FEDERAL COURT OF AUSTRALIA

Rocke (as liquidator of ACN 080 794 636 Pty Ltd),

In the matter of ss 502 and 506(4) of the Corporations Act [2007] FCA 1687

CORPORATIONS – replacement of liquidators and deed administrators – replacement of trustees of Creditors’ Trusts – replacements occasioned by restructuring of relevant firms of accountants – administrative continuity demonstrated – cost saving in application to Court – alternative numerous and expensive creditors’ meetings – liberty to creditors to apply to vary orders made –  features of creditors’ trusts - costs not to be borne by companies or trusts affected by orders  

Corporations Act 2001  (Cth) s 447A, s 449D, s 473, s 502, s 503

Trustees Act 1962 (WA) s 77

Australian Securities and Investments Commission v Edensor Nominees Pty Ltd  (2001) 204 CLR 559 cited

Ian Charles Francis and Michael Patrick Joseph Ryan as Trustees of The West Australian Shed Commercial Pty Ltd Creditors Trust Deed and West Australian Shed Co Pty ltd Creditors Trust Deed [2003] WASC 39 cited

In the matter of The Bonang Gold Mining Company, Limited (1893) 14 LR (NSW) Eq 262 cited

Open Telecommunications Ltd (Subject to Deed of Company Arrangement) [2003] NSWSC 1198 cited

Re Application of Vouris (2004) 49 ACSR 543 cited

Re McGrath and Anor (as liqs of HIH Insurance Ltd (in liq)) (2005) 54 ACSR 55 cited

Re Memdarma Pty Ltd (In liq) (No 2) (2007) 61 ACSR 601cited

Rupert Co v Chameleon Mining (2006) 24 ACLC 635 cited

 Heaver-Wren T, “DOCA Termination through Creditors’ Trust Deeds” (2004) 12 Insolv LJ

McKenzie R, “Creditors’ Trusts and the ASIC Guidelines” (2005) 17(3) Australian Insolvency Journal

Proudman D: “Some Issues Surrounding Creditors’ Trust Deeds Parts 1 and 2” (2005) 6 INSLB

CLIFFORD STUART ROCKE AND JEFFERY LAURENCE HERBERT IN THEIR CAPACITIES AS LIQUIDATORS OF ACN 080 794 636 PTY LTD and NORMAN MEL ASHTON IN HIS CAPACITY AS LIQUIDATOR OF KEYROS PTY LTD

WAD177 OF 2007

JEFFERY LAURENCE HERBERT IN HIS CAPACITY AS TRUSTEE OF THE CARR CIVIL CONTRACTING PTY LTD CREDITORS’ TRUST AND OTHERS

WAD178 OF 2007

CLIFFORD STUART ROCKE AND IAN MENZIES carson IN THEIR CAPACITIES AS LIQUIDATORS OF ASSET BUILD (AUST) PTY LTD (IN LIQUIDATION), BRIDGEVIEW HOLDINGS PTY LTD (IN LIQUIDATION), GOLDTAG PTY LTD (IN LIQUIDATION), WESTPOINT MONEY MANAGEMENT PTY LTD (IN LIQUIDATION), CINEMA CITY DEVELOPMENT PTY LTD (IN LIQUIDATION), WESTPOINT CONSULTING GROUP, JETSTONE PTY LTD (IN LIQUIDATION), NETWORK COMPANY PTY LTD (IN LIQUIDATION), PAGELIGHT NOMINEES PTY LTD (IN LIQUIDATION), KINGDREAM PTY LTD (IN LIQUIDATION), JUSON PTY LTD (IN LIQUIDATION), WESTSIDE BRISBANE DEVELOPMENTS PTY LTD (IN LIQUIDATION) FORRESTVIEW NOMINEES PTY LTD (IN LIQUIDATION) AND EASTLANDs PTY LTD (IN LIQUIDATION) AND OTHERS

WAD179 OF 2007

FRENCH  J

date of judgment: 31 OCTOBER 2007 (SYDNEY)

date of publication of reasons: 6 november 2007 (perth)

IN THE MATTER OF SS 502 AND 506(4) OF THE

CORPORATIONS ACT

AND IN THE MATTER OF ACN 080 794 636 PTY LTD

(IN LIQUIDATION)

AND

IN THE MATTER OF KEYROS PTY LTD (ACN 009 364 783)

(IN LIQUIDATION)

THE COURT ORDERS THAT:

1.                  Jeffery Laurence Herbert, having tendered his resignation as liquidator of ACN 080 794 636 Pty Ltd (In liquidation), Andrew John Birch of Level 1, 5 Mill Street, Perth, is appointed as a liquidator of the company in his place to hold office with Simon Andrew Read.

2.                  Clifford Stuart Rocke, having tendered his resignation as liquidator of ACN 080 794 636 Pty Ltd (In liquidation), Simon Andrew Read of Level 1, 5 Mill Street, Perth, is appointed as a liquidator of the company in his place to hold office with Andrew John Birch.

3.                  Norman Mel Ashton, having tendered his resignation as liquidator of Keyros Pty Ltd (In liquidation), Andrew John Birch, of Level 1, 5 Mill Street, Perth, is appointed as liquidator of the company in his place.

4.                  It is hereby determined that anything that is required or authorised by the Corporations Act 2001 (Cth) to be done by Simon Andrew Read and Andrew John Birch as the liquidators of ACN 080 794 636 Pty Ltd (In liquidation) may be done by either or both of them.

5.                  The plaintiffs do, on or before 21 November 2007, send a letter to each of the known creditors of each of ACN 080 794 636 Pty Ltd (In liquidation) and Keyros Pty Ltd (In liquidation) in the terms set out in the Schedule to the originating process in these proceedings amended to accord with the terms of these orders.

6.                  There be liberty to any creditor to apply to the Court  on or before 12 December 2007 for a variation of the orders effecting appointments pursuant to the resignations of Messrs Rocke, Ashton and Herbert.

7.                  The costs of the application are not to be treated as costs in the winding up of either of the companies and are not payable out of the assets of either of the companies.

