Plaintiffs v Defendants

2 The first plaintiffs ('the Liquidators'), are the court-appointed liquidators of:

(a) RM Road Services Pty Ltd (in liquidation) ('RMS');

(b) Roadmaster Traffic Management Pty Ltd (in liquidation) ('RM Traffic'), as trustee for the Roadmaster Traffic Management Trust ('Trust'); and

Roadmaster Line Marking Pty Ltd (in liquidation) ('RM Line Marking'), (together, 'the Roadmaster Companies').

3 At the time this proceeding was commenced, the property of the Roadmaster Companies was in the possession and control of one or more of the defendants, being:

(a) the first defendant, Ms Semra Ofli ('Ms Ofli'), the director of the Roadmaster Companies;

(b) the second defendant, AESK Holdings Pty Ltd ('AESK'), a company of which Ms Ofli is the sole director; and

(c) the third defendant, Mr Haissam Khabbaz ('Mr Khabbaz'), Ms Ofli's ex-husband, the previous director of the Roadmaster Companies and an undischarged bankrupt.

4 By way of their Further Amended Originating Process dated 6 December 2023 ('FAOP'), the Liquidators seek various orders and declarations to enable them to take possession of, and realise, the property of the Roadmaster Companies for the benefit of creditors. These orders include orders:

(a) Appointing the Liquidators as receivers of the property of the Trust;

(b) Requiring delivery up by the defendants of the property of RMS and RM Traffic;

(c) Authorising the Liquidators and/or their staff to enter the premises of the Roadmaster Companies, located at 8 Webber Parade, Keilor East ('Keilor Premises') for the purposes of taking possession of the property of RMS and RM Traffic;

(d) Restraining the defendants from interfering with the Liquidators taking possession of the property of RMS and RM Traffic;

(e) Requiring Ms Ofli to comply with certain statutory notices and other requirements issued by the Liquidators;

(f) In respect of the Liquidators taking possession of and realising the assets of RM Line Marking, despite registered security interests in favour of AESK and Mr Khabbaz;

(g) Restraining the defendants from interfering with the Liquidators taking possession of the property of RM Line Marking; and

(h) For the defendants to pay the plaintiffs' costs of the proceeding on an indemnity basis.

5 By the FAOP, the Liquidators also seek declarations that two security interests granted by RM Traffic to Ms Ofli and AESK have vested in RM Traffic as at the date the Liquidators were appointed as administrators (ie 18 October 2023) and that RM Traffic carried on business and holds assets solely in its capacity as trustee of the Trust.

6 The Liquidators rely on four affidavits of Shane Justin Cremin made on 31 October 2023 ('Cremin 1'), 9 November 2023 ('Cremin 2'), 1 December 2023 ('Cremin 3'), and 11 December 2023 ('Cremin 4'). They also rely on two affidavits of their solicitor, Ariel Curie Borland, affirmed 2 November and 21 December 2023 (respectively, 'Borland 1' and 'Borland 2'). The defendants rely on two affidavits of Ms Ofli made on 8 November 2023 ('Ofli 1') and 20 December 2023 ('Ofli 2'). Ms Ofli also made an affidavit on 4 December 2023 ('Ofli 2'), which is referred to in the plaintiffs' extensive written outline dated 11 December 2023.

7 By the time the proceeding came on for trial on 21 December 2023:

(a) the Liquidators no longer pressed for the relief referred to in paragraph 4(e) above;

(b) Ms Ofli and AESK consented to the relief referred to in paragraphs 4(a) to (d), above; and

(c) Ms Ofli and AESK consented to the two declarations referred to in paragraph 5 above being made.

8 Mr Khabbaz has not taken any part in this proceeding, despite ample opportunity to do so.

9 This left for determination the relief referred to in paragraphs 4(f) to (h) above, as these remained in contest as between the Liquidators on the one hand and Ms Ofli and AESK on the other.

10 At the commencement of the trial, Ms Ofli and AESK applied for an adjournment, which was refused for the reasons given ex tempore.

11 I then heard submissions from the Liquidators' counsel and from Mr Pogoriller for Ms Ofli and AESK on the matters remaining in dispute, following which I indicated that:

(a) I would make the orders and declarations consented to by Ms Ofli and AESK and not opposed by Mr Khabbaz, as I was satisfied on the evidence that this course was appropriate;

(b) I would grant the relief sought by the Liquidators and referred to in paragraphs 4(f) and (g) above, with some [1]djustments;1 and

(c) in respect of costs, for reasons given ex tempore at the hearing, I would make orders that:

(i) Mr Khabbaz pay the plaintiffs' costs of and associated with the proceeding on an indemnity basis; and

(ii) Ms Ofli and AESK pay the plaintiffs' costs of and associated with the proceeding up to 17 December 2023 on an indemnity basis and from 18 December 2023 on a standard basis.

12 I further indicated that I would publish my reasons in respect of the relief sought in paragraphs 4(f) and (g) above ('Disputed Matters') later. These are those reasons.

13 In setting out the background, I have focused on those matters which go to the Disputed Matters, but have traversed beyond that where necessary.

14 The Roadmaster Companies provide services to the road management and construction industries, operating from the Keilor Premises, which are leased by RM Line Marking.

15 The current shareholders of the Roadmaster Companies are AESK (as to 52%) - of which Ms Ofli is the sole director and shareholder - and Mr Camilo Martos ('Mr Martos') (as to 48%). Ms Ofli is the current director of each Roadmaster Company. Mr Martos was formerly a director of the Roadmaster Companies, and Mr Khabbaz was formerly a director of RM Traffic and RM Line Marking. Mr Khabbaz claims that he is an employee of RM Line Marking.

