Re ACN 120 426 173 Pty Ltd (formerly known as UBU Communications) & Ors [2022] VSC 640 (21 October 2022)

1 Before the Court is an urgent application initially made under ss 473, 473A, 480, and 532(2) of the Corporations Act 2001 (Cth) ('the Act') and ss 90-15(3)(b) and (c) of the Insolvency Practice Schedule (Corporations) ('the Practice Schedule') in Sch 2 of the Act for the retirement of Geoffrey Niels Handberg as sole liquidator of seven companies ('the Companies') and appointment of Brent Leigh Morgan as the replacement liquidator of the Companies. Four of the Companies were the subject of a creditors' voluntary winding up and three were wound up either by this Court or the Federal Court of Australia. Both Mr Handberg and Mr Morgan are registered liquidators at the insolvency firm Rodgers Reidy.

2 Ancillary orders are sought to the effect that prior resolutions and determinations concerning the remuneration of Mr Handberg have application to Mr Morgan and that pursuant to s 532(2) of the Act, Mr Morgan has leave to be appointed liquidator of the Companies notwithstanding that his firm may be a creditor in the external administrations of the Companies in respect of unpaid costs and disbursements.

3 The proceeding was commenced by way of originating process on 6 October 2022. The plaintiff sought an urgent hearing because of the pending expiry of his registration as liquidator and the proceeding was accordingly allocated for hearing today.

4 The originating process was accompanied by the supporting affidavit of Mr Handberg sworn 6 October 2022, together with exhibits. Following inquiries initiated by my Chambers regarding the nature of the relief sought and the extent of the material relied upon, yesterday evening, the plaintiff's solicitors emailed the Court an unfiled affidavit of Ms Alexzandra Elizabeth Claire Erskine, solicitor, sworn 20 October 2022, along with exhibits, by way of supplementary evidence in support of the application. That affidavit was formally filed today. In addition, immediately following the hearing this morning, the plaintiff filed an affidavit sworn by David John Holton, a director of Rodgers Reidy, which addresses the respective positions of creditors and the Australian Securities and Investments Commission ('ASIC') in relation to this application.

5 By Ms Erskine's affidavit, the plaintiff seeks to amend the originating process to rely on s 499(3) of the Act to ensure the replacement of liquidator in respect of those companies where there has been a creditors' voluntary winding up. I will grant the plaintiff leave to amend the originating process accordingly and dispense with any requirement for service of that amended document.

6 As a result of this proposed change to the scope of the application, on 20 October 2022, Connock J ordered that the originating process be referred to an Associate Judge for hearing and determination pursuant to r 77.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) and, if required, also pursuant to r 16.1(3) of the Supreme Court (Corporations) Rules 2013 (Vic) ('the Corporations Rules').

7 At the hearing this morning, Ms Erskine confirmed that the plaintiff no longer pressed for orders under s 480 of the Act for the release of Mr Handberg from any liability in respect of any act done or default made by him in relation to his conduct as liquidator of the Companies. I note, in any event, that the affidavit material relied upon does not fully engage with the detailed requirements set out in r 7.5 of the Corporations Rules that pertain to such applications.

8 On 10 October 2022, Rodgers Reidy sent by prepaid post a circular to each of the creditors appearing in the books of the Companies, giving notice of this application. The circular advised creditors that this proceeding had been commenced, noted today's hearing date and time and directed creditors to a website address at which they could access the originating process and supporting affidavit. Mr Holton has made inquiries of Mr Handberg and staff at Rodgers Reidy who are working on the relevant liquidations and is informed that no creditors of the Companies have responded or objected to, or made any inquiries about, the circular.

9 Also on 10 October 2022, Ms Erskine caused an email to be sent to ASIC, which attached a covering letter, the originating process, and the affidavit of Mr Handberg, in accordance with r 2.8 of the Corporations Rules. ASIC confirmed receipt of the email and its attachments. On 17 October 2022, Ms Erskine caused a further email to be sent to ASIC, enquiring whether it intended to appear at the application today and whether it consents to or opposes it. This morning, ASIC provided a response stating that it considers the matters raised in the application are 'properly left for the determination of the Court'. Consequently, ASIC confirmed it does not propose to intervene in the application or seek leave to appear at the hearing.

10 In short compass, Mr Handberg was appointed as sole liquidator of the Companies at the following times and in the following circumstances.