8.         Liberty to the plaintiffs to apply within 48 hours to vary the detail of any of the preceding orders.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE MATTER OF SS 447a AND 449d OF THE

CORPORATIONS ACT

AND

IN THE MATTER OF BANWELL PTY LTD

(Subject to deed of company arrangement)

(Receiver and manager appointed)

(ACN 009 394 585)

and

In the matter of Old Ferry Co Pty Ltd

(Subject to deed of company arrangement)

(Receiver and manager appointed)

(ACN 008 935 297)

and

In the matter of Kitcher Property Investments Pty Ltd

(Subject to deed of company arrangement)

(Receiver and manager appointed)

(ACN 008 935 260)

and

IN THE MATTER OF OMEGATREND INTERNATIONAL PTY LTD

(SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(ACN 074 557 681)

AND

IN THE MATTER OF OMEGATREND AUSTRALIA PTY LTD

(SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(ACN 067 357 886)

AND

IN THE MATTER OF OMEGATREND GLOBAL PTY LTD

(SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(ACN 114 229 944)

AND

IN THE MATTER OF S77 OF THE TRUSTEES ACT 1962 (WA)

AND IN THE MATTER OF BANWELL PTY LTD

(SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(RECEIVER AND MANAGER APPOINTED)

(ACN 009 394 585)

AND

IN THE MATTER OF CARR CIVIL CONTRACTING PTY LTD

(ACN 100 438 257)

AND

IN THE MATTER OF KITCHER PROPERTY INVESTMENTS

PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(RECEIVER AND MANAGER APPOINTED) (ACN 008 935 260)

THE COURT ORDERS THAT:

1.         The vacancy in the office of deed administrator of Omegatrend International Pty Ltd, Omegatrend Australia Pty Ltd and Omegatrend Global Pty Ltd arising by reason of the resignation of Clifford Stuart Rocke as deed administrator not be filled.

2.         The vacancy in the office of deed administrator of Kitcher Property Investments Pty Ltd, Banwell Pty Ltd and Old Ferry Co Pty Ltd arising by reason of the resignation of Norman Mel Ashton, be filled by the appointment of Andrew John Birch of Level 1, 5 Mill Street, Perth, he to hold office together with Simon Andrew Read, an existing deed administrator of the companies.

3.         The vacancy in the office of trustee of:

            (i)         The KPI Creditors’ Trust; and

            (ii)        The Banwell Creditors’ Trust Deed,

            arising by reason of the resignation of Norman Mel Ashton, be filled by the appointment of Andrew John Birch of Level 1, 5 Mill Street, Perth, he to hold office together with Simon Andrew Read, an existing trustee of the Creditors’ Trusts.

4.         The vacancy in the office of the trustee of the Carr Civil Contracting Pty Ltd Creditors’ Trust arising by reason of the resignation of Jeffery Laurence Herbert, be filled by the appointment of Andrew John Birch of Level 1, 5 Mill Street, Perth, he to hold office together with Simon Andrew Read, an existing trustee of the Creditors’ Trust.

5.         The plaintiffs do, on or before 21 November 2007, send a letter to each of the known creditors of each of the companies and Creditors’ Trusts referred to in the terms set out in the Schedule to the originating process amended to accord with the terms of these orders.

6.         The preceding requirement will be satisfied by:

            (i)         the sending of the letters by post to all creditors who have debts of A$50 or greater;

            (ii)        the advertisement of a notice of the resignation of Clifford Stuart Rocke in national newspapers circulating in:

                        (a)        Australia;

                        (b)        Malaysia;

                        (c)        New Zealand; and

                        (d)        Singapore;

            (iii)        sending a copy of the letter by email to every creditor in Malaysia and Singapore in relation to which the administrators have an email address;

            (iv)       causing the letter to be placed on the McGrathNicol website: www.mcgrathnicol.com.

7.         There is liberty to any creditor to apply to the Court on or before 12 December 2007 for a variation of the orders effecting appointments pursuant to the resignations of Messrs Rocke, Ashton and Herbert.

8.         The costs of this application shall not be costs in the administrations and shall not be recovered from the funds the subject of administration or of the assets of the Creditors’ Trusts.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE MATTER OF S 473(7) OF THE CORPORATIONS

ACT

AND

IN THE MATTER OF PASTICCERIA AUSTRALIA PTY LTD

(ACN 055 796 588) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTPOINT CORPORATION PTY LTD

(ACN 009 395 751) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTPOINT CONSTRUCTIONS PTY LTD

(ACN 009 399 740) (IN LIQUIDATION)

AND

IN THE MATTER OF ASSET BUILD (AUST) PTY LTD

(ACN 100 871 298) (IN LIQUIDATION)

AND

IN THE MATTER OF BRIDGEVIEW HOLDINGS PTY LTD

(ACN 063 407 563) (IN LIQUIDATION)

AND

IN THE MATTER OF GOLDTAG PTY LTD

(ACN 085 432 239) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTPOINT MONEY MANAGEMENT PTY LTD

(ACN 098 779 778) (IN LIQUIDATION)

AND

IN THE MATTER OF CINEMA CITY DEVELOPMENT PTY LTD

(ACN 091 824 298) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTPOINT CONSULTING GROUP

(ACN 053 799 410) (IN LIQUIDATION)

AND

IN THE MATTER OF JETSTONE PTY LTD

(ACN 108 153 617) (IN LIQUIDATION)

AND

IN THE MATTER OF NETWORK COMPANY PTY LTD

(ACN 101 151 400) (IN LIQUIDATION)

AND

IN THE MATTER OF PAGELIGHT NOMINEES PTY LTD

(ACN 109 455 110) (IN LIQUIDATION)

AND

IN THE MATTER OF KINGDREAM PTY LTD

(ACN 092 481 377) (IN LIQUIDATION)

AND

IN THE MATTER OF JUSON PTY LTD

(ACN 008 998 927) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTSIDE BRISBANE DEVELOPMENTS PTY LTD

(ACN 116 479 013) (IN LIQUIDATION)

AND

IN THE MATTER OF FORRESTVIEW NOMINEES PTY LTD

(ACN 063 440 102) (IN LIQUIDATION)

AND

IN THE MATTER OF EASTLANDS PTY LTD

(ACN 009 349 053) (IN LIQUIDATION)

THE COURT ORDERS THAT:

1.         The vacancy in the office of a liquidator of Pasticceria Australia Pty Ltd (In liquidation) arising by reason of the resignation of Clifford Stuart Rocke, be filled by the appointment of Andrew John Birch of Level 1, 5 Mill Street, Perth.

2.         The vacancy in the office of a liquidator of:

            (i)         Westpoint Corporation Pty Ltd (In liquidation); and

            (ii)        Westpoint Constructions Pty Ltd (In liquidation)

            arising by reason of the resignation of Jeffery Laurence Herbert, be filled by the appointment of Andrew John Birch, of Level 1, 5 Mill Street, Perth, he to hold office together with Simon Andrew Read, an existing liquidator of the companies.

