RE AUSTRALIAN STOCKBROKING AND ADVISORY SERVICES PTY LTD (IN LIQUIDATION); EX PARTE JONES as liquidator of AUSTRALIAN STOCKBROKING AND ADVISORY SERVICES PTY LTD (IN LIQUIDATION) [2024] WASC 193 (23 May 2024)

1. In support of his application, the plaintiff relies on:

(a) affidavits sworn by him on 12 February 2024, 6 March 2024, 14 May 2024 and 22 May 2024;

(b) affidavits of John Leo Graham sworn on 13 February 2024 and 7 March 2024;

(c) an affidavit of Nerida Jane Smith sworn on 11 March 2024;

(d) an outline of submissions filed on 8 March 2024; and

(e) further submissions by email to my associate on 13 and 14 May 2024.

1. The application was listed before me in the Master's List on 14 March 2024, when I heard brief submissions from counsel for the plaintiff. The application was adjourned to be determined on the papers. On 13 May 2024, the plaintiff provided further brief submissions, and filed a further minute of proposed orders. Further affidavits of the plaintiff were also filed, as outlined, on 14 and 22 May 2024 in support of the plaintiff's remuneration application.
2. The Australian Securities and Investments Commission (ASIC) was given notice of the application and the hearing on 12 March 2024 and served with the originating process and supporting affidavits, as required by r 2.8 of the Supreme Court (Corporations) (WA) Rules 2004.
3. ASIC has not informed the plaintiff or the court that it seeks to be heard on the application and did not attend the hearing on 12 March 2024.
4. For the reasons that follow, I am satisfied it is appropriate to make the orders sought to terminate the winding up of the Company upon payment to the plaintiff to satisfy amounts due to its creditors and the plaintiff's remuneration. I also approve the plaintiff's remuneration, which is determined, approved and fixed in the amount of $74,694.95 (inclusive of GST).

The application to terminate the winding up of the Company Relevant factual background

1. The following factual background and the context in which the application is made are derived from the affidavits filed in support of the application.
2. The plaintiff seeks orders terminating the winding up of the Company following an approach made to him by John Leo Graham in early 2023 about the possibility of terminating the winding up of the Company.[1] Mr Graham previously worked as a stockbroker with the Company. He wishes to resurrect and operate the stockbroking business formerly operated by the Company.
3. Mr Graham deposes to having made arrangements, together with some of the Company's original stockbrokers, to provide funding to discharge the debts owed to the Company's creditors and to pay the plaintiff's remuneration.[2]
4. Since the application to terminate the winding up was filed, ASIC has transferred all the Company's issued share capital, being 900,001 ordinary shares, to Mr Graham, on his application.[3]
5. Administrators were initially appointed to the Company on 15 April 2011, and it went into liquidation pursuant to orders made by the Supreme Court of New South Wales on 3 August 2011.[4]
6. The Company was subsequently deregistered on 3 September 2015.[5]
7. On 13 September 2018, orders were made by this court reinstating the Company and appointing the plaintiff and Mr Rushton as liquidators, pursuant to s 601AH(2) and s 601AH(3) of the Act.
8. The Company was reinstated because of ongoing litigation in two separate actions brought against the Company, and others, in this court: CIV 3124 of 2009, Edwin George Smith v Leveraged Equities Ltd & Ors and CIV 1793 of 2012, Howathara Investments Pty Ltd v Todd Michael King & Ors.[6]
9. The proceedings in CIV 1793 of 2012 went to trial in 2016. The claim against the Company in that action was dismissed in 2018. In 2020, an appeal against the decision dismissing the claim was dismissed and, on 30 March 2023, costs were awarded in the Company's favour.[7] Mr Graham deposes that if the application to terminate the winding up is successful, he will take steps to cause the Company to recover those costs.[8]
10. The plaintiff in action CIV 1793 of 2012, Howathara Investments Pty Ltd, was the superannuation fund of Edwin George Smith, who brought the claim in CIV 3124 of 2009. The plaintiff states in his report to creditors that none of the allegations made against the Company in that action were substantiated, and the action was resolved by a negotiated settlement between the parties.[9]
11. Mr Graham says that, prior to its liquidation, the Company operated successfully. He wishes to resurrect the stockbroking business formerly operated by the Company, to replicate the Company's collegiate atmosphere and previous business plan, continue its business, and restore its reputation.[10]
12. In June 2023, following Mr Graham's approach, the plaintiff caused a report to be made and sent to the creditors of the Company to determine the current creditor position and the viability of termination of the winding up.[11] As a result, the plaintiff received proofs of debt from two creditors which he determined represented valid claims against the Company.[12]
13. One of those creditors is the General Employee Entitlements and Redundancy Scheme (GEERS), which claims an amount of $81,682.56 advanced between 1 December 2011 and 16 May 2012 under s 560 of the Act to pay a proportion of outstanding employee entitlements. The other is the Australian Taxation Office (ATO), which claims $658.39 in respect of a Running Balance Account deficit debt in respect of business activity statements (BAS) amounts as at 13 September 2018.
14. In his report to creditors of 23 June 2023, the plaintiff reports on the liquidation of the Company, including from his review of records relating to the period prior to reinstatement of the Company's registration and his appointment as liquidator in 2018. In the report, the plaintiff states that the former liquidator of the Company submitted his statutory report to ASIC on 23 November 2011, which detailed his investigations of the Company's affairs. The plaintiff also reported that the former liquidator had received confirmation that ASIC would not be pursuing any matters raised.[13]
15. The plaintiff also deposes that, based on his own and previous investigations and reports, he has been unable to find any reason to consider investigating any past officer or conducting further investigations into the affairs of the Company.[14]
16. Alex Burt is presently the sole director of the Company.[15] Mr Burt, Mr Graham and Lawerence Angelo Buono have consented to act as the directors of the Company should an order terminating the winding up be made.[16] No orders relating to the future management or control of the Company are sought on the basis that Mr Burt, as the Company's sole director, will resume management and control of the Company, and will resolve to make the further appointments upon termination of the winding up.

