute barred, the Liquidator provided MPC with limited authority to file, in the Company's name, but not serve, a generally indorsed writ,[40] substantially in the form prepared by Mr Levine.

41 On 17 August 2017, the Company filed the Westpac Claim as a generally endorsed writ in the 2017 Proceeding.

42 Subsequently, the Liquidator became aware that Westpac was a creditor of the Company for approximately $1 million and held a security interest over all personal and after-acquired property of the Company registered on the Personal Property Securities Register ('PPSR'). When he provided the Remuneration Estimate in around August 2016, the Liquidator had not been told by the plaintiff, and was unaware, that Westpac held a registered security interest and remained a secured creditor of the Company.[41]

43 On 20 November 2017 MO sent an email to MPC informing them of the position concerning Westpac and of their opinion that the effect of reregistration of the Company was to restore Westpac as a secured creditor. The emails said that given the Westpac Claim is property of the Company captured by the Westpac security, the Liquidator required the consent of Westpac before the claim could be assigned. It observed that Westpac was unlikely to give its consent and, even if it did and the claim was successful, the proceeds as to the first $1 million would be payable to Westpac. That is, unless orders were made that affected the validity of that security. The email suggested a meeting to discuss resolution of those issues.[42]

44 On 23 November 2017 MPC responded. They expressed their disagreement as to the effect of reregistration of the Company, and their disagreement that Westpac held a security interest that attached to the Westpac Claim, now the subject of the 2017 Proceeding.[43]

45 A meeting took place between the respective clients and their legal advisers on 23 November 2017. What occurred at that meeting is not described in the affidavit evidence.

46 On 24 January 2018 MO sent a detailed five-page letter to MPC in which they outlined their opinion concerning issues with the proposed assignment of the Westpac Claim. The letter referred to practical difficulties confronting the Liquidator given that the Company was liquidated and deregistered seven years earlier and no longer has any assets, that the Liquidator's remuneration and expenses are not funded and the Liquidator has no information or books or records from which to identify the existing creditors. The letter said that given the Company was reinstated on the application of the plaintiff, the Liquidator was committed to working with him to do what he could to give effect to the plaintiff's aim of pursuing the Westpac Claim. That is, subject to and within the confines of his statutory obligations. To that end, as had apparently been discussed at the November 2017 meeting, details were provided of a proposal for a Deed of Company Arrangement ('DOCA'), including details as to both legal and Liquidator costs associated with taking 15 identified steps required to implement such a proposal. The letter advised the Liquidator would require $100,000 to be paid into the MO trust account prior to commencing the DOCA process. It concluded by seeking a response from the plaintiff by 2 February 2018 and reiterated the timetable was based on the plaintiff immediately providing a list of creditors, as previously requested.[44]

47 If a DOCA had been successfully pursued, this would have put the plaintiff in control of the Company and the liquidation would have been terminated.

48 The 1 February 2018 response from MPC was combative. It alleged that MO had a conflict of interest arising from that firm's relationship with Westpac. It asserted the plaintiff was willing to fund the Supreme Court proceeding and 'the reason for the failure of the Liquidator to prosecute the Supreme Court proceeding was entirely due to your firm's conflict of interest'. It went on to assert that the Liquidator had breached his duty to act with reasonable care and diligence in retaining MO. It concluded by requesting the Liquidator undertake to resign immediately, provide a fully itemised bill of his costs and of MO's costs, agree to refund all payments made by the plaintiff that 'have been unnecessarily incurred', including when MO was allegedly acting in a conflict of interest. The letter demanded the Liquidator pay the plaintiff's costs of $25,000 arising from dealing with MO's conflict of interest. It demanded delivery up of the MO file in relation to legal advice said to have been provided in breach of the firm's conflict of interest. The letter included the following:

there are sufficient circumstances to warrant the Supreme Court conducting an investigation into the liquidation ... (Clause 90-10, 90-15 and 90-20 of the Insolvency Law Reform Act) ... The Supreme Court upon undertaking the investigation may make such orders as it thinks fit that include:

(a) a liquidator cease being the external administrator...

(b) the liquidator pay costs and compensation for their conduct and

(c) the liquidator's remuneration is reviewed and that the liquidator be disentitled to part of their costs and expenses , as being unnecessarily incurred.[45]

49 Unsurprisingly, there was a prompt response from MO. By letter sent on 2 February 2018 they denied any conflict of interest. They informed MPC that MO was not on Westpac's legal panel and did not receive instructions to act for it. The letter referred to the seriousness of the Westpac Claim which included claims of fraud and that MO would not sign off on such a claim without substantial further work. The letter denied that the Liquidator had failed to prosecute the 2017 Proceeding due to a conflict of interest which MO said was 'blatantly incorrect'. The Liquidator had not prosecuted the Westpac Claim because he was not satisfied it was in the interests of the Company's creditors or in his own interest to do so. As a result, he had not given instructions to serve the writ.

50 The letter went on to reiterate obstacles in the path of the Westpac Claim including that in excess of $900,000 was required to satisfy Westpac's security before there would be any return to unsecured creditors making the commercial basis for an assignment 'hard to find'. It expressed concern about unfunded costs being incurred by the Liquidator in an attempt to find a way forward to enable the plaintiff to pursue the Westpac Claim. It said that if there was no resolution by 16 February 2018 the Liquidator would proceed on the basis that the assignment of the Westpac Claim would not be achieved in a way that was in the best interests of creditors and that he would take steps to conclude the liquidation.[46]

51 Relations between the parties and their respective legal advisers continued to deteriorate. On 5 February 2018, 11 of 15 numbered paragraphs in a letter from MPC to MO commenced with the words 'we disagree'. That is indicative of the tone of the correspondence. The letter included an assertion that the Liquidator should obtain directions from the Court to clarify the matters in dispute.[47]

52 On 27 February 2018, by letter from MO, the Liquidator said that if he was funded he would apply to the Court for directions. The letter included a detailed discussion of legal issues concerning the effect of the Westpac charge.[48]

53 That MO should apply for directions on behalf of the Liquidator was not acceptable to the plaintiff who continued to allege MO to have a conflict of interest. On 14 March 2018 MPC said the plaintiff would fund an application for directions, but only if the originating process was filed by MPC, not by MO. Even though no basis for the asserted conflict of interest was identified, the objection to MO continuing to act for that reason was repeated.[49]

54 On 3 April 2018 MO wrote to MPC to confirm the willingness of the Liquidator to apply for directions on the question of whether the Westpac Claim could be assigned to the plaintiff. It advised MPC that in circumstances where MPC acted for the plaintiff seeking to take the proposed assignment of the claim, the Liquidator was of the view that it had a conflict of interest and could not advise the Liquidator on the application for directions. It advised the Liquidator's unfunded remuneration costs and expenses to date were $26,962. It noted the Liquidator was without funds in the liquidation. Referring to s 545 of the Act, unless there was confirmation of funding of those amounts plus the costs of a directions application, estimated at $35,000 - $50,000 the Liquidator would finalise the liquidation of the Company.[50]

55 On 20 April 2018 MPC responded, disputing that they had a conflict of interest in applying for directions on behalf the Liquidator. They asserted the plaintiff did not accept that MO had the expertise to make such an application. They repeated that MO had a conflict of interest. The letter from MPC requested 'a proper particularised estimate of costs claimed'. It accused the Liquidator of refusing to act with reasonable care and diligence.[51]

56 On 11 May 2018, MO suggested that given the apparent impasse, in the alternative the plaintiff may wish to consider seeking derivative leave to pursue the Westpac Claim in the name of the Company. At the same time a detailed breakdown of MO's cost estimate for the proposed application for directions was provided.[52]

57 On 18 May 2018 MPC advised their client would be making an application to the Court within seven days for removal of the Liquidator with orders that he pay costs and damages. The letter asserted that the Liquidator's consent to appointment was on the basis he would progress the claim against Westpac and 'as the Liquidator was well aware, the Company was reregistered solely for this purpose'. The letter asserted that it was in the creditors interests to prosecute a claim that 'has already been determined by the Supreme Court to be bona fide' when the Court ordered reinstatement.[53]

58 On 15 June 2018, the plaintiff instituted the Derivative Leave Proceeding, seeking orders:

(a) for leave to continue the 2017 Proceeding as a derivative action; and

(b) for a direction the Liquidator assign that proceeding to him.

59 The Derivative Leave Proceeding was not served on the Liquidator or his solicitors until 11 July 2018. The first directions hearing was the next day. The Liquidator appeared by counsel at that hearing.

60 The Liquidator swore the 2018 Rohrt Affidavit in the Derivative Leave Proceeding. The affidavit exhibited a detailed breakdown of the Liquidator's costs, expenses and remuneration.[54]

61 In August 2018, the plaintiff issued an application to extend the period for validity for service of the 2017 Proceeding, as that proceeding would lapse on 16 August 2018 if not served. On 3 August 2018, the Court extended the period of validity of the writ for service until 4.00 pm on 10 February 2020.