3.         The vacancy in the office of a liquidator of the following companies arising by reason of the resignations of Clifford Stuart Rocke and Ian Menzies Carson, be filled by the appointment of Andrew John Birch of Level 1, 5 Mill Street, Perth, he to hold office together with Simon Andrew Read, an existing liquidator of those companies:

            The companies

            (i)         Asset Build (Aust) Pty Ltd (In liquidation);

            (ii)        Bridgeview Holdings Pty Ltd (In liquidation);

            (iii)       Goldtag Pty Ltd (In liquidation);

            (iv)       Westpoint Money Management Pty Ltd (In liquidation);

            (v)        Cinema City Development Pty Ltd (In liquidation);

            (vi)       Westpoint Consulting Group (In liquidation);

            (vii)      Jetstone Pty Ltd (In liquidation);

            (viii)      Network Company Pty Ltd (In liquidation);

            (ix)       Pagelight Nominees Pty Ltd (In liquidation);

            (x)        Kingdream Pty Ltd (In liquidation);

            (xi)       Juson Pty Ltd (In liquidation);

            (xii)      Westside Brisbane Developments Pty Ltd (In liquidation);

            (xiii)      Forrestview Nominees Pty Ltd (In liquidation);

            (xiv)     Eastlands Pty Ltd (In liquidation).

4.         Anything required or authorised by the Corporations Act 2001 (Cth) to be done by Simon Andrew Read and Andrew John Birch as the liquidators of the companies referred to in the preceding orders may be done by either or both of them.

5.         On or before 21 November 2007, the plaintiffs send a letter to each of the known creditors of each of the companies, the subject of the preceding orders in the terms set out in the Schedule to the originating process amended to accord with the terms of the these orders.

6.         There be liberty to any creditor to apply to the Court on or before 12 December 2007 seeking a variation of the orders effecting applications pursuant to the resignations of Messrs Rocke, Herbert and Carson.  

7.         The costs of the application will not be costs in the winding up of any of the companies and shall not be recoverable from the assets of the companies.

8.         Liberty to the plaintiffs to apply within 48 hours to vary the detail of the preceding orders.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

in the matter of SS 502 AND 506(4) OF THE

CORPORATIONS ACT

AND IN THE MATTER OF ACN 080 794 636 PTY LTD

(IN LIQUIDATION)

AND

IN THE MATTER OF KEYROS PTY LTD (ACN 009 364 783)

(IN LIQUIDATION)

IN THE MATTER OF SS 447a AND 446d OF THE

CORPORATIONS ACT

AND

IN THE MATTER OF BANWELL PTY LTD

(subject to deed of company arrangement)

(receiver and manager appointed)

(acn 009 394 585)

and

In the matter of Old Ferry Co Pty Ltd

(Subject to deed of company arrangement)

(Receiver and manager appointed)

(ACN 008 935 297)

and

In the matter of Kitcher Property Investments Pty Ltd

(Subject to deed of company arrangement)

(Receiver and manager appointed)

(ACN 008 935 260)

and

IN THE MATTER OF OMEGATREND INTERNATIONAL PTY LTD

(SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(ACN 074 557 681)

AND

IN THE MATTER OF OMEGATREND AUSTRALIA PTY LTD

(SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(ACN 067 357 886)

AND

IN THE MATTER OF OMEGATREND GLOBAL PTY LTD

(SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(ACN 114 229 944)

AND

IN THE MATTER OF S77 OF THE TRUSTEES ACT 1962 (WA)

AND IN THE MATTER OF BANWELL PTY LTD

(SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(RECEIVER AND MANAGER APPOINTED)

(ACN 009 394 585)

AND

IN THE MATTER OF CARR CIVIL CONTRACTING PTY LTD

(ACN 100 438 257)

AND

IN THE MATTER OF KITCHER PROPERTY INVESTMENTS

PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(RECEIVER AND MANAGER APPOINTED) (ACN 008 935 260)

IN THE MATTER OF S 473(7) OF THE CORPORATIONS

ACT

AND

IN THE MATTER OF PASTICCERIA AUSTRALIA PTY LTD

(ACN 055 796 588) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTPOINT CORPORATION PTY LTD

(ACN 009 395 751) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTPOINT CONSTRUCTIONS PTY LTD

(ACN 009 399 740) (IN LIQUIDATION)

AND

IN THE MATTER OF ASSET BUILD (AUST) PTY LTD

(ACN 100 871 298) (IN LIQUIDATION)

AND

IN THE MATTER OF BRIDGEVIEW HOLDINGS PTY LTD

(ACN 063 407 563) (IN LIQUIDATION)

AND

IN THE MATTER OF GOLDTAG PTY LTD

(ACN 085 432 239) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTPOINT MONEY MANAGEMENT PTY LTD

(ACN 098 779 778) (IN LIQUIDATION)

AND

IN THE MATTER OF CINEMA CITY DEVELOPMENT PTY LTD

(ACN 091 824 298) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTPOINT CONSULTING GROUP

(ACN 053 799 410) (IN LIQUIDATION)

AND

IN THE MATTER OF JETSTONE PTY LTD

(ACN 108 153 617) (IN LIQUIDATION)

AND

IN THE MATTER OF NETWORK COMPANY PTY LTD

(ACN 101 151 400) (IN LIQUIDATION)

AND

IN THE MATTER OF PAGELIGHT NOMINEES PTY LTD

(ACN 109 455 110) (IN LIQUIDATION)

AND

IN THE MATTER OF KINGDREAM PTY LTD

(ACN 092 481 377) (IN LIQUIDATION)

AND

IN THE MATTER OF JUSON PTY LTD

(ACN 008 998 927) (IN LIQUIDATION)

AND

IN THE MATTER OF WESTSIDE BRISBANE DEVELOPMENTS PTY LTD

(ACN 116 479 013) (IN LIQUIDATION)

AND

IN THE MATTER OF FORRESTVIEW NOMINEES PTY LTD

(ACN 063 440 102) (IN LIQUIDATION)

AND

IN THE MATTER OF EASTLANDS PTY LTD

(ACN 009 349 053) (IN LIQUIDATION)

REASONS FOR JUDGMENT ON APPLICATIONS FOR REPLACEMENT OF LIQUIDATORS, DEED ADMINISTRATORS AND CREDITOR TRUST TRUSTEES

Introduction

1                     Following the combination of national accountancy firm McGrathNicol with the accountancy firm, PPB, three applications have been brought before the Court for the replacement of liquidators, deed administrators and trustees of Creditors’ Trusts who were previously associated with PPB and who will not be continuing with the combined entity.  For the reasons that follow, I was prepared to make orders on 31 October 2007 giving effect to the proposed replacements following upon the resignations of the previously appointed officers who are not continuing.  There were associated orders for the notification of creditors and liberty to creditors to apply in relation to those orders.  I did not accept the application for orders that the costs of these applications be in the various administrations to which they relate.   I gave the plaintiffs liberty to apply to vary the orders made on 31 October 2007.  Two minor variations affecting the orders made in WAD178 of 2007 have been proposed.  I have therefore reissued that order with those minor variations and omitted from them the liberty to the plaintiffs to further vary them.

2                     I now publish the reasons for the orders which I made on 31 October 2007 and which, in WAD178 of 2007, are made in slightly varied form today.