ACN 120 426 173 Pty Ltd (formerly known as UBU Communications) (ACN 120 426 173) ('UBU')

Creditors' voluntary winding up under s 491 of the Act

ACN 615 353 234 Pty Ltd (formerly known as Construct Traffic (Qld) (ACN 615 353 234) ('Construct Traffic')

Creditors' voluntary winding up under s 491 of the Act

Nine IMC Pty Ltd (ACN 167 535 122) ('Nine IMC')

Creditors' voluntary winding up under s 491 of the Act

Post Press Solutions Pty Ltd (ACN 600 670 308) ('Post Press')

Creditors' voluntary winding up under s 491 of the Act

ACN 136 616 889 Pty Ltd (formerly known as Immersive Solutions) (ACN 136 616 889)

By order of the Supreme Court of Victoria pursuant to s 459P of the Act

Experior Pty Ltd (ACN 123 625 267) ('Experior')

By order of the Federal Court of Australia pursuant to s 459P of the Act

Khaya Plantation Services Pty Ltd (ACN 100 784 192) ('Khaya')

By order of the Federal Court of Australia pursuant to s 459P of the Act

11 I will collectively refer to UBU, Construct Traffic, Nine IMC and Post Press as 'the CVL Companies' and to Immersive, Experior and Khaya as the 'Court Liquidation Companies'.

12 Mr Handberg became a registered liquidator in 1998. He has practiced principally in the field of corporate insolvency for over 30 years. Since June 2020, he has been winding down his practice and has not provided any new consents to act as liquidator. Mr Handberg wishes to retire from Rodgers Reidy and leave the profession on or around 9 November 2022. His registration with ASIC is set to expire on that date and he does not intend to renew it. By reason of Mr Handberg's proposed retirement and resignation as liquidator, there will be a vacancy in the office of liquidator for each of the Companies that must be filled.

13 Mr Morgan has been a chartered accountant since 19 May 2000, a registered liquidator since 17 November 2004 and an official liquidator since 18 October 2005. He has been appointed as an external administrator or receiver and manager on more than 591 occasions and is currently involved in 98 appointments. He is a director of Rodgers Reidy and has provided his consent to be appointed as liquidator of each of the Companies.

14 Mr Handberg deposes to his belief that it is in the interests of creditors of the Companies that he be replaced with Mr Morgan. He further states that the replacement will ensure continuity in the conduct of the external administrations of the Companies and avoid the incurring of duplicated costs that may result as a consequence of a practitioner from an alternate firm being appointed. If Mr Morgan is appointed as a replacement liquidator for Mr Handberg, the liquidation of each of the Companies will continue to be administered, on a day-to-day basis, by the same staff employed by Rodgers Reidy, including all relevant senior managers, associate directors, and their respective teams, under the ultimate supervision of Mr Morgan. There is also evidence that Mr Handberg has provided the necessary information to enable the handover of the liquidation of each of the Companies to Mr Morgan.

15 There have been remuneration approvals or determinations made to date in respect of Mr Handberg's work as liquidator in the external administrations of Experior and Khaya. Mr Handberg is informed by Mr Morgan that Mr Morgan 'is agreeable to continue the conduct of the liquidations as though the fee resolutions [and remuneration determinations] already obtained would continue to apply to his entitlement to claim and draw remuneration from the [Companies] should he be so appointed'. I take this to mean that Mr Morgan intends to continue to apply the same rates of remuneration already approved in the liquidations of the Companies if he is appointed. Ms Erskine, solicitor for the plaintiff, submitted the evidence should be read in this way and suggested that, as a consequence, the creditors of the relevant Companies would not be disadvantaged by the replacement of liquidator. I accept that submission.

16 The evidence discloses that there have been statutory reports issued by Mr Handberg as liquidator of each of the Companies at various times since November 2017, ostensibly pursuant to the reporting requirements found in rr 70-30 to 70-40 of the Insolvency Practice Rules (Corporations) 2016 (Cth). The reports cover standard information provided to creditors, including the fact of appointment of a liquidator; the rights of creditors to request information in the liquidation; the rates of remuneration the liquidator intended to charge during the liquidation; the Companies' estimated assets and liabilities; details of the inquiries undertaken in the liquidation; and the likelihood of creditors receiving a dividend before the affairs of the Companies are fully wound up. It may be that where there is a change in liquidator, a new appointee is required to issue a report to creditors containing substantially the same information as that contained in any initial reports.[1] The Court can safely infer there will necessarily be costs associated with that process.