62 The Liquidator was legally represented at directions hearings in the Derivative Leave Proceeding and on the first day of the trial of that proceeding before Connock J on 19 February 2019. Prior to the trial, Westpac, Mr Gaylard and Mr Flory, the proposed defendants to the Westpac Claim, were added as parties to the derivative leave proceeding. The Derivative Leave Proceeding was heard over eight sitting days commencing 19 February 2019 and ending on 23 August 2019.[55]

63 At the directions hearing in the Derivative Leave Proceeding on 8 February 2019, counsel for the Liquidator informed the court that, if put in funds the Liquidator would be prepared further to explore on the Company's behalf, the merits of the legal position in relation to the Westpac Claim and to work out whether the claim should or should not be pressed. Further, that subject to receiving appropriate advice and costs protection, the Liquidator was willing to proceed as considered appropriate.[56] The Liquidator's position was repeated by his counsel at the outset of the Derivative Leave Proceeding.[57] In his subsequent reasons, Connock J observed that counsel for the Liquidator responsibly assisted the court by clarifying his position in the lead up to and at the time of hearing in the then prevailing circumstances, as was appropriate.[58] His Honour found:

To the extent that it was submitted that the liquidator has acted unreasonably by carrying out a limited merits assessment to date, I do not accept that submission. To the extent that it occurred, it was appropriate to do so and remains appropriate for liquidator to be satisfied that it is in the interests of creditors if litigation is to be pursued.[59]

64 On 13 February 2019, six days before the start of the trial in the Derivative Leave Proceeding, by letter from MO, the Liquidator invited any interested party to make an offer to take an assignment of the Westpac Claim by 18 February 2019 on terms as follows:

(a) pay a purchase price in excess of $126,500 (being the Liquidator's remuneration, costs and expenses including of the hearing listed for 19 February 2019) in order for the Liquidator to ensure that the assignment results in a return to creditors;

(b) confirming that Westpac's consent is not required for assignment of the Westpac Claim; and

(c) the Liquidator obtain court approval to assign the claim on the terms agreed between him and the proposed purchaser.[60]

65 The 13 February 2019 letter from MO was before the Court on the hearing of the Derivative Leave Proceeding.[61]

66 The response from MPC on 15 February 2019 accused the Liquidator of 'trafficking' in litigation. It asserted the timeframe in the 13 February 2019 letter for the receipt of offers to assign the Westpac Claim was unacceptably short and favoured defendants who had sufficient financial resources to make an offer in a short period of time. The letter noted the condition of the offer that it be sufficient to meet remuneration fees and expenses that had not been approved either by the creditors, a committee of inspection or the Court and therefore had not been fixed. It concluded by asserting that the Liquidator had 'acted improperly throughout the liquidation that has crystallised in making the offer in the letter'. The letter threatened to refer the Liquidator's conduct to ASIC as a matter of urgency. It reserved the plaintiff's right to make an urgent application returnable on 19 February 2019 for removal of the Liquidator.[62]

67 During 2019, before the conclusion of the hearing of the Derivative Leave Proceeding, which extended on separate days over many months, there were extensive communications between MPC and MO. Those communications included:

(a) On 8 May 2019 MPC complained the accounts lodged by the Liquidator with ASIC did not refer to $23,200 transferred on 11 August 2017 to MO's trust account. MPC sought confirmation whether the sum had been dispersed or was still held in trust and why it was omitted from the Liquidator's accounts. The letter referred to the 2018 Rohrt Affidavit which referred to remuneration costs and expenses totalling $75,692.76[63] and noted that amount had now increased to $125,000.[64] The letter 'required' the Liquidator to specify the basis on which he contended that remuneration had been fixed under the Insolvency Law Reform Act 2016 (Cth). A response was sought within two days.[65]

(b) On 10 May 2019 MO responded. MO contended the time specified for a response was unreasonable and was relevantly a lesser time period than specified under the Insolvency Practice Schedule (Corporations),[66] and the IPR. MO said the omission of the $23,300 paid into the MO trust account from the accounts lodged with ASIC was inadvertent and in error. It confirmed that $23,200 had been applied solely to disbursements (being part payment of MO's fees and counsel's fees). The letter advised that to date, MO had only advised of the quantum of remuneration the Liquidator had incurred. That remuneration had not been determined under the IPS and the Liquidator had never contended that his remuneration had been so determined.[67] It is to be noted that MO's trust account records produced on the hearing of this application show on 4 April 2018 $13,200 was transferred by MO from its trust account to office on account of costs/disbursements of bill 247879. On 7 December 2018 $5840 was transferred to office on account of costs/disbursements of bill 305721 and on 6 May 2019 $4160 was transferred to office on account of costs/disbursements of bill 325091.

(c) On 13 May 2019 MPC asserted that the amount of $23,200 was not transferred to the Liquidator for the payment of counsels' fees and that remuneration would need to be determined pursuant to s 473(3) of the Act. The letter repeated the plaintiff's intention to refer the Liquidator to ASIC for investigation. It asserted the Liquidator placed improper pressure upon the plaintiff to accede to requests for payment of his remuneration costs and expenses in the letter of 13 February 2019. It expressed a reservation of rights to make an application to the Court in respect of the Liquidator's conduct.[68]

(d) On 1 August 2019 MPC forwarded a proposed interlocutory process to the associate to Connock J, seeking an investigation into the liquidation pursuant to clause 90-10 of Schedule 2, an order that Mr Rohrt cease as liquidator of the Company and that he pay compensation to the plaintiff for his conduct as liquidator. MPC sought a return date on 23 August 2019. The Court determined not to deal with the proposed application as part of the Derivative Leave Proceeding.

68 On 23 October 2019, the Court dismissed the Derivative Leave Proceeding.[69] Connock J found while it was not necessary for him to consider whether the statutory criteria in s 237 was satisfied, had it been necessary to do so and, assuming each of the causes of action in the Westpac Claim raised serious questions to be tried, his Honour would have concluded that the statutory criteria in s 237(2)(c) of the Act were not satisfied.

69 His Honour found the plaintiff did not establish that it was in the best interests of the Company that he be given leave to bring the proceeding.[70] He found the plaintiff had not established that security offered by him in the form of a third party property in which there was said to be equity of about $380,000 was likely to be sufficient to provide an appropriate measure of costs and expenses protection to the Company and to the Liquidator.[71] His Honour's assessment of prospects of success of the Westpac Claim was a matter weighing against the grant of leave being in the best interests of the Company as required by s 237(2)(c).[72] His Honour said:

... for completeness, I add, on the evidence presently before the court, the plaintiff has not established that there is a serious question to be tried or a reasonable prospect of success in respect of the cause of action.[73]

[T]he position remains that the merits of the ... Proceeding, and any steps to be taken in relation to it, can properly be further explored and acted upon, by the plaintiff putting the liquidator in funds ... Further, leaving the ... Proceeding and the issues associated with it in the hands of the liquidator to determine, after taking appropriate advice, how best to proceed, also sits comfortably with the observations that had been made in other cases regarding the appropriateness or desirability of leaving litigation in the hands of liquidators ... The liquidator is also well-equipped and best placed to consider the interests of all the creditors - which remains the position even if Westpac's position is put to one side.[74]

71 After derivative leave was refused, the plaintiff asserted in correspondence from MPC to MO that MPC, who had been provided with a limited authority to commence and preserve the 2017 Proceeding, could not keep acting in that proceeding.[75] On this application, the plaintiff submitted that contrary to the affidavit of the Liquidator,[76] the plaintiff had no standing to make an application for a further extension of the period for valid service of the 2017 Proceeding. MPC had limited authorisation only in 2017 to issue that proceeding and an implied authorisation to extend the time for service. However, because the reasons for decision of Connock J said that the cause of action had to be left in the hands of the Liquidator, it was no longer up to the plaintiff to apply for an extension of time.

72 On 6 February 2020, MPC advised MO that the plaintiff 'has no interest' in entering into a funding agreement for the prosecution of the 2017 Proceeding with the Liquidator.

73 The Liquidator, having sought one extension to the validity period of the 2017 Proceeding and not being funded to seek a further extension or to prosecute the proceeding, did not apply to extend the validity period of service of that proceeding beyond 10 February 2020.

74 On 11 February 2020, the period of the validity for service of the writ in the 2017 Proceeding expired.

75 The failure by the Liquidator to provide a s 533 report was one of the key matters relied upon at the hearing in support of the application for an inquiry.

Reports by liquidator

(1) If it appears to the liquidator of a company, in the course of a winding up of the company, that:

(a) a past or present officer or employee, or a member or contributory, of the company may have been guilty of an offence under a law of the Commonwealth or a State or Territory in relation to the company; or

(b) a person who has taken part in the formation, promotion, administration, management or winding up of the company:

(i) may have misapplied or retained, or may have become liable or accountable for, any money or property of the company; or

(ii) may have been guilty of any negligence, default, breach of duty or breach of trust in relation to the company; or

(c) the company may be unable to pay its unsecured creditors more than 50 cents in the dollar;

the liquidator must:

(d) as soon as practicable, and in any event within 6 months, after it so appears to him or her, lodge a report with respect to the matter and state in the report whether he or she proposes to make an application for an examination or order under section 597; and

(e) give ASIC such information, and give to it such access to and facilities for inspecting and taking copies of any documents, as ASIC requires.

(2) The liquidator may also, if he or she thinks fit, lodge further reports specifying any other matter that, in his or her opinion, it is desirable to bring to the notice of ASIC.

(3) If it appears to the Court, in the course of winding up a company:

(a) that a past or present officer or employee, or a contributory or member, of the company has been guilty of an offence under a law referred to in paragraph (1)(a) in relation to the company; or

(b) that a person who has taken part in the formation, promotion, administration, management or winding up of the company has engaged in conduct referred to in paragraph (1)(b) in relation to the company;

and that the liquidator has not lodged with ASIC a report with respect to the matter, the Court may, on the application of a person interested in the winding up, direct the liquidator so to lodge such a report.

77 The plaintiff submitted the responsibility for reporting is personal to the Liquidator and that his failure to report to ASIC as required by s 533 constituted a dereliction of duty. Reliance was placed upon the decision in Edge,[77] where ignorance of the obligation to provide a s 533 report was held not to be an answer to a complaint that the Liquidator had failed in his duties.[78]

78 It is common ground the Liquidator did not report pursuant to s 533. The primary position of the Liquidator was that the discharge of the s 533 obligation was a matter for the Former Liquidator. In response, the plaintiff said there was no evidence the Former Liquidator had provided a report and, in any case, the Liquidator could not rely by way of delegation upon actions of the Former Liquidator.