Application for replacement of liquidators – WAD177/2007

3                     Clifford Stuart Rocke and Jeffery Laurence Herbert in their capacities as liquidators of a company designated only as ACN 080 794 636 Pty Ltd (In Liquidation), (previously known as Downunder Submersible Motors Pty Ltd (hereinafter referred to as DUSM)) and Norman Mel Ashton as liquidator of Keyros  Pty Ltd (In Liquidation) (Keyros) apply for declarations that they have resigned from their respective offices as liquidators of those companies.  Both companies were a creditors’ voluntary winding up.  The plaintiffs seek orders that the vacancies be filled by the appointments in their place of:

(i)         Andrew John Birch and Simon Andrew Read as liquidators of DUSM;

(ii)        Andrew John Birch as liquidator of Keyros.

They seek orders that creditors of the two companies be advised by letter within 21 days of the appointment of the new liquidators and that any creditor have liberty to apply within 21 days of receipt of the letter to seek a variation of any orders made pursuant to the originating process.  They also seek an order that the costs of the application be costs apportioned equally in the winding up of the two companies.

Application for replacement  of deed administrators and trustees of Creditors’Trusts – WAD 178/2007

4                     By this application a declaration is sought that Clifford Stuart Rocke has resigned as deed administrator from Omegatrend International Pty Ltd (subject to Deed of Company Arrangement), Omegatrend Australia Pty Ltd (subject to Deed of Company Arrangement) and Omegatrend Global Pty Ltd (subject to Deed of Company Arrangement).  A declaration is also sought, pursuant to s 449D of the Corporations Act 2001 (Cth) (the Act) and, alternatively, s 447A of the Act that any vacancy in the office of deed administrator arising by reason of Mr Rocke’s resignation will not be filled.

5                     A declaration is sought that Norman Mel Ashton has resigned as deed administrator from Kitcher Property Investments Pty Ltd (subject to Deed of Company Arrangement) (Receiver and Manager Appointed), Banwell Pty Ltd (subject to Deed of Company Arrangement) (Receiver and Manager Appointed) and Old Ferry Co Pty Ltd (subject to Deed of Company Arrangement) (Receiver and Manager Appointed).  An order is sought pursuant to s 449D and, alternatively, s 447A of the Act that any vacancy in the office of deed administrator of those companies arising by reason of Mr Ashton’s resignation be filled by the appointment of Andrew John Birch to hold office together with Simon Andrew Read who is an existing deed administrator of the companies. 

6                     Declaratory orders are sought that Norman Mel Ashton, in his capacity as trustee, resign from the KPI Creditors’ Trust Deed and the Banwell Creditors’ Trust Deed and that Jeffery Laurence Herbert, in his capacity as trustee, resign from the Carr Civil Contracting Pty Ltd Creditors’ Trust.  Orders are sought pursuant to s 77 of the Trustees Act 1962 (WA) that the vacancies thus created be filled by the appointment of Andrew John Birch to hold office with Simon Andrew Read, an existing trustee of the relevant creditors’ trust. 

7                     Notification of creditors of the companies and the creditors trusts is also proposed.  The notification would involve letters to all creditors with debts of A$50 or greater, advertisement in national and international newspapers, email copies of the letter to be sent to every person in Malaysia and Singapore in relation to whom the administrators have an email address and placement of the letter on the McGrathNicol website.

8                     Again creditors would be given liberty to apply to the Court within 21 days of receipt of the relevant letter seeking a variation of any orders made pursuant to the originating process.  It is proposed that costs of the application be apportioned equally in the administration of the companies and the Creditors’ Trusts.

Application for replacement of liquidators – WAD179 of 2007

9                     Clifford Stuart Rocke, Jeffery Laurence Herbert and Ian Menzies Carson seek orders by way of declarations that they have resigned from a large number of companies, all but one of which are associated with the Westpoint Group.  They seek the appointment in their place of Andrew John Birch to hold office together with Simon Andrew Read, an existing liquidator of the relevant companies. 

Statutory framework

10                  Chapter 5 of the Act is entitled “External administration”.  Part 5.3A is entitled “Administration of a company’s affairs with a view to executing a deed of company arrangement”.  Division 13 of Pt 5.3A is entitled “Powers of Court”.  It comprises ss 447A to 447F.  Section 447A provides:

(1)       The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.

(2)       For example, if the Court is satisfied that the administration of a company should end:

(a)        because the company is solvent; or

(b)       because provisions of this Part are being abused; or

(c)        for some other reason;

the Court may order under subsection (1) that the administration is to end.

(3)       An order may be made subject to conditions.

(4)       An order may be made on the application of:

(a)        the company; or

(b)       a creditor of the company; or

(c)        in the case of a company under administration – the administrator of the company; or

(d)       in the case of a company that has executed a deed of company arrangement – the deed’s administrator; or

(e)        ASIC; or

(f)        any other interested person.

11                  Division 15 of Pt 5.3A is entitled “Removal, replacement and remuneration of administrator”.  It comprises ss 449A to 449E.  Section 449D provides:

(1)       Where the administrator of a deed of company arrangement:

(a)        dies; or

(b)       becomes prohibited from acting as administrator of the deed; or

(c)        resigns by notice in writing given to the company;

the Court may appoint someone else as administrator of the deed.

(2)       Where a deed of company arrangement has not yet terminated, but for some reason no administrator of the deed is acting, the Court may appoint a person as administrator of the deed.

(3)       An appointment may be made on the application of ASIC or of an officer, member or creditor of the company.

12                  Part 5.4B of the Act deals with winding up in insolvency or by the Court.  Division 2 relates to court-appointed liquidators.  It comprises ss 472 to 481.  Section 473 contains general provisions about liquidators.  It provides, inter alia:

(1)       A liquidator appointed by the Court may resign or, on cause shown, be removed by the Court.

...

(7)       A vacancy in the office of a liquidator appointed by the Court must be filled by the Court.

(8)       If more than one liquidator is appointed by the Court, the Court 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 any one or more of the persons appointed. 

13                  Part 5.5 of the Act deals with voluntary winding up.  Division 4 contains provisions relating to voluntary winding up generally.  It comprises ss 501 to 512 inclusive.  Section 502 provides:

If from any cause there is no liquidator acting, the Court may appoint a liquidator.

Section 503 provides:

The  Court may, on cause shown, remove a liquidator and appoint another liquidator.

14                  Section 77 of the Trustees Act provides:

(1)       The Court may, whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient, difficult or impracticable so to do without the assistance of the Court, make an order for the appointment of a new trustee or new trustees, either in substitution for, or in addition to, any existing trustee or trustees, or although there is no existing trustee.

(2)       In particular, and without limiting the generality of the provisions of subsection (1), the Court may make an order appointing a new trustee in substitution for a trustee who –

(a)        desires to be discharged;

...