16 As noted earlier, RM Traffic is the trustee of the Trust, which was established by a deed of trust on 1 October 2014 ('Trust Deed'), and which has an ABN. The Trust Deed contains an 'ipso facto' clause disqualifying a trustee from remaining in office upon an insolvency appointment.

17 The Liquidators were appointed as voluntary administrators by Ms Ofli by a resolution made pursuant to s 436A of the Corporations Act on 18 October 2023 ('Appointment Date') on the basis that each Roadmaster Company was insolvent or was likely to become insolvent.

18 As a result of a winding up application brought in this Court by Mr Martos, the Roadmaster Companies were wound up, and the Liquidators were appointed (as liquidators), pursuant to s 461(1)(k) of the Corporations Act, on 3 November 2023.

Attendance at Keilor Premises prior to commencement of the proceeding

19 On 19 October, the Liquidators' staff attended the Keilor Premises but faced resistance from Ms Ofli, who objected to photographs being taken. Subsequently, on 20 October, at the request of the Liquidators, Slattery Auctions attended and reported discrepancies in the assets listed in a valuation report prepared in May 2023 and found fewer vehicles on-site than had been listed in that report and in a list compiled by the Liquidators. On 22 October, the Liquidators attempted to secure assets of the Roadmaster Companies at the Keilor Premises but were excluded from the premises, with the defendants having taken possession of most tangible assets.

20 On 23 October, the Liquidators expressed concerns to Ms Ofli about the whereabouts of the Roadmaster Companies' assets. The following day, the Liquidators received a letter from solicitor Peter McLeod ('Mr McLeod'), who stated that he acted on behalf of the defendants, citing alleged security interests and asserting possession of the security property. Security agreements were not provided. Despite this, the Liquidators continued their attempts to secure the property.

21 On 24 October, one of the Liquidators' staff, Joseph Crisara, attended the Keilor Premises with Gavin Woolley and others of Slattery Auctions. The entrance to the Keilor Premises was locked. Mr Khabbaz refused them access. They left after Mr Khabbaz threatened that he would kill Mr Crisara if he entered the Keilor Premises. The Liquidators have since refrained from instructing their staff or Slattery Auctions to attend the Keilor Premises due to safety concerns.

Production of security agreements and the defendants' debts

22 Following the attendance on 24 October 2023, Mr McLeod produced copies of the agreements for the alleged security interests to the Liquidators' solicitors.

23 Each agreement is dated 24 April 2023 and titled 'General Security Agreement Comprehensive All Assets'. The General Security Agreements ('GSAs') are expressed to be between:

(a) RM Traffic and AESK;

(b) RM Traffic and Ms Ofli;

(c) RM Line Marking and AESK; and

(d) RM Line Marking and Mr Khabbaz

24 In correspondence with the Liquidators, Mr McLeod detailed the debts claimed by the defendants and secured by the GSAs:

(a) $33,625 owed to AESK for equipment hire invoices and loans to RM Line Marking;

(b) $168,258.02 owed to Mr Khabbaz for wages and entitlements by RM Line Marking;

(c) $189,365 owed to AESK for equipment hire invoices by RM Traffic; and

(d) $128,087.80 owed to Ms Ofli for wages and entitlements by RM Traffic.

25 The Liquidators have not investigated RM Traffic's debts to AESK or Ms Ofli, considering the alleged security interests have vested.

26 Relevantly, the GSAs between RM Line Marking and each of AESK and Mr Khabbaz have been registered on the Personal Property Securities Register ('PPSR') pursuant to the Personal Property Securities Act 2009 (Cth) ('PPSA').

27 Concerning debts by AESK and Mr Khabbaz against RM Line Marking, investigations by the Liquidators have revealed challenges in matching AESK's invoices and Mr Khabbaz's entitlement claims with RM Line Marking's records. Mr Cremin's affidavits highlight a lack of cooperation from Ms Ofli, who refused meetings and information sharing. The documents received from the defendants could not be reconciled, and further investigations relied on existing documents and company accounts. Mr Cremin estimates current amounts owed by RM Line Marking to be $33,625 and $60,482.23 for AESK and Mr Khabbaz, respectively.

28 The Liquidators have not called for, or adjudicated, proofs of debt. They have nonetheless been informed of claims in the liquidations by secured and unsecured creditors. Below I describe the evidence regarding alleged debts of RM Line Marking: it is not necessary for me to do so in respect of RMS and RM Traffic.

29 The Liquidators have been informed of the defendants' claims against RM Line Marking, summarised as follows:

(a) $33,625 claimed by AESK in an email on 26 October 2023 from Mr McLeod (which the Liquidators estimate at $33,625), whereas Ms Ofli deposes in Ofli 3 that the debt claimed by AESK is $113,964.55; and

(b) $168,258.02 claimed by Mr Khabbaz (which the Liquidators estimate at $60,482.23).

30 Other secured claims have been made against specific assets of RM Line Marking, summarised as follows:

(a) $67,864 claimed by Capital Finance Australia Limited against a White 2017 Hino Machine (Reg: 1KF3FE); and

(b) $105,233.55 claimed by Commonwealth Bank of Australia against a White 2019 Fuso Tray (Reg: XV94JD). The Commonwealth Bank has indicated that it is taking steps to repossess its collateral.

31 The Liquidators are aware of unsecured creditors of RM Line Marking, totalling $265,489.93. The largest unrelated creditor is the Commissioner of Taxation, who has lodged a proof of debt for $166,131.97 in the liquidation of RM Line Marking.

