ROBERT MICHAEL KIRMAN as joint and several receiver of THE MICHAEL FOTIOS FAMILY TRUST -v- DELTA RESOURCE MANAGEMENT PTY LTD [2023] WASC 266 (18 July 2023)

(a) an originating process seeking orders, amongst other things, that the defendant be wound up in insolvency, alternatively, on just and equitable grounds; and
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> (b) an interlocutory process seeking orders that the plaintiffs be appointed provisional liquidators of the defendant.

2. The originating process was brought pursuant to s 459A, s 459P and s 461(1)(k) of the Act. The originating process included the following background to the application:

The Michael Fotios Family Trust (Trust) holds assets, amongst other things, of approximately 76% of the issued share capital of Delta Resource Management Pty Ltd (ACN 118 613 175) on trust for the beneficiaries of the Trust.

Helios Corporation Pty Ltd (ACN 636 970 771) (Administrators Appointed) (Helios) is the trustee of the Trust. On 19 August 2021, Mr Robert Michael Kirman and Mr Robert Conry Brauer (Kirman and Brauer) were appointed joint and several administrators of Helios.

On 6 September 2021, Kirman and Brauer were appointed as the receivers of the Trust by the Federal Court of Australia.

On or about 18 October 2021, the sole director of the Defendant died, leaving the Defendant without a director.

This is an application for the Defendant to be wound up by the Court in insolvency, further or alternatively, on the ground that it is just and equitable to do so.

1. The interlocutory process included the following background to the orders sought therein:

The Plaintiffs make this application for this Honourable Court to appoint a provisional liquidator to the Defendant in order to protect and preserve the Defendant's assets in circumstances where it is directorless and therefore rudderless, investigate the solvency or otherwise of the Defendant, and otherwise maintain the status quo of the Defendant until determination of the Originating Process filed on 9 February 2022.

1. On 15 February 2022, this court made orders appointing the plaintiffs as provisional liquidators.[3] Those orders were made pursuant to the power in s 472(2) of the Act. Section 472 provides as follows:

(1) On an order being made for the winding up of a company, the Court may appoint a registered liquidator to be liquidator of the company.

(2) The Court may appoint a registered liquidator provisionally at any time after the filing of a winding up application and before the making of a winding up order or, if there is an appeal against a winding up order, before a decision in the appeal is made.

(3) A liquidator appointed provisionally has or may exercise such functions and powers:

(a) as are conferred on him or her by this Act or by rules of the Court that appointed him or her; or

(b) as the Court specifies in the order appointing him or her.

1. On 20 May 2022, the provisional liquidators filed a report as contemplated by the orders made on 15 February 2022 (as amended by an order made on 16 May 2022).[4]
2. On 23 June 2022:

(a) orders were made by this court for, amongst other things, leave for the provisional liquidators to be appointed as joint and several administrators of the defendant and as deed administrators of any DOCA entered into by the defendant; and
>
> (b) the provisional liquidators were appointed administrators of the defendant.[5]

3. Following their appointment as administrators, the provisional liquidators negotiated a terms sheet with Obsidian Metals Group Pty Ltd (Obsidian Metals) by which Obsidian Metals proposed a Deed of Company Arrangement (Terms Sheet). The Terms Sheet was to be put to creditors of the defendant at the second meeting of creditors.[6]
4. At the second meeting of creditors of the defendant, creditors voted in favour of the deed of company arrangement proposal reflected in the Terms Sheet.[7]
5. On 21 December 2022, the administrators, the defendant and Obsidian Metals entered into a DOCA reflecting the terms of the Terms Sheet (Obsidian DOCA).[8] Under the terms of the Obsidian DOCA, amongst other things, the administrators became the deed administrators of the defendant and Obsidian Metals was required to satisfy a number of conditions precedent by 20 April 2023. Obsidian Metals failed to satisfy the conditions precedent and on 21 April 2023, it was automatically placed into liquidation.[9]
6. Under both the Obsidian DOCA and pursuant to s 446AA of the Act, the deed administrators became the liquidators of the defendant upon termination of the Obsidian DOCA.