(3)       An order under this section, and any consequential vesting order or conveyance, does not operate further or otherwise as a discharge to any discharged, former or continuing trustee than an appointment of new trustees under any power for that purpose contained in any instrument would have operated.

Subsections (4) and (5) are not relevant for present purposes.

The Creditors’ Trust Deeds – resignation provisions

15                  Each of the three Creditors’ Trust Deeds which is associated with a Deed of Company Arrangement contains provision for the trustee to resign by giving not less than 30 days prior notice to the creditors and to the company.  In that event the trustee is required to convene a meeting of creditors for the purpose of appointing a replacement trustee. 

The restructuring behind the applications

16                  These applications arise out of a restructuring involving a national accounting firm McGrathNicol and PPB (WA) Pty Ltd which is part of PPB, described by Mr Read in his affidavits as “a national accounting practice that consists of individually owned and operated State practices specialising in corporate insolvency and reconstruction”.  Associated with the restructuring, Messrs Rocke, Herbert, Ashton and Carson have given notice of their resignations as liquidators, deed administrators and trustees of Creditors’ Trusts in connection with the companies mentioned in the applications now before the Court.  Where applicable, the resigning liquidators and administrators have provided Mr Read with appropriate Forms 505 for lodgment with the Australian Securities and Investments Commission (ASIC) under the Corporations Regulations 2001.

17                  The sequence of events relevant to the applications, as appears from affidavits filed in support of them and sworn by Mr Read, is:

1.         Simon Read became a partner in PPB (WA) in 1993.  At that time the PPB practice had not been incorporated.

2.         In June 2005, Norman Mel Ashton resigned as a partner of PPB (WA).

3.         On or about 31 March 2006, Jeffery Laurence Herbert resigned as a partner of PPB(WA).

4.         On or about 30 June 2006 Simon Read, Andrew Birch and Clifford Rocke, the three remaining partners of PPB(WA) agreed to incorporate it as PPB(WA) Pty Ltd and become that company’s executive directors.

5.         On or about 4 July 2007 Andrew Birch and Simon Read and a majority of their staff joined McGrathNicol. 

6.         On or about 17 July 2007, Clifford Rocke resigned as an executive director of PPB(WA) Pty Ltd and on or about 29 July 2007, informed Mr Read that he had elected not to continue his employment with that company.

7.         On or about 30 July 2007 the practice operated by PPB(WA) Pty Ltd ceased and Messrs Read, Birch and a majority of the company’s staff joined McGrathNicol.

8.         McGrathNicol does not have any affiliation with any of the other PPB State practices.

As a result of the effective takeover of the PPB practice by McGrathNicol and the staff changes associated with it, Mr Ashton who was liquidator of Keyros and Messrs Herbert and Rocke who were liquidators of DUSM would no longer be involved in the day-to-day management of the administration of those companies. 

18                  Messrs Ashton, Herbert and Rocke had also been appointed as deed administrators or trustees of the various companies referred to in application WAD178 of 2007.  In an affidavit sworn in that application, Mr Read said that the result of the McGrathNicol and PPB combination and the staff changes meant that those appointees would no longer be involved in the day to day management of the administration of the companies or the creditors’ trust deeds. 

19                  Relevantly to application WAD179 of 2007, Ian Menzies Carson is a partner of the PPB(Vic) practice.  He, along with Messrs Herbert and Rocke, were Court appointed liquidators of the various companies referred to in the application.  Mr Read contended that the result of the PPB/McGrathNicol combination would be that the previous appointees would no longer be involved in the day-to-day management of the administration of the companies and that it would be necessary to change the appointees in order to finalise the liquidations of the companies.

Evidence relevant to the continuity of the administrations following the proposed replacements

(i)         Application WAD 177 of 2007 – DUSM and Keyros

20                  In each of the applications, according to Mr Read, the proposed replacement appointees were persons involved in and familiar with the work of the various administrations and trusteeships and would be able to provide continuity in relation to them.    

21                  In his affidavit filed in WAD177 of 2007 Mr Read stated his belief that staff with day- to-day knowledge of the status of the external administration for each of DUSM and Keyros would continue to be employed by what he called the “combined entity”.  The resigning liquidators had conducted detailed file handovers so that continuing staff would have the requisite knowledge in relation to the ongoing conduct of the liquidations.  He named two staff members who would continue to be employed by the combined entity. 

22                  Mr Read said it was the practice of his office that once a month a “file review” of every external administration appointment was conducted.  He set out the file review process.  A job controller, the employee responsible for day-to-day management of the relevant external administration, would complete a file review form.  The file review form would contain:

1.         Background information on the case.

2.         A summary of the key issues.

3.         A task list, detailing items requiring action, who was required to take the action and the time by which the action was required.

4.         Details of work in progress and costs.

The job controller would discuss each individual file review with the manager of the relevant external administration.  Signed file reviews were provided to the lead appointee or the executive director in charge of the day-to-day control of the external administration for further reviews. 

23                  Mr Read described “leadership meetings” held each week, normally on a Monday.  They are attended by all available managers and at least one executive director.  Discussions are often held at these meetings about the progress of individual external administrations and major issues arising from their day-to-day management.  The purpose of these meetings is to ensure that the leadership group is kept up to date with all external administrations in the office so that any member of the group would be able to take over the day-to-day running of that administration if required.  Mr Read himself has regularly attended leadership meetings where the issues and progress of the external administrations of DUSM and Keyros have been discussed.

24                  In relation to DUSM he stated his belief that it would cost approximately $3,000 to conduct a creditors meeting for DUSM.  Its liquidation is 75% complete.  The only remaining tasks for the liquidators are to:

1.         Investigate and potentially pursue an additional preference action.

2.         Call a final meeting of creditors.

3.         Issue a final dividend.

4.         Finalise the liquidation.

He stated his belief that Mr Birch and he have sufficient knowledge of the DUSM file to take over from Messrs Rocke and Herbert as its liquidators.

25                  Mr Birch, in a separate affidavit sworn in the same matter, dealt specifically with Keyros.  He said that the liquidation of Keyros was finalised on or about 23 May 2005 and it was deregistered.  However in February 2006 Mr Jared Palandri, a supervisor at the time but no longer employed by his firm, identified assets allegedly hidden by a director of Keyros.  Keyros’ registration was reinstated on 21 February 2006 and Mr Ashton resumed office as its liquidator.  Copies of the relevant Supreme Court orders were annexed to Mr Birch’s affidavit. 

