By Originating Process filed today by leave, Messrs Sutherland, Arnautovic and Civil seek orders under ss 473, 502 and 532 and Part 5.7 of the Corporations Act 2001 (Cth) and s 51 of the Associations Incorporation Act 1984 (NSW), together with a number of ancillary provisions seeking, in effect, an order for the replacement of Mr Sutherland as official liquidator of two entities and voluntary liquidator of several other entities. It is contemplated those orders would take effect upon, in the case of the official liquidations, the filing with the Registrar of the Court and the lodgement with the Australian Securities and Investments Commission of Mr Sutherland's memorandum of resignation and, in the case of the voluntary liquidations, upon filing the appropriate notice with the Australian Securities and Investments Commission.
It is convenient first to deal with the application so far as it involves St Gregory's Armenian School Inc (in liquidation) ("School"). There is some complexity in identifying the applicable legislation which confers jurisdiction on the Court in order to replace a liquidator of an organisation incorporated under the Associations Incorporations Act. Happily, I have been assisted in that respect by detailed submissions of Ms Taylor, who appears for the plaintiffs in the application, and also by two earlier judgments where Barrett J, whose views are always worthy of the highest respect in this field, has undertaken a careful analysis of the complexities of the legislative provisions, namely QBE Workers Compensation (NSW) Ltd v Wandiyali ATSI Inc (in liq) [2004] NSWSC 1022; (2004) 51 ACSR 330 and Bankstown Community Child Care Incorporated [2008] NSWSC 173.
I will first refer to the evidence in support of the application, so far as it involves the replacement Mr Sutherland as liquidator of the School, before returning to the applicable statutory provisions. The application, in respect of the School, is supported by affidavits of Mr Sutherland sworn 23 February 2016, who is presently the liquidator of the School, and Mr Arnautovic sworn 23 February 2016, who has consented to appointment as liquidator of the School in place of Mr Sutherland.
Mr Sutherland notes that he is the liquidator of the School, and of several entities to which I will turn below, having been appointed as liquidator of the School on 21 June 2010. I proceed on the basis that the liquidation of the School involves significant legal and practical complexities, and many of those complexities have been addressed in judgments of this Court from time to time. Mr Sutherland notes that he has decided to transition to retirement, although he will continue in the employment of his present firm for a period of two years to assist in transitioning his appointments as official liquidator and as voluntary liquidator to other persons within the firm, who may be appointed as replacement liquidators, or who may assist with the liquidations. Mr Sutherland indicates that, if the Court is minded to order that Mr Arnautovic be appointed as his replacement as liquidator of the School, as is proposed, he will do all things necessary to comply with and give effect to the order in the most efficient way, including giving notice of his resignation and assisting Mr Arnautovic where it is appropriate to do so.
Mr Arnautovic, in his affidavit dated 23 February 2016, confirms that he has signed a consent to act as liquidator of the School and refers to the progress of the liquidation, identifying issues as to proofs of debt that have been lodged by two persons claiming to be creditors of the School, and to costs orders which have been made in favour of the School in recent proceedings, and the need for an assessment of costs in respect of those orders. Mr Arnautovic also indicates that, since the liquidation was commenced, he has regularly discussed matters concerning the liquidation with Mr Sutherland, a proposition which is perhaps not surprising in a liquidation which would have generated particular complexities. Mr Arnautovic also refers to the fact that Mr Christopher Brereton, a former employee of the firm, has been retained to consult on the liquidation since he left the firm's employment, and he will continue to perform that role following Mr Sutherland's resignation. Mr Arnautovic notes, sensibly enough, that Mr Brereton's continuing involvement with the liquidation will assist in proceeding with finalisation of the liquidation. He also points out that both the hard copy and electronic files for the liquidation are maintained with the firm's Sydney office.
Mr Arnautovic indicates that he believes the interests of the School's creditors would best be served by his appointment as liquidator, to the extent that that will avoid or minimise duplication of work, since the same staff will manage the administration of the files under his supervision, and he would charge for his services at the same rates as had previously been charged by Mr Sutherland in respect of the liquidation. Mr Arnautovic also confirms his intent to give effect to an order made by the Court in the most effective way, including liaising with Mr Sutherland where appropriate to do so.
