Federal Court of Australia

Cathro (liquidator), in the matter of Petsamo No 14 Pty Ltd (in liq) v Thomassian [2022] FCA 399

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 30.21(1)(b) of the Federal Court Rules 2011 (Cth) the hearing of this proceeding, having been called three times, will proceed in the absence of the second defendant, George Thomassian.

2.    Pursuant to s 1322 of the Corporations Act 2001 (Cth) validating the first plaintiff’s appointment as liquidator of the second plaintiff, nunc pro tunc.

3.    Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), being Schedule 2 to the Act (IPS), that the first plaintiff be entitled, pursuant to s 1274B of the Act, to rely upon the accuracy of the company extract for the second plaintiff prepared by the Australian Securities and Investments Commission (ASIC) as prima facie evidence of the facts recorded therein, including:

(a)    the first defendant and second defendant respectively own one-third and two-thirds of the issued share capital of the second plaintiff; and

(b)    the second defendant ceased to be a director of the second plaintiff on 26 August 2019.

4.    Pursuant to s 90-15 of the IPS the declaration of solvency lodged by the second plaintiff with ASIC on 27 August 2019 is not invalid by reason of any contravention of Arts 1.5, 2.1 and 2.6 of the second plaintiff’s Constitution or by reason of any contravention of s 494 of the Act.

5.    Pursuant to s 1322(4) of the Act the removal of the second defendant, George Thomassian, as a director of the second plaintiff on 26 August 2019 was not invalid by reason of any contravention of Art 2.5 of the second plaintiff’s Constitution.

6.    Pursuant to s 90-15 of the IPS the distribution of a surplus of $3,423,419.69 to the first defendant, Alfred Thomassian, on 8 October 2019 was not invalid.

7.    Pursuant to s 90-15 of the IPS, the first plaintiff is justified in not undertaking any further investigations into the affairs of the second plaintiff.

8.    Pursuant to s 90-15 of the IPS the first plaintiff has leave to distribute the balance of the second plaintiff’s assets in the following manner:

(a)    first, in payment of the plaintiffs’ costs and disbursements of this application and this proceeding;

(b)    second, in payment of the first plaintiff’s expenses of the liquidation (including the costs of this litigation);

(c)    third, in payment of the first plaintiff’s remuneration; and

(d)    fourth, as to the balance, to the legal personal representative of the late George Thomassian.

9.    Pursuant to s 60-11(c), or in the alternative s 90-15, of the IPS the fee resolution made on 28 August 2019 be reviewed and set aside and substituted with another resolution in the form set out in annexure ‘A’ to these Orders.

10.    Pursuant to cl 5.6.71(1) of the Corporations Regulation 2001 (Cth) that these Orders need not have annexed to them a schedule in accordance with Form 551.

11.    The requirements of r 7.9(2) and (3) of Federal Court (Corporations) Rules 2000 (Cth), that the first plaintiff publish a notice in accordance with Form 15, be dispensed with.

12.    Pursuant to s 90-15 of the IPS the first plaintiff be released as liquidator of the second plaintiff, he be discharged from all liability in respect of any act done or default by him in relation to the liquidation of the second plaintiff, including in giving effect to these Orders, and that ASIC deregister the second plaintiff.

13.    Leave be granted to the first plaintiff to destroy the books of the second plaintiff pursuant to s 70-35 of the IPS one month after deregistration of the second plaintiff.

14.    The costs of the first plaintiff of this proceeding be paid out of the balance of the second plaintiff’s assets.

15.    The plaintiffs are to provide to Mrs Thomassian a copy of these Orders by 5.00 pm on 28 March 2022 by sending a copy of the order by email to the following email addresses: alisa.vasakyan@mail.ru and tomasianalisa@gmail.com.

16.    The undertaking given by the first defendant to the Court on 28 April 2021 be discharged.

17.    Liberty to apply on three days’ notice in relation to any difficultly that arises in connection with the first plaintiff’s compliance with Order 8(d) above.

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

Annexure A

That the remuneration of the Liquidator from 28 August 2019 to 12 October 2020 is determined at a sum equal to the costs of time spent by the Liquidator and his partners and staff, calculated by applying the Worrells’ Hourly Rates currently set by the firm and detailed at page 8 of Exhibit SJC-2 in the amount of $40,767.88 inclusive of GST, and that the Liquidator be entitled to draw that remuneration.

That the third party disbursement expenses incurred by the Liquidator from 28 August 2019 to 12 October 2020 is determined in the amount of $41,159.70 inclusive of GST, and that the Liquidator be entitled to pay those disbursements from the assets of the Petsamo No 14 Pty Ltd ACN 001 778 043 (In Liquidation).

That any future third party disbursement expenses incurred by the Liquidator and any future remuneration of the Liquidator from 13 October 2020 to finalisation of the Liquidation is determined at a sum equal to the costs of time spent by the Liquidator and his partners and staff, calculated by applying the Worrells’ Hourly Rates up to 31 July 2021 and then the Cathro & Partners’ Hourly Rates from 1 August 2021 currently set by the firms and detailed at page 8 of Exhibit SJC-2 and at Annexure “A” of the affidavit of Simon Cathro dated 24 February 2022 up to a capped amount of $200,000, exclusive of GST, and that the Liquidator can draw the remuneration on a monthly basis or as required and to pay such third party expenses as required.

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 28 March 2022 on the application of the first plaintiff, Simon John Cathro in his capacity as liquidator of Petsamo No 14 Pty Ltd (in liquidation) (Liquidator), I made Orders including orders pursuant to s 1322 of the Corporations Act 2001 (Cth) and s 90-15 of the Insolvency Practice Schedule (Corporations), being Schedule 2 to the Corporations Act (IPS). The Liquidator sought relief from the Court so as to enable him to complete the winding up of the second plaintiff, Petsamo No 14 Pty Ltd. The first and second defendants, respectively Alfred Thomassian and George Thomassian (who for ease and without intending any disrespect I will refer to as Alfred and George) are brothers and are shareholders in Petsamo: Alfred holds one share and George holds two shares.

2    These are my reasons for making those Orders.

background

The incorporation of Petsamo

3    Petsamo was incorporated on 13 December 1979. At the time of its incorporation its sole shareholders were George and his father, Haritune Thomassian (who again, without intending disrespect and for ease I will refer to as Haritune) and they, together with other members of the Thomassian family, were also directors.

4    Between 1979 and 1993 Robert John George Miles, a former partner of law firm Abbott Tout Creer & Wilkinson (later Abbott Russell Kennedy and then Abbott Tout), provided legal advice and services to Haritune and George and at a later time Alfred.

5    On instructions from George, Mr Miles arranged for the incorporation of Petsamo, the appointment of George and Haritune as directors and for them to be issued with one share each. Mr Miles recalls that Haritune held his one share on trust for George.

6    From about 1979 Mr Miles had numerous conversations with George about his family business activities in Australia. Prior to 1990 many of those conversations also involved Haritune. During these conversations, among other things, Haritune informed Mr Miles that he had generated substantial wealth, most of which he had passed on to George for the benefit of the Thomassian family. The wealth that he had accumulated was to be invested through Petsamo for the benefit of the Thomassian family and George, as his eldest son, had responsibility for enhancing the family’s wealth.

7    George lived in Germany and travelled to Australia periodically. On 4 January 1988 upon instructions from George, Mr Miles prepared a general power of attorney for him in favour of Alfred which was registered with the Land Titles Office and stamped with duty on 27 January 1988.