17 Mr Handberg deposes that he is unaware of any circumstances that would result in prejudice being suffered by any of the Companies or creditors as a result of his resignation as liquidator or the appointment of Mr Morgan in his place.

18 Prior to the introduction of the Insolvency Law Reform Act 2016 (Cth) ('the ILR Act'), s 473 of the Act stipulated that a liquidator appointed by the Court may resign, or on cause shown, be removed by the Court. By operation of the ILR Act, the resignation of a liquidator is now dealt with by ss 473 and 473A (in the case of Court appointed liquidators) and s 499(3) (in the case of liquidators appointed by a creditors' voluntary winding up) and the removal of a liquidator is provided for in ss 90-15(3)(b) and (c) of the Practice Schedule, which finds application through s 600K of the Act.

19 Section 473 of the Act in its current form simply states that '[a] liquidator appointed by the Court may resign'.

(1) A vacancy in the office of a liquidator appointed by the Court may be filled by:

(a) the Court;

(4) If more than one liquidator is appointed under this section, the Court or ASIC (as the case may be) must declare whether anything that is required or authorised by this Act to be done by the liquidator is to be done by all or anyone or more of the persons appointed.

(3) If a liquidator, other than a liquidator appointed by, or by the direction of, the Court resigns:

(a) the Court ...

may fill the vacancy by the appointment of a liquidator.

22 The commencement machinery for changes enacted by the ILR Act is somewhat convoluted. Section 1634 of Sch 2 to the ILR Act provided for regulations to be made, prescribing matters of a transitional nature relating to the amendments and repeals made by Sch 2. By virtue of the transition machinery found in reg 10.25.02 of the Corporations Regulations 2001 (Cth), the 1 March 2017 commencement date of the IRL Act was delayed until 1 September 2017, with the effect that the repeal of the old versions of ss 473 and 499(3) and the introduction of the new ss 473, 473A and s 499(3) was deferred until that time. Regulation 10.25.02 provides that the current ss 473A and 499(3) apply in relation to external administrations on or after 1 September 2017.[2] However, s 1584 of the Act provides that:

Subsection 473A(1) (as inserted by Schedule 2 to the [ILR Act]) applies whether or not the vacancy in the office of liquidator occurred before, on or after the commencement day.

23 It follows that despite Mr Handberg being appointed to Khaya prior to the introduction and commencement of s 473A(1), because of the operation of the saving provision in s 1584, the source of statutory power to appoint Mr Morgan to replace Mr Handberg as liquidator of that company is found in s 473A(1) of the Act, rather than the predecessor version of s 473.[3] It is also clear that ss 473A(1) and 499(3) variously apply in relation to the balance of the Companies.

24 Although Mr Handberg was appointed as liquidator of Khaya and Experior by the Federal Court of Australia and not this Court, the case law confirms that this Court nonetheless has the power to make the necessary orders for his replacement.[4] That is made clear by the use of the expression 'the Court' in s 473A(1), which finds its definition in s 58AA of the Act and includes the Supreme Court of a State or Territory, along with the Federal Court of Australia.

(2) Subject to this section, a person must not, except with the leave of the Court, seek to be appointed, or act, as liquidator of a company:

...

(b) if the person is, otherwise than in his or her capacity as liquidator, a creditor of the company or of a related body corporate in an amount exceeding $5,000; ...

26 Section 90-15(1) of the Practice Schedule provides that the Court may make such orders as it thinks fit in relation to the external administration of a company. The external administration of a company is defined in s 5-15 to include a company to which a liquidator has been appointed. According to s 90-15(2), the Court may exercise the power under s 90-15(1) on its own initiative, during proceedings before the Court, or on application under s 90-20.

27 Section 90-15(3) provides that, without limiting subsection (1), the orders a Court may make include any one or more of the following:

(a) an order determining any question arising in 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;

28 Section 90-15 is broad in its scope and contemplates not only the exercise of judicial discretion but also the determination of substantive rights.[5]

29 Section 90-20 specifies who may apply for an order under s 90-15. Those persons include:

(a) a person with a financial interest in the external administration of the company;

...

(d) an officer of the company; ...