79 In his points of defence, the Liquidator said that to the extent investigations had not been undertaken by the Former Liquidator:

(a) despite enquiries of the Former Liquidator and Receivers, the Liquidator was unable to locate or access any books and records of the Company (to the extent that any remain in existence) given the time since the deregistration; and

(b) pursuant to s 545 of the Act, given there was insufficient property of the Company, he was not required to incur the expense of investigating the circumstances which precipitated the liquidation as pleaded in the 2017 Proceeding.

80 Sections 533(1)(a) and (b) of the Act, taken together with s 533(1)(d) and (e), are primarily directed to the reporting by a liquidator to ASIC of conduct that has taken place by persons involved in the affairs of the Company prior to winding up. If it appears to the liquidator in the course of the winding up that conduct as described in either of subsections (a) and (b) has occurred, the liquidator is obliged as soon as practicable and, in any event, within six months, to lodge a report and to state in that report whether the liquidator proposes to apply for an examination order under s 597. The same six month reporting obligation applies in a case to which s 533(1)(c) has application, where it appears to the liquidator that the Company is or may be unable to pay its unsecured creditors more than $0.50 in the dollar.

81 The Former Liquidator was appointed on 30 July 2003, 13 years before the appointment of Mr Rohrt. There is no evidence that the Former Liquidator did or did not provide a report pursuant to s 533. The Former Liquidator retired on 16 November 2009 after a liquidation that lasted for six years. At around the time of his retirement, the Form 524 lodged by him in November 2009[79] reported that no dividend would be paid to any class of creditor.

82 Section 533(1)(c) and the related provisions in s 533(1)(d) and (e) have application to the Company. Those sections had application in relation to the First Liquidation. At a point in time in the six years of the First Liquidation, no later than the date on which the Former Liquidator filed his final Form 524 in November 2009, it must have been clear to the Former Liquidator that there would be no return to unsecured creditors. The obligations which flow from s 533(1)(c), to report and to provide access to information and documents to ASIC, were obligations of the Former Liquidator.

83 In Edge,[80] Dodds-Streeton J described the purpose of s 533(1)(c):

1. A s 533(1)(c) report is fundamental to the Act's scheme of protection for creditors, shareholders and the public, because an officer of two or more companies which may have failed to pay more than $0.50 in the dollar may be the subject of a "show cause" notice and ultimately disqualified from managing corporations for up to 5 years ... Such reports are essential to monitoring, and where appropriate removing, the directors of successive "bad debts" companies from continued activity which may place the public at risk.[81]

84 As a matter of statutory construction, I do not accept that in the circumstances of this case the obligation in s 533(1)(d) to report within six months to which s 533(1)(c) gives rise applied to the Liquidator. Those obligations were spent long before his appointment. The 'cut off' date for the reporting obligation in s 533(1)(d) expired no later than mid-2010, more than six years before Mr Rohrt was appointed.

85 If I am incorrect that as a matter of construction the operation of the section was spent before the Liquidator was appointed, there was nothing in the behaviour of the Liquidator that would support an inquiry. Looking to the purpose of s 533(1)(c) as described in Edge,[82] the directors of this Company had been free to act as directors for 13 years after the liquidation of the Company prior to the appointment of Mr Rohrt. To suggest that, after 13 years of the directors being permitted to 'place the public at risk', it was important that the liquidator appointed after the reinstatement of the Company report pursuant to s 533(1)(c), so that in the future action might perhaps be taken against them by ASIC, is unrealistic.

86 I accept that, following his appointment, the Liquidator took reasonable steps to attempt to locate the books and records of the Company, but that those efforts did not bear fruit. In circumstances where the Liquidator pursued the delivery up of the books and records of the Company from the Former Liquidator and from the Receivers, and where no books and records were made available by them, or by the plaintiff and his legal advisers, there was no ability for the Liquidator to investigate the matters to which s 533(1)(a) and (b) of the Act are directed. It is only if books and records or other information is or becomes available to a liquidator as a result of his or her investigations that there will be a basis for the liquidator to provide information and documents to ASIC. At the time he was appointed, the Company had no other assets and there were no funds available to him, except for funding the plaintiff might provide by agreement.

87 Sections 533(1)(d) and (e) refer to applications for s 597 examinations, and providing ASIC with information and access to documents. There was no submission on behalf of the plaintiff that the Liquidator should have carried out examinations pursuant to s 597 of the Act or should have applied to do so.

88 The Former Liquidator had an obligation to report 'as soon as practicable' and in any event within six months after it appeared to him that the Company 'may be unable to pay its unsecured creditors more than $0.50 in the dollar. Having regard to the six monthly reporting obligation, the years that had elapsed since the 2003 liquidation, the inability of the Liquidator to obtain books and records, the purpose of a s 533(1)(c) report, the purpose of the reinstatement of the Company and of the appointment of the Liquidator, and the absence of any available funding, even if s 533(1)(c) had application to the Liquidator, and I do not consider that it did, it was not unreasonable for the Liquidator to proceed on the basis of reporting compliance by the Former Liquidator.

89 To approach the s 533(1)(c) obligation in that way is not an impermissible delegation as submitted on behalf of the plaintiff. The Former Liquidator had that obligation. The approach for which the Liquidator contended in argument reflects a realistic assessment and understanding of the purpose of s 533 and of the impact of the passage of time.

90 The delay in taking steps to reinstate the Company was solely attributable to the plaintiff. I do not accept that the failure on the part of the Liquidator to personally comply with s 533(1)(c) following the reinstatement of the Company 13 years after it went into liquidation and with no access to the books and records of the Company was a dereliction of duty as was submitted on behalf of the plaintiff.

91 The circumstances here are very different to those in Edge[83] upon which the plaintiff relied. Mr Edge asserted that in 25 years practice as an insolvency practitioner he had been unaware of the requirements of s 533(1)(c) and only become aware of the obligation to lodge a report when preparing for the hearing. Dodds-Streeton J did not accept his explanation. In Edge,[84] eleven different companies were involved where Mr Edge was the appointed liquidator. Separate reports were required to be lodged because each of those companies was or may have been unable to pay its creditors more than $0.50 in the dollar. In those circumstances the relevant breaches were not trivial but were breaches that seriously jeopardised the regime of creditor protection established by the Act.[85] That is not so in the circumstances of this case, where the liquidator about whom the complaint is made was not the original liquidator, and where many years had passed between the winding up and the completion of the First Liquidation, at which point the absence of a dividend for unsecured creditors was both clear and reported upon by the Former Liquidator in his final Form 524.

92 Even if s 533(1)(c) also had application to the Liquidator, his failure to comply with the section does not provide the basis for an inquiry. It was not argued that upon investigation by the Liquidator any specific matters coming within s 533(1)(a) or (b) would have been and should have been uncovered and reported to ASIC. The failure by the Liquidator to personally report pursuant to s 533 cannot be said to give rise, or even to contribute to the existence of a 'well based suspicion', or a 'positive feeling of actual apprehension or mistrust' concerning the conduct of the Liquidator.

F. The complaint of improper delegation of work to solicitors

93 The plaintiff submitted the Liquidator delegated duties that he should have performed himself to MO and that such delegation was impermissible. In support of this submission, reliance was placed upon Edge[86] where Dodds-Streeton J said:

the appointment of an agent is, however, permitted only in circumstances where it is unreasonable to expect the liquidator to perform the relevant task personally. A general delegation of a company's affairs, or the retention of a liquidation which the liquidator is disabled from performing, is impermissible.[87]

94 The power of a liquidator to delegate in favour of an agent is specified in s 477(2)(k) of the Act to which her Honour directed attention, noting that the permitted use of an agent is in terms, quite circumscribed.[88] However, s 477(2)(b), a section not relevant on the facts in Edge,[89] expressly provides that a liquidator may appoint a solicitor to assist him or her in his or her duties. That is what the Liquidator did.

95 In Edge, Dodds-Streeton J found that Mr Edge consistently and improperly delegated his duties and functions as a liquidator or administrator to his associate, Mr Armistead, who was inadequately qualified, instructed and supervised.[90] Her Honour found that Mr Edge made a general delegation of his duties to Harrison's Insolvency in relation to numerous companies,[91] failing to bring his personal skills and experience to all significant aspects of the relevant liquidations:

1. Relevant case law emphasises the importance of the liquidator's personal discharge of duties and responsibilities of office. In many cases, some of the necessary tasks of a liquidation will necessarily be performed principally by an appropriately supervised employee. The farming out of the bulk of the work on multiple liquidations over time in return for a set percentage of the fees, as occurred in the present case, is, however, wholly unjustifiable.
2. In the present case, there was no valid impediment to Mr Edge's personal performance of his duties as liquidator. Due to his own demanding full-time employment and that of his assistant, Mr Armistead, he elected not to perform the necessary work and the relevant administrations are liquidations. In such circumstances, it was his duty to resign.[92]

96 Mr Rohrt did not appoint an agent to do his work as liquidator. He appointed MO to perform legal work to assist him in his duties as expressly contemplated by s 477(2)(b).