The evidence led by Mr Sutherland and Mr Arnautovic is in a form that addresses issues that commonly arise in the case of a resignation of a liquidator. In this case, as I noted above, some further complexities arise by reason of the fact that the School is an incorporated association, rather than a company incorporated under the Corporations Act. That raises the question as to how the Court has jurisdiction, which it would ordinarily have in respect of a company under s 473(7) of the Corporations Act, to fill a vacancy in the office of a liquidator which will arise on the liquidator's resignation.
Ms Taylor points to the possibility that that jurisdiction might arise, simply under the terms of s 473(7) of the Corporations Act because, in this case, the Court has appointed a liquidator, and the section in terms provides that the Court must fill a vacancy in the office of a liquidator it has appointed. While that submission has an attractive simplicity, it seems to me that it may give too little weight to the fact that s 473(7) appears in an Act which deals with corporations, and is implicitly limited by its subject matter. However, the same result is reached by a somewhat more complex route to which Ms Taylor also refers.
Section 51(1) of the Associations Incorporation Act 1984 (NSW), which was in effect at the time Mr Sutherland was appointed as liquidator of the School, provided for the circumstances in which the Court could appoint a liquidator to an association incorporated under that Act. Section 51(3) in turn provided that the winding up of an incorporated association, other than by voluntary winding up, by the Court was declared to be an applied Corporation legislations matter for the purposes of Part 3 of the Corporations (Ancillary Provisions) Act 2001 in relation to the Part 5.7 (Winding up bodies other than companies) of the Corporations Act, subject to specified modifications. Section 14 of the Corporations (Ancillary Provisions) Act 2001 (NSW), which I need not set out in detail, in turn sets out the circumstances in which a law of a state could be declared to be an applied Corporations legislation matter. The interaction of these provisions was recognised by Barrett J in QBE Workers Compensation (NSW) Ltd v Wandiyali ATSI Inc (in liq) above, where his Honour noted (at [11]) that a combination of the Associations Incorporation Act and the Corporations (Ancillary Provisions) Act caused Part 5.7 of the Corporations Act (Cth) to apply to the winding up of an incorporated association, other than a voluntary winding up, by the Court in New South Wales, as if Part 5.7 of the Corporations Act were a law of New South Wales. His Honour expressed the same view, adopting the same reasoning, in Bankstown Community Child Care Inc [2008] NSWSC 173 at [3].
The result is, therefore, that Part 5.7 of the Corporations Act is applied, as a law of the State, in relation to a winding up of an entity incorporated under the Associations Incorporation Act. In the present case, one further complexity has arisen since these issues were considered by Barrett J, namely that the Associations Incorporation Act 1984 (NSW) ("1984 Act") has now been replaced by the Associations Incorporation Act 2009 (NSW) ("2009 Act"). However, as Ms Taylor points out, the effect of the transitional provisions in the Associations Incorporation Act 2009 (NSW) is that, where anything began before the commencement of the 2009 Act under a provision of the 1984 Act, and there is a corresponding provision in the 2009 Act, it may be continued and completed under the 1984 Act as if the 2009 Act had not been enacted. The liquidation of the School began before the commencement of the 2009 Act and there is a corresponding provision dealing with liquidation in the 2009 Act, namely s 63 of the 2009 Act. As Ms Taylor points out, the winding up may therefore continue and be completed under the 1984 Act, and by Part 5.7 of the Corporations Act, to the extent that it is applied as a law of the State of New South Wales in the manner in which I have noted.
By this complex route, Part 5.7 of the Corporations Act is left to operate, as a law of the State, conferring power on the Court to exercise any powers or do any act in the case of a Part 5.7 body, which will relevantly include an association incorporated under the 1984 Act, that might have been exercised in the winding up of a company. By s 583 of the Corporations Act, Chapter 5 of the Corporations Act also applies to a Part 5.7 body with such adaptions as are necessary. The Court therefore has power to make an order replacing the liquidator of the School, as a body incorporated under the Associations Incorporation Act 1984, because s 473(7) of the Corporations Act would allow the Court to make that order in respect of the winding up of a company.
Ms Taylor points out that, if that analysis were incorrect, the Court may well also have inherent jurisdiction to appoint a new liquidator, or could rely upon its general jurisdiction in s 23 of the Supreme Court Act 1970 (NSW) so that the office of the liquidator which it appointed is not left vacant. I accept that proposition. However, it seems to me that the analysis set out above is in fact correct, for the reasons noted by Barrett J in the decisions to which I have referred, and by reference to the transitional provisions to which Ms Taylor has referred, and it is not necessary to rely upon the Court's inherent jurisdiction in that respect.