1. Upon application under s 482 of the Act, the court may make an order terminating the winding up of a company on a day specified in the order, at any time during the winding up. Any such order is prospective, with the company being treated as having been in winding up until the date of the order.
2. Section 482(1A)(a) of the Act provides, relevantly, that an application to terminate a winding up may be made by the liquidator, a creditor or a contributory of the company.
3. The power of the court to make an order under s 482 of the Act is discretionary. The onus is on the applicant to make out a positive case for termination or a stay.[17]
4. Although the Act does not specify any criteria to indicate when an application to terminate a winding up will be granted, the law is well established.
5. In Hume v Carey,[18] Hill J stated:

1. While the court does not have to find special reasons for granting an application to terminate a winding up, there must be some valid reason for the discretion to be exercised in favour of the applicant, taking into account the interests of the creditors, the liquidator, the members of the company and weighing in the balance the public interest. 2. The factors that generally inform the exercise of the court's discretion to terminate a winding up include:

(a) the attitude and interests of creditors (including future creditors who might be prejudiced if the company was released from winding up);
>
> (b) the interests of the liquidator (particularly with respect to costs) and contributories;
>
> (c) the nature and extent of creditors and whether all debts have been discharged;
>
> (d) the company's current trading position and general solvency;
>
> (e) any explanation for any non-compliance by directors with their statutory duties and of the circumstances leading to the winding up order;
>
> (f) the nature of the company's business; and
>
> (g) the public interest including the public interest in upholding commercial morality.