97 MO did not perform the work of the Liquidator, they performed solicitors' work. They were initially engaged to advise in relation to the Westpac Claim, the assignment of it and how it might be valued. They were put under unrealistic time pressure when the legal advisers to the plaintiff delayed in providing a copy of the draft pleading until 4 August 2017. From 23 June 2017, MO began to engage with Mr Levine of counsel and then with MPC, the solicitors for the plaintiff, in relation to the Westpac Claim. On 10 August 2017 MO informed the plaintiff of their costs for advising in relation to that claim and of the Liquidator's costs to that point in time.[93] MO acted as the Liquidator's solicitors, including dealing with MPC. From early 2018 the tone of correspondence from MPC became aggressive to them as solicitors and, shortly afterwards, accusatory and highly critical of the Liquidator's conduct.[94] It was entirely appropriate that MO, as the solicitors appointed to assist the Liquidator, should have dealt with these communications from MPC on behalf the plaintiff as they did and should have undertaken the other legal work which they did on behalf of the Liquidator.

98 There is no substance to the complaint about improper delegation of work to solicitors.

1. The complaint that unnecessary and excessive costs and expenses were incurred

99 This broad ranging and multi-faceted complaint concerns the external legal expenses of MO and the Liquidator's own remuneration. It is important to record that at no time has the Liquidator sought to draw any remuneration, nor is there property of the Company from which to draw any such remuneration. There is also insufficient property in the liquidation to pay the legal costs of MO.

100 The plaintiff submitted that the Liquidator, as fiduciary, owes a duty not to incur expense unnecessarily and to minimise costs and that the Liquidator breached that duty. Reliance was placed upon the decision in ASIC v McDermott[95] as the basis for the contended duty.[96]

101 The passages from McDermott[97] relied upon by the plaintiff do not refer to the existence of a duty in the terms for which the plaintiff contends. They refer to the duty of the Liquidator to protect the interests of the unsecured creditors,[98] and refer with approval to the following passage from Edge:

The extensive powers vested exclusively in the liquidator entail a corresponding vulnerability in the creditors, members and the public. The liquidator is a fiduciary on whom high standards of honesty, impartiality and probity are imposed both by the Act and the general law. As an officer of the company, the liquidator has a statutory duty of care, diligence and good faith.[99]

102 I proceed on the basis that as part of the Liquidator's duties to act diligently and in good faith there is a duty not to incur expense unnecessarily. What will constitute unnecessary expense will depend upon all the circumstances. There is no absolute fiduciary duty to minimise costs. The critical question is whether the Liquidator is acting reasonably and in the interests of the creditors and in the discharge of his or her functions when carrying out work for which remuneration and expenses are incurred.

103 The plaintiff submitted there was a high degree of costs incurred for no real purpose and that this warranted an inquiry. A significant area of complaint concerned the level of MO's fees and disbursements. The bills that record those charges have not been made available to the plaintiff. It was said that $179,000 in remuneration costs and expenses, which included work carried out by MO considering a proposed DOCA was unnecessary and that the legal costs incurred to deal with a 'simple claim', was excessive, even though the plaintiff did not know what work was done by the solicitors.[100]

104 The 2020 Rohrt Affidavit broke down the composition of the $179,707.02 remuneration costs and expenses as follows: the Liquidator's remuneration, $36,164.70 (including GST), costs and expenses, $143,542.32 (including GST) of which $143,319.32 (including GST) comprises MO's fees and disbursements.[101]

105 The 2020 Rohrt Affidavit exhibited a breakdown of the Liquidator's remuneration, $36,164.70, by employee and by number of hours from 14 October 2016 to 9 July 2020.[102] In light of this evidence, there can be no complaint about non-disclosure of the Liquidator's remuneration. There was no obligation on the Liquidator to provide such information. The quantum of the remuneration for work over nearly four years appears modest. Nothing about the quantum of the Liquidator's unpaid remuneration supports an order for an inquiry.

106 The plaintiff sought details of costs agreements between the Liquidator and MO. I ordered that the Liquidator produce any disclosure statements or costs agreements between him and MO in the period 14 October 2016 to 24 January 2020 but not including any disclosure statements or costs agreements that relate to the 2017 Proceeding or to this proceeding. No documents were produced in response.

107 In supplementary submissions, the absence of a costs agreement and of a disclosure statement were relied upon by the plaintiff in support of various arguments said to favour an order for an inquiry. Those arguments included that the absence of a costs agreement meant that the costs were not recoverable, that there was no proper basis for MO to have withdrawn amounts from the $23,200 in trust and that there was no basis for the Liquidator to have demanded the payment of MO's fees as a condition of assignment of the Westpac Claim. That was said to be so because MO could only have looked to the Company's assets in liquidation for payment as a priority payment in the liquidation.

108 I do not accept the plaintiff's arguments concerning costs disclosure obligations by MO or the asserted consequences for recovery of costs by MO for which the plaintiff contends. Part 4.3 of the LPUL concerns legal costs. It provides that so far as the part has application, legal costs must be fair and reasonable,[103] a law practice must disclose information about its legal costs including the manner in which the costs will be calculated, and an estimate of those costs,[104] and fees must be disclosed to the client.[105] If a law practice contravenes a disclosure obligation then the costs agreement, if any, is void and there are obstacles that stand in the way of cost recovery by the law practice.

109 The problem for the plaintiff is that none of the statutory requirements in Part 4.3 apply to the Liquidator who, by s 170 of the Legal Profession Uniform Law Application Act 2014 (Vic), is a 'commercial government client' to whom Part 4.3 does not apply.[106] Because the requirements of Part 4.3 of the LPUL has no application to the relationship between the Liquidator and MO, the absence of a fee agreement and disclosure statement cannot provide a basis for complaint concerning either the Liquidator or MO.

110 The plaintiff complained separately about an alleged failure by MO to provide cost estimates and details of their costs. Contrary to submissions on behalf of the plaintiff, when MO was required, or where the proper conduct of the liquidation warranted it, MO did provide cost estimates and breakdowns for the information of and consideration by the plaintiff.

111 On 10 August 2017 MO gave an estimate of $12,000 for their costs of advice concerning the proposed assignment. They advised that the Liquidator had incurred almost $10,000 to date in costs and disbursements. The letter clearly identified two components, MO's costs to provide advice, and the Liquidator's remuneration to date, together with GST, making up the amount of $23,200 in funding requested from the plaintiff.[107] That amount was subsequently paid to MO.

112 On 24 January 2018, MO provided a cost estimate of $100,000 for a DOCA.[108] On 3 April 2018, MO advised the Liquidator's unfunded costs and expenses were now $26,962. MO advised costs estimated at $35,000 to $50,000 to make an application to the Court for directions.[109] On 11 May 2018, MO provided a detailed estimate of its anticipated legal costs for work that would be done to assist the plaintiff to pursue the Westpac Claim.[110] The 2018 Rohrt Affidavit provided details of the Liquidator's remuneration, $19,440.85 at that time, it exhibited timesheets, and advised MO's fees and disbursements were $54,586.41.[111] The affidavit described the work performed both by the Liquidator and by MO to which the total remuneration costs and expenses, at that time, $75,692.76, related.

113 By 13 February 2019 the Liquidator's total remuneration costs and expenses had increased to $126,500.[112] The increased quantum no doubt reflected the involvement by the Liquidator in the Derivative Leave Proceeding in which he was represented by solicitors and counsel and the continued costs of communicating with those representing the plaintiff. No request was made by the plaintiff for a break-up of the sum of $126,500 at that time, and there was no occasion for the Liquidator to provide such information.

114 A consideration of the many communications between MO and MPC does not provide support for an inference that there would have been any reluctance on the part of MO or on the part of the Liquidator to have their costs and remuneration independently scrutinised and/or determined.

115 As to the complaint about the overall quantum of MO's legal costs, it is clear from the materials available to the Court on this application that the volume of work performed by MO was substantial. Contrary to the submissions on behalf of the plaintiff, this was not a 'simple claim' and the work carried out on behalf of the Liquidator had many component parts. MO was required to and responded to a very large number of detailed communications from MPC. There were many complaints and communications concerning the conduct of the Liquidator to which MO responded. Counsel was briefed and appeared at the directions hearing, then at the commencement of the trial of the Derivative Leave Proceeding.

116 I accept the submission on behalf of the Liquidator that a large portion of the volume of the work performed by MO and therefore of the costs incurred by the Liquidator was the product of the combative approach to the Liquidator and MO adopted by MPC and their client. An obvious example was the allegation by MPC of a conflict of interest on the part of MO, an unfounded allegation with which MPC persisted. There is no evidence to suggest that the level of MO's costs and disbursements, including in relation to the Derivative Leave Proceeding, is excessive or that the Liquidator acted unreasonably in engaging or in continuing to engage MO, or that MO was engaged to perform work that was unnecessary. Specifically, in the circumstances of this liquidation and the purpose of the reinstatement of the Company, investigating the possibility of a DOCA as a potential means of effecting an assignment of the Westpac Claim after the 23 November 2017 meeting was legal work appropriately carried out by MO.

117 The plaintiff made a number of complaints concerning the sum of $23,200 paid by him or on his behalf to MO on 11 August 2017.

118 As the history of the liquidation shows, from the very first meeting funding was an issue raised by the Liquidator.[113] He raised the need to obtain his own legal advice concerning the proposed Westpac Claim and its assignment, and said he would engage MO.[114] There was no opposition by the plaintiff or his legal advisers at the initial meeting to the retainer of MO. There is no doubt it was an appropriate course for the Liquidator to adopt, and one specifically contemplated under the Act.[115] The plaintiff paid the sum of $23,200 in response to the request from MO that it be put in funds to cover cost of such advice and the Liquidator's past remuneration to that point in time.

119 The plaintiff referred to the 2018 Rohrt Affidavit[116] in support of his complaints concerning the $23,200 paid to MO. It was submitted that on the face of that affidavit, the Liquidator was intending to apply $10,000 of the $23,000 that had been paid to MO for his own fees.[117] It was submitted that the Liquidator was unfunded only as to $9,400 so that it must have been the case that he had applied $10,000 of the money paid to MO to his own fees. It was submitted that paragraphs of the 2018 Rohrt Affidavit contradicted the Liquidator's 2020 affidavit.

