FEDERAL COURT OF AUSTRALIA

Dudley, in the matter of Manamy Pty Ltd v Deputy Commissioner of Taxation [2015] FCA 1448

IN THE MATTER OF MANAMY PTY LTD ACN 073 817 704

THE COURT ORDERS THAT:

1.    The role of the parties referred to in the originating application as applicant, first respondent and second respondent be amended to plaintiff, first defendant and second defendant.

2.    The Court notes the proposed resignation of the plaintiff as liquidator of the second defendant, and declares it is appropriate for him to resign as liquidator as proposed.

3.    Pursuant to s 473(7) of the Corporations Act 2001 (Cth), the vacancy in the office of liquidator which will arise upon the resignation of the plaintiff as court-appointed liquidator of the second defendant be filled by Jennifer Elizabeth Low of Sheridans Accountants, Level 9, 40 St Georges Terrace, in the State of Western Australia.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF MANAMY PTY LTD ACN 073 817 704

REASONS FOR JUDGMENT

1    On 19 August 2015, the Court ordered that the second defendant, Manamy Pty Ltd, be wound up in insolvency and that the plaintiff, Mr Gregory Bruce Dudley, be appointed as liquidator of the affairs of Manamy.

2    Mr Dudley now proposes to resign voluntarily from his role as court-appointed liquidator due to a conflict of interest which has since come to light, and applies under s 473 of the Corporations Act 2001 (Cth) for an order that the vacancy which will arise upon his resignation be filled by Ms Jennifer Elizabeth Low of Sheridans Accountants.

3    Following the filing of written submissions by the plaintiff, this application was dealt with on the papers. (The first defendant, the Deputy Commissioner of Taxation, filed a notice of appearance on 19 November 2015 indicating it neither consents nor opposes the application, and did not file submissions.)

Background

4    In his affidavit dated 4 November 2015, Mr Dudley sets out the following circumstances relating to his appointment by the Court as liquidator of Manamy and subsequent discovery of a conflict of interest:

    On 30 March 2015, Gadens Lawyers on behalf of the Deputy Commissioner of Taxation, a creditor who intended to apply for an order to wind up Manamy, approached Mr Dudley’s partner at RSM Bird Cameron Partners (now known as RSM Australia Partners), Mr Mark Conlan, to inquire whether he would be able to be appointed as liquidator of Manamy if a winding up order was made. Mr Conlan was not available to accept the appointment, and referred the invitation to Mr Dudley.

    Mr Dudley, and other staff members on his behalf, then completed each of the steps identified on the RSM Bird Cameron internal checklist headed “Conflict Search/Checklist” in order to check whether there was any impediment, by reason of a conflict of interest, to him acting as liquidator of Manamy. The steps completed included: obtaining an ASIC historical extract for Manamy; undertaking a search for Manamy and its directors, including former directors, on an internal database containing all of RSM Bird Cameron’s current and former clients; circulating an email to all RSM Bird Cameron staff requesting a response as to whether any conflict or perceived conflict might exist; and conducting a search of Manamy on a database called “Global Relationship Tracker”, which contains details of client relationships, to establish whether there was any relationship between Manamy and RSM Bird Cameron, or other firms in the RSM international network.

    In reliance on completing the steps in the “Conflict Search/Checklist”, Mr Dudley concluded there was nothing that would affect his objectivity in performing his duties if appointed liquidator of Manamy.

    On 31 March 2015, Mr Dudley consented to acting as liquidator of Manamy.

    On 19 August 2015, Mr Dudley learned that orders were made by the Court for the winding up of Manamy and for his appointment as liquidator of Manamy.

    Subsequently, on 20 August 2015, Mr Dudley’s assistants spoke with Mr Stephen Brian Davis, a director of Manamy, and ascertained that various staff members in the RSM Bird Cameron Geraldton office had been engaged to provide accounting services to Manamy as a trustee for the Davis family trust.

    Further inquiries with the Geraldton office revealed that Mr Dudley’s partner, Mr John Thomson, who was away from the office at the time Mr Dudley’s email was circulated to RSM Bird Cameron staff, had previously been engaged to act for Manamy, instructed by Mr Davis and Ms Louise Davis as directors of Manamy. The entity engaged, Birdandco Nominees Pty Ltd trading as RSM Bird Cameron, was related to RSM Bird Cameron. As the client details had been recorded as “Davis Family Trust”, the connection with Manamy’s directors had not been established at the time of the earlier inquiries.

    As a result of the prior involvement of Birdandco Nominees Pty Ltd with Manamy, Mr Dudley decided it was no longer appropriate for him or any other member of RSM Bird Cameron to retain the appointment as liquidator of Manamy.

Plaintiff’s submissions

5    With regard to the relevant legal principles, Mr Dudley submits there is ample support for the proposition that it would not be appropriate for a liquidator to act in that capacity in circumstances where he or she has (or might have) a conflict of interest with the company in liquidation, referring to the following principles and authorities:

(1)    A liquidator must be independent of the company, its directors and shareholders and individual creditors and must act impartially in the discharge of his or her duties and responsibilities: Re Stewden Nominees (No 4) Pty Ltd (1975) 1 ACLR 185 at 187.

(2)    A liquidator must ensure that he or she does not place himself or herself in a position where there is, or might be, a conflict between his or her duty to creditors and members and his or her personal interest: National Australia Bank Ltd v Market Holdings Pty Ltd (in liq) (2001) 161 FLR 1 at 29-30; [2001] NSWSC 253.