6. I have applied those principles in determining the plaintiff's application.

1. I am satisfied the plaintiff has standing to bring the application to terminate the winding up as the sole liquidator of the Company.[19] He brings the application following an approach made by Mr Graham to revive the Company and to use it as a vehicle to re‑establish the Company's former stockbroking business, as outlined. All of the Company's issued share capital has been transferred by ASIC to Mr Graham, who has deposed to his interest in and desire to revive the Company's stockbroking business.
2. The Company has no active trading position. Prior to its winding up, the Company operated as a stockbroker and was the holder of an Australian Financial Services Licence. To resume business as a stockbroker, it will need to obtain an Australian Financial Services Licence, which is a process overseen by ASIC.
3. There is a clear public interest in the court ensuring that the termination of a winding up will not result in an insolvent company being allowed to trade. However, it is not a prerequisite for an order terminating the winding up that the Company is shown to be solvent.[20]
4. There is no evidence the Company has any assets, other than the costs order made in its favour, which Mr Graham deposes he will take steps to have the Company enforce if the winding up is terminated. It is not known how much is likely to be recovered or what the prospects of recovery are. The Company has two creditors, GEERS in the amount of $81,682.56 and the ATO in the amount of $658.39.[21]
5. Mr Graham has arranged for himself and others who previously worked at the Company to provide funding for the Company, including to repay the creditors and to pay the plaintiff's remuneration. Mr Graham has also paid the costs involved in transferring the Company's issued share capital to him and the costs of the application.[22]
6. Pursuant to the plaintiff's further minute of proposed orders filed on 13 May 2024, any order for the termination of the winding up of the Company will not take effect until the plaintiff, as liquidator, has received payment of $157,035.90. This amount comprises the total of the outstanding debts to the Company's creditors and the plaintiff's remuneration sought to be approved.
7. I have taken into account the evidence of the plaintiff, an experienced liquidator. He deposes that he is not aware of any reason that would suggest the application ought not be granted, noting that is ultimately a matter for determination by the court in the exercise of its discretion.[23]
8. I have turned my mind to considerations of the public interest and I am satisfied that making an order for the termination of the winding up of the Company would not be contrary to the commercial morality or public interest.
9. The plaintiff and Mr Graham have demonstrated that there is a valid reason for the exercise of the discretion. I have taken into account the interests of the creditors, the plaintiff (as liquidator), Mr Graham (as the sole member of the Company), and the public interest generally. I am satisfied it is appropriate to exercise my discretion to order that the winding up of the Company be terminated, subject to payment being made to the plaintiff, of the amount required to discharge the debts owed to the Company's creditors and the plaintiff's remuneration.
10. I turn now to the application to approve the plaintiff's remuneration.

The application for approval of the plaintiff's remuneration

1. The plaintiff seeks approval of his remuneration and costs incurred in respect of the work undertaken in relation to the winding up of the Company in the amount of $74,694.95 (inclusive of GST).
2. Mr Graham has agreed to pay $74,694.95 (inclusive of GST) to the plaintiff in respect of his remuneration as liquidator, within seven days of any order made terminating the winding up of the Company.[24]

1. Although Mr Graham has agreed to pay the plaintiff's remuneration, in approving the remuneration the subject of the application, the court must be satisfied it has been reasonably incurred and for work that was necessary, as provided in the relevant provisions of the IPS.
2. By IPS s 60-5(1), an external administrator is entitled to receive remuneration 'for necessary work properly performed' in accordance with a remuneration determination. A remuneration determination may be made by resolution of the creditors; absent which, if there is a committee of inspection, it may be made by the committee; and in the absence of both, it is made by the court: s 60-10(1).[25]
3. In making a determination under s 60-10(1)(c), the court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters set out in s 60-12 of the IPS, as applicable:

(a) the extent to which the work by the external administrator was necessary and properly performed;

(b) the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed;

(c) the period during which the work was, or is likely to be, performed by the external administrator;

(d) the quality of the work performed, or likely to be performed, by the external administrator;

(e) the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator;

(f) the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues;

(g) the extent (if any) to which the external administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;

(h) the value and nature of any property dealt with, or likely to be dealt with, by the external administrator;

(i) the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors;

(j) if the remuneration is worked out wholly or partly on a time‑cost basis - the time properly taken, or likely to be properly taken, by the external administrator in performing the work;

(k) whether the external administrator was, or is likely to be, required to deal with one or more controllers, or one or more managing controllers;

(l) if:

(i) a review has been carried out under Subdivision C of Division 90 (review by another registered liquidator) into a matter that relates to the external administration; and

(ii) the matter is, or includes, remuneration of the external administrator;

the contents of the report on the review that relate to that matter;