26                  Mr Birch said that he was informed by Mr Ashton on or about 7 September 2007 of Mr Ashton’s intention to resign as liquidator of Keyros.  He was provided with the relevant ASIC form and a written notice of resignation.  File reviews for Keyros were performed by Mr Palandri and then further reviewed by another staff member, Kirman, and by Mr Birch.  Mr Birch stated his belief that it would cost approximately $3,000 to conduct a creditors’ meeting for Keyros.  The remaining tasks for the Keyros liquidators are to investigate and potentially pursue actions against the former director, call a final meeting of creditors, issue a final dividend (if funds permit) and finalise the liquidation.  Mr Birch stated his belief that he has sufficient knowledge of the Keyros file to replace Mr Aston as its liquidator.  He has consented to act as liquidator.

(ii)        Application WAD178 of 2007 – Deeds of Company Arrangement and Creditors’ Trusts

27                  In application WAD178 of 2007, Mr Read swore an affidavit which identified staff members continuing with the “combined entity” who had day-to-day knowledge of the status of the external administrations for each of the companies the subject of the application in WAD178 of 2007.  Each of these is a company subject to a deed of company arrangement.  In addition, there are three Creditors’ Trusts for which Messrs Herbert, Ashton and Read are trustees. 

28                  Mr Read identified Mr Kirman, Ms Breadmore, Mr Rew and Ms Stirling as staff members familiar with these administrations who would continue to be employed by the combined entity.  He described again the file review and leadership meeting process referred to in his affidavit in proceedings WAD177 of 2007.

29                  At least one of Messrs Ashton, Herbert and Rocke was appointed as deed administrator or trustee of the various companies and creditors’ trust deeds the subject of the application.  In relation to companies in which Mr Rocke was deed administrator, Mr Read had been provided with Mr Rocke’s written notice of resignation.  File reviews for those companies were performed by Mr Abberton, a senior analyst then, but no longer employed by Mr Read’s firm, who acted as the job controller.  These were further reviewed by Messrs Kirman and Birch.  Mr Read believes that due to the large number of creditors spread both nationally and internationally it would cost approximately $16,000 to conduct a creditors’ meeting for the companies affected by Mr Rocke’s resignation.  He stated his belief that the administration of the deed funds of the three Omegatrend companies, was 90% complete and did not require the appointment of a further deed administrator.

30                  Mr Read referred to the companies in respect of which Mr Ashton was a deed administrator, they being Kitcher Property Investments Pty Ltd, Banwell Pty Ltd and Old Ferry Co Pty Ltd (the Ashton companies).  Mr Ashton was also a trustee of the KPI Creditors’ Trust and the Banwell Creditors’ Trust (the Ashton trusts).  Mr Read and Mr Ashton had been appointed deed administrators of the Ashton companies on 22 November 2002.  Mr Ashton informed Mr Read of his intention to resign as deed administrator of the Ashton companies on or about 7 September 2007.  File reviews for the Ashton companies were performed by Ms Breadmore who acted as job controller and were further reviewed by Messrs Kirman, Birch and himself.  Administration of the deed funds of the Ashton companies is 80% complete.  It would cost approximately $11,500 for the Ashton companies to conduct creditors’ meetings to approve the resignation of Mr Ashton and the appointment of Mr Birch.  Mr Read believes that Mr Birch has sufficient knowledge of the files of the Ashton companies to replace Mr Ashton as their deed administrator.

31                  A similar position is said to exist in relation to the Ashton trusts.  Mr Read believes that it would take approximately 30 days and cost a total of about $8,000 for the Ashton trusts to conduct creditors’ meetings in order to approve the resignation of Mr Ashton and the appointment of Mr Birch.  Again he stated his belief that Mr Birch had sufficient knowledge of the files of the Ashton trusts to replace Mr Ashton as their trustee.  

32                  Mr Read referred to the Carr Civil Contracting Creditors’ Trust of which he and Mr Herbert were appointed trustees in or about April 2004.  The file reviews for that trust were performed by Ms Stirling who acted as job controller.  They were further reviewed by Messrs Kirman, Birch and himself.  He stated his belief that the administration of the trust fund of the Carr Civil Contracting Creditors’ Trust was 75% complete.  It would take about 30 days and cost about $4,000 to conduct a creditors’ meeting to approve the resignation of Mr Ashton and the appointment of Mr Birch. 

(iii)       Application WAD179 of 2007 – Westpoint companies and Pasticceria Australia Pty Ltd

33                  Mr Read gave similar evidence in relation to the various companies referred to in application WAD179 of 2007.  All but one of the companies the subject of this application are related to Westpoint Corporation Pty Ltd (In Liquidation).  The company not so related is Pasticceria Australia Pty Ltd (In liquidation) (Pasticceria).  In each case the liquidator was Court appointed.  Mr Read said that the liquidations of the companies to which Mr Rocke had been appointed as liquidator were smaller and less complex than those to which Mr Herbert had been appointed and would not require the joint and several appointment of three liquidators.  He believed that Mr Birch had sufficient knowledge of the files of the companies to which Mr Rocke had been appointed to replace Messrs Rocke and Carson as their liquidator.  He also believed that Mr Birch had sufficient knowledge of the files relating to the companies of which Mr Herbert had been a liquidator to replace him in that office. 

Submissions in support of the applications

34                  In support of the application in WAD177 of 2007 it was said that the practical effect of the orders proposed would be that Messrs Rocke and Herbert would be removed in their capacity as liquidators of DUSM.  I interpolate that the removal would be affected as a consequence of their tendering their resignations. As Barrett J set out in Re Application of  Vouris (2004) 49 ACSR 543 the Act is silent on the effect of the resignation of one of several jointly appointed liquidators in a voluntary winding up.  Messrs Read and Birch would fill the vacancies in the office of liquidator arising by reason of the resignations of Messrs Rocke and Herbert.  Mr Ashton would be removed in his capacity as liquidator of Keyros and Mr Birch would fill the resulting vacancy.  The costs of the application, if the orders sought were made, would be apportioned equally between DUSM and Keyros. 

35                  It was submitted that pursuant to s 502 of the Act the Court may fill a vacancy in the office of a liquidator where such a vacancy exists.  Reference was made to the judgment of Barrett J in Re McGrath and Anor (as liqs of HIH Insurance Ltd (in liq)) (2005) 54 ACSR 55 in which it was held that the Court can make a prospective order appointing a liquidator contingent upon a vacancy being created by the liquidator’s resignation.  Re Application of Vouris (2004) 49 ACSR 543 was also cited.

36                  It was submitted that the Court may consider an application in groups according to the source and nature of the appointment.  The plaintiffs submitted that each appointment of liquidators to the companies should be grouped according to the nature of the liquidator or liquidators’ appointment. 

37                  In relation to DUSM it was submitted that under s 499(5) of the Act a liquidator has the power to resign subject to lodging a Form 505 with ASIC.  Messrs Rocke and Herbert had been appointed as liquidators of DUSM and had provided Forms 505.  A similar position applied in relation to Mr Ashton as liquidator of Keyros. 