(3)    A liquidator may be removed for an actual or apparent conflict of interest, or if his or her conduct is such that a reasonable observer would perceive a lack of impartiality or lack of objectivity: Re Allebart Pty Ltd (in liq) [1971] 1 NSWLR 24 at 30.

(4)    A liquidator may be removed, inter alia, where the liquidator faces a conflict of interest arising from his or her relationships with the company, its management or persons interested in its affairs, or for bias or the appearance of bias: Re Ross Wood & Sons Pty Ltd (in liq); Wood v Targett (1997) 23 ACSR 291 at 298-299.

6    Further, Mr Dudley notes that the duration, stage of the winding up and potential for wasted costs and delay if another liquidator is appointed are relevant considerations for the Court in removing a liquidator. See SingTel Optus Pty Ltd v Weston (2012) 90 ACSR 225 at [165]; [2012] NSWSC 674; Haulotte Australia Pty Ltd v All Area Rentals Pty Ltd (in liq) (2012) 90 ACSR 177; [2012] FCA 615; Re St Gregory’s Armenian School (in liq) (2012) 92 ACSR 588 at [25]-[27]; [2012] NSWSC 1215.

7    Mr Dudley further submits that if cause for the liquidator’s removal is established, he or she will ordinarily be afforded an opportunity to resign, referring to Re Allebart at 31, and says the appointment of a liquidator is a matter for the discretion of the court, citing Re Austral Knitting Mills Ltd (1926) 43 WN (NSW) 131 and Re Obie Pty Ltd (No 1) (1983) 8 ACLR 439.

8    Turning to the facts of this case, Mr Dudley submits there is a conflict of interest or potential conflict of interest between himself and Manamy, of which he was not aware at the time of his appointment as liquidator, as set out above.

9    He says that before consenting to his appointment as liquidator, he conducted all the standard internal checks which RSM Australia Partners normally conducts for conflicts of interest and was satisfied that to the extent the information was available to him at the time, there was no conflict of interest of which he was aware which would preclude him from acting as liquidator.

10    In Mr Dudley’s submission, a potential or actual conflict of interest arises by reason of Manamy being a former client of Birdanco Nominees Pty Ltd, which is related to RSM Bird Cameron, of which Mr Dudley is a partner.

11    He says that as a result of an inadvertent and honest administrative oversight by the Geraldton office staff of RSM Bird Cameron, and despite the comprehensive checks he made for conflicts of interest, he did not know about the relationship between Birdanco Nominees Pty Ltd and Manamy at the time he consented to being appointed as Manamy’s liquidator.

12    In these circumstances, it is submitted there would be no prejudice caused to the company or any of its creditors by reason of Mr Dudley’s proposed resignation and the appointment of a replacement liquidator for the reasons stated in Mr Dudley’s affidavit dated 4 November 2015. Namely, Mr Dudley deposes that the tasks in the course of the liquidation to date are preliminary administrative tasks, such as lodging with ASIC a notice of appointment, advertising his appointment as liquidator in the West Australian newspaper, notifying other potential creditors of Manamy of his appointment and requesting each of Manamy’s directors provide information and deliver him Manamy’s books and records. He says the majority of the substantive liquidation tasks such as taking possession, realisation and distribution of assets of Manamy remain to be conducted by the new liquidator. Further, Mr Dudley says the appointment of a new liquidator will cause no wasted costs to be incurred by any party as he does not seek and waives the right to claim remuneration in relation to the liquidation to date.

13    Therefore, Mr Dudley submits he should be afforded an opportunity to resign voluntarily (rather than being removed by Court order).

14    He states in his affidavit that the proposed substitute to act as court-appointed liquidator, Ms Low, is an appropriate replacement because she has sufficient commercial expertise and qualifications to act as Manamy’s official liquidator, there is no known impediment or conflict of interest which would prevent her from acting in that capacity, and Ms Low has consented to act as Manamy’s official liquidator. In that regard, Mr Dudley annexed Ms Low’s Form 8 consent to act as liquidator of Manamy, dated 30 October 2015, to his affidavit.

CONCLUSION AND ORDERS

15    Section 473(1) and (7) of the Corporations Act provides:

473  General provisions about liquidators

(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.

16    I accept Mr Dudley’s evidence that he inadvertently failed to realise he had a potential or actual conflict of interest with Manamy, despite making certain inquiries prior to consenting to be appointed by the Court as Manamy’s liquidator.

17    In the circumstances, given the requirement that a liquidator maintain high standards of independence and impartiality in relation to the company in liquidation, its directors and its shareholders, it is appropriate for Mr Dudley to resign as liquidator of Manamy. He may do so, pursuant to s 473(1) of the Corporations Act.

18    Further, pursuant to s 473(7), it is appropriate that the vacancy in the office of the liquidator appointed by the Court, on Mr Dudley’s resignation, be filled by Ms Low by order of the Court. On the evidence before the Court, Ms Low appears suitably qualified to act as court-appointed liquidator of Manamy.

19    In the circumstances set out above, the Court makes the following orders:

(1)    The role of the parties referred to in the originating application as applicant, first respondent and second respondent be amended to plaintiff, first defendant and second defendant.

(2)    The Court notes the proposed resignation of the plaintiff as liquidator of the second defendant, and declares it is appropriate for him to resign as liquidator as proposed.

(3)    Pursuant to s 473(7) of the Corporations Act, the vacancy in the office of liquidator which will arise upon the resignation of Gregory Bruce Dudley as court-appointed liquidator of the second defendant be filled by Jennifer Elizabeth Low of Sheridans Accountants, Level 9, 40 St Georges Terrace, in the State of Western Australia.

Associate:

Dated:    17 December 2015