120 There is no substance to these complaints. The 2018 Rohrt Affidavit is entirely accurate. At that time, the Liquidator said it was intended to apply part of $23,200 to pay MO and part towards his remuneration.[118] If the Liquidator had applied the moneys in trust at that time as he said was intended, that would have been consistent with the express basis upon which the funds were both requested and paid in August 2017. At the time the 2018 Rohrt Affidavit was sworn, $13,200 had been transferred from MO's trust account, on account of bill 247879. After the 2018 Rohrt Affidavit, by payments on 7 December 2018 and 6 May 2019, the balance of the funds held were applied toward MO's costs and disbursements. The fact the balance was later so applied does not have the consequence that there was any impropriety in what the Liquidator said was his intention at the time of swearing the 2018 Rohrt Affidavit.

121 After the 6 May 2019 payment, on 10 May 2019 MO wrote to MRP and advised that the $23,300 paid into MO's trust account on 11 August 2017 had been applied by the defendant _'_solely to disbursements (being part payment of MO's fees and counsel's fees)'. That was an accurate statement.

122 The MO trust statement of account as at 28 January 2021 produced during the hearing showed the receipt of $23,200 on 14 August 2017 consistent with the purposes set out in the 10 August 2017 email 'on account of MO costs and liquidator's remuneration'.[119] The trust statement of account establishes beyond doubt that no part of the $23,200 was applied to the Liquidator's own remuneration and that all of the $23,200 was applied to pay MO's costs and disbursements. Contrary to submissions on behalf of the plaintiff, the Liquidator's 2020 affidavit is entirely accurate when it says this is what occurred.[120] There remains a shortfall of more than $100,000 in respect of MO's costs and disbursements and the Liquidator's remuneration remains entirely unpaid.

123 Separately, the plaintiff complained about the failure by the Liquidator to refer to and account for the $23,200 in his accounts filed with ASIC. When this issue was raised by MPC on 8 May 2019,[121] and a response demanded within two days, MO responded by saying that it was an inadvertent error. In fact, that response by MO, given under time pressure, was itself an error. As contended on behalf of the Liquidator in his points of defence, the $23,200 was not required to be recorded in his ASIC lodgements because:

(i) those funds were not a receipt of, or payment from, the realisation of an asset of the Company;

(ii) they were paid to, and held in, MO's trust account and not the administration account; and

(iii) they were applied in payment of disbursements incurred in the liquidation.

124 A separate complaint was made about the Liquidator's failure to have remuneration costs and expenses approved. There was no requirement to convene a creditor's meeting to authorise the Liquidator's remuneration, costs and expenses. That is so because at no time has the Liquidator sought to draw remuneration (for which Court or creditor approval is required) and there is insufficient property of the Company, none available at all, to do so.

125 Separate complaint was made by the plaintiff about the 'demand' by the Liquidator for payment of MO's costs and his remuneration in the sum of $126,500 as a condition of assignment the Westpac Claim in the 13 February 2019 letter.[122] Although the remuneration of the Liquidator had not been fixed, there was nothing improper about the 13 February 2019 letter which invited an offer for the assignment of the Westpac Claim on conditions that included payment of the Liquidator's external costs and his remuneration, without which there could be no return to the unsecured creditors. As submitted by Ms Gobbo, it was open to any party responding to the 13 February 2019 letter with an offer, including any response by the plaintiff, to impose a requirement that costs and remuneration be independently assessed, approved or determined by the Court. There was no such request from any person.

126 In support of his many and varied remuneration costs and expenses complaints, the plaintiff relied upon Edge.[123] He submitted that if a liquidator is to incur costs, then the quantum of those costs should first be disclosed. It was said that it did not matter that this did not lead to any damage in the sense that neither the Liquidator nor MO were paid, it was nevertheless incumbent on the Liquidator as a professional to disclose the costs.

127 In Edge, there were multiple examples of payments made from the funds of companies in liquidation in payment of remuneration with no documents available to substantiate those charges because relevant documents had previously been destroyed. Dodds-Streeton J described the position as follows:

1. In the present case, amounts now characterised by the defendant as remuneration have been drawn from the relevant companies funds without valid approval. The question is not one of review, but of the appropriation of funds to which, on the available evidence, the liquidator was not entitled. Much documentation has been unlawfully destroyed by Mr Edge. Mr Armistead's evidence indicates that the timesheets, invoices and other relevant records which were prepared were inadequate ... in that the records, including accounting records, did not give a complete and accurate record of the liquidator's administration of the company's affairs.[124]

128 Her Honour was not satisfied that Mr Edge drew the remuneration in good faith and in the belief that the remuneration had been validly fixed. She was also not satisfied as to what work had been performed. An order was made that amounts drawn from remuneration without valid approval should be paid into Court and any application by Mr Edge for approval of remuneration should be made to a Master.[125]

129 The circumstances in Edge[126] concerning remuneration costs and expenses are far removed from the present case. Here, contrary to the plaintiff's submissions, there was proper disclosure of both anticipated and actual remuneration, costs and disbursements. In this case, the Liquidator has not received payment for any of the work performed by him as liquidator of the Company and there is no real prospect of him being paid. The same is the case so far as MO's fees are concerned, except as to the sum of $23,200.

130 There is no substance to the complaints against the Liquidator concerning costs, remuneration or as to the application of the sum of $23,200. There is simply no evidence of any lack of good faith. None of the matters raised, individually or collectively, support an order for an inquiry. There is nothing in the dealings between the Liquidator and MO or as to MO's costs and disbursements which suggests that the Liquidator acted in any way other than reasonably, diligently, in good faith and in the interests of creditors. There is no evidence of unnecessary or excessive remuneration, costs or expenses.

H. The complaint of failure to report to creditors and to meet creditors

131 There are two separate complaints concerning the absence of communications with creditors. First, an alleged failure to report to creditors. Second, a failure to convene a meeting of creditors.

132 In the points of defence the Liquidator responded to the first complaint by saying that the obligation to provide a statutory report to creditors within three months of being appointed as currently exists under s 70-40 of the IPR was only introduced by the Insolvency Law Reform Act 2016 ('ILRA') for all creditors' voluntary liquidations occurring on or after 1 September 2017. Both the First Liquidation and the reinstatement of the liquidation by the appointment of the Liquidator, occurred prior to this date.

133 As the obligation to report was introduced only after the appointment of the Liquidator, there is no substance to this complaint. Even if the obligation had existed or otherwise had application to the Liquidator, given the First Liquidation, any failure does not provide the basis for an inquiry.

134 As to the second complaint, the plaintiff's claim that an inquiry should be ordered because the Liquidator did not convene a meeting of creditors, the plaintiff referred to McDermott.[127] It was accepted during the hearing by counsel for the plaintiff that McDermott falls short of requiring meetings of creditors.[128] The plaintiff submitted that nevertheless the Liquidator should have met with creditors.

135 It was submitted on behalf of the plaintiff that while there were a number of meetings between the plaintiff's solicitors and the solicitor for the Liquidator, once MO had been appointed, no meetings took place between the creditors directly and the Liquidator personally at which the attitude of the creditors could be conveyed to the Liquidator. This was said to support an order for an inquiry.

136 To hold a meeting of all of the creditors requires the liquidator to have some information about the identity of those creditors. The Former Liquidator last met with the creditors in 2008. On 24 January 2018, the Liquidator sought information about the identity of creditors from the plaintiff. The plaintiff did not provide a response.

137 As contended on behalf of the Liquidator in his points of defence, all identified creditors of the Company, being Westpac and the plaintiff, were aware of and had copies of the Writ filed in the 2017 Proceeding and were parties to the Derivative Leave Proceeding which sought directions in relation to the 2017 Proceeding. In those circumstances, one may ask rhetorically, what would have been the purpose of a meeting of creditors. One creditor, the plaintiff, was seeking derivative leave to sue the other, Westpac. Unless Westpac's security were to be successfully impugned in such a proceeding, the first $1 million or so of any judgment would be the property of Westpac. In any case, the issues between the two creditors were ventilated in the Derivative Leave Proceeding where both were represented by solicitors and counsel.

138 The plaintiff's complaint that the Liquidator communicated via MO rather than with him directly has no substance. The plaintiff engaged his solicitors, MPC, and counsel, Mr Levine, to communicate on his behalf. They did so, in communications with MO, including in the case of MPC, communicating baseless allegations of conflict of interest, concerning MO. From early 2018 the tone of communications directed to the Liquidator and MO required responses by solicitors on behalf of the Liquidator. It is very difficult to see how a personal meeting between the Liquidator and the plaintiff could have advanced the interests of the creditors or of the plaintiff himself in that context.

139 There is nothing in the 'failure to call a meeting' complaint that provides a basis for an inquiry into the conduct of the Liquidator. That is so whether considered in the formal sense of a meeting of creditors or in an informal sense of the Liquidator meeting personally with the plaintiff.

1. Failure to know at an earlier time of the existence of Westpac as secured creditor

140 The plaintiff complained in oral submissions that the Liquidator should have known of the existence of the secured creditor, Westpac, much earlier than deposed to in his affidavit and should have done so from documents filed with ASIC.