38                  On the question of the costs of the application, the plaintiffs submitted that the costs incurred in bringing it were properly incurred in winding up the companies.  The liquidators of the companies, it was submitted, should be indemnified from the assets of the companies for the costs incurred in bringing the application on their behalf: In the matter of The Bonang Gold Mining Company, Limited (1893) 14 LR (NSW) Eq 262 and Re Mendarma Pty Ltd (In liq) (No 2) (2007) 61 ACSR 601.

39                  Similar submissions were made in relation to the replacement of the deed administrators and trustees sought in WAD178 of 2007. It was pointed out that the practical effect of the orders sought would be that Mr Rocke would be removed in his capacity as deed administrator of the Omegatrend companies and that vacancy would not be filled.  Mr Ashton would be removed in his capacity as deed administrator of the companies to which he had been appointed and Mr Birch would fill the vacancy in the office of a joint and several deed administrator arising by reason of Mr Ashton’s resignation.  He would hold office together with Mr Read who would continue as deed administrator of those companies.  Mr Herbert would be removed in his capacity as trustee of the Carr Civil Contracting Creditors’ Trust and his vacancy would be filled by Mr Birch who would hold office with Mr Read who would continue as a trustee.  Mr Ashton would be removed in his capacity as trustee from the trusts for which he was trustee and his vacancy would be filled by Mr Birch who would hold office with Mr Read continuing as a trustee of those trusts.

40                  Reference was made to s 449D of the Act and the decision of Barrett J in Re Application of Vouris 49 ACSR 543 that the Court can make a prospective order appointing a deed administrator contingent upon a vacancy being created by the resignation of a deed administrator.  Reference was made also to s 447A as providing the Court with a very wide power to make such order as it thinks appropriate.  Barrett J considered that the powers conferred on the Court by s 447A of the Act were wide enough to give the Court power to appoint a joint and several deed administrator.

41                  In relation to the Creditors’ Trusts reliance was placed on s 77 of the Trustees Act and s 93 of that Act under which an existing or incumbent trustee could bring to Court an application under s 77. 

42                  In relation to the resignation of Mr Rocke as a joint and several deed administrator, reference was made to the difficulty identified by Barrett J in Re Application of Vouris 49 ACSR 543 where a joint and several liquidator resigns or dies leaving only one of the joint and several liquidators remaining.  Barrett J, it was said, held that two options were available to the Court in those situations:

1.         Appoint a second liquidator jointly and severally to fill the vacancy; or

2.         Remove the remaining jointly and severally appointed liquidator and then appoint the previously remaining liquidator as a sole liquidator.

43                  It was said that in the case of a deed of administration the difficulties identified  in Re Application of Vouris  49 ACSR 543 would not arise where two or more deed administrators remained jointly and severally appointed.  The plaintiffs submitted that Birch and Read remained jointly and severally appointed deed administrators of the companies from which Mr Rocke had offered his resignation so that no vacancy in the office of a joint and several deed administrator arose by reason of that resignation.

44                  It was said that the proposed orders both in respect of the deeds of administration and the creditors’ trusts would not prejudice creditors.  Notification and the liberty to apply would give any objecting creditor an opportunity to approach the Court. 

45                  Again, it was submitted that pursuant to s 443 of the Act a deed administrator had priority to recover costs and expenses properly incurred from company assets.  Section 71 of the Trustees Act provided a trustee with the ability to recover costs and expenses properly incurred from trust assets.  The plaintiffs submitted that the costs incurred in bringing the application were properly incurred in the administration of the deeds and the Creditors’ Trusts.  On that basis the deed administrators and trustees should be indemnified from the assets of the companies for the costs incurred in bringing this application on their behalf.  It was submitted that the costs be apportioned equally between the companies. 

46                  In application WAD 179 of 2007 relating to the replacement of the liquidators, similar submissions were made and it is not necessary to revisit them here.

A note on the Creditors’ Trusts

47                  “Creditors’ Trusts” have been explained in a regulatory guide issued by the ASIC in May 2005 thus:

1.1       A creditors’ trust in a [Deed of Company Arrangement] DCA is a mechanism used to accelerate a company’s exit from external administration.  To date, it has been used most commonly (but not exclusively) in connection with the rehabilitation of public companies listed on the Australian Stock Exchange Ltd (ASX).  In some cases, this leads to a ‘backdoor’ listing.

1.2       Typically, under the terms of the DCA and one or more interconnected deeds, a trust entity is created and the company’s obligations to some or all of the creditors bound by the DCA are compromised and transferred to the trust.  Those creditors become beneficiaries of the trust.  Occasionally, there may be separate creditors’ trusts for employee and non-employee creditors, or for secured and unsecured creditors.

1.3       The company and/or third parties promise to make one or more payments (or transfer other property) to the trustee in satisfaction of the creditors’ claims against the company.  In return, the creditors’ rights against the company are extinguished.

1.4       The trustee of the new trust becomes solely responsible to the former creditors (now beneficiaries) for:

            (a)        ensuring that the company and/or other third parties perform their payment and other obligations to the trustee;

            (b)        determining how much each of the former creditors is entitled to receive from the trust; and

            (c)        in due course, making any distribution to those former creditors. 

48                  The ASIC guideline notes that it is usual for the deed of company arrangement to be effectuated and to terminate after creditors’ claims against the company have been removed in that way.  When the deed of company arrangement terminates, the company ceases to be externally administered, the directors regain full control and it is no longer required to use the endorsement “subject to deed of company arrangement” on its public documents: see s 450E(2) of the Act.  The relevant ASIC guideline is entitled ‘External administration: Deeds of company arrangement involving a creditors’ trust A Guide for registered liquidators appointed under Part 5.3A’.  The guide is numbered Regulatory Guide 82 and was published in May 2005.  The regulatory guide is quoted as an explanation of the creditors’ trust in Ford’s Principles of Corporations Law, (Butterworths) Part VII Chapter 26 at [26.200].  Creditors’ trusts have been helpfully discussed in Heaver-Wren T, “DOCA Termination through Creditors’ Trust Deeds” (2004) 12 Insolv LJ 117-120; see also McKenzie R, “Creditors’ Trusts and the ASIC Guidelines” (2005) 17(3) Australian Insolvency Journal 4-6; Proudman D, “Some Issues Surrounding Creditors’ Trust Deeds Parts 1 and 2” (2005) 6 INSLB 1-5 and 31-34.   The mechanism has been touched on in the Supreme Court decisions: Ian Charles Francis and Michael Patrick Joseph Ryan as Trustees of The West Australian Shed Commercial Pty Ltd Creditors Trust Deed and West Australian Shed Co Pty Ltd Creditors Trust Deed [2003] WASC 39 (Pullin J); Open Telecommunications Ltd (Subject to Deed of Company Arrangement) [2003] NSWSC 1198 (Hamilton J) and Rupert Co v Chameleon Mining (2006) 24 ACLC 635 (Austin J).