32 The primary assets of the Roadmaster Companies, and the focus of the Liquidators' investigations, are vehicles. However, the defendants, citing alleged security interests, have not until very recently allowed the Liquidators to take possession of or inspect the assets of RMS and RM Traffic, and not at all regarding RM Line Marking. Nor had the defendants provided to the Liquidators a record or register of the assets they have seized.

33 To identify the assets, the Liquidators turned to third-party sources, including VicRoads registers, the management accounting system of the Roadmaster Companies, other books and records, and schedules of assets provided by Mr Martos and contained within the valuation report.

34 Based on the information at their disposal, the Liquidators have compiled two lists of assets:

(a) The Asset Schedule is a schedule of all assets which are or may be assets of the Roadmaster Companies.

(b) The Asset List is a list of assets that the Liquidators can 'reliably' say are assets of the Roadmaster Companies.

35 The Liquidators estimate the value of the vehicles on the Asset List as being:

36 The defendants do not claim a security interest in the property of RMS, and the Liquidators consider that the alleged security interest in RM Traffic has vested. The defendants maintain their reliance on the alleged security interest granted by RM Line Marking, and the Liquidators seek orders for possession and delivery up of all assets.

37 During the course of the two to three days leading up to the trial, Ms Ofli and AESK delivered up possession of the vehicles owned by RMS and RM Traffic, or made arrangements to do so by 22 December in respect of two of the vehicles. Accordingly, by the time of trial, the real contest was over the vehicles owned by RM Line Marking.

38 Prior to the commencement of this proceeding, the Liquidators (as administrators) were granted leave to appear in the winding-up application by Barrett AsJ on 19 October 2023, for the purpose of making an application for an adjournment. That application was supported by AESK, who was a party to the winding up application. His Honour adjourned the winding up application to 3 November 2023.

39 On 1 November 2023, the Liquidators filed their originating process, which was made returnable on 3 November 2023 before Barrett AsJ. This proceeding, and the winding up application came before his Honour on that date. Amongst other things:

(a) Mr Martos and the Liquidators consented to orders winding up the Roadmaster Companies, and appointing the Liquidators as liquidators;

(b) the Liquidators sought the orders set out in the originating process on an urgent basis, alternatively, interlocutory injunctive relief;

(c) Ms Ofli appeared in-person to contest the relief; and

(d) Barrett J indicated that he was not able to deal with the matter but would make enquiries with the Practice Court.

40 In the afternoon of 3 November 2023, the proceeding came before Attiwill J for the hearing of an application for an injunction. Ms Ofli appeared at that hearing and sought to be heard on behalf of AESK and Mr Khabbaz. His Honour granted the Liquidators' application for an interim injunction and made an order in the following terms:

Until 4:00pm on 10 November 2023 or further order, the defendants, whether by their servants, agents or howsoever otherwise, be restrained from transferring, selling, using, dealing, encumbering or removing the property of the second or third plaintiffs (Property) from the premises situated at 8 Webber Parade, Keilor East, Victoria, or wherever else the Property is situated.

41 The Liquidators filed a summons in relation to their application for an injunction on 6 November 2023. That summons was returnable before Lyons J on 10 November 2023. Ms Ofli sought and was granted leave to appear on behalf of AESK and Mr Khabbaz. His Honour ordered that the interim injunction be extended pending the hearing and determination of the Liquidators' application. His Honour delivered a ruling in respect of those orders, including the following:

I am satisfied that an injunction should be granted until further order or the trial of this proceeding in respect of any assets belonging to RTM or RMS at the Keilor premises or elsewhere. First, this is because, as Ms Ofli concedes, the defendants do not have any proprietary security claim over the assets of RMS. Second, this is because the plaintiffs have established a prima facie case that the assets of RTM are not the subject of any security interest in favour of the defendants.

42 The orders of Lyons J made on 10 November 2023 also provided:

(a) that the Liquidators have leave to amend their originating process;

(b) for a timetable for the parties to file affidavits and submissions; and

(c) that the proceeding be set down for hearing on an expedited basis, on a date not before 9 December 2023, on an estimate of two hours.

43 On 13 November 2023, the Liquidators filed their amended originating process. This added a claim for a declaration or direction that all property of RM Traffic was held as trustee of the Trust. That application arose from Ms Ofli's submissions before Attiwill J that RM Traffic held assets in its own right.

44 On 17 November 2023, the originating process was fixed for trial before me on 21 December 2023 on an estimate of 2 hours.

45 On 6 December 2023, the plaintiffs filed the FAOP pursuant to leave granted by me on that date.

46 For the most part, the defendants have not been represented by solicitors in the conduct of the proceeding. The evidence discloses that Mr Pogoriller informed the plaintiffs' solicitors on the evening of 13 December 2023 that he had been retained to act for Ms Ofli and AESK in the proceeding, and Mr Pogoriller filed a Notice of Appearance on their behalf on 18 December 2023.

Section 90-15 of the IPS

47 Section 90-15 of the IPS relevantly provides as follows:

(1) The Court may make such orders as it thinks fit in relation to the external administration of a company.

(2) The Court may exercise the power under subsection (1):

(a) on its own initiative, during proceedings before the Court; or

(b) on application under section 90-20.

(3) Without limiting subsection (1), those orders may include any one or more of the following:

(a) an order determining any question arising in the external administration of the company;

(b) an order that a person cease to be the external administrator of the company;

(c) an order that another registered liquidator be appointed as the external administrator of the company;

(d) an order in relation to the costs of an action (including court action) taken by the external administrator of the company or another person in relation to the external administration of the company;

(e) an order in relation to any loss that the company has sustained because of a breach of duty by the external administrator;

(f) an order in relation to remuneration, including an order requiring a person to repay to a company, or the creditors of a company, remuneration paid to the person as external administrator of the company.