While the process by which the Court had jurisdiction to make the order sought in respect of the School involves some complexity, the question whether the Court should make the order seems to me to be relatively straightforward. Ms Taylor points to several factors which support the making of the relevant order, namely that an order of this kind will allow the continuance of access to Mr Sutherland's expertise, since he will be continued to be employed by the relevant firm, where he has significant background knowledge in the liquidation of the School; Mr Arnautovic already has at least some knowledge of the background of the liquidation; a consultant who is already acting in the liquidation will continue to act in it, where it will remain within the same firm; that firm already holds the relevant files; and the transitional costs which would be involved in the appointment of a new firm would be avoided. These are all matters which are well recognised in this territory as supporting the appointment of a liquidator of the same firm as that from which a liquidator resigns, in the ordinary course. There have been now several cases that have referred to the desirability of that course, largely for the purposes of costs efficiency: for example, Re Free [2010] NSWSC 1079 at [6]; Re Porter and Mansfield [2012] NSWSC 220 at [5]; Re Kukluovski [2015] NSWSC 2040 at [7]. For these reasons, I am satisfied that I should make the orders sought in respect of the appointment of Mr Arnautovic as official liquidator of the School upon the resignation of Mr Sutherland.
I note that Ms Taylor has also, quite properly, drawn attention to the possible relevance of s 532 of the Corporations Act, which limits the circumstances in which a person who is a creditor of a company for an amount in excess of $5,000 may be appointed as liquidator. That is an issue which often arises in applications of this kind, and I am satisfied that, as has also often occurred in the authorities, leave should be granted under s 532(2) of the Corporations Act for the replacement of Mr Sutherland with Mr Arnautovic, notwithstanding that his firm may have a claim for fees in that respect. It should be noted that, as a matter of substance, no additional issue as to independence is raised by the resignation of a liquidator, where after it occurs, the liquidator's firm will have the same claim for fees as it had prior to that resignation.
The position in respect of the replacement of Mr Sutherland by Mr Civil as official liquidator of British Motor Heritage Pty Ltd (in liq) is more straightforward, because that entity is a corporation. I have referred above to the evidence led by Mr Sutherland explaining the reasons for his resignation. Mr Civil in turn points out that he has had involvement in the liquidation of British Motor Heritage Pty Limited (in liq) and that managers from the firm have also been involved in, and have had the day to day management of the liquidation. Mr Civil in turn refers to the cost savings which are likely to be involved by the transfer of the liquidation, without the need to change firms, and minimising the amounts of duplication of work that would be involved. I have referred to the authorities above where those matters have been held to support the replacement of the liquidator, by another official liquidator within the same firm, and I am satisfied that the orders sought should be made in respect of the replacement of Mr Sutherland by Mr Civil as liquidator of British Motor Heritage Pty Limited (in liq) for the same reason. Leave should also be granted under s 532(2) of the Corporations Act for the replacement of Mr Sutherland with Mr Civil on the same basis.
Finally, an order is sought under s 502 of the Corporations Act for the replacement of Mr Sutherland with Mr Civil as the liquidator of several companies that are in creditors' or members' voluntary liquidation. Section 502 of the Corporations Act provides that if, from any cause, there is no liquidator acting in a voluntary liquidation, the Court may appoint a liquidator.
I have referred above to Mr Sutherland's affidavit in support of the application, which also extends to these companies. Mr Civil leads evidence of the administrative advantages and minimisation in wasted costs, which he anticipates from his appointment. He also points, with considerable force, to the fact that wasted costs are likely to be incurred, if it were necessary to convene creditors' meetings to replace Mr Sutherland, in respect of the companies in voluntary liquidation, particularly where several companies are involved, multiplying the number of meetings which would be involved.
I am satisfied that the Court should appoint Mr Civil as liquidator of those companies that are listed in the affidavits, which are in creditors' voluntary liquidation or in members' voluntary liquidation, both to minimise the transition costs which will be incurred on Mr Sutherland's retirement, to allow the continued use of staff within the same firm who are presently working on the liquidations, and to avoid the costs of meetings of creditors or members which would be required for that purpose, were the Court not to make such an order.
I note that no order has been sought for the payment of the costs of the application from the assets of the relevant companies, and accordingly I do not make such an order. I make orders in accordance with the short minutes of order initialled by me and placed on the file.
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Decision last updated: 16 June 2016