141 This complaint is both without substance and a matter which, if of concern, the plaintiff could himself have readily remedied. The plaintiff must have known that Westpac was a secured creditor, and that it had not been paid out. The final Form 524 accounts filed by the Former Liquidator in November 2009, listing secured and unsecured creditors and the final accounts filed by the Receivers show $910,000 outstanding to Westpac, the secured creditor. The onus was not on the unfunded liquidator to go back to ASIC documents to ascertain whether Westpac was and remained a secured creditor at any time before the proposed Westpac Claim became a reality. Until 4 August 2017, thirteen days before the expiration of the limitation period, the plaintiff, who wanted to pursue such a claim, did not even provide the Liquidator with a proposed pleading. He was, until 11 August 2017, six days before the limitation deadline, without any funds.

142 The evidence establishes that after the writ was filed, the Liquidator became aware of the Westpac security. There is no basis for an inquiry arising out of these events. The sequence which involved the Liquidator taking steps to ascertain Westpac's position once his solicitors had been provided with a draft pleading and he had been put in funds, in the context of this case, the plaintiff moving to reinstate the Company so as to pursue the Westpac Claim, was perfectly acceptable.

143 There is no substance to the complaint of delay by the Liquidator in becoming aware of the Westpac security and certainly nothing in relation to any such delay that would warrant an inquiry in the public interest.

1. The complaint the Liquidator failed to prosecute the 2017 Proceeding

144 The plaintiff is critical of correspondence dated 27 February 2018 from MO on behalf of the Liquidator that made it clear that he was not prepared to prosecute the 2017 Proceeding in the name of the Company.[129] The plaintiff is critical of that communication because of his contention that there was nothing to show that there was not a viable cause of action against Westpac.

145 As stated in correspondence from MPC to MO and repeated in submissions on 18 May 2018, during the hearing the plaintiff contended that the Supreme Court had already determined the Westpac Claim to be bona fide when reinstatement was ordered. Reinstatement having been ordered for the stated purpose was said to have the consequence that it was not proper for the Liquidator just to say 'no', he could have sought security or asked for funding. Instead, because he refused to bring the case, this meant the plaintiff had to either obtain an assignment of the cause of action or obtain derivative leave. It was submitted it was the duty of the Liquidator to prosecute the claim.

146 The plaintiff's assertion that as part of reinstating the Company on 14 October 2016, the Court had determined the Westpac Claim to be bona fide is both incorrect and, even if correct, would not support a complaint regarding the Liquidator's refusal in February 2018 to prosecute the claim. The Order made on 14 October 2016 recorded in 'other matters' that the plaintiff had given sworn evidence that he was aggrieved and that the Company owed him money. The recorded purpose of reinstatement was to fund an action by the Company. Neither the Order, nor the recitals to the Order referred to the merits or otherwise of the proposed proceeding. At that point in time, the general endorsement issued one year later was not in existence. If the Court gave reasons in favour of its decision to reinstate the Company, those reasons were not in evidence on this application. However, they could not have included a consideration of the bona fides of a claim not yet articulated.

147 In responding to this complaint, amongst other things, the Liquidator contended that he was not satisfied that prosecuting the 2017 Proceeding was in the best interests of creditors of the Company; and that there was insufficient property in the liquidation to fund the costs of the 2017 Proceeding. Separately, he placed reliance upon s 545 of the Act.

148 The plaintiff's submissions at the hearing were to the effect that at no time did the Liquidator indicate concerns about the proper basis of the 2017 Proceeding and that he agreed to give limited authority enabling the proceeding to be issued prior to the expiration of the limitation period. Counsel for the plaintiff disagreed with the proposition that, given the nature of the allegations in the proceeding that it was important for the Liquidator to be careful in relation to the proceeding, which the Liquidator was later unwilling to prosecute.

149 What the letter of 27 February 2018 of which complaint is made stated was that the Liquidator was not prepared to prosecute the claim, which he had previously given limited authority to be commenced. The letter said that the Liquidator would not assign the claim without either Westpac's consent or a direction of the Court that such consent was not required. The letter said that the Liquidator was willing to apply to the Court for directions, if funded by the plaintiff to do so.

150 The context in which the 27 February 2018 letter was sent is very important. The context includes the MPC letter of 1 February 2018 and the acrimonious communications from MPC that followed.[130]

151 The liquidator acted responsibly and reasonably in 2017 when he gave limited authority to the plaintiff's solicitors to issue a generally endorsed writ in respect of the Westpac Claim so as to avoid the expiration of the limitation period.

152 It is a very serious matter to bring a proceeding where fraud is alleged. It is clearly appropriate that any liquidator carefully investigate the merits of a proceeding which involves any serious allegations before agreeing to continue with that proceeding as the plaintiff contends he ought to have done. Sections 41 and 42 of the Civil Procedure Act 2010 (Vic) ('the CPA') impose substantive obligations upon the Liquidator and upon legal practitioners engaged on his behalf to be satisfied there is a proper basis for allegations made.

153 The liquidator's actions in 2017 were consistent with what is envisaged by s 44 of the CPA which provides limited dispensation in the case of urgent filing of documents where the limitation period is about to expire. Once issued, the obligation in ss 41 and 42 of the CPA apply and must be considered.

154 The claim was a very old claim, it involved fraud allegations and it required careful investigation by the Liquidator and legal advisers on his behalf as to the proper basis or otherwise underpinning the claims made. Failure to carry out such investigations before proceeding to prosecute the claim would likely have put the Liquidator and his legal advisers in breach of their obligations under the CPA. It may have exposed them to personal liability for costs. A liquidator should not engage in costly litigation where there is no real prospect of success[131] and should institute and maintain proceedings only after careful thought.[132]

155 This complaint is one of failure by the Liquidator to prosecute the 2017 Proceeding. As the earlier discussion of the history of the liquidation reveals, from the time the 2017 Proceeding was issued on 17 August 2017 until 1 February 2018, the plaintiff was not seeking that the 2017 Proceeding be prosecuted by the Liquidator, he was seeking an assignment of the proceeding.

156 On 1 February 2018, MPC asserted there existed circumstances to warrant an inquiry into the conduct of the liquidation by the Supreme Court.[133] Between 1 February 2018 and August 2018 when the period for validity for service of the writ was extended until 10 February 2020, there were various communications[134] about the prospect of the plaintiff funding the Liquidator to apply for directions. Like the question of pursuit of the proceeding by the plaintiff, these communications were blighted by continual, but baseless allegations by MPC on behalf of the plaintiff of conflict of interest on the part of MO.

157 Contrary to submissions on behalf of the plaintiff, it was not necessary in the context of the complaints made against the Liquidator and MO that preceded the letter of 27 February 2018 that the Liquidator say in that letter why he was not prepared at that time to prosecute the action himself. For the Liquidator to prosecute the action funded by the plaintiff in circumstances where it was clear any trust between the plaintiff on the one hand and the Liquidator and MO had clearly broken down would have been untenable. Even that scenario assumes that funding would have been agreed as between the plaintiff and the Liquidator, and it never was.

158 The letter of 27 February 2018 from MO contained the Liquidator's advice that he would not prosecute the claim in the name of the Company.[135] It was submitted on behalf of the plaintiff that because the Liquidator refused to prosecute the claim that it was necessary for the application to be made to Connock J for an assignment and also for derivative leave. Connock J was said not to have dealt with the assignment question because the parties could not agree on the terms of assignment, making an assignment hypothetical.

159 It is correct, as submitted on behalf of the plaintiff, that the parties reached an impasse, and that the impasse led to the derivative leave application being issued in June 2018. However, no blame can properly be attributed to the Liquidator for that impasse or for the need for the plaintiff to issue the Derivative Leave Proceeding in order that he might advance his personal aim of prosecuting the Westpac Claim.

160 The letter from MO of 27 February 2018 advised the Liquidator's willingness to apply for directions if funded. The liquidator's willingness to apply to the Court, and to instruct MO to act on his behalf on such an application was confirmed on 3 April 2018. It was because the plaintiff refused to fund an application for directions unless MPC were the solicitors, due to the baseless allegations of conflict on the part of MO, that on 11 May 2018 MO suggested an application be made by the plaintiff for derivative leave. That is the background to the application.

161 The plaintiff determined to issue the Derivative Leave Proceeding, it was his choice alone. It was a choice made at a time when he was critical of the Liquidator and his conduct. However, those criticisms were without merit.

162 Section 545 is a defence to the separate and related complaint the Liquidator failed to prosecute the 2017 Proceeding or to obtain advice as to its merits.

163 The liquidator had no funding in February 2018 to obtain legal advice on the merits of the claim the subject of the 2017 Proceeding. In his points of defence in this proceeding, the Liquidator placed reliance upon s 545 of the Act to contend that as there was insufficient available property in the Company, he had no obligation to incur legal expenses That submission is correct. As Finkelstein J explained in Jenkins v Jonkay Pty Ltd:[136]

1. ... In deciding whether the liquidator is acting unreasonably it is necessary to have regard to s 545 of the Corporations Act. Subsection (1) provides that "a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property". (There are certain exceptions in relation to lodging of documents with ASIC: see s 545(3).) The effect of the section is that, apart from lodging certain documents, a liquidator is not required to do anything if he cannot recover his expenses. It means the liquidator commits no wrong in failing to carry out any duties.
2. Here I think the liquidator found himself in a difficult position. He was not sure what to do. He thought that he was at risk if he were to accede to the plaintiff's request. Ordinarily the liquidator should have obtained legal advice regarding what to do. If he had there is little doubt he would have been told to refund the deposit. The liquidator did not consult a lawyer because he had no funding to do so. So he did nothing. Still, he is protected by s 545 unless it could be shown that it would have been obvious to any liquidator that the plaintiff was entitled to his money. I cannot make that finding and therefore I will not make a costs order against the liquidator.[137]

164 In circumstances where the writ was kept 'alive' and the Liquidator was without funds to obtain advice as to the merits of the Westpac Claim or to prosecute the 2017 Proceeding, where his solicitors, MO, were the subject of a baseless attack and he was threatened with removal and an inquiry, there can be no legitimate criticism of the Liquidator's failure to prosecute the action himself between February and June 2018. From June 2018 until judgment in the Derivative Leave Proceeding on 23 October 2019, once again, the plaintiff's preferred course was not for the Liquidator to pursue the Westpac Claim. The plaintiff's preferred course was for him to do so personally via a grant of derivative leave or alternatively, via an assignment. For this period also, there can be no legitimate criticism of the Liquidator's failure to himself pursue the 2017 Proceeding which the plaintiff was seeking to personally control.