(4) Without limiting the matters which the Court may take into account when making orders, the Court may take into account:

(a) whether the liquidator has faithfully performed, or is faithfully performing, the liquidator's duties; and

(b) whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and

(c) whether an action or failure to act by the liquidator is in compliance with an order of the Court; and

(d) whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and

(e) the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act on public confidence in registered liquidators as a group.

The Liquidators' submissions regarding the Disputed Matters

48 By their application in respect of the Disputed Matters, the Liquidators seek orders facilitating the realisation of RM Line Marking's property and payment by the Liquidators of debts secured against that property. The orders assume the validity of the defendants' alleged security interests in RM Line Marking. The Liquidators acknowledge that the orders sought are unorthodox, but say they seek them due to concerns regarding how the defendants have used the company's assets for purposes which appear foreign to securities enforcement.

Liquidators' submissions regarding the evidence

49 The defendants have been in possession of RM Line Marking's property since the Appointment Date. They have not appointed receivers over the assets but their previous solicitor stated in correspondence with the Liquidators that:[2]

The security holders have already exercised their enforcement powers pursuant to the agreements by taking possession of such of the Grantor's security property that they have been able to identify and locate and proceeding to manage those assets. ...

50 The Liquidators were initially informed that the defendants relied on an event of default under clause 12(a)(iii) of the GSA,[3] being the appointment of the Liquidators as administrators (and notwithstanding that they had been appointed by Ms Ofli). On 27 October 2023, the defendants served 'Notices of Default and Seizure' on the Liquidators.[4] The Notices of Default stated the following: [5]

You are in default of the terms and conditions of the Agreement pursuant to paragraph 12 of the Agreement such default including but not limited to:

(i) Non-payment of monies secured by the agreement;

(ii) Non-performance of obligations under the agreement;

(iii) Appointment of an administrator

(1) Insolvency - being unable or stating that you are unable to pay your debts as they fall due;

(2) Suspending payments of your debts;

(3) Ceasing to carry on all material part of your business.

The Secured Party has seized all assets, collateral, and other security property of the Grantor as described in the Agreement and including:

(i) all circulating noncirculating property as defined in the agreement; and

(ii) does hereby seize all intangible property pursuant to Section 123 of the Personal Property Securities Act 2009 (Cth).

51 The defendants appear to be 'controllers' within the meaning of s 9 of the Act, as they are in possession, or have control, of the property of a corporation for the purpose of enforcing a security interest.

52 While the defendants have served Notices of Default, they have not:

(a) lodged a 'Form 504' with ASIC under s 427 of the Act notifying of their appointment as controllers to RM Traffic;

(b) served a notice on RM Traffic that AESK and Mr Khabbaz are controllers of the property of RM Traffic under s 429 of the Act; or

(c) served any notices under the PPSA, including those under s 135 that deal with and are a precondition to the retention of collateral by a secured party.

53 Mr Cremin gives evidence in his third affidavit of concerns arising from his investigations. These include Ms Ofli accessing the Quickbooks accounts for the Roadmaster Companies and making adjustments to the accounts, after she had appointed the Liquidators as administrators.

54 Notwithstanding the amount of their claim, the defendants are in possession of at least 12 vehicles belonging to RM Line Marking.[6] Mr Cremin estimates those vehicles to have a market value of $700,850 and an auction realisable value of $466,100.[7]

55 After deducting claims of AESK, Mr Khabbaz, and other financiers, Mr Cremin arrives at an estimate of RM Line Marking's equity in the vehicles of between $71,119.43 and $433,645.22.[8] This is RM Line Marking's equity of redemption, reflected in s 142 of the PPSA.

56 The Liquidators seek the relief in respect of the Disputed Matters in circumstances where it is said that:

(a) the Liquidators were prevented from entering the Keilor Premises from 24 October 2023;

(b) a member of the Liquidators' staff was subjected to a death threat from Mr Khabbaz on his attendance at the Keilor Premises;

(c) Ms Ofli, has failed to respond to requests for information and assistance or to meet with the Liquidators to discuss the issues the subject of this application;

(d) it appears that Ms Ofli has altered accounting entries in the Roadmaster Companies' management accounts, following the Liquidators' appointment;[9]

(e) the defendants have commenced operating a business using the property of RM Line Marking; [10]

(f) the defendants have retained a vehicle owned by RMS despite having conceded in open court that they have no proprietary claim to that vehicle;[11]

(g) the defendants have failed to comply with statutory obligations imposed on controllers; and

(h) the defendants have until the last two to three days failed to provide the Liquidators with a record of the assets in their possession, custody or control.

57 There are three matters of particular concern to the Liquidators.

58 First, two of the vehicles owned by RM Line Marking in the defendants' possession are subject to finance and other security interests granted to Capital Finance (owed $67,864) and the Commonwealth Bank (owed $105,233.55). The Commonwealth Bank has informed the Liquidators that they are seeking to 'liaise with the director to arrange repossession'.[12] There is no evidence that the defendants have allowed repossession or are accounting to them.

59 Secondly, the evidence as to the defendants' intentions is deficient:

(a) Mr Khabbaz has given no evidence in the proceeding, and a Jones v Dunkel[13] inference ought be drawn against him.

(b) Ms Ofli stated in an email to the Liquidators' solicitor that her '[i]ntentions are to sell items pay finance companies and or banks and utilise excess funds to recover debts owed'.[14]

(c) Ms Ofli stated in her affidavit that she sought to sell a vehicle owned by RM Line Marking 'to pay for my legal representation'.[15] She does not have security over its property.