1. By this Application, the plaintiffs sought orders terminating the provisional liquidation of the defendant and dismissing the application for winding up.
2. As to the pending winding up application, the plaintiffs emphasised that the defendant has now proceeded into liquidation in any event (albeit a creditors' voluntary winding up, rather than an official liquidation). The plaintiffs submitted there was no utility in two concurrent liquidations of the same company and there was no or minimal practical difference between a creditors' voluntary winding up and an official liquidation. Accordingly, the plaintiffs sought orders dismissing the winding up application. The submission of the plaintiffs is sound in my view. The pending winding up application has become redundant through the changing circumstances. It was thus appropriate to dismiss that application.
3. Given my view as to the appropriateness of dismissing the pending winding up application, it will not be surprising that I also considered the plaintiffs' application to terminate the provisional liquidation had merit and should be made, subject to being satisfied the court had the necessary power to do so. The plaintiffs submitted that the purposes of their appointment were the preservation of assets and provision of a report as to solvency. The plaintiffs pointed to the delivery of their report as required under the orders made on 15 February 2022, and highlighted the subsequent appointment of the liquidators. The plaintiffs submitted that the purposes for which the provisional liquidation was commenced had fallen away, and it was therefore appropriate to order the termination of the provisional liquidation.
4. As to the source of the power to make the order to terminate the provisional liquidation, the plaintiffs placed reliance on the power in s 90-15(1) of the IPS. That provision empowers the court to make such orders as it thinks fit in relation to the external administration of a company. The plaintiffs rely on that power in the absence of any express power in the Act for the court to make the termination order.
5. A company is taken to be under 'external administration' where a provisional liquidator has been appointed in relation to the company and, consistently with this, a provisional liquidator of a company falls within the definition of an 'external administrator': s 5-15 and s 5-20 of the IPS.
6. The power in s 90-15(1) is undoubtedly broad and likely wider in scope than the previous powers in s 479(3) or s 511.[10] Section 90-15 relevantly provides as follows:

Division 90 -- Review of the external administration of a company

90-15 Court may make orders in relation to external administration

Court may make orders

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

Orders on own initiative or on application

(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.

Examples of orders that may be made

(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.

1. The breadth of the power in s 90-15(1) is quite evident from the scope of s 90-15(3)(a), which also supports the conclusion that the power accommodates the determination of substantive rights.[11] Australian courts which have considered s 90-15(1) have embraced the view that the provision should not read by making implications or imposing limitations which are not found in the express words of the provision.[12] Relatively recently, in One T Development Pty Ltd v Peter Krejci in his capacity as liquidator of ENA Development Pty Ltd [2023] NSWCA 120 (Ward P, Leeming & Mitchelmore JJA), the NSW Court of Appeal unanimously held that:

It is plain that the current form of the conferral of power is broader than its predecessor. The restriction noted by McLelland J [in Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674] concerning determining rights and liabilities cannot survive the express power in subsection (3)(a). The former power, framed in terms of authorising the liquidator to "apply to the Court for directions in relation to any particular matter arising under the winding up", has been expanded so as to include, specifically, "an order determining any question arising in the external administration of the company". 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": Owners of the Ship "Shin Kobe Maru" v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; [1994] HCA 54, and, in the context of the Corporations Act, see Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270; [2000] HCA 30 at [17] and Glenfyne International Holding Ltd v Glenfyne Farms International AU Pty Ltd (in liq) (2019) 101 NSWLR 358; [2019] NSWCA 304 at [61]. The basic question posed by statute is whether the order relates to the external administration of the company. (underlining added)[13]