30 An 'officer' is defined in s 9 of the Act to include a liquidator of a company.

31 In Re Equiticorp Australia Ltd (in liq),[6] Black J observed that the orders permitting the appointment of another liquidator under s 90-15 of the Practice Schedule correspond to a longstanding power of the Court to make orders for the appointment of a new liquidator on the resignation of an existing liquidator.

32 In Re Columbia Private Holdings Pty Ltd,[7] Brereton J explained that s 90-15 permits the Court to do things that were previously authorised under predecessor provisions of the legislation such as ss 473 and 499.

33 In applying the provisions concerning the resignation and replacement of liquidators, the authorities have recognised the benefit to creditors in maintaining a liquidation within the same firm following the resignation of the incumbent liquidator.[8]

34 In my view, it is desirable for reasons of cost efficiency and continuity of the external administrations of the Companies that Mr Morgan, a liquidator from the same firm as Mr Handberg, be appointed as the replacement liquidator of the Companies. Mr Morgan has already commenced familiarising himself with the affairs of the Companies and will be in a position to assume supervision of the same staff who have worked on the respective liquidations of the Companies.

35 Moreover, I consider that the interests of creditors of the Companies would be served by the Court appointing Mr Morgan, a qualified and experienced insolvency practitioner, as liquidator of the Companies.

36 I accept that there is no readily identifiable prejudice that may be suffered by any of the Companies or their creditors as a result of Mr Handberg's resignation as liquidator or the appointment of Mr Morgan in his stead.

37 Whilst there is no direct evidence of amounts owing by each of the Companies to Rodgers Reidy in respect of costs and disbursements, it may be inferred that amounts are likely to be owing and that the firm, of which Mr Morgan is a director, is a creditor of each of the Companies. Accordingly, it is likely that s 532(2) of the Act is engaged. To the extent necessary, leave will be granted in accordance with s 532(2) of the Act for the replacement of Mr Handberg with Mr Morgan as liquidator of each of the Companies.

38 To minimise the costs associated with the change of liquidator of the Companies, it is appropriate to grant Mr Morgan a dispensation from any requirement to reissue the information that has already been provided by Mr Handberg to creditors. Such an order will be made under s 90-15(1) of the Practice Schedule.

39 I note that it is not proposed that the Companies bear the costs of this application. Instead, these costs will be met by the plaintiff's firm so as to not prejudice the creditors. That approach is appropriate in the circumstances.

40 I will make orders in the terms set out in the Annexure to these reasons.

1 The plaintiff has leave to amend the originating process to seek additional relief under s 499(3) of the Corporations Act 2001 (Cth) ('the Act') and any requirement for service of the amended document is dispensed with.

2 Upon the resignation of Geoffrey Niels Handberg as liquidator of ACN 136 616 889 Pty Ltd (formerly known as Immersive Solutions) (ACN 136 616 889) (by order of the Supreme Court of Victoria); Experior Pty Ltd (ACN 123 625 267) (by order of the Federal Court), and Khaya Plantation Services Pty Ltd (ACN 100 784 192) (by order of the Federal Court) ('the Court Liquidation Companies'), Brent Leigh Morgan is appointed liquidator of the Court Liquidation Companies pursuant to s 473A(1) of the Act.

3 Upon the resignation of Mr Handberg as liquidator of ACN 120 426 173 Pty Ltd (formerly known as UBU Communications) (ACN 120 426 173), ACN 615 353 234 Pty Ltd (formerly known as Construct Traffic (Qld) (ACN 615 353 234), Nine IMC Pty Ltd (ACN 167 535 122), and Post Press Solutions Pty Ltd (ACN 600 670 308) ('the CVL Companies'), Mr Morgan is appointed liquidator of the CVL Companies pursuant to s 499(3) of the Act and ss 90-15(3)(b) and (c) of Sch 2 of the Act.

4 Pursuant to s 90-15(3)(f) of the Act, in respect of each of the CVL Companies and/or the Court Liquidation Companies (collectively, 'the Companies'), the remuneration of Mr Morgan be fixed and determined in accordance with all previous remuneration approvals and determinations made as at the date of these orders (including as to the same rates of remuneration) and that any reference to Mr Handberg in the previous remuneration approvals and determinations be deemed to be a reference to Mr Morgan.