60 Thirdly, the Liquidators hold a significant concern that property of RM Line Marking is being used in a potential phoenix company's operations - Project 1 Linemarking Pty Ltd ('Project 1'). The Liquidators have received booking checklists issued by Project 1, by which it booked a job using one of RM Line Marking's vehicles. Ms Ofli is the sole director of Project 1, and it appears to carry the same or a similar business operated by RM Line Marking.[16]

Liquidators' submissions regarding the orders sought and the Court's power to make them

Section 90-15 of the IPS

61 The Liquidators seek orders under s 90-15 of the IPS that would authorise them to take possession of RM Line Marking, and further orders that impose a regime by which the Liquidators will realise property of RM Line Marking under the supervision of the Court.

62 Specifically, the orders contemplate that the Liquidators will realise the property of RM Line Marking and deal with its proceeds ('Proceeds') as follows:

(a) the Liquidators will be entitled to apply the Proceeds in payment of reasonable remuneration, costs and expenses incurred in the care, preservation and realisation of the property of RM Line Marking (including, for example, legal costs, and auctioneers' costs) ('Salvage Costs');[17]

(b) the Liquidators will retain a sum from the Proceeds ('Retained Proceeds'). This amount will be $282,222.57 which is the total amount claimed by AESK and Mr Khabbaz, if that sum is remaining after payment of the Salvage Costs. If the Proceeds are insufficient, the Liquidators will hold the balance of the Proceeds after payment of the Salvage Costs;

(c) the Liquidators will deal with any surplus Proceeds, over and above the Retained Proceeds and after payment of the Salvage Costs, in the winding up as though not subject to the RM Line Marking GSAs (ie, towards payment of properly incurred expenses which are not Salvage Costs and in paying dividends to creditors);

(d) the Liquidators will hold the Retained Proceeds for a period of six months (or such other period determined by the Court to be appropriate) in which period AESK and Mr Khabbaz can apply to the Court for a declaration as to the amount, if any, owed to them by RM Line Marking; and

(e) if no application is made by AESK and Mr Khabbaz, the Liquidators will deal with the Retained Proceeds as though not subject to the RM Line Marking GSAs.

63 The Liquidators additionally seek a direction under s 90-15 that they would be justified in taking possession, dealing with, and realising the property of RM Line Marking in the manner contemplated by the proposed orders.

64 The relief sought is novel, but necessary, and it is submitted that the Court has the power pursuant to s 90-15 of the IPS to grant it.

65 Section 90-15(1) of the IPS empowers the Court to make such orders as it thinks fit in relation to external administration of a company.

66 In In the matter of Polat Enterprises Pty Ltd (In liquidation), Hetyey AsJ observed that s 90-15 is 'broad in its scope and contemplates not only the exercise of judicial discretion but also the determination of substantive rights'.[18]

67 A number of authorities have recognised that the power to make orders under s 90-15 of the IPS 'is, in its terms, unconstrained'. In GDK Projects Pty Ltd v Umberto Pty Ltd (in liq), Farrell J made the much-cited observation that: [19]

... it is difficult to envisage circumstances where the power would be exercised if the Court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration.

68 The Court of Appeal of Western Australia (Buss P, Mitchell and Beech JJA) recently held in Australian Securities and Investments Commission (ASIC) v Jones: [20]

The power in s 90-15 is expressed in broad and unconfined terms. It permits the court to make such orders as it thinks fit in relation to the external administration of a company. ... it would be inappropriate to read into s 90-15 limitations that are not found in express terms of the provision. ... The basic question posed by s 90-15 is whether the proposed order relates to the external administration of the Companies. ...

69 Their Honours cited a recent decision of Ward P, Leeming and Mitchelmore JJA, in One T Development Pty Ltd v Krejci in his capacity as liquidator of ENA Development Pty Ltd, where it was said:[21]

It is plain that the current form of the conferral of power is broader than its predecessor. The restriction ... concerning determining rights and liabilities cannot survive the express power in subsection (3)(a). ... There is no reason not to read the new grant of power broadly, nor is there any reason to prevent "any" from bearing its ordinary meaning. After all, it is "quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words" ... The basic question posed by statute is whether the order relates to the external administration of the company. [emphasis added]

70 Accordingly, the plaintiffs submit that there is no good reason why - as a matter of power - the Court cannot make the orders sought under s 90-15 of the IPS. The existence of that power in the Court is further supported by its general equitable jurisdiction to control the conduct of controller of property and mortgagees in possession, as set out below.

71 As noted above, AESK and Mr Khabbaz claim to be controllers of the property of RM Line Marking. They have not complied with usual lodgement and notices provisions.

72 The plaintiffs submit that it can be inferred that the defendants are not aware of the obligations imposed on controllers of property of a corporation. Apart from lodgement and notice provisions, they are obliged to maintain bank accounts and financial reports (s 421 of the Act), and more importantly, to sell property of the company at not less than market value or at the best price that is reasonably obtainable (s 420A of the Act). The Liquidators say that they have no confidence that AESK and Mr Khabbaz have a proper appreciation of their obligations as secured creditors.

73 Equity has developed methods of controlling the conduct of mortgagees in possession in the exercise of their enforcement powers. The plaintiffs submit that these support the orders presently sought.