1. While the criteria in s 60-12 of the IPS direct the court to the factors that are to be taken into account, the ultimate question is whether the remuneration claimed by the plaintiff is reasonable.
2. The principles concerning applications for approval of the remuneration incurred by insolvency practitioners are well established. Many of the applicable authorities relate to s 449E of the Act, which though now repealed, contained factors in materially the same terms as those in s 60‑12 of the IPS.[26]
3. I refer to and respectfully adopt Strk J's recent summary of the relevant principles in M2 Assets Pty Ltd v GT Capital Partners Pty Ltd (subject to deed of company arrangement) [No 2],[27] referring in turn to Jackson J's observations and summary of the relevant authorities in Higgins v JSS Logistics Pty Ltd (in liq).[28] The principles were also recently referred to and applied by Feutrill J in Australian Securities and Investments Commission v Marco (No 15).[29]
4. The onus is on the insolvency practitioner to establish the remuneration claimed is reasonable, and for work that was (or is) reasonably necessary and properly performed. The court is not required to undertake a line‑by‑line review but must consider whether, on the materials provided and bringing an independent mind to bear, the plaintiff has made out a prima facie case on the evidence that the remuneration claimed is fair and reasonable. The remuneration should be proportionate to the value of the services provided and the difficulty and importance of the tasks performed.
5. I have applied these principles in determining this application.

1. The plaintiff has provided a summary of the tasks completed as part of the liquidation and attached to his affidavits schedules of the work undertaken by him and his staff in relation to the Company's liquidation, including descriptions of the tasks performed broken down by task area. He has provided a breakdown of the tasks completed, who undertook the work, their position, the time spent on the tasks, the value of the work performed and the hourly rate applied.
2. The total value of the work undertaken between 6 August 2021 and 16 February 2024 is $63,925.95 (inclusive of GST).
3. In his affidavits sworn on 6 March 2024 and 14 May 2024, the plaintiff estimated that the total value, on a time cost basis, of the further necessary work up to termination of the winding up of the Company was estimated to be $10,769 (inclusive of GST).
4. In his affidavit sworn on 22 May 2024, the plaintiff attaches a schedule of the work undertaken by him and others in the period from 23 February 2024 to the date of his affidavit. The schedule also includes details of further work and tasks to be undertaken to finalise the winding up of the company after orders are made, including completing lodgments with the ATO and ASIC and payment to the Company's creditors, the ATO and GEERS. The plaintiff deposes that the total value of this work exceeded the amount of $10,769 estimated in his affidavit of 14 May 2024. However, he has limited his claim for remuneration to the amount previously estimated.
5. I have reviewed the schedules and information provided in relation to the tasks undertaken, the personnel undertaking the work and the hourly rates applied.
6. I am satisfied that, in all the circumstances, the work undertaken and to be completed, the time involved, rates applied and the remuneration sought to be approved in the amount of $74,694.95 (inclusive of GST) is prima facie fair and reasonable, having regard to the tasks performed by the plaintiff and other staff, the nature of the work, and of this application.

1. For these reasons, I am satisfied it is appropriate to make an order terminating the winding up of the Company, to take effect upon payment being made to the plaintiff in the amount of $157,035.90. That amount is made up of:

(a) $74,694.95 in satisfaction of the plaintiff's remuneration, as determined and approved by the court and which Mr Graham has agreed to pay; and

(b) $81,682.56, being the amount owed to the Company's creditors.

1. I will therefore make the following orders:
   1. Upon receipt by the plaintiff of the amount of $157,035.09 within 7 business days of the date of this order, pursuant to s 482(1) of the Corporations Act 2001 (Cth) (Act), the winding up of Australian Stockbroking and Advisory Services Pty Ltd (In Liquidation) (ACN 094 106 751) (Company) be terminated.
   2. Pursuant to s 60-5 of the Insolvency Practice Schedule (Corporations) being Schedule 2 to the Act, the plaintiff's remuneration and costs incurred in respect of the work undertaken in relation to the winding up of the Company for the period from 6 August 2021 to its termination in accordance with order 1 is determined and approved in the amount of $74,694.95 (inclusive of GST).
   3. There be liberty to apply.
   4. No order as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Affidavit of Martin Bruce Jones filed on 15 February 2024 (First Jones Affidavit) [4]; Affidavit of John Leo Graham filed on 15 February 2024 (First Graham Affidavit) [13].