8    In December 1990 Haritune passed away.

Alfred becomes a director of and shareholder in Petsamo

9    In late January 1991, at a meeting in Mr Miles’ office, George instructed Mr Miles that Alfred was to be allotted one share in Petsamo and appointed a director. George informed Mr Miles that the reason for the allocation of the share in Petsamo was to recognise the work Alfred had done for George, Pestamo and the Thomassian family. Mr Miles subsequently prepared a Form 207 notification of allotment of shares and a Form 304 notification of change to office holders.

10    Mr Miles provided the Form 207 and the Form 304 to George who later returned signed copies to him by post. However, upon their return the forms did not include the details of the person who had signed them or the date upon which they were signed. Upon making an enquiry of George, Mr Miles was informed that George’s brother, Vartkes Thomassian, who at the time was also a director of Petsamo, had signed the Form 207 and the Form 304 on 21 January 1991. At George’s request, Mr Miles wrote the words “Vartkes Thomassian” and “Director” and the date “21/1/1991” on each of the forms.

11    On 14 October 2016 Petsamo appointed Alfred as attorney to execute documents on its behalf. The deed of appointment was executed by Alfred and George on behalf of Petsamo and by Alfred as the attorney appointed under the deed. It was registered on 14 November 2016 with the Registrar General.

12    On 29 November 2018 Petsamo sold its primary asset, a property located at 31-33 Knox Street, Double Bay, New South Wales for $12.5 million (Double Bay Property). The sale occurred at George’s insistence. He intended to use the sale proceeds to fund a commercial development in Armenia.

13    Following the sale of the Double Bay Property Alfred informed George that he had received advice from Petsamo’s accountants that putting Petsamo into voluntary administration would achieve the most efficient tax treatment for the sale proceeds. George agreed to this course.

Petsamo goes into liquidation

14    On 26 August 2019 Petsamo resolved that George should be removed as a director and that Petsamo should become a single director company. The minute of resolution was signed by Alfred in his capacity as a member of Petsamo and on behalf of George pursuant to the power of attorney.

15    On 27 August 2019 Petsamo lodged a declaration of solvency with the Australian Securities and Investments Commission (ASIC) which was signed on the same date by Alfred in his capacity as a director of Petsamo. It specified assets of $10,270,264.07 with the only liability being the expenses of the winding up estimated to be $11,000.

16    Relevantly, as recorded in a statement of resolutions signed by Alfred, both on his behalf and on behalf of George in his capacity as a member pursuant to the power of attorney, the members of Petsamo resolved that:

(1)    Petsamo be wound up voluntarily and the Liquidator be appointed;

(2)    the Liquidator be authorised to distribute in specie such assets of Petsamo as he may determine;

(3)    the remuneration of the Liquidator and his agents and staff be determined on a time basis applying the Simplified Solvency Management Rates published from time to time by Worrells Solvency & Forensic Accountants, being Mr Cathro’s firm at the time, and that the Liquidator be empowered to draw his fees from time to time; and

(4)    the Liquidator be authorised to destroy Petsamo’s records six months after the finalisation of the liquidation.

Steps following the liquidation of Petsamo

17    Upon liquidation the Liquidator recovered assets, by way of cash at bank, in the amount of $10,269,274. Based on his review of Petsamo’s books and records, the Liquidator understood this sum to represent the surplus proceeds from the sale of the Double Bay Property and that Petsamo did not have any other creditors.

18    The Liquidator calculated that, after interest and costs, an amount of $10,270,259 was available for distribution to members. He intended to distribute that sum as follows:

(1)    $3,423,420 to Alfred as a one third shareholder; and

(2)    $6,846,839 to George as a two thirds shareholder.

19    On 13 September 2019 the Liquidator issued a Notice of Intention to Declare Dividend pursuant to r 5.6.65(1) and r 5.6.69 of the Corporations Regulations 2001 (Cth) stating that he would declare a first and final dividend for Petsamo on 9 October 2019.

20    On 8 October 2019 the Liquidator caused to be distributed the sum of $3,423,420 to Alfred in his capacity as a shareholder holding one share. At the time of making that distribution the Liquidator was not aware of any of the allegations that were subsequently raised by George.

21    On 20 December 2019 the Liquidator was contacted by Ken Kanjian, a solicitor acting for George. In his email of that date Mr Kanjian informed the Liquidator that his client, George, “was surprised to learn that [Petsamo] had been placed into liquidation” and that he was instructed that George “had no knowledge or notice of this”. Mr Kanjian requested that the Liquidator not pay out any further funds until his inquiries were complete and provided the Liquidator with a copy of a revocation of the power of attorney dated 20 December 2019 which had also been served on Alfred earlier that day.

22    There was a significant amount of subsequent correspondence between, on the one hand, the Liquidator and/or his solicitor, Christopher Hadley of Holman Webb, and on the other, George, either directly or through his solicitor, Mr Kanjian. Relevantly, George raised several issues associated with the winding up of Petsamo and the conduct of its affairs. In the correspondence sent by him or on his behalf, among other things, George alleged that the Liquidator’s appointment was potentially defective because, although the power of attorney was effective at the relevant time:

(1)    Alfred was acting in breach of his fiduciary duty owed to George and “for ulterior and improper purposes”;

(2)    there may be inaccuracies in transactions recorded in Petsamo’s account, including the repayment of a loan from George that he claimed was never received;

(3)    the Liquidator was too close to Sevan, Alfred’s son, to bring to bear the independence and “rigour” required to “seek redress against Alfred and perhaps others in connection with the affairs of Petsamo”;

(4)    the declaration of solvency was invalid because it was declared by Alfred as a sole director when there was no evidence that Petsamo had passed a resolution to become a single director company;

(5)    he was removed as a director without his knowledge or consent;

(6)    the appointment of Alfred as attorney for Petsamo was not lawful because his signature on the deed of appointment had been forged;

(7)    the appointment of Alfred as a director and the allocation to him of a share in Petsamo was not lawful because Vartkes Thomassian’s signatures on the Form 207 and the Form 304 had been forged. A handwriting report from a forensic document examiner, Steven Dubedat dated 8 May 2020 was provided; and

(8)    he did not receive Petsamo’s interim dividend declared for the period 1 July 2019 to 27 August 2019.

23    On 14 May 2020 and 8 September 2020 the Liquidator wrote to Alfred seeking his response to George’s allegations. In response, Alfred denied the allegations and provided the Liquidator with supporting records in relation to some of them.

24    At the Liquidator’s request, by letter dated 16 September 2020, Alfred, through his solicitor at the time, Mr Miles, undertook to preserve the distribution of $3,423,419.69 made to him (see [20] above) pending the resolution of George’s allegation that Alfred was not entitled to receive a distribution from Petsamo.

The Liquidator commences this proceeding

25    On 16 October 2020 the Liquidator commenced this proceeding by filing the originating process and the Liquidator’s affidavit sworn on 14 October 2020 (Liquidator’s October 2020 Affidavit).

26    On the same day Courtney Tran, a solicitor in the employ of Holman Webb, the Liquidator’s solicitors, sent a copy of the originating process and the Liquidator’s October 2020 Affidavit to George by email.

27    By email dated 1 November 2020 addressed to the Liquidator George said, among other things, that:

I think, that it is expedient for both you and me to withdraw your lawsuit or postpone the deal.

In that way it is evident that from about the time of filing George was aware of this proceeding.