165 After the decision by Connock J in the Derivative Leave Proceeding on 23 October 2019, the Liquidator continued to be without funds. As part of his Honour's reasons dismissing the application for derivative leave, Connock J said that he did not consider the Westpac Claim to have reasonable prospects of success.[138] Given that assessment by his Honour based on the available evidence, the continued absence of funding and the apparent absence of any new or further evidence that would cause a revision of an assessment of prospects as expressed by his Honour, it was entirely reasonable of the Liquidator from that point on to take no further steps to prosecute the 2017 Proceeding. Based on his Honour's assessment, it seems likely that to take steps at that time to prosecute the 2017 Proceeding would have exposed the Liquidator and his legal advisers to the risk of breach of their obligations under the CPA.

166 There is no substance to any of the complaints relating to the 2017 Proceeding.

1. Complaint concerning the derivative leave application

167 There is similarly no substance to the complaint of lack of good faith concerning the Liquidator's involvement in the Derivative Leave Proceeding.

168 As noted in the points of defence, the letter from MO dated 11 May 2018:

(a) suggested that the plaintiff consider whether or not he could seek leave from the court (in its inherent jurisdiction) to pursue the 2017 Proceeding in the name of the Company;

(b) made clear that MO had not considered the merits or prospects of such an application but pointed out the factors the Court would have regard to when considering such an application; and

(c) at no time did the Liquidator or MO indicate that the Liquidator would support, unconditionally, an application by the plaintiff for a derivative action;

(d) the Derivative Leave Proceeding brought by the plaintiff was in a form that was materially different from that which MO suggested be considered by the plaintiff in the letter dated 11 May 2018;

(e) the Liquidator's position on the plaintiff's application for leave to pursue the Westpac Claim in the name of the Company was that he would neither consent to nor oppose the application provided that:

(i) his remuneration, costs and expenses to date, and his costs of such an application were paid by the plaintiff in full;

(ii) the plaintiff agreed to indemnify the Company for its costs of the 2017 Proceeding; and

(iii) adequate security was put in place to protect the Company from any adverse costs orders.

169 After the Derivative Leave Proceeding was issued, the Liquidator was represented both at directions hearings from 12 July 2018 and on the first day of the trial. As earlier mentioned, at directions on 8 February 2019, the Liquidator informed the Court that, subject to receiving appropriate advice and costs protection, he was willing to proceed as considered appropriate.[139] In his reasons for judgment in the Derivative Leave Proceeding, Connock J observed that counsel for the Liquidator acted responsibly in assisting the Court. There is absolutely nothing in his Honour's careful and detailed reasons that even hints at a lack of good faith on the part of the Liquidator in relation to the Derivative Leave Proceeding.

170 It was not for the Liquidator to 'take sides' on the hearing of the Derivative Leave Proceeding and the Liquidator did not do so. He was not an active participant in the hearing, other than to appear on the first day of the hearing. There can be no legitimate criticism of the conduct and involvement of the Liquidator in that proceeding.

1. The alleged lack of good faith concerning the proposed assignment of the Westpac Claim

171 Detailed submissions were advanced in support of an alleged lack of good faith on the part of the Liquidator during negotiations to assign the cause of action relating to the Westpac Claim. The key complaint concerned the 13 February 2018 letter from MO and the 'requirement' that the price of any proposed assignment included paying $126,500 in respect of the Liquidator's remuneration, costs and expenses.

172 The Liquidator contended that the 13 February 2019 letter to the parties to the Derivative Leave Proceeding was in accordance with his statutory duty to act in the best interests of creditors. It was submitted the letter sought to ensure that in circumstances where the Westpac Claim was the only asset of the Company, the Liquidator would obtain the best possible price for any assignment of that claim. Further, that the amount for which the Westpac Claim was to be assigned would not be an amount less than the Liquidator's remuneration, fees and expenses, as, if it was, this would result in no benefit to creditors. The liquidator submitted that he was not acting in any way in an improper manner by authorising MO to send the letter.

173 The priority given in favour of a liquidator by s 556 of the Act for payment of remuneration costs and expenses means that only after amounts given statutory priority will there be a return to creditors. In this case, after payment of priority amounts, unless a court set aside the Westpac security, or some arrangement was made concerning it, any amounts obtained in exchange for an assignment of the Westpac Claim in excess of the remuneration costs and expenses afforded s 556 priority, would first go to Westpac.

174 There is no evidence as to the value of the chose in action. The plaintiff made no monetary offer to the Liquidator in exchange for an assignment, and nor did Westpac.

175 In the context of s 556, I do not consider that the request by the Liquidator for payment of the amount of $126,500 was in any way improper, or that by including a reference to payment of that amount in the 13 February 2018 letter the Liquidator demonstrated a lack of good faith. There is no evidence the plaintiff sought to engage with the Liquidator concerning the 13 February 2018 letter. There is no evidence of a lack of good faith in 'negotiations' relating to any proposed assignment. There is no evidence at all of any 'negotiations' on the part of the plaintiff concerning an assignment.

176 I accept as submitted on behalf of the Liquidator that it was open to the plaintiff to request taxation of costs and an assessment of the Liquidator's remuneration as a condition of assignment. The plaintiff did not do so. There is no evidence to suggest that, had a request been made, the Liquidator would have resisted appropriate scrutiny. His approach to disclosure and that of MO makes it likely that, if asked, the Liquidator would have agreed to have his remuneration scrutinised.

177 Separately, the plaintiff contended that the Liquidator should have disclaimed the Westpac Claim.

178 Responding to this allegation, the Liquidator submitted that the Westpac Claim does not fall within the categories of property of a company that can be disclaimed by a liquidator under s 568 of the Act. Further, that even if the Westpac Claim was property that could be disclaimed, the effect of doing so would be to vest the Westpac Claim in ASIC. The plaintiff's counsel did not seek to contradict these propositions during the hearing of the application.

179 In this case the applicant for the inquiry has failed to establish that there is something that needs to be investigated concerning the liquidation of the Company. He has failed to establish that there is any, let alone any sufficient basis to constitute a 'complaint' in relation to the Liquidator's conduct of the liquidation of the Company. As a result, there is no jurisdiction to order an inquiry.

180 The complaint relying upon s 533 fails. First, because I consider that on the facts of this case the reporting obligation in s 533(1)(d) arising by reason of s 533(1)(c) had no application to the Liquidator. Second, because even if it did have application, the absence of a report by the Liquidator 13 years after the Company was wound up, a liquidator appointed seven years after the First Liquidation concluded cannot be the cause of any detriment to creditors, to ASIC, or to the public. Despite appropriate enquiries, the Liquidator had no information or documents to provide to ASIC that might be relevant to the purposes s 533 is intended to serve.

181 There is no substance to the complaint of improper delegation of work to solicitors. Section 477(2)(b) expressly contemplates that a liquidator may appoint a solicitor. The Liquidator did so. The work performed by the solicitors was legal work.

182 There is also no substance to the multi-faceted complaints about unnecessary and excessive costs and expenses. Given the work required to be performed, including legal work responding to the plaintiff and his solicitors and appropriate albeit limited participation in the Derivative Leave Proceeding, I am not satisfied there is evidence of unnecessary or excessive costs. The disclosure obligations in the LPUL have no application to legal practitioners engaged on behalf of a liquidator. Nonetheless, both MO, the legal practitioners and the Liquidator have made disclosure of their actual and anticipated costs and remuneration as appropriate. There is no substance to the various complaints concerning the sum of $23,200 paid to MO on 11 August 2017. In relation to his own remuneration, and also in relation to costs and disbursements, the Liquidator acted reasonably, diligently and in the interests of creditors. MO remains significantly out of pocket for its costs and disbursements; the Liquidator has not been paid at all.

183 The complaint of failure to report to creditors and of failure to call a meeting of creditors has no merit. The section relied upon for reporting has no application to the Liquidator. There is no statutory obligation to call a meeting of creditors. There is no requirement for the Liquidator to meet personally with creditors. Here, the creditor who complains of failure to meet in person routinely communicated via his solicitors and counsel.

184 The plaintiff complained about the Liquidator's failure to be aware of the continued existence of Westpac as a secured creditor at an earlier time in the administration. The plaintiff could himself, or by his solicitors and counsel, have provided that information much earlier - at the very first meeting in August 2016. He did not do so. The liquidator investigated the position after the generally endorsed writ was issued. That was an appropriate time for him to do so.

185 There is no substance to the complaint the Liquidator failed to prosecute the Westpac Claim. He authorised the issue of the 2017 Proceeding to ensure the claim did not become statute barred. The allegations, including fraud, were serious. To pursue the claim consistent with his duties as a liquidator and his obligations under the CPA, the Liquidator would first have needed to carefully investigate and evaluate the merits of the claim. He was without funds to do so. Further, for the period until February 2018, the plaintiff was seeking an assignment of the proceeding, not the pursuit of it by the Liquidator. When the plaintiff expressed willingness thereafter to fund the Liquidator, that 'offer' was accompanied by unfounded allegations that the plaintiff's solicitors, MO, were conflicted and complaints about the Liquidator's own conduct. From mid-2018 until the decision in the Derivative Leave Proceeding, once again, the plaintiff's preferred course was that he control and pursue the claim against Westpac. After the decision of Connock J in October 2019 where his Honour said he did not consider the claim to have reasonable prospects of success, the Liquidator was still without funds. Once again there can be no valid criticism of the Liquidator for his not prosecuting the proceeding after October 2019. There is nothing about the failure to prosecute complaint that supports an order for an inquiry.