1. That basic question identified by the NSW Court of Appeal can readily be answered in the affirmative in the present case, in my view. An order to terminate a provisional liquidation previously ordered by the court relates to the external administration of the defendant.
2. The examples described in s 90-15(3) give further insight into the scope of the power. One of the examples of the exercise of the power identified by the legislature in s 90-15(3) is an order that a person cease to be the external administrator of the company (s 90-15(3)(b)). The exercise of the power in that context does not depend on whether the external administrator has failed in the exercise of his or her duties.[14]
3. Section 90-15(3)(b) does not directly support the exercise of the power in s 90-15(1) in the manner sought by the plaintiffs (i.e. to terminate a provisional liquidation as opposed to an order that a provisional liquidator cease to be an external administrator). Nonetheless, the existence of a power to order that a person cease to be the provisional liquidator of a company points in favour of a construction of s 90-15(1) and s 90-15(3)(a) which would extend to the termination of the provisional liquidation in terms. Further, given the interim nature of a provisional liquidation, the existence of a power to order that a person cease to be the provisional liquidator of a company would arguably be sufficient for the plaintiffs' present purposes.
4. For completeness, let me now turn to the relevant authorities relied upon by the plaintiffs.
5. There are several reported instances where a court has ordered that a provisional liquidation be terminated. The plaintiffs drew my attention to the decisions of Austin J in Re United Medical Protection and Ors [2003] NSWSC 103; (2003) 47 ACSR 705, McLelland J in Garden Mews-St Leonards Pty Ltd v Butler Pollnow Pty Ltd (No 4) (1984) 2 ACLC 682,[15] and Simmonds J in Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [201] WASC 113, in this regard. Each of these cases concerned an application to terminate a provisional liquidation. To that list I would add the decision of Brereton J in Grace v Grace (No 5) [2013] NSWSC 601. Each of these cases was decided before the enactment of s 90-15.
6. In Re United Medical Protection, Austin J granted the application, relying on the power, found in the rules of the court, to set aside or vary any previous interlocutory order, including the original order appointing the provisional liquidator. Austin J's decision is typically cited in leading texts as the primary authority which supports the power to terminate the appointment of a provisional liquidator if the purposes for which he or she has been appointed have been fulfilled.[16]
7. In Professional Services of Australia, Simmonds J (at [4]) noted in his ex tempore reasons that the parties before him had agreed that the removal of a provisional liquidator (as opposed to the termination of a provisional liquidation) could be ordered under s 473(1) of the Act (as it then existed), which his Honour noted was accepted by the authors of McPherson's Law of Company Liquidation at [6.900]. Simmonds J observed there were no formal provisions in the Act for the termination of a provisional liquidation. His Honour ultimately placed reliance on the analysis of Austin J in Re United Medical Protection.
8. The relevant power was either assumed or not the subject of express comment in both Butler Pollnow and Grace.
9. The foregoing emphasises the importance of understanding the precise reasoning of Austin J in Re United Medical Protection. The rule of the court relied upon by Austin J was pt 40 r 9 of the then Supreme Court Rules 1970 (NSW).[17] There is no equivalent general rule in the Rules of the Supreme Court 1971 (WA). In this court, the general power to discharge or vary orders made on a prior interlocutory application is found in the inherent jurisdiction of the court. The extent of that jurisdiction was comprehensively reviewed by Steytler P in Commonwealth v Albany Port Authority [2006] WASCA 185 [23] - [25] and by Corboy J in Commonwealth Bank of Australia Ltd v Saraceni [2013] WASC 115 [9]. There may be limits on the extent of that jurisdiction, arising from the nature of the particular orders and whether they were procedural or have substantive effect. A judge must also be cautious not to take on an appellate jurisdiction where none exists.
10. It appears to me from the analysis in Commonwealth v Albany Port Authority that it is at least recognised that a judge of this court has inherent power, in a proper case, to vary, discharge, or suspend an order made by another judge on the basis that changed circumstances make it just and proper to do so. Further, even when orders of a substantive nature have been made after a contested interlocutory hearing, courts have been willing to set aside, vary or discharge them where the interests of justice require this, usually in cases of a material change of circumstances or the discovery of fresh evidence.
11. The orders for the appointment of the plaintiffs as provisional liquidators were inherently interlocutory, not final. The primary function of a provisional liquidator, as explained by McLelland J in Butler Pollnow is to preserve the assets of the company for the benefit of those who may ultimately be found to be entitled to them. His Honour described the function of a provisional liquidator as purely an interlocutory one.
12. Accordingly, there is a strong basis for the conclusion that the order sought by the plaintiffs, to terminate the provisional liquidation, can be supported by the inherent jurisdiction of the court. The order being sought is one that would effectively discharge the original interlocutory order appointing the provisional liquidators, as made on 15 February 2022.
13. As the matter has not been fully argued before me, I would prefer to refrain from expressing a concluded view as to the scope of the court's inherent jurisdiction to discharge or vary the original order, by which the provisional liquidators were appointed. In any event, it is not necessary to do so in order to resolve this application as I consider the power in s 90-15(1) is broad enough to support an order which terminates a provisional liquidation. In summary:

(a) The text of both s 90-15(1) and s 90-15(3)(a) is expansive and should not be read down or limited. The basic question posed by the legislation is whether the order sought relates to the external administration. An order to terminate a provisional liquidation of a company previously ordered by the court does relate to the external administration of that company.
>
> (b) Further, the examples given in s 90-15(3) are not intended to limit the breadth of s 90-15(1). So, although there is no identified example which authorises the making of an order for the termination of an external administration, that is not determinative of the absence of such a power. The failure to include that example may be explicable because the Act elsewhere provides for the manner in which various forms of external administration come to an end (although the Act does not do so for the purposes of a provisional liquidation). This is likely, in my view, because that form of external administration is intended to be short-lived and interlocutory in nature, pending other forms of administration coming into effect.
>
> (c) That said, one can see in s 90-15(3)(b) the express example which extends the power to authorise an order that a person cease to be the external administrator of the company. In terms, this power is directed to the removal of an appointed person rather than a cessation of the form of external administration. It provides some support, as a matter of construction though, to the argument that the legislature contemplated the power being deployed to bring an end to an external administration scenario, subject of course to the existence of other provisions in the Act which deal with those circumstances.