28    On 3 November 2020 Mr Hadley forwarded the email he had received from the Court containing the details of, and the Microsoft Teams link for, the first case management hearing scheduled to take place on 5 November 2020 to George and Hayden Fox, the solicitor for Alfred. By email sent on 5 November 2020 at 2.22 am AEDT George acknowledged receipt of that email stating, among other things, that he had “noticed, that [his] trial must begin online on November 5 at 9.30 a.m”.

29    On 28 April 2021 the Court noted Alfred’s undertaking (see [24] above).

30    On 14 September 2021 the Court made orders to the effect that service of, among other things, the originating process and the Liquidator’s October 2020 Affidavit were deemed to have been effectively served on George on 21 August 2021 by serving them by email and by international express post.

31    The proceeding was next listed for case management hearing on 20 October 2021. By email dated 18 October 2021 Mr Hadley provided George with the email from the Court which in turn provided the dial-in details for that case management hearing.

32    By email dated 21 October 2021 Mr Hadley provided George with a copy of the Orders made by the Court on 20 October 2021 and informed him that the originating process was listed for hearing, with an estimate of one day, on 16 March 2022 at 10.15 am AEDT.

33    On 4 March 2022 Mr Hadley received an email form Alisa Thomassian (who for ease, and without intending any disrespect, I will refer to as Alisa), George’s wife, informing him that George had passed away on 8 January 2022.

34    On 15 March 2022 the Court made Orders (15 March 2022 Orders) adjourning the hearing scheduled to take place on 16 March 2022 to 28 March 2022 and granting leave to Alisa to file and serve any application to be joined to the proceeding and for any relief she intended to seek in relation to the subject matter of the proceeding, together with any affidavit in support, by 23 March 2022. The 15 March 2022 Orders also required the Liquidator’s solicitors to provide a copy of those Orders to Alisa by email.

35    On 15 March 2022 Mr Hadley forwarded the 15 March 2022 Orders to Alisa by email. Also attached to Mr Hadley’s email was an email from the Court dated 15 March 2022 which provided the dial-in details for the hearing on 28 March 2022.

36    By email dated 18 March 2022 Alisa requested Mr Hadley provide Mr Kanjian with “all the necessary information” as he would “represent [her] interests in Court”.

37    There followed correspondence between Mr Hadley and Mr Kanjian. However, by the time of the hearing on 28 March 2022 no application had been filed by or on behalf of Alisa by Mr Kanjian or any other person and no other person had sought to appear purporting to represent George’s interests or those of his estate.

38    On 28 March 2022 at the commencement of the hearing the matter was called three times outside the Court room. There was no appearance by or on behalf of Alisa or any other person on behalf of George or his estate either in person or, given that Alisa (and formerly George) resides in Armenia, via the Microsoft Teams link available for the hearing.

39    In the course of the hearing an email dated 28 March 2022 from Alisa to the Court’s Registry came to the attention of the Court. The Court provided the email to the parties. In it Alisa stated (as written):

Your Honor,

I am very grateful, that You gave me the opportunity to exercise my right and act as a third defedant.

I want to inform You that refuse the opportunity given to me.

I also inform You that I am applying to the Supreme Court to accept the inheritance in respect of George Thomassian’s share.

And please, inform me, as a legitimate widow of George Thomassian about Your lawful and fair decision regarding the case No: NSD 1133/2020.

Best Regards

Alisa Thomassian

Application to proceed in the absence of a party

40    At the commencement of the hearing the plaintiffs made an application to proceed in the absence of a party, namely George (or his legal personal representative). That application was supported by Alfred.

41    Rule 30.21 of the Federal Court Rules 2011 (Cth) relevantly provides that:

(1)    If a party is absent when a proceeding is called on for trial, another party may apply to the Court for an order that:

…

(b)    if the absent party is the respondent:

(i)    the hearing proceed generally or in relation to a particular aspect of the application; or

…

42    For the following reasons I acceded to that application and made the order sought by the Liquidator.

43    The facts established that:

(1)    George was on notice of the issues which caused the Liquidator to commence this proceeding since he raised them at the end of 2019;

(2)    George was on notice of the proceeding since its commencement on or about 16 October 2020 and, at the very latest, by 5 November 2020;

(3)    George was provided with the Microsoft Teams links for each of the case management hearings and for the hearing of the Liquidators’ application for deemed service and was informed about orders made by the Court in the course of its preparation for hearing;

(4)    the originating process and supporting affidavits were deemed to be served on George on 21 August 2021; and

(5)    George was informed of the hearing date of 16 March 2022.

44    Each of these events took place prior to George’s death. Despite George clearly being on notice and aware of the proceeding he took no steps to comply with the Court’s orders and to agitate, by the filing of affidavits or otherwise, the allegations contained in the correspondence that had passed between him and Liquidator.

45    Further, since George’s passing opportunity was given to Alisa, George’s widow, to make an application to be joined to the proceeding and to press any claim she may have. That leave was granted despite the parties not knowing Alisa’s status vis a vis George’s estate. In any event, that invitation was not taken up and, indeed in her email dated 28 March 2022 (see [39] above), Alisa made it plain to the Court that she did not intend to participate in the proceeding.

46    No other person purporting to be the legal personal representative of George or of his estate sought to be joined to the proceeding.

47    Finally, as set out above, at the commencement of the hearing no person appeared for or on behalf of George or his estate.

48    In the circumstances the plaintiffs were entitled to proceed to have their claim considered and determined.

Legal principles

49    Putting to one side the question of the Liquidator’s costs, the plaintiffs sought relief under s 90-15 of the IPS and s 1322 of the Corporations Act.

Section 90-15 of the IPS

50    Section 90-15 of the IPS empowers the Court to make such orders as it thinks fit in relation to the external administration of a company. A company to which a liquidator has been appointed is taken to be a company under “external administration”: see s 5-15 of the IPS. The Liquidator has standing to seek such orders because he is a “person with a financial interest in the external administration of a company”: see s 5-30 of the IPS.

51    Section 90-15(3) of the IPS sets out a non-exhaustive list of the types of the orders which may be made under s 90-15(1) of the IPS. They include:

(a)    an order determining any question arising in the external administration 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;

…

(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.

52    Section 90-15(4) sets out the matters which the Court may take into account when making orders including:

(a)    whether the liquidator has faithfully performed, or is faithfully performing, the liquidator's duties; and

(b)    whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and

(c)    whether an action or failure to act by the liquidator is in compliance with an order of the Court; and

(d)    whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and

(e)    the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act on public confidence in registered liquidators as a group.

53    The statutory predecessor to s 90-15 of the IPS was s 511(1)(a) of the Corporations Act and (for Court appointed liquidators its analogue, s 479(3) of the Corporations Act)(now repealed). Section 90-15 of the IPS is broader in its terms than the former s 511(1)(a) and s 479(3) of the Corporations Act, a feature which, as Banks-Smith J observed in Joiner (Liquidator), in the matter of CuDeco Limited (Receivers and Managers Appointed) (in liq) [2020] 14 ALR 239; FCA 1661 at [93] has been the subject of some consideration. Notwithstanding that the exercise of the power in s 90-15 of the IPS has and can be informed by matters relevant to the exercise of power under the predecessor provisions.