186 The complaint about the Liquidator's involvement in the Derivative Leave Proceeding is also without substance. Connock J expressly found that the Liquidator acted responsibly in assisting the Court.

187 There was no lack of good faith involved in the Liquidator's request in the 13 February 2018 letter from his solicitors that his remuneration costs and expenses be paid as part of any assignment of the chose in action. There was no request that those costs and remuneration be taxed or assessed. There is nothing to suggest that upon a request for taxation or assessment that the Liquidator would have opposed such a course of action. By reason of s 556 of the Act, only after the Liquidator's proper remuneration costs and expenses were paid would there be any money for creditors.

188 Each of the complaints made by the plaintiff in support of an order for an inquiry has been found to be without substance. Even if one or more had been found sufficient to support an order for an inquiry, in the exercise of discretion I would have refused to make an order.

189 The complaints made by the plaintiff reflect his dissatisfaction with what occurred in relation to the Company after his successful application for its reinstatement in 2016. These are matters personal and peculiar to this plaintiff. In reality, by this application he seeks to vindicate private rights. That is not the purpose of the power in clauses 90-10, 90-15 and 90-20 of Schedule 2. The purpose is to serve the public interest by advancing and promoting the regulation, supervision, discipline and correction of liquidators in the interests of honest and efficient administration of the estates of companies subject to winding up.[140] There is nothing about the interests of honest and efficient administration of estates of this Company that falls for investigation. No issues of supervision, discipline or correction of the Liquidator arise.

190 The application and therefore the proceeding is dismissed.

191 The parties should file short submissions concerning costs, limited to no more than four pages each. Those submissions should be filed and served no later than 14 days from the date of publication of these reasons. Unless the parties are advised otherwise, costs issues will be determined on the papers.

[1] [2018] VSC 705 ('Westpoint'), [301].

[2] The plaintiff filed the following five sets of submissions: Outline of submissions of paragraph 3 of the originating process, dated 27 March 2020 ('Plaintiff's March 2020 Submissions'); Outline of submissions, notice to produce, dated 7 September 2020 ('Plaintiff's September 2020 Submissions'); Further Outline of Submissions, dated 11 November 2020; Supplementary outline of submissions, dated 9 February 2021; and Further supplementary outline of submissions dated 10 February 2021. The defendants filed two sets of submissions: Outline of submissions, dated 7 September 2020 ('Defendants' September 2020 Submissions'); and Further outline of submissions, filed 15 December 2015.

[3] (2009) 75 NSWLR 99; [2009] NSWCA 65 ('Hall').

[5] [2018] VSC 705.

[6] (2010) 79 ACSR 558; [2010] NSWSC 959 ('BL & GY International').

[10] Westpoint [2018] VSC 705, [285].

[11] [2007] VSC 170 ('Edge').

[15] (2009) 75 NSWLR 99; [2009] NSWCA 65.

[17] [2018] VSC 705.

[18] [2019] NSWSC 521 ('Wily'), [37]. Refer to Plaintiff's March 2020 Submissions, [5]-[6]; Defendants' September 2020 Submissions, [15]-[20], [22]; Plaintiff's September 2020 Submissions', [4].

[19] Kennards Hire Pty Ltd v RMGA Pty Ltd [2010] NSWSC 1387, [35]-[37]; Lollback v Brakepower, [22]-[23]; this formula has its origin in the judgment of Kitto J in Queensland Bacon Pty Ltd v Rees [1966] HCA 21; (1966) 115 CLR 266, 303; [1966] HCA 21; [1966] ALR 855.

[20] Kennards Hire Pty Ltd v RMGA Pty Ltd [2010] NSWSC 1387, [37]; Lollback v Brakepower, [22].

[21] Wily [2019] NSWSC 521, [35]-[38].

[22] (1993) 11 ACLC 272.

[23] Ibid, 273; cited with approval in Hall 75 NSWLR 99; [2009] NSWCA 65, [56].

[24] Hall 75 NSWLR 99; [2009] NSWCA 65, [56]-[60], [79].

[25] [2001] FCA 371 ('Leslie').

[26] The Full Federal Court was here referring to the decisions of Young J in Burns Philip Investments Pty Ltd v Dickens (No 2) (1993) 10 ACSR 626 and the decision of Drummond at first instance in Leslie, in the matter of the Aboriginal Councils and Associations Act 1976 v Hennessy [2000] FCA 1532.

[27] Leslie [2001] FCA 371, [6].

[28] (2010) 79 ACSR 558; [2010] NSWSC 959.

[30] As set out in Legal Profession Uniform Law Application Act 2014 (Vic), Schedule 1.

[31] Mr Rohrt was appointed liquidator pursuant to the Orders of Efthim AsJ dated 14 October 2016 in proceeding S CI 2016 03446 ('14 October 2016 Orders').

[32] 2020 Rohrt Affidavit, [11]-[14]. In the 2018 Rohrt Affidavit, [6]-[8], the Liquidator did not refer to the August 2016 meeting. He referred to discussions with Mr Levine, and his understanding from those discussions that he could either be funded by the plaintiff to run the Westpac Claim in the name of the Company or to assign the claim to the plaintiff. The first alternative is consistent with the recital in other matters in the 14 October 2016 order, the second alternative is what the Liquidator was told was envisaged at the August 2016 meeting.

[37] [1874] UKLawRpCh 20; (1874) LR 9 Ch App 244.

[38] In his reasons in proceeding 2018 02277 ('the Derivative Leave Proceeding') delivered 23 October 2019, In the matter of ACN 091 581 302 Pty Ltd (in liquidation) (formerly Pinnacle Investments Pty Ltd) [2019] VSC 699, Connock J considered the claims made in the writ as issued were such that Mr Djordjevich ought file and serve a document specifying and identifying each cause of action sought to be pleaded by Pinnacle against each of the defendants to the Westpac Claim.

[39] 2020 Rohrt Affidavit, [25], Exhibit RTR-4.

[54] Ibid,[42], [44], Exhibit RTR- 22.

[55] In the matter of ACN 091 581 302 Pty Ltd (in liquidation) (formerly Pinnacle Investments Pty Ltd) [2019] VSC 699.

[60] 2020 Rohrt Affidavit, Exhibit RTR-25.

[61] In the matter of ACN 091 581 302 Pty Ltd (in liquidation) (formerly Pinnacle Investments Pty Ltd) [2019] VSC 699, [100].

[62] 2020 Rohrt Affidavit, Exhibit RTR-26.

[64] 2020 Rohrt Affidavit, Exhibit RTR-27, citing an earlier letter from MO dated 10 April 2019.

[67] 2020 Rohrt Affidavit, Exhibit RTR-27.

[69] In the matter of ACN 091 518 302 Pty Ltd (in liq) (formerly Pinnacle Investments Pty Ltd) [2019] VSC 699.

[77] [2007] VSC 170.

[80] [2007] VSC 170.

[82] [2007] VSC 170.

[83] Edge [2007] VSC 170.

[91] Ibid, [201]. The behaviour of Mr Edge was compounded by his failure in his first affidavit to refer to his delegation of work to Harrison's insolvency.

[93] Refer to paragraphs [36]-[38] above.

[94] Refer to paragraphs [48]-[51] above.

[95] [2016] FCA 1186 ('McDermott').

[96] Ibid, [9], [16], [19], [21], [24].

[99] Edge [2007] VSC 170, [44].

[100] The plaintiff relied on Hall 75 NSWLR 99; [2009] NSWCA 65, [156].

[103] Legal Profession Uniform Law Application Act 2014 (Vic), Schedule 1, s 172.

[104] Ibid, s 174(1).

[105] Ibid, s 174(6).

[107] Refer to paragraphs [36]-[38] above.

[108] Refer to paragraph [46] above.

[109] Refer to paragraph [54] above.

[110] Refer to paragraph [56] above.

[111] 2018 Rohrt Affidavit, [42]-[44].

[113] Refer to paragraph [28(c)] above.

[118] 2018 Rohrt Affidavit, [42]-[43].

[119] Refer to paragraph [37] above.

[120] 2020 Rohrt Affidavit, [94]-[96].

[121] Refer to paragraph [67(a)] above.

[122] Refer to paragraph [64] above.

[123] Edge [2007] VSC 170, [208]-[212].

[126] [2007] VSC 170

[127] [2016] FCA 1186, [12], [28], [29], [67], [73] and [74].

[128] Transcript, 28 January 2021, 60.

[129] As set out in 2020 Rohrt Affidavit, [42(c)], Exhibit RTR-15.

[130] Refer to paragraphs [48]-[57] above.

[131] Re Tavistock Ironworks Co (1871) 24 LT 605; Re Silver Valley Mines [1882] UKLawRpCh 174; (1882) 21 Ch D 381.

[132] RBG Resources Plc (in liq) v Rastogi [2005] EWHC 994 (Ch).

[133] Refer to paragraph [48] above.

[134] Refer to paragraph [61] above.

[135] 2020 Rohrt Affidavit, Exhibit RTR-15, [8].

[136] [2007] FCA 858.

[138] Refer to paragraph [74] above.

[139] Refer to paragraph [63] above.

[140] Wily [2019] NSWSC 521, [37].