5 To the extent necessary, pursuant to s 532(2) of the Act, and in so far as the firm Rodgers Reidy may have claims for unpaid costs and disbursements exceeding $5,000 in any of the external administrations of the Companies, Mr Morgan has leave to be appointed liquidator of the Companies.

6 Mr Morgan is not required to perform tasks required by ss 70-30 to 70-40 of the Insolvency Practice Rules (Corporations) 2016 (Cth), which have already been performed by Mr Handberg in the liquidations of the Companies.

7 The plaintiff shall provide the Australian Securities and Investments Commission with a copy of these orders within 4 business days.

8 The plaintiff shall notify the creditors of each of the Companies by circular letter sent by pre-paid post to their last known addresses within 10 business days of the making of these orders.

GEOFFREY NIELS HANDBERG as liquidator of the FIRST TO SEVENTH CORPORATIONS

A.C.N. 120 426 173 PTY LTD (formerly known as UBU COMMUNICATIONS) (ACN 120 426 173)

A.C.N. 136 616 889 PTY LTD (formerly known as IMMERSIVE SOLUTIONS) (ACN 136 616 889)

A.C.N. 615 353 234 PTY LTD (formerly known as CONSTRUCT TRAFFIC (QLD) (ACN 615 353 234)

KHAYA PLANTATION SERVICES PTY LTD (ACN 100 784 192)

[1] The plaintiff proceeded on this basis in seeking orders for the replacement of a retiring liquidator in Re A.C.N. 167 984 045 Pty Ltd (in liq) [2021] VSC 652, [23] (Gardiner AsJ).

[2] Referring to items 144 and 164 of Pt 2 of Sch 2 to the Insolvency Law Reform Act 2016 (Cth) ('ILR Act').

[3] Re Golden Sands Hospitality Pty Ltd (in liq) [2017] NSWSC 410, [7] (Gleeson J, as her Honour then was); Re A.C.N. 167 984 045 Pty Ltd (in liq) [2021] VSC 652, [31] (Gardiner AsJ) ('Re A.C.N. 167 984 045').

[4] As regards s 473, as the legislative precursor to s 473A: Naudi; Re ACN 156 335 787 Pty Ltd (in liq) [2017] FCA 815, [18] (Besanko J) ('Naudi'); Re Ambridge Investments Pty Limited [2015] NSWSC 1671, [13] (Bergin CJ in Eq). As regards s 473A, see Keith; Re Aequitas Limited (in liq) [2019] FCA 1314, [21](1) (Gleeson J, as her Honour then was); Re A.C.N. 167 984 045, [9] (Gardiner AsJ); Re Equiticorp Australia Ltd (in liq) [2017] NSWSC 1456, [5] (Black J) ('Re Equiticorp').

[5] See Re Polat Enterprises Pty Ltd (in liq) [2020] VSC 485, [31] (Hetyey AsJ) and Re Barokes Pty Ltd (in liq) [2020] VSC 555, [31] (Hetyey AsJ), both citing Michael Murray and Jason Harris, Keay's Insolvency: Personal and Corporate Law and Practice (Lawbook, 10th ed, 2018) [10.345]. See also [10.335] of the 11th edition of the book: Michael Murray and Jason Harris, Keay's Insolvency: Personal and Corporate Law and Practice (Lawbook, 11th ed, 2022) and GDK Projects Pty Ltd v Umberto Pty Ltd (in liq) [2018] FCA 541, [33] (Farrell J).

[7] [2017] NSWSC 1859, [3]-[6].

[8] Re Richard James Porter and David Ian Mansfield [2012] NSWSC 220, [5] (Black J); Condon v Watson [2009] FCA 11; (2009) 174 FCR 314, 318 (Lindgren J); Re Free [2010] NSWSC 1079, [6] (Barrett J); Re Bridgewater Investments Pty Limited and other Companies referred to in Schedules A and G to the Amended Originating Process [2013] NSWSC 426, [7] (Black J); Re Kukulovski, Arnautovic & Crisp [2015] NSWSC 2040, [7] (Black J); Re Equiticorp, [6] (Black J); Re FGM Print Pty Limited [2018] NSWSC 1478, [9] (Black J); Re Arresso Consulting Pty Ltd [2019] NSWSC 997, [7] (Ward CJ in Eq); Re A.C.N. 167 984 045, [35] (Gardiner AsJ).