54    To that end in In the matter of Willmott Forests Limited (Receivers and Managers Appointed) (in liquidation) (2012) 88 ACSR 18; [2012] VSC 125 Davies J considered an application for directions under s 511 of the Corporations Act by the liquidators of Willmott Forests Limited (receivers and managers appointed) (in liquidation) that they would be justified and acting properly and reasonably in taking certain steps. The foreshadowed steps would see the liquidators terminate and disclaim project documents governing the schemes conducted on land which they intended to sell, effectively extinguishing the rights of the members of the schemes. The liquidators also sought directions that they would be justified in, and acting properly and reasonably, if they distributed the proceeds of sale in a particular way.

55    In addressing the application Davies J considered the nature of the court’s jurisdiction under the former s 479 and s 511 of the Corporations Act. Her Honour concluded that the court had power to make orders of a substantive nature affecting third parties: see Willmott Forests at [45]. Her Honour continued at [45]-[46] saying:

[45]    … It is a separate question as to whether the court should exercise that power in a given case but the issue is one of discretion, not of power. In that regard, the cases on s 479(3) make it reasonably plain that the court should not make substantive orders under that provision affecting the rights of third parties without first giving the affected parties the opportunity to be heard. This is a matter of process and procedure for the Court, not a matter of the power of the Court under s 479(3), which is a facultative provision entitling the liquidator to apply for directions.

[46]    Secondly, there is authority directly on point that the court can entertain an application under s 511(1) for the determination of substantive rights affecting third parties. In Meadow Springs Fairway Resort Ltd (In Liq) v Balanced Securities French J (as His Honour then was) held that it was a matter of discretion whether the Court should determine competing claims in an application brought by a liquidator under s 511(1). French J referred to a passage from ASIC v Melbourne Asset Management Nominees where Northrop J said in relation to s 479(3):

It has been accepted that Courts have power to make final orders in preference claims on an application by a liquidator under sections similar to subsection 479(3) of the Corporations Law. There is no logical reason why final orders binding on other persons cannot be made on applications under subsection 479(3) with respect to other subject matters. The second passage from the judgment of McLelland J cited above refers to consent of parties or to cases where a party “will not suffer injustice in consequence of the alteration to the status of the proceedings”. This is the crucial matter. In proceedings brought by a liquidator under subsection 479(3), I can see no reason why binding orders cannot be made where the parties affected have been given the opportunity to be heard …The parties affected by the directions and orders sought on the motion in the winding up proceedings are before the Court and have been heard.

French J stated that these observations were “even more apposite in applications made under [s 511(1)]” given the more substantive character of the applications contemplated by s 511(1)(a) than by s 479(3). His Honour concluded:

[51]    In my opinion it is open to the Court, in a suitable case, to entertain an application for the determination of questions under s 511 by joining affected parties with competing interests as defendants and permitting them to file cross-claims for declaratory relief as between themselves and any other interested parties and the liquidator so that there can be a res judicata between all of them. Such a course may be appropriate where the evidence necessary to determine the questions and the competing claims is largely documentary and amenable to expeditious hearing and determination. Otherwise the parties can simply commence their own substantive proceedings.

The limitation on the power under s 511(1) is that the Court is only to accede to the liquidator’s application if the determination of the question or exercise of power “will be just and beneficial”.

56    In CuDeco Limited the liquidators sought relief by way of “broad ranging directions and declarations” and asserted that relief was required to enable them to proceed with the liquidation with some comfort that they were protected from personal liability or could otherwise consider their options: at [5]. At [94] Banks-Smith J, referring to the decision in Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481, said:

His Honour went on to observe that the power granted to the Court under s 90-15 is wider than under s 479(3) and accommodates the determination of substantive rights, stating:

[8]    In Walley (as administrators of Poles & Underground Pty Ltd (admins apptd) and Icon Plant Pty Ltd (admins apptd)) [2017] FCA 486 at [41], Gleeson J remarked that the question of whether to exercise the power in s 90-15 was 'to be answered by reference to the principles applied to the exercise of the discretions previously contained in ss 479(3) and 511 of the Act'. That may be accepted insofar as the external administrator seek the directions of the Court, but the power under s 90-15 to 'make such orders as it thinks fit in relation to the external administration of a company' (s 90-15(1)) including 'an order determining any question arising in the external administration of a company' (s 90-15(3)(a)), is wider and accommodates the determination of substantive rights. Of course, the Court would not do so without affording potentially affected parties an opportunity to be heard: Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd [2007] FCA 1443 at [49]-[51] (French J, referring to Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd (rec and mgr apptd) (1994) 49 FCR 334 at 352; 121 ALR 626 at 643 (Northrop J)); Re Willmott Forests Ltd (recs and mgrs apptd) (in liq) (No 2) (2012) 88 ACSR 18; [2012] VSC 125 at [45]-[46] (Davies J); Re ICS Real Estate Pty Ltd (in liq) [2014] NSWSC 479 at [25] (Brereton J).

57    At [95]-[99] her Honour continued:

95    This Court has held that s 90-15 provides the jurisdiction and power to make declarations. In Ross v Manpak Holdings Pty Ltd, in the matter of Manpak Holdings Pty Ltd [2018] FCA 1548, McKerracher J observed:

[9]    There is no jurisdictional impediment which would prevent the Court making the orders sought. Under s 90-15(1) of the Insolvency Practice Schedule, the Court has the jurisdiction and power to make orders 'as it thinks fit' in relation to the external administration of a company, encompassing the declarations sought in the plaintiffs' application …

96    In Ross, the declarations related to the realisation by deed administrators of trust assets and included a declaration that the sale proceeds formed part of the fund for distribution under the deed of company arrangement.

97    In Re Polat Enterprises Pty Ltd (in liq) [2020] VSC 485 (Hetyey AsJ) the Court observed that s 90-15 is 'broad in its scope and contemplates not only the exercise of judicial discretion but also the determination of substantive rights' (at [31]). The Court made declarations 'pursuant to sections 90-15 and 90-20 of the Insolvency Practice Schedule (Corporations)'. The declarations included declarations to the effect that certain resolutions and share transfers were invalid and ineffective.

98    Although the power conferred by s 90-15 is broader than that conferred by its predecessor provisions, courts have nonetheless been guided by the matters relevant to the exercise of the predecessor provisions: Walley, in the matter of Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 486 at [41] (Gleeson J). These notions include that the power should be exercised where it is just and beneficial to do so: Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520 199 Pty Ltd (in liq) [2017] FCA 444 at [64] (Gleeson J). Whilst a court generally refrains from making directions relating to a liquidator's or administrator's business or commercial decisions, it may give directions relating to issues such as a legal issue of substance or procedure, or an issue of power, propriety or reasonableness: Re Ansett Australia Ltd and Korda [2002] FCA 90; (2002) 115 FCR 409 at [44] (Goldberg J).

99    Therefore, in exercising powers under s 90-15 the court will be guided by similar principles to those that governed the exercise of powers under former s 479(3) and s 511 of the Corporations Act, although the relief that the court may grant under s 90-15 appears broader and extends to the making of declarations where appropriate.

58    It has also been recognised that in making an application under s 90-15 of the IPS a liquidator can seek directions to obtain guidance in relation to the conduct of a liquidation and as a means to protect against allegations of breach of duty but that it is generally not appropriate in such an application to make the liquidator’s commercial decisions where he or she has full power to act: see Hutson (liquidator), in the matter of WDS Limited (in liq) (Receivers and Managers Appointed) [2020] FCA 299 at [67].