[2] First Graham Affidavit [15] - [16].

[3] First Graham Affidavit [19], 'JG3'; Affidavit of Martin Bruce Jones filed on 6 March 2024 (Second Jones Affidavit) [6], 'MBJ13'.

[4] First Jones Affidavit [6], 'MBJ3'; Outline of submissions [3].

[5] First Jones Affidavit [6], 'MBJ3'; Outline of submissions [3].

[6] First Jones Affidavit [6], 'MBJ3', Report to Creditors dated 23 June 2023, section 3, Litigation.

[7] First Jones Affidavit [6], 'MBJ3', Report to Creditors dated 23 June 2023, section 3, Litigation; First Graham Affidavit [11].

[9] First Jones Affidavit [6], 'MBJ3', Report to Creditors dated 23 June 2023, section 3, Litigation.

[11] First Jones Affidavit [6], 'MBJ3', Report to Creditors dated 23 June 2023.

[12] First Jones Affidavit [7] - [8], 'MBJ4', 'MBJ5', 'MBJ6'.

[13] First Jones Affidavit [6], [9], 'MBJ3', Report to Creditors dated 23 June 2023, section 2.

[15] First Graham Affidavit [10]; Outline of submissions [4].

[16] First Graham Affidavit [14], [21], 'JG2', 'JG4', 'JG5'; Outline of submissions [4].

[17] Ex parte James (as liquidator of Bluegold Corporation Pty Ltd (in liq)) [2021] WASC 98 [21] (Strk AM) citing El-Fahkri, Re Elfah Pty Ltd (in liq) [2002] FCA 1469 [9] (Finkelstein J); Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685; Aetna Properties Pty Ltd v GA Listing & Maintenance Pty Ltd (1994) 13 ACSR 422.

[18] Hume v Carey [2022] WASC 256 [12] - [13]. See also Ex parte James (as liquidator of Bluegold Corporation Pty Ltd (in liq)) [2021] WASC 98 [22] ‑ [23] (Strk AM) and the authorities referred to.

[19] Section 482(1A)(a) of the Act.

[20] Re Thoroughbred Consultants Pty Ltd [2021] VSC 627 [86], [101].

[21] First Jones Affidavit [7] - [8], 'MBJ4', 'MBJ5', 'MBJ6'; First Graham Affidavit [17].

[24] Affidavit of John Leo Graham sworn and filed on 7 March 2024 [3]; Second Jones Affidavit [4]; Third Affidavit of Martin Bruce Jones sworn and filed on 14 May 2024.

[25] Australian Securities and Investments Commission v Jones [2023] WASCA 130 [297].

[26] There are some minor changes to the language used: for example, s 60‑12 of the IPS refers to the extent to which the work was 'necessary and properly performed'; s 449E(4) of the Corporations Act 2001 (Cth) referred to the extent to which the work performed was 'reasonably necessary'.

[27] M2 Assets Pty Ltd v GT Capital Partners Pty Ltd (subject to deed of company arrangement) [No 2] [2023] WASC 111 [40] - [42], which related to determination of the remuneration of a provisional liquidator under s 60-16 of the IPS, and to which the matters in s 60-12 of the IPS apply in the same way as for a determination under s 60-10 of the IPS.

[28] Higgins v JSS Logistics Pty Ltd (in liq) [2022] FCA 1320 [18] - [20] and the authorities referred to, including Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2017] NSWCA 38; (2017) 93 NSWLR 459 [54] ‑ [60] (Bathurst CJ with whom the other members of the court agreed); Re Sakr Nominees Pty Ltd [2017] NSWSC 668 [29] (Black J); Conlan v Adams [2008] WASCA 61 [28] (McLure JA, Buss JA & Newnes AJA agreeing); Venetian Nominees Pty Ltd v Conlan (1998) WAR 96, 102 (Kennedy & Ipp JJ, Wallwork J agreeing).

[29] Australian Securities and Investments Commission v Marco (No 15) [2024] FCA 347 [72] - [74], [76] ‑ [82].