74 In Downsview Nominees Ltd v First City Corp,[22] the Privy Council held that while a receiver and managed owed no general duty in negligence to subsequent encumbrances, equity imposed a duty of good faith. Lord Templeton said (at 312):

Several centuries ago, equity evolved principles for the enforcement of mortgages and the protection of borrowers. The most basic principles were, first, that a mortgage is security for repayment of a debt and, secondly, that a security for repayment of a debt is only a mortgage. From these principles flowed two rules, first, that powers conferred on a mortgagee must be exercised in good faith for the purpose of obtaining repayment and secondly that, subject to the first rule, powers conferred on mortgagee may be exercise although the consequences may be disadvantageous to the borrower. These principles and rules apply also to a receiver and manager appointed by the mortgagee.

A mortgagee owes a general duty to subsequent encumbrancers and to the mortgagor to use his powers for the sole purpose of securing repayment of the moneys owing under his mortgage and a duty to act in good faith. He also owes the specific duties which equity has imposed on him in the exercise of his powers to go into possession and his powers of sale.

76 These statements represent the position in Victoria. In Nom De Plume Nominees Pty Ltd v Fingal Developments Pty Ltd,[23] the Court of Appeal (McLeish JA, and Tate JA and Ginnane AJA agreeing) considered Downsview, and said the following:[24]

... The case relevantly stands for the proposition that the powers of a mortgagee must be exercised in good faith and for the sole purpose of securing repayment of the moneys owing under the mortgage, and that failure to do so renders the mortgagee liable to account to a subsequent encumbrancer and the mortgagor.

77 The Court went on to consider Knight v Bowyer,[25] which it said was authority for the proposition that 'powers of a security holder may only be exercised for the purpose of recovering the debt secured'.[26]

Discretionary reasons said by the Liquidators to favour making the orders

78 In summary, the plaintiffs submit that the Court has power under s 90-15 of the IPS to make the orders sought. There are said to be good discretionary reasons for granting that relief, which are set out below.

79 First, the defendants are in possession of the property of RM Line Marking, and they have failed to comply with the obligations imposed on controllers of property under the Act, including duties in the exercise of a power of sale under s 420A.

80 Secondly, in the event of a breach, RM Line Marking will have no meaningful recourse against the defendants. There is no evidence of the asset position of AESK. Ms Ofli stated to the Court that she is, in effect, impecunious.[27] Mr Khabbaz is an undischarged bankrupt.[28]

81 Thirdly, RM Line Marking has a proprietary interest and potentially significant equity of redemption in its property, which Mr Cremin estimates to be up to $433,645.22.[29]

82 Fourthly, the defendants have now been in possession of the property of RM Line Marking for a period of two months. The evidence that steps are being taken to realise the assets is comprised in a single email that refers to a failed sale, and no information has been given regarding the terms of sale or identity of the purchaser.[30]

83 Fifthly, the evidence regarding Project 1 is deeply concerning. It is consistent with the view that AESK and Mr Khabbaz have not - as the authorities require - exercised powers for the sole purpose of securing repayment of the moneys owing. The evidence instead suggests that the collateral is being used in an unrelated business venture. Ms Ofli's affidavits do not address this matter, and Mr Khabbaz has not given evidence.

84 Sixthly, the Liquidators are professional insolvency practitioners and officers of the Court. The Court can be confident that they will responsibly realise the assets and apply their proceeds in accordance with their statutory obligations. The Court should have no such confidence in the defendants. In those circumstances, the plaintiffs' application ought to be granted.

85 Ms Ofli and AESK opposed the relief sought by the Liquidators in respect of the Disputed Matters. Primarily, they submitted that the relief sought constitutes an unwarranted interference with the rights of the defendants as secured creditors with valid registered securities against the assets of RM Line Marking. In this regard, this can only really apply to AESK and Mr Khabbaz, since Ms Ofli does not have a GSA with RM Line Marking or any other interest registered against that company on the PPSR.

86 AESK and Mr Khabbaz are said to have taken possession of the assets of RM Line Marking, which is their right under their respective GSAs. Taking possession is said to be an integral act of enforcement. Notice of default was given, albeit notice of taking possession was not, however this is said not to be disentitling. AESK submits that other enforcement action has been taken, such as contacting potential purchasers and auction houses. Mr Pogoriller acknowledged in his submissions that there was no evidence of all of the steps AESK and Ms Ofli are said to have taken, but says that this was due to him having insufficient time to take full instructions and adduce all relevant evidence. In submissions, Mr Pogoriller said that the security interests registered by the Liquidators against some of the assets of RM Line Marking had hindered Ms Ofli's attempts to realise the assets for the purposes of enforcing AESK's security.

87 Ms Ofli and AESK submits that the fundamental difficult facing the Liquidators in the application is that the relief sought is based on the Court's powers regarding the external administration of a company, but AESK and Mr Khabbaz have standalone securities, and they are entitled to enforce them absent serious disentitling conduct.

88 Ms Ofli and AESK agree to some extent with the Liquidators' submissions regarding the scope of s 90-15 of the IPS, but disagree that it is a source of power for the Court to make the orders sought in this instance. They do not dispute the Court's power to give injunctive relief or to act pursuant to its inherent jurisdiction.

89 In relation to s 90-15, Ms Ofli and AESK refer to the passage from ASIC v Jones that "The basic question posed by s 90-15 is whether the proposed order relates to the external administration of the Companies", as cited above.

90 In this regard, Ms Ofli and AESK note that the Court is not being asked, as part of the orders sought in this application, to determine the amounts owing under the GSAs to AESK and Mr Khabbaz. If it was, determining the amount of the debts would relate to the external administration of RM Line Marking.

91 It is said that the application goes not to the external administration of RM Line Marking but to the Court's ability to make orders pursuant to s 206(1)(a) and/or (c) of the PPSA. Therefore, Ms Ofli and AESK submit that the Court should not make the orders sought in reliance on s 90-15 of the IPS.