Section 1322 of the Corporations Act

59    Section 1322(4) of the Corporations Act empowers the Court, on application by an interested person, to make all or any of the orders set out therein either unconditionally or subject to such conditions as it imposes. Those orders relevantly include:

(a)    an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;

…

60    Section 1322(6) sets out the preconditions to making an order under s 1322 and relevantly provides:

(6)    The Court must not make an order under this section unless it is satisfied:

(a)    in the case of an order referred to in paragraph (4)(a):

(i)    that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;

(ii)    that the person or persons concerned in or party to the contravention or failure acted honestly; or

(iii)    that it is just and equitable that the order be made; and

…

(c)    in every case – that no substantial injustice has been or is likely to be caused to any person.

61    In assessing whether there is any injustice for the purposes of s 1322(6)(c) of the Act the Court is required to weigh any prejudice that would be suffered if the order is made against the prejudice suffered if an order was not made: see Car Buyers Australia Pty Limited v ASIC [2020] FCA 599 at [31].

Consideration

62    The plaintiffs sought relief under s 90-15 of the IPS and s 1322(4) of the Corporations Act in relation to the Liquidator’s appointment and a number of aspects of the liquidation of Petsamo. I deal with each category of relief in turn.

The appointment of the Liquidator to Petsamo

63    The plaintiffs sought an order pursuant to s 1322 of the Corporations Act validating the Liquidator’s appointment as liquidator of Petsamo nunc pro tunc.

64    That issue arose because the resolutions passed by the members of Petsamo on 28 August 2019 resolving, among other things, that Petsamo be wound up voluntarily and that the Liquidator be appointed as liquidator of Petsamo were signed by Alfred pursuant to the power of attorney.

65    The power of attorney in its terms appointed Alfred to be George’s attorney to exercise, subject to any conditions and limitations specified in Part 2 thereof, the authority conferred on him by s 163B of the Conveyancing Act 1919 (NSW). No limitations or conditions were specified in the power of attorney.

66    Section 163B of the Conveyancing Act, which was found in Pt 16 of that Act, was repealed by the Powers of Attorney Act 2003 (NSW): see sch 4.1. However, s 6 of the Powers of Attorney Act concerns the application of that Act and relevantly provides:

(2)    Act does not generally apply to existing powers of attorney This Act does not apply to any power of attorney created (or purporting to have been created) by an instrument executed before the commencement of this section, except as provided by subsection (5).

(3)    Repealed provisions of Conveyancing Act 1919 continue to apply to existing powers of attorney. Subject to subsection (5), the provisions of Part 16 of, and Schedule 7 to, the Conveyancing Act 1919 (and of any regulations made under those provisions) as in force immediately before the commencement of this section continue to apply to any power of attorney created (or purporting to have been created) by an instrument executed before that commencement despite the repeal of those provisions by this Act.

67    Nothing in s 6(5) of the Powers of Attorney Act has any present relevance. Thus s 163B of the Conveyancing Act continued to apply to the power of attorney. That section provided:

(1)    Subject to this section, an instrument (whether or not under seal) in or to the effect of the form in Schedule VII confers on the attorney thereby appointed authority to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do.

(2)    The authority conferred by an instrument referred to in subsection (1) does not include:

(a)    authority to exercise or perform any power, authority, duty or function as a trustee conferred or imposed on the person executing the instrument, or

(b)    unless it is expressly conferred by the instrument—authority to execute an assurance or other document, or do any other act, as a result of which a benefit would be conferred on the attorney appointed by the instrument.

(3)    Where an instrument referred to in subsection (1) specifies any conditions or limitations to which the authority conferred by the instrument is to be subject, the authority is so conferred subject to compliance with those conditions or limitations.

68    Petsamo’s constitution relevantly provided:

(1)    in relation to proceedings at meetings:

If a member has appointed a proxy or attorney or (in the case of a member which is a body corporate) a representative to act at a meeting of members, that member is taken to be present at a meeting at which the proxy, attorney or representative is present.

(2)    in relation to proxies, attorneys and representatives:

14.1    Appointment of proxies

Each member may appoint a proxy to attend and act for the member at a meeting of members. If the member is entitled to cast two or more votes at the meeting, the member may appoint two proxies to attend and act for the member at a meeting of members. An appointment of proxy must be made by written notice to the Company that:

(a)    complies with section 250A(1); or

(b)    is in a form and mode, and is signed or otherwise authenticated by the member in a manner, satisfactory to the Board.

If a member appoints two proxies and the appointment does not specify the proportion or number of the member's votes each proxy may exercise, each proxy may exercise half of those votes.

14.2 Member's attorney

A member may appoint an attorney to act, or to appoint a proxy to act, at a meeting of members. If the appointor is an individual, the power of attorney must be signed in the presence of at least one witness.

14.3 Deposit of proxy appointment forms and powers of attorney

An appointment of a proxy or an attorney is not effective for a particular meeting of members unless:

(a)    in the case of a proxy, the proxy appointment form and, if it is executed by an attorney, the relevant power of attorney or a certified copy of it; and

(b)    in the case of an attorney, the power of attorney or a certified copy of it,

are received by the Company at its registered office or a fax number at that office (or another address specified for the purpose in the relevant notice of meeting) at least 48 hours before the time for which the meeting was called or, if the meeting has been adjourned, before the resumption of the meeting.

69    In New South Wales Henry George Foundation Ltd v Booth (2002) 54 NSWLR 433 the question before the New South Wales Supreme Court was whether donees of certain powers of attorney were entitled to attend and vote at an annual general meeting of the plaintiff. In considering that question at 436 Gzell J noted that there was no common law right on the part of a member of a corporation to vote by proxy, it was necessary to look elsewhere for the power of delegation and, in relation to a statutory corporation, to look at the statute itself, referring to Harben v Phillips (1883) 23 Ch D 14 at 35-36. At 438 his Honour said:

Counsel for the defendants submitted that the absence of mention of voting by attorney in the current legislation was logical because provision was made for powers of attorney in other legislation and, in particular, the Conveyancing Act. The question is not, however, whether an attorney was properly appointed. The question is whether the attorney was entitled to attend the meeting on Saturday 15 September 2001 and to vote at that meeting. In the absence of a common law rule that one may vote by attorney, one has to find statutory authority for it, not in the general law, but in the law relating to corporations. As Bowen LJ said in Harben (at 35-36) it is not to the point that one may appoint a delegate to act in many situations. A shareholder may only vote through a delegate if the legislation or rules made under it so provide. That, in my view, means legislation relating to corporations.

…

In my view, the Corporations Act (Cth), Pt 2G.2, Div 6, prescribes the ways in which a shareholder may be represented at a meeting of a company’s members. It does not simply describe some of the delegates who may act for a shareholder. It is not to be implied that other forms of shareholder representation are permissible. It gives statutory force to the permitted methods of representation: by proxy and, in the case of a corporate shareholder, by individual representative.

…

The Corporations Act (Cth), s 250A(1), identifies the circumstances in which an appointment of a proxy is valid. It must be signed by the member making the appointment and it must contain the member’s name and address, the company’s name, the proxy’s name or the name of the office held by the proxy and the meetings at which the appointment may be used. Section 250B(1) identifies when an appointment of a proxy is effective. It must be lodged with the company at least 48 hours before the meeting as must the authority under which the appointment is signed or a certified copy of the authority if the appointment is signed by the appointor’s attorney. Section 250A(2) and s 250B(5) contain provision for the amendment of these requirements by the constitution of a company. That does not mean, however, that the constitution may make provision for a different form of shareholder representation that does not comply with s 250A(1) and s 250B(1) as validly altered by a company’s constitution in terms of s 250A(2) and s 250B(5).