14. For the purposes of this Application, I ultimately considered the breadth of s 90-15 was sufficient to provide a foundation for the making of the order which was sought by the plaintiffs.
15. As to whether the power should be exercised, I had regard to the principles summarised below, which strike me as being applicable to the exercise of the power in s 90-15(1) as much as they were applicable to the general power of the court to discharge or vary previous orders.
16. In Butler Pollnow Pty Ltd, McLelland J terminated the provisional liquidation in circumstances where the provisional liquidator's administration was not active and there were no assets in his possession other than the company's books and records. In United Medical Protection, Austin J built upon the analysis of McLelland J. His Honour also referred to the principles applied in broadly analogous circumstances (concerning termination of winding up and receivership processes). His Honour ultimately expressed the view that the following issues were relevant to an application to terminate the appointment of a provisional liquidator:

(a) whether the purposes for which the appointment was made have been exhausted, and whether there is a reasonable prospect that matters may arise in future with which the provisional liquidator should deal;
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> (b) whether the termination might put at risk the interests of creditors, contributories and the provisional liquidator;
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> (c) whether it is in the public interest that the appointment be terminated.[18]

17. In Professional Services of Australia, Simmonds J agreed that the question whether the objects of the provisional liquidation have been achieved is a pertinent question when deciding whether to terminate a provisional liquidation.[19]
18. Having regard to these principles, I had no difficulty in reaching the view that the power should be exercised in the present circumstances. In this case, the provisional liquidators were appointed:

(a) due to the death of the sole director, George Fotios and the practical difficulties associated with replacing him; and
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> (b) to allow investigations to be undertaken in relation to the solvency of the defendant, pending the hearing of the winding up application.[20]

19. Given the delivery of the report by the plaintiffs as required under the orders made 15 February 2022 and the subsequent appointment of the liquidators, the purpose for which the provisional liquidation was commenced had fallen away. Further, there is no suggestion that the termination of the provisional liquidation would itself put the interests of creditors at further risk in any way, and there were no additional public interest matters that tended against the making of such an order.

1. The orders I made on 22 May 2023 are set out in Attachment A to these reasons.

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

[1] Affidavit of Anthea Rae Scaddan sworn 22 May 2023.

[2] See the several reasons of Colvin J in Federal Court No. WAD 143 of 2020: Francis (Trustee), in the matter of Fotios (Bankrupt) v Helios Corporation Pty Ltd [2022] FCA 199; Francis (Trustee), in the matter of Fotios (Bankrupt) v Helios Corporation Pty Ltd (No 2) [2022] FCA 652; and Francis (Trustee), in the matter of Fotios (Bankrupt) v Helios Corporation Pty Ltd (No 3) [2023] FCA 251. See also the Affidavit of Robert Michael Kirman sworn 9 February 2022, [2], [3] pp 11 - 25.

[6] Kirman Affidavit, [13] and pp. 8 - 13.

[7] Kirman Affidavit, [13] and pp. 8 - 13.

[8] Kirman Affidavit, [15] and pp. 27 - 77.

[9] Kirman Affidavit, [18] and [20].

[10] Re Branded Media Holdings Pty Ltd (in liq) [2020] NSWSC 557 [3] (Black J).

[11] Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481; (2018) 125 ACSR 355 [8] (Gleeson JA).

[12] See, for example, Glenfyne International Holding Limited v Glenfyne Farms International AU Pty Ltd (in liq); Glenfyne International Limited v GI Commercial Pty Ltd (in liq) [2019] NSWCA 304 [61] (Bell P, Bathurst CJ & Macfarlan JA agreeing).

[13] [2023] NSWCA 120 [33].

[14] The breadth of the power is not to be so confined, as explained by Bell P in Glenfyne International Holding Limited v Glenfyne Farms International AU Pty Ltd (in liq); Glenfyne International Limited v GI Commercial Pty Ltd (in liq) [2019] NSWCA 304 (Bathurst CJ & Macfarlan JA agreeing).

[15] This citation is a reference to McLelland's brief decision delivered on 22 October 1984 concerning the termination of the provisional liquidation. The decision reported at (1984) 9 ACLR 82; 2 ACLC 511 is his Honour's decision delivered on 19 July 1984 concerning earlier interlocutory matters.

[16] Including in Austin & Black's Annotations to the Corporations Act at [5.472].

[17] That has been superseded by r 36.16(2)(b) of the Uniform Civil Procedure Rules 2005 (NSW). The terms of the former rule and its successor are set out in Pham v Gall [2020] NSWCA 116 [92] - [98] (Payne JA).

[19] Professional Services of Australia [5].

[20] Affidavit of Robert Michael Kirman sworn 9 February 2022, [25].