92 Ms Ofli and AESK submit that the Court is being asked, in an expedited hearing, to give final relief which may affect the security holders' ongoing rights under their GSAs. This was not just the rights of AESK and Mr Khabbaz which would be affected, but those of other security holders with registered interests against assets of RM Line Marking.

93 Mr Pogoriller noted that he does not appear for Mr Khabbaz, but said that there are serious matters alleged against him but the evidence relied on in support of those allegations is hearsay, as Mr Cremin gives evidence about the alleged death threat based on information and belief. Mr Pogoriller says that none of the people present on the day have given evidence, so the Court should give Mr Cremin's hearsay evidence limited weight.

94 Ms Ofli and AESK submit that the Liquidators have only been able to point to one instance of Project 1 potentially using a vehicle belonging to RM Line Marking, and they say that the only evidence in this regard is a booking sheet and that there is no evidence of actual use (for example, there is no invoice in respect of it).

95 Ms Ofli and AESK acknowledge that they cannot dispute that there has been some tense interactions and difficulties, but say that there has been co-operation since Mr Pogoriller was retained by them, and that in any event there is an insufficient basis to displace valid securities and the security holders' rights pursuant to them. Ms Ofli deposes in her third affidavit to the steps she and AESK have taken recently to co-operate with the Liquidators.

96 In reply, counsel for the Liquidators, Ms Bell, took me to ss 205 and 206 of the PPSA, noting that the Part of the PPSA in which those provisions appear concerns judicial proceedings regarding matters arising under the PPSA. In particular, Ms Bell referred to s 206(5), which provides that nothing in this Part affects any other jurisdiction of any court.

97 In respect of the alleged death threat by Mr Khabbaz, the Liquidators submit that it was only in oral submissions at the hearing that any objection was made to Mr Cremin's evidence, noting that the evidence about this issue was contained in Mr Cremin's first affidavit. It was submitted that the Court can, and should, make a Jones v Dunkeld inference given that Mr Khabbaz himself, despite being a party to the proceeding, has not given any evidence.

98 In response to the submission that the orders sought by the Liquidator are, in the circumstances, not related to the external administration of RM Line Marking, the Liquidators submit that the computation of debts and the realisation of the company's assets are clearly part of the liquidation. This is said to be apparent both as a matter of logic and the company's right of redemption pursuant to s 554 of the Act.

99 As noted above, at the end of the hearing and having considered all of the evidence, the plaintiffs' written outline, those aspects of Mr Pogoriller's written and oral submissions regarding the adjournment application which were relevant to the substantive application, and the oral submissions made by Ms Bell and Mr Pogoriller, I stated that I would grant the relief sought by the Liquidators in respect of the Disputed Matters.

101 First, I am satisfied that the Court has power to make the orders sought. In this regard:

(a) I accept that the ambit of s 90-15 of the IPS is wide and that the orders I am being asked to make fall within its scope;

(b) I do not accept the submission that these orders are not related to the liquidation of RM Line Marking. The orderly realisation of assets could not be more connected to or related to the external administration of a company; and

(c) I do not consider that the provisions of the PPSA, in particular the provisions relied upon by Ms Ofli and AESK in their submissions, mean that the Court does not have power to make the orders sought or that it should not do so.

102 Second, while I accept that making the orders does interfere with AESK's and Mr Khabbaz's rights as secured creditors of RM Line Marking, I am satisfied that this course is justified, for the reasons which follow.

103 Third, I am not satisfied that the defendants have taken possession of the assets of RM Line Marking solely for the purposes of AESK and Mr Khabbaz realising their security. In this regard:

(a) There is a lack of evidence to support the submission that Ms Ofli and AESK have been taking enforcement steps beyond AESK taking possession;

(b) There is no evidence at all as to what assets Mr Khabbaz has taken possession of and what he has done. The evidence that is available demonstrates that he is said to be living at the Keilor Premises (I note these are commercial premises) and has, on at least one occasion (being 24 October 2023), been seen to control access to those premises. At least some of RM Line Marking's vehicles appear to be stored at the Keilor Premises;

(c) None of the statutory requirements imposed on controllers have been complied with by AESK and/or Mr Khabbaz; and

(d) I do not accept the attempt to minimise the effect of the evidence in respect of Project 1. Ms Ofli controls Project 1 and could have given evidence as to the use of RM Line Marking's vehicle referred to by the Liquidators, but has not. She is the one in a position to rebut that evidence, but has not done so. Permitting another entity to use the collateral in an unrelated business venture is hardly consistent with enforcement of one's security, and I accept the Liquidators' submission that the evidence regarding Project 1 is deeply concerning and Ms Ofli has not given evidence in response to these concerns.

104 Fourth, while Ms Ofli and AESK have belatedly co-operated with the Liquidators in respect of the vehicles belonging to RMS and RM Traffic, their conduct up until that point hardly fills the Court with confidence that they will properly fulfil their duties as controller of RM Line Marking's property or the guiding mind of that controller. It goes without saying that I have no confidence at all in Mr Khabbaz fulfilling his obligations.

105 Fifth, I accept that RM Line Marking is likely to have no meaningful recourse against the defendants if they do not fulfil their obligations to RM Line Marking, for the reasons given by the Liquidators.

106 Sixth, I accept the Liquidators' submission that the alarming increase in the amount claimed under the GSA by AESK during the proceeding is cause for concern, suggesting that matters are best managed by the Liquidators. Relatedly, I accept the Liquidators' submission that Mr Khabbaz's GSA interest is highly unusual, which also goes to why he should not be left to deal with his security.