70    In Cordiant Communications (Australia) Pty Ltd v the Communications Group Holdings Pty Ltd [2005] NSWSC 1005; 194 FLR 322 Palmer J considered, among other things, whether a power of attorney could be a “proxy” for the purposes of the Corporations Act and under the defendant’s constitution and, if so, whether it was invalid because it did not comply with aspects of s 250A and s 250B of the Corporations Act. At [22]-[25] his Honour said:

[22]    However, the starting point of all of Mr Studdy’s arguments on the invalidity of the Power of Attorney as a proxy is the submission that a shareholder has no right at common law to vote at shareholders meetings either by proxy or by an attorney; if a shareholder has such a right it is to be found only in statute, i.e, the Corporations Act, and in the company’s constitution. This submission is undoubtedly correct: see e.g. Harben v Phillips (1883) 23 Ch D 14 at 35–6 per Bowen LJ; Cousins v International Brick Co Ltd [1931] 2 Ch 90 at 100 per Lord Hanworth MR (“Cousins”); Totally & Permanently Incapacitated Veterans’ Association of NSW Ltd v Gadd (1998) 28 ACSR 549, at 557 per Young J (as his Honour then was); New South Wales Henry George Foundation Ltd v Booth (2002) 54 NSWLR 433 at 436 per Gzell J (“Booth)”.

[23]    I do not think that there could be any doubt that TCGH’s constitution recognises that a shareholder has a right to vote by a proxy and that the proxy may be given by means of a Power of Attorney: see cll 32, 43.1, 44.5, 44.6, 46.1, 47.

[24]    CA Part 2G.2 Div 6 expressly provides for shareholders to vote by proxy (s 249X(1)) and by representative if the shareholder is a corporation (s 250D). The Corporations Act, however, says nothing expressly about voting by an attorney. Nevertheless, both parties accept, as do I, the correctness of the decision of Gzell J in Booth that the reference to “proxy” in the Corporations Act is broad enough to encompass an attorney: Booth at [21]. In support of this proposition, Gzell J cites a statement by Lindley LJ in Re English Scottish and Australian Chartered Bank [1893] 3 Ch 385 at 409 to the effect that a proxy simply means some agent properly appointed. To that authority may be added an observation of Lord Hanworth MR in Cousins (at 100):

What then is meant by a proxy? A person representative of the shareholder who may be described as his agent to carry out a course which the shareholder himself has decided upon.

[25]    I accept, therefore, that TCGH’s constitution permits voting by the appointment of an attorney, provided that the appointment complies with the requirements for a valid proxy contained in CA ss 250A and 250B: Booth at [20]–[22].

71    As set out above, the resolutions for the winding up of Petsamo and the appointment of the Liquidator were signed by Alfred in his capacity as a member and by Alfred on behalf of George pursuant to the power of attorney. While a power of attorney may be taken to be a proxy for the purpose of the constitution, there must also be compliance both with the terms of the constitution and with s 250A and s 250B of the Corporations Act. That did not occur: there is no evidence that the power of attorney was received at the registered office at least 48 hours before the time for which the meeting was called as required by cl 14.3 of the constitution and s 250B of the Corporations Act nor, to the extent it was required to do so, did the power of attorney comply with s 250A of the Corporations Act in that it did not include Petsamo’s name nor refer to the meeting at which it could be used.

72    It was in these circumstances that the plaintiffs sought an order under s 1322 of the Corporations Act validating the Liquidator’s appointment as liquidator, nunc pro tunc. I was satisfied that such an order should be made because:

(1)    the company has been in liquidation for an extended period and there is no suggestion that it should be returned to trading;

(2)    its only asset was the Double Bay Property which was sold prior to the Liquidator’s appointment;

(3)    the Liquidator advertised his intention to declare a final dividend and no third party, for example a creditor, objected to that course;

(4)    of its two shareholders, Alfred wishes for the liquidation to be complete; and

(5)    notwithstanding George’s complaints, which extended to the use by Alfred of the power of attorney, he did not seek prior to January 2022 to terminate the liquidation.

73    I was thus satisfied that it was just and equitable that the order be made and that no substantial injustice had been, or was likely to be, caused to any person by the making the order.

Reliance on ASIC’s records

74    Section 1274B of the Corporations Act provides:

 (1)    In this section:

"data processor" means a mechanical, electronic or other device for processing data.

(2)    In a proceeding in a court, a writing that purports to have been prepared by ASIC is admissible as prima facie evidence of the matters stated in so much of the writing as sets out what purports to be information obtained by ASIC, by using a data processor, from the national database. In other words, the writing is proof of such a matter in the absence of evidence to the contrary.

(3)    A writing need not bear a certificate or signature in order to be taken to purport to have been prepared by ASIC.

(4)    Nothing in this section limits, or is limited by, section 1274 or 1274A.

75    In Cooper as Administrator of Goldbiz Paperbiz Pty Limited (Administrator Appointed) ACN 097 355 872, in the matter of Goldbiz Paperbiz Pty Limited (Administrator Appointed) ACN 097 355 872 [2005] FCA 1887 at [19] Emmett J observed that under s 1274B of the Corporations Act, ASIC’s records constitute prima facie evidence of the correctness of the statements made in them. That is, the writing is proof of such a matter in the absence of evidence to the contrary.

76    A search of Petsamo obtained by the Liquidator from the database maintained by ASIC records that:

(1)    George ceased to be a director on 26 August 2019; and

(2)    Petsamo had three shares which, as set out at [1] above, were owned as to two shares by George and one share by Alfred.

77    In light of s 1274B of the Corporations Act this Court is entitled to act on the matters disclosed in that search as prima facie evidence of the facts disclosed in it, in the absence of evidence to the contrary. There is no evidence to the contrary. Despite the originating process having been served on George, he did not seek to challenge the Liquidator’s application including the evidence he relies on, nor to challenge the affidavits served by Alfred. In particular, Alfred served an affidavit from Mr Miles in which Mr Miles sets out evidence which contradicts the allegations made by George in his correspondence.

78    The only exception is the expert report prepared by Mr Dubedat which George provided to the Liquidator’s solicitor. Mr Dubedat was instructed to consider whether Vartkes Thomasian’s signatures on the Form 207 and the Form 340 were forgeries. While the Liquidator tendered that report, he did so and it was received into evidence, not as evidence of the truth of its contents but as evidence of the fact that it was sent. It was therefore not apt nor necessary for the content of that report to be considered and it could not displace the presumption set up by s 1274B of the Corporations Act.

79    In those circumstances, it was appropriate for this Court to rely on the contents of the ASIC search and for orders to be made pursuant to s 90-15(1) of the IPS that the Liquidator can rely on the ASIC search of Petsamo as prima facie evidence of the facts recorded therein including the record of George’s removal as a director on 26 August 2019 and Alfred’s shareholding. It follows that the distribution to Alfred of the surplus of $3,423,419.69 on 8 October 2019 was not invalid.

The removal of George as a director and the declaration of solvency

80    Articles 1.5, 2.1, 2.5 and 2.6 of the constitution provide:

1.5    Single Director Company

The Company is a Single Director Company if:

(a)    at the time of its registration as an Australian company, only one person had consented to be a Director; or

(b)    the Company has passed an ordinary resolution that it be a Single Director Company,

and the Company has not, since registration or the passing of that resolution (as the case requires), passed a resolution that it cease to be a Single Director Company and, at the relevant time, there is only one Director.