49                  The West Australian Shed Co case involved an application to vary the terms of a creditors’ trust deed to allow for payment of a single lump sum to the trust in lieu of a requirement that 50% of the net profit generated by the companies in two successive financial years be paid in.  The variation was there approved.

50                  In  Open Telecommunications Ltd (Subject to Deed of Company Arrangement) [2003] NSWSC 1198 a deed administrator applied to Hamilton J for directions under s 447D of the Act that he would be justified in executing and giving effect to a varied deed of company arrangement and a proposed creditors’ trust deed.  In discussing the creditors’ trust deed, Hamilton J observed (at [4]):

The mechanism proposed by the deed administrator is quite ingenious.  It is for the adoption of an amended DCA coupled with a creditors’ trust deed.  This would remove the sums promised to creditors from the ambit of the DCA to the ambit of a deed of trust.  When this is done, the DCA could be discharged; the company would no longer be subject to a DCA; and it is likely that it could be restored to the Stock Exchange board and the contemplated additional capital sums raised, both to feed the promised amounts into a scheme for the creditors and to restore the company to viability.  Although this would take the management of the money outside the ambit of the CA, it would be held and supervised in the creditors’ interests according to the general law of trusts and their position would be thus protected.  Even disputes as to entitlement, if they arose, would have a mechanism for their resolution through the provisions of s 63 of the Trustee Act 1925.

His Honour held in that case that there could be no objection on the ground of legality or propriety to the course that the administrator proposed to follow and gave directions accordingly.  The arrangement was, of course, subject to approval by the creditors for its implementation. 

51                  In Rupert Co 24 ACLC 635, Austin J terminated a winding up of a company under s 482 of the Act having regard to the effect of a deed of company arrangement and creditors’ trust which left the company with no significant body of creditors.  As a result of those arrangements, it was solvent.  The liquidator had advertised for creditors to lodge their claims against the trust.  Describing the effect of the deed of company arrangement and the creditors’ trust his Honour said (at [18]):

… the effect of the DOCA and the Creditors’ Trust is to transfer the creditors’ claims to the Trust and release the company from liability to pay those debts. 

He observed that the arrangements appeared to conform to the ASIC guidelines of May 2005 and that ASIC did not oppose the application.

52                  The three creditors’ trusts affected by the proposed orders are the KPI Creditors’ Trust, the Banwell Creditors’ Trust and the Carr Civil Contracting Creditors’ Trust.

53                  The terms of the KPI Creditors’ Trust are found in an amended Creditors’ Trust Deed which was executed in December 2003 and took effect upon the termination of an amended varied deed of company arrangement executed by the company and the administrators on the execution date.  The trust assets comprised the company’s assets, a fund and the sum of $10.  The fund was to be formed from the proceeds of realisation of the company’s assets.  Those assets were all of the company’s assets or property and all of the assets or property of the KPI Tri Unit Trust and the KPI Trust No 2.  Relevantly, cl 6 provided:

6.1       The Trustees shall consider the Claims of each of the Creditors for the purpose of determining the Creditors’ Entitlements under this Trust Deed.

6.2       For the purposes of determining the Entitlements, to the extent that those Entitlements have not been determined under the Amended Varied DOCA, regulations 5.6.39 to 5.6.72 of the Corporations Regulations shall apply to this Trust Deed and to the Trustees as if the reference to the liquidator were references to the Trustees and references to winding up were references to this Trust Deed and with such other modifications as are necessary to give effect to this Trust Deed. 

6.3       Subdivision A to E of Division 6 of Part 5.6 of the Corporations Act apply to the admission of Claims and payment of Entitlements under this Trust Deed as if the references to winding-up were references to this Trust Deed and with such other modifications as are necessary to give effect to this Trust Deed.

54                  Clause 8 which governed the distribution of the Fund provided, inter alia, that the trustees were to pay from the Fund in priority following the administrators and trustees’ remuneration:

… Creditors who would, if the Company were in liquidation, be entitled to a priority under section 556 of the Corporations Act, to the extent necessary to satisfy their Claims in full; …

Thereafter the trustees were required to pay what was called the ‘Kitcher Payment’ if it had not already been paid pursuant to the provisions of the Amended Varied DOCA.  The Kitcher Payment meant the payment of the sum of $300,000 (or the assignment or transfer of an equivalent value of the company’s assets) from the company’s assets or the Fund by the company (by the Administrators) to the director.

55                  These provisions are mentioned to show the close relationship between the amended varied DOCA and the KPI Creditors’ Trust.

56                  Similar provisions were found in the Banwell Creditors’ Trust Deed which had a similar relationship to a deed of company arrangement executed by Banwell Pty Ltd (subject to Deed of Company Arrangement) and the Banwell administrators.

57                  The Carr Civil Contracting Creditors’ Trust had similar terms and a similar relationship to a deed of company arrangement executed by Carr Civil Contracting Pty Ltd (Administrators appointed) pursuant to a resolution of creditors on 5 April 2004.

Whether the orders sought should be made

58                  In my opinion orders giving effect to the proposed replacements of the various liquidators, administrators and trustees can and should be made.  In relation to the application under the Trustees Act I regard that application as falling within the accrued jurisdiction of the Court by reason of the close connection between the Creditors’ Trusts and the Deeds of Company Arrangement to which they related.  The replacement of the trustees arises out of the same set of events as has given rise to the application for the appointment of new liquidators and deed administrators.  Although the term “the Court” in s 77 of the Trustees Act is defined as the Supreme Court of Western Australia, this Court may exercise the jurisdiction as part of its federal jurisdiction in accordance with Australian Securities and Investments Commission v Edensor Nominees Pty Ltd  (2001) 204 CLR 559. 

59                  I do not consider it necessary to make the various declarations of vacancy which were sought in the originating applications.  Moreover, in my opinion, the text of the letters proposed to be sent to the creditors should not be framed so as to give the appearance that any of the liquidators, administrators or trustees has been removed by order of the Court. 

60                  So far as the costs are concerned, I have had regard to the submissions of the plaintiffs that they should be treated as costs in the liquidations, deed administrations and trusteeships affected by these orders.  It was submitted that the reorganisation should be regarded as an incident of the administrations and should, in effect, be part of their overhead costs.  I do not accept that submission.  In my opinion it is quite inappropriate that costs flowing from a voluntary restructuring of the firm whose members have assumed these various offices should effectively be visited upon creditors.  I can see no reasonable basis upon which the orders sought could properly be made.  The costs orders will be refused and I will make orders to make it clear that these costs are not recoverable out of the assets of the companies or trusts affected by them.

Associate:

Dated:         6 November 2007