107 Seventh, I accept the Liquidators' submission that the matters referred to in paragraph 56 above must be taken into account.

108 Eighth, I am satisfied that the interests of AESK and Mr Khabbaz as secured creditors of RM Line Marking are sufficiently protected, given the form of orders sought, in particular the preservation of the Retained Proceeds. Mr Pogoriller submitted that the procedure envisaged in the Liquidators' proposed orders for AESK and Mr Khabbaz to have to make an application to the Court for a declaration as to the amounts owed to them is a reversal of the onus and procedure contemplated in the GSAs, which provide for a certificate of indebtedness issued by them being conclusive evidence (absent manifest error) of the amount owed. I accept that is the case, but consider it to be warranted in this instance. In any event, it is open to them to attempt to reach agreement with the Liquidators as to the relevant amounts.

109 Ninth, while I accept Mr Pogoriller's submission that the Liquidators' proposed regime of dealing with the Proceeds does not sufficiently provide for the interest of other secured creditors, I consider that adjustments to the proposed orders can be made to deal with that concern. During the course of argument, I raised with Ms Bell my concern, which was echoed by Mr Pogoriller, that the proposed regime had the effect of giving AESK and Mr Khabbaz priority to the Retained Proceeds in circumstances where there were prior registered security interests against the assets (or specific assets) of RM Line Marking. Ms Bell accepted this, and when pronouncing orders I indicated that provision to protect those security interests would need to be made. In this regard, the final form of orders discussed by Ms Bell and Mr Pogoriller after the hearing and provided to my Chambers have addressed this concern. The implied suggestion that there was some impediment to making the orders because it would constitute final relief is not accepted: this was the trial of the proceeding and so of course the Court could grant final relief if it was minded to do so.

110 Tenth, I accept the submission that as professional insolvency practitioners and officers of the Court, the Court can have confidence in the Liquidators responsibly realising the assets and applying the proceeds in accordance with their statutory obligations, and that the Court cannot have that confidence in the defendants. While Ms Ofli and AESK have now co-operated and taken a more appropriate position, there are lingering concerns as to their understanding of their obligations. Insofar as Mr Khabbaz is concerned, in the face of the evidence presented, I have no reason to believe that he will abide his obligations. I can and do draw the Jones v Dunkeld inference in respect of his conduct in the subject matter of these proceedings, and I see no reason to discount Mr Cremin's evidence as to the death threat made by Mr Khabbaz.

111 In all, I consider that the best interests of the creditors of RM Line Marking are served by the Liquidators having control of the orderly realisation of the company's assets and that this be done under the supervision of the Court.

112 For these reasons, I granted the relief sought by the Liquidators, with the adjustment referred to in paragraph 109 above.

SHANE JUSTIN CREMIN and BRETT LEIGH MORGAN IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF RM ROAD SERVICES PTY LTD (IN LIQUIDATION) (ACN 609 113 037), ROADMASTER TRAFFIC MANAGEMENT PTY LTD (IN LIQUIDATION) (ACN 601 193 391) AS TRUSTEE FOR THE ROADMASTER TRAFFIC MANAGEMENT TRUST (ABN 23 708 998 744) and ROADMASTER LINE MARKING PTY LTD (IN LIQUIDATION) (ACN 163 486 431) (and others according to the attached Schedule)

RM ROAD SERVICES PTY LTD (IN LIQUIDATION) (ACN 609 113 037)

ROADMASTER TRAFFIC MANAGEMENT PTY LTD (IN LIQUIDATION) (ACN 601 193 391) AS TRUSTEE FOR THE ROADMASTER TRAFFIC MANAGEMENT TRUST (ABN 23 708 998 744)

[1] These adjustments were dealt with at the hearing, however it is convenient for me to address these later in these reasons.

[5] See e.g., Ofli 2, Exhibit SO-01 at 29.

[6] Cremin 3, [28]. I note that clarification since the 3rd Cremin Affidavit means that the number of vehicles is now likely to be 10, not 12, which may also affect the values given in the remainder of this paragraph and the subsequent paragraph.

[7] Cremin 3, [12], [14] and [28].

[11] See paragraph 41 above.

[13] [1959] HCA 8; (1959) 101 CLR 298.

[14] Cremin 3, [32] and Exhibit SJC-3 at 167-242.

[17] That is, their costs incurred in accordance with Re Universal Distributing Co Ltd (In Liquidation) [1933] HCA 2; (1933) 48 CLR 171.

[18] [2020] VSC 485, [31]. See also Re Joiner (in their capacity as joint and several liquidators of CuDeco Ltd) (recs and mgrs apptd) (in liq) [2020] FCA 1661 at [93]-[97] per Banks-Smith J; and Re Jahani (as joint and several liquidators of Ralan Property Services Qld Pty Ltd (in liq) [2022] FCA 107; (2022) 159 ACSR 222 at [158] per Farrell J.

[19] [2018] FCA 541, [33], and see Shangri-La Construction Pty Ltd v GVE Hampton Pty Ltd (in liq) [2021] VSC 161; (2021) 152 ACSR 19 at [82]; Re Pirina Fund Options (Australia) Pty Ltd (in liq) [2020] FCA 1256 at [41]; Re Aus Streaming (in liq) [2020] VSC 313 at [41].

[20] [2023] WASCA 130, [306] ('ASIC v Jones').

[21] [2023] NSWCA 120, [33].

[22] [1993] AC 295 ('Downsview').

[23] (2016) 114 ACSR 539 ('Nom De Plume').

[25] [1859] EngR 908; (1859) 4 De G & J 619.

[30] Ofli 2, [29] and Exhibit SO-01 at 281.