2.1    Number of Directors

The Company must have at least:

(a)    if the Company is a Single Director Company, one; or

(b)    otherwise, two,

Directors (not counting Alternates) and, until otherwise decided by ordinary resolution, not more than six Directors (not counting Alternates).

…

2.5    Removal from office

Whether or not a Director's appointment was expressed to be for a specified period,

(a)    the Company by ordinary resolution; or

(b)    members holding a majority of the issued shares of the Company conferring the right to vote, by writing delivered to the Company,

may remove a Director from office.

2.6    Too few Directors

If the number of Directors is reduced below the minimum required by rule 2.1, the continuing Directors may act as the Board only:

(a)    to appoint Directors up to that minimum number;

(b)    to convene a meeting of members; and

(c)    in emergencies.

81    As set out at [14] above, on 26 August 2019, in accordance with Art 1.5, a resolution was passed that Petsamo become a single director company and that George be removed as a director. There is no challenge to the validity of the power of attorney at the time it was used by Alfred in passing the resolution to remove George as a director. Rather, as set out at [22(5)] above, George alleged this was done without his knowledge or consent. However, to the extent that the issue in relation to the resolutions to wind up Petsamo and appoint the Liquidator also arise in relation to this resolution, which was passed by Alfred both in his capacity as a member of Petsamo and by Alfred on behalf of George pursuant to the power of attorney, the matters set out at [72]-[73] above apply equally here.

82    I was satisfied that in this case any invalidity should be cured. The evidence demonstrated that George intended to appoint Alfred as a director of Petsamo and to share in its profits and that George decided to step aside as a director to ensure the most favourable tax treatment of the proceeds of the sale of the Double Bay Property. In those circumstances I was satisfied that it was just and equitable to make an order validating George’s removal as a director of Petsamo. No substantial injustice was likely to arise because the making of such an order would give effect to George’s intentions at the time.

83    In relation to the declaration of solvency which was signed by Alfred in his capacity as a director of Petsamo, the Court can rely on the ASIC search as prima facie evidence of the facts disclosed therein, including relevantly that Alfred held that role. There is no evidence to the contrary. Insofar as Mr Dubedat’s report is concerned my observations at [78] above apply equally here such that there is no contrary evidence to displace the presumption in s 1274B of the Corporations Act in relation to Alfred’s role as a director. However, to the extent necessary and given the allegations that have been made, for the reasons set out at [81] above I was satisfied that it was appropriate to make an order pursuant to s 90-15 of the IPS that the declaration of insolvency was not invalid by reason of any contravention of Arts 1.5, 2.1 and 2.6 of the constitution or by reason of a breach of s 494 of the Corporations Act

Further investigations

84    The plaintiffs sought an order pursuant to s 90-15 of the IPS that the Liquidator be justified in not undertaking any further investigations into the affairs of Petsamo.

85    It is plain from the Liquidator’s evidence that he has made reasonable inquiries in relation to his appointment and George’s allegations into the conduct of the affairs of Petsamo. Contrary to George’s assertions, those investigations have revealed that:

(1)    George instigated the appointment of Alfred as a director of Petsamo and the allotment to him of a share in recognition of his hard work;

(2)    Petsamo made repayments on a loan from George;

(3)    Petsamo paid George, or his nominees, his share of the interim dividend;

(4)    George was aware that he was being removed as a director of Petsamo and that Petsamo would be wound up. This was because to do so would result in the most tax efficient treatment of the proceeds of sale of the Double Bay Property; and

(5)    Pestamo passed a resolution to become a single director company.

86    The Liquidator submitted and, I accept, that any further investigations would likely be futile as the resolution of the remaining issues between George and Alfred would likely turn on an assessment of their respective credibility. The resolution of those issues is also further complicated by the recent death of George.

87    The dispute turns entirely upon competing allegations made by Alfred and George arising from facts occurring before Petsamo’s liquidation. In the absence of George or Alfred seeking to litigate the issues it is incumbent upon the Liquidator to do so but he cannot without their assistance. As the Liquidator submitted there is no good commercial reason why Petsamo’s assets should be directed to funding litigation which cannot be prosecuted in the certainty that the company will not receive assistance from Alfred and/or George.

88    In those circumstances I accepted that an order pursuant to s 90-15(1) of the IPS should be made relieving the Liquidator from conducting any further investigations. Such an order was appropriate given the potential for an attack on the reasonableness of a decision by the Liquidator to do so.

Distribution of Petsamo’s surplus assets and release of the Liquidator

89    The plaintiffs sought an order pursuant to s 90-15 of the IPS that the balance of Petsamo’s assets be distributed in a certain manner: first, in payment of their costs and disbursements of this application and this proceeding; secondly, in payment of the Liquidator’s expenses of the liquidation (including the costs of this proceeding); thirdly, in payment of the Liquidator’s remuneration; and fourthly, as to the balance, to George’s legal personal representative. They also sought an order pursuant to s 90-15 IPS that the Liquidator be released.

90    I was satisfied that orders to that effect should be made.

91    This was a case in which the parties’ substantive rights could be determined. The interested parties had been joined to the proceeding and had an opportunity to be heard and to file cross-claims for declaratory relief as between themselves if they so desired.

92    George’s allegations, which he never withdrew, delayed the completion of the liquidation. Notwithstanding the time which has passed he never took steps, prior to his passing, to file any affidavits, an application for removal of the Liquidator, despite his threat to do so, or cross-claims of the nature referred to in the preceding paragraph. Nor would he agree to fund the Liquidator to undertake any investigations into the matters alleged by him. In the meantime, the Liquidator communicated with George providing him with information in response to his requests and his allegations.

93    There is no analogue to s 480 of the Corporations Act, which enables a court appointed liquidator to apply to the court for an order that he or she be released and that ASIC deregister a company once all steps have been taken in the liquidation of a company, in relation to a voluntary winding up. That may be because of the nature of a voluntary winding up. Notwithstanding that, the Liquidator gave evidence of the nature that would be required pursuant to r 7.5(3) of the Federal Court (Corporations) Rules 2000 (Corporations Rules) on an application for a release pursuant to s 480 of the Corporations Act, namely that:

(1)    the whole of Petsamo’s property has been realised;

(2)    no calls have been made on the contributories in the course of the winding up;

(3)    the only dividend paid was that made to Alfred;

(4)    there is no committee of creditors;

(5)    ASIC has not caused the books of Petsamo to be audited under s 70-15 of the IPS;

(6)    the Court has not ordered the preparation of a report on the Liquidator’s accounts;

(7)    he has not submitted a report prepared pursuant to s 533 of the Corporations Act to ASIC;

(8)    he has not received any objection to his release from an auditor appointed by ASIC or the Court or any creditor, contributory or other interested person;

(9)    as George’s allegations are not proved, he does not think it necessary to report on the affairs of Petsamo or any of its officers;

(10)    no property has been disclaimed in the course of the winding up; and

(11)    as far as the Liquidator is aware there are no costs, charges or expenses payable by him if the Court grants the release sought.

94    In the circumstances and given the breadth of the power in s 90-15 of the IPS I was satisfied that an order in the nature of the release sought by the Liquidator should be made. He had carried out all of his duties as Liquidator and, subject to final payments of costs of the liquidation and distribution of the balance to the legal personal representative of George, there were no further steps to take and no outstanding liabilities of Petsamo. There was no evidence that the Liquidator has carried out his duties as liquidator other than properly and, given the unsubstantiated allegations that had been made in the past by George, this was a case in which it was appropriate that an order in the nature of a release should be made.

95    Accordingly I made the orders sought by the plaintiffs in relation to both the distribution of the balance of the proceeds and the release of the Liquidator.

The Liquidator’s remuneration

96    The plaintiffs also sought an order pursuant to s 60-11(c) of the IPS that the fee resolution made on 28 August 2019 be reviewed and either be set aside and substituted with another resolution or varied. The substituted resolution or variation thereof sought by the Liquidator was in the following terms:

That the remuneration of the Liquidator from 28 August 2019 to 12 October 2020 is determined at a sum equal to the costs of time spent by the Liquidator and his partners and staff, calculated by applying the Worrells’ Hourly Rates currently set by the firm and detailed at page 8 of Exhibit SJC-2 in the amount of $40,767.88 inclusive of GST, and that the Liquidator be entitled to draw that remuneration.

That the third party disbursement expenses incurred by the Liquidator from 28 August 2019 to 12 October 2020 is determined in the amount of $41,159.70 inclusive of GST, and that the Liquidator be entitled to pay those disbursements from the assets of the Petsamo No 14 Pty Ltd ACN 001 778 043 (In Liquidation).

That any future third party disbursement expenses incurred by the Liquidator and any future remuneration of the Liquidator from 13 October 2020 to finalisation of the Liquidation is determined at a sum equal to the costs of time spent by the Liquidator and his partners and staff, calculated by applying the Worrells’ Hourly Rates up to 31 July 2021 and then the Cathro & Partners’ Hourly Rates from 1 August 2021 currently set by the firms and detailed at page 8 of Exhibit SJC-2 and at Annexure “A” of the affidavit of Simon Cathro dated 24 February 2022 up to a capped amount of $200,000, exclusive of GST, and that the Liquidator can draw the remuneration on a monthly basis or as required and to pay such third party expenses as required.

97    Pursuant to s 60-11 and s 90-15(3)(f) of the IPS the Court is empowered to review remuneration previously approved for an external administrator of a company. Section 60-11(4) provides that after reviewing the remuneration determination the Court must either: affirm the remuneration determination; vary the remuneration determination; or set aside the remuneration determination and substitute another remuneration determination.

98    Section 60-12 of the IPS requires that in conducting a review under s 60-11 the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:

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

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

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

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

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

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

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

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

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

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

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

(l)    if:

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

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

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

(m)    any other relevant matters.

99    In Re Sakr Nominees Pty Ltd [2017] NSWSC 668 at [23] Black J summarised the principles applicable to a review of remuneration:

I will first refer, relatively briefly, to the principles applicable to the assessment of the amount of an administrator’s or liquidator’s remuneration. I have drawn on my summary of those principles in Re Primespace Property Investment Limited (in liq) [2016] NSWSC 1821 and on the Court of Appeal’s decision in Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr above in doing so. A liquidator is entitled to reasonable remuneration for his or her services and the liquidator bears the onus of establishing that the amount of remuneration they seek is fair and reasonable and, in determining a liquidator’s reasonable remuneration, the Court will have regard to the factors specified in s 473(10) of the Corporations Act, to which I refer further below. The Court must bring an independent mind to bear on the question whether the remuneration sought by a liquidator is fair and reasonable; the liquidator must lead evidence in sufficient detail that the Court can determine that question; and the Court will generally need to be provided with an account in itemised form, setting out at least the details of the work done; the persons who did the work; the time taken to perform the work; the remuneration claimed; and, to the extent relevant, the expenses incurred by the liquidator: Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 102–103. Proportionality is an important matter in considering the question of whether remuneration is reasonable, and the “value” of a liquidator’s work can include the benefit of resolving the position of creditors and beneficiaries; the benefit to the community of not permitting assets to remain unproductively in the hands of a defunct company for a long period; and can include work that was required to be done, although it did not result in a return to creditors: Thackray v Gunns Plantations Ltd [2011] VSC 380 ; (2011) 85 ACSR 144 at [64]; Macks v Maka [2015] SASC 200; (2015) 110 ACSR 279 at [52]–[66];Warner, Re GTL Tradeup Pty Ltd (in liq) [2015] FCA 323; (2015) 104 ACSR 633 at [70]–[71]; Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; (2015) 108 ACSR 545.

100    The Court also has power to approve future remuneration, particularly where a winding up is close to completion, in order to avoid the costs of a further application: see In the matter of JPD Media & Design Pty Limited (subject to deed of company arrangement) [2020] NSWSC 1311 at [15].

101    Section  90-15(3)(d) of the IPS allows an external administrator to seek an order in relation to the costs of a proceeding taken by them thereby entitling them to be indemnified from the assets of the company for their costs in bringing proceedings, provided such costs were properly incurred in the sense that they were reasonably and honestly incurred: see Sallway, in the matter of Mossgreen Pty Ltd (in liq) (Remuneration of Liquidators) (2019) 140 ACSR 331; [2019] FCA 1771 at [42].

102    The plaintiffs’ application for review of his remuneration arises in circumstances where his initial estimate assumed that the winding up would be straightforward and, at the time he provided that estimate, he was unaware of the matters which George subsequently raised.

103    The Liquidator gave detailed evidence about the nature of the work that he and his staff have undertaken. In the Liquidator’s opinion that work was necessary and was properly performed. Further, his personal involvement became increasingly necessary, having regard to the nature of George’s allegations against Alfred, which required him to exercise a high degree of supervision and responsibility.

104    Having regard to the factors in s 60-12 of the IPS I was satisfied that the remuneration sought by the Liquidator was reasonable given:

(1)    the itemised accounts provided for the work performed by the Liquidator which was both necessary and properly performed;

(2)    the lengthy period over which the work was performed;

(3)    the necessity for the Liquidator to investigate and respond to George’s allegations increased the complexity of the liquidation. This not only required the Liquidator to exercise a degree of care but caused him to spend additional time liaising with both George and Alfred as well as seeking legal advice;

(4)    the value of the property to be dealt with under the administration was not insubstantial; and

(5)    the time taken for each task was, in my opinion, reasonable, and the level of employee performing each task was appropriate, as matters of a more routine nature were performed by more junior employees and charged at lower hourly rates.

105    Further, given this proceeding was only brought after George refused to grant a release of the Liquidator it is appropriate to permit the costs and disbursements related to the proceeding to be paid out of the assets of Petsamo.

Other orders

106    Given the small number of shareholders and the fact that Petsamo has no creditors, I also made an order dispensing with the requirement in reg 5.6.71 of the Regulations that the order authorising the Liquidator to distribute any surplus have annexed to it a schedule in accordance with Form 551. Similarly, because Petsamo has no creditors and all shareholders are on notice of the winding up, I made an order dispensing with the notice requirements in r 7.9(2) and (3) of the Corporations Rules. Those rules concern the requirement to serve the affidavit in support of an application to distribute a surplus and to publish notice of the application in a daily newspaper circulating in the state in which the company has its principal place of business at least 14 days prior to the hearing of the application. Finally, because the liquidation will be finalised, I made an order that the Liquidator have leave to destroy the books of Petsamo pursuant to s 70-35 of the IPS one month after deregistration of Petsamo.

conclusion

107    For those reasons I made the Orders that I did on 28 March 2022.

Associate:

Dated:    14 April 2022