FEDERAL COURT OF AUSTRALIA

Ford v Commissioner of Taxation, in the matter of Careers Australia Group Limited (in liq) (No 3) [2022] FCA 1420

ORDERS

THE COURT NOTES THAT:

A.    On 25 May 2017, the first plaintiff, Martin Francis Ford, was appointed as administrator of Careers Australia Group Limited and certain of its subsidiaries (collectively, the Group). The Group includes the plaintiff companies in this proceeding and the plaintiff companies in proceeding VID 749 of 2021 (collectively the Plaintiff Companies). On 30 June 2017, Martin Francis Ford was appointed as liquidator of the Group (the Liquidator).

B.    Orders in substantially the same terms have been made in proceeding VID 749 of 2021.

THE COURT ORDERS THAT:

Discovery

1.    By 30 November 2022, the plaintiffs give non-standard discovery pursuant to r 20.15 of the Federal Court Rules 2011 (FCR) of all documents relevant to the solvency (including, for the avoidance of doubt, the financial position) of each of the Plaintiff Companies and the Group in the period from 1 July 2016 to 25 May 2017 (excluding any documents discovered to date in the proceeding pursuant to the Orders made on 30 September 2021 by Registrar Farrell).

2.    By 30 November 2022, the defendant and the respondent give non-standard discovery to the plaintiffs of all documents relevant to the solvency (including, for the avoidance of doubt, the financial position) of each of the Plaintiff Companies and the Group in the period from 1 July 2016 to 25 May 2017, excluding in respect of the respondent:

(a)    documents produced to the plaintiffs in Federal Court proceeding no. NSD 1381 of 2020 by the respondent; and

(b)    emails to, from, CC or BCC an email address ending:

(i)    “@careersaustralia.edu.au”;

(ii)    “@asm.edu.au”;

(iii)    “@workstar.com.au”;

(iv)    “@globallearnings.support.com”; or

(v)    “@acae.edu.au".

3.    By 30 November 2022, each party serve a verified list of all documents discovered (including for the avoidance of doubt, documents produced pursuant to the Orders made on 30 September 2021 in this proceeding and Orders made on 28 March 2022 in proceeding VID 749 of 2021), as required by FCR 20.16 and 20.17.

4.    The discovery referred to in Orders 1 and 2 is to be provided in an electronic format in accordance with the electronic discovery protocol agreed between the parties in this proceeding and proceeding VID 749 of 2021.

5.    The parties have leave to use in this proceeding any document discovered or otherwise produced on notice to produce or subpoena by the parties in proceeding VID 749 of 2021.

Statement of Agreed Facts

6.    By 16 December 2022, the plaintiffs provide the defendant and the respondent to this proceeding and the defendants in proceeding VID 749 of 2021, their proposed statement of agreed facts (Proposed Statement of Agreed Facts) (and, if necessary, assumptions) on the issue of insolvency to be provided to the Referee (defined below) which is to include, by reference to document identification numbers, any documents relied on in support of the facts proposed to be agreed.

7.    By 28 February 2023, the defendant and the respondent and the defendants in proceeding VID 749 of 2021 provide their responses to the plaintiffs' Proposed Statement of Agreed Facts, specifying whether they agree with each proposed fact and assumption, or otherwise put forward an alternative fact (or assumption) which is to include, by reference to document identification numbers, any documents relied on in support of the alternative facts (and if necessary, assumptions) proposed to be agreed.

8.    By 10 March 2023, the parties in this proceeding and proceeding VID 749 of 2021 are to agree on one document which contains the parties’ agreed facts (Statement of Agreed Facts).

Reference Process

9.    Shaun Fraser of McGrathNicol is appointed referee (Referee).

10.    Pursuant to s 37P(2) and/or s 54A of the Federal Court of Australia Act 1976 (Cth):

(a)    the questions set out in Annexure A to this Order (Relevant Questions) are referred to the Referee for the purposes of the Referee conducting an inquiry into the Relevant Questions (Reference) and providing a report to the Court stating, with reasons, the Referee's opinion on the Relevant Questions (Report);

(b)    the Reference will commence on 20 March 2023 (Commencement Date);

(c)    by 24 March 2023, the plaintiffs are to provide to the Referee (with a copy to the other parties to the Reference):

(i)    a statement of proposed findings of fact in respect of each of the Relevant Questions (see FCR 28.65(7)); and

(ii)    any documents and lay evidence in writing by affidavit they wish the Referee to consider in answering the Relevant Questions;

(d)    by 28 April 2023, the defendant and the defendants in proceeding VID 749 of 2021 (either jointly or separately) are to provide to the Referee (with a copy to the other parties to the Reference):

(i)    a statement of proposed findings of fact in respect of each of the Relevant Questions (see FCR 28.65(7)); and

(ii)    any documents and lay evidence in writing by affidavit they wish the Referee to consider in answering the Relevant Questions;

(e)    each party to the Reference must do all things required of the party by the Referee to enable the Referee to form an opinion about the Relevant Questions, and not wilfully do, or cause to be done, any act to delay or prevent the Referee forming an opinion (see FCR 28.65(8));

(f)    the Referee is to implement such process for conducting the Reference as will, without undue formality or delay, enable a just, efficient, timely and cost-effective resolution of the Reference and allow completion of the Report, including, as the Referee considers it appropriate or necessary:

(i)    the making of inquiries to a person/entity on notice to the other parties (whether by telephone, videoconference or in writing); and

(ii)    the making of such directions to a party as the Referee considers appropriate for the conduct of the Reference on notice to the other parties (including but not limited to, directions to the parties to produce copies of any such documents, which the Referee considers will assist him to conduct the Reference);

(g)    without limiting Order 10(f) above, to the extent the Referee considers it necessary or appropriate for the Referee to obtain a submission from any party, the Referee may make any direction the Referee considers appropriate in relation to such submissions on notice to the other parties (and provide a copy of that direction and the said party’s submissions to the other parties to the Reference);

(h)    without limiting Order 10(f) above, to the extent the Referee considers it necessary or appropriate and on notice to the parties, the production of documents may be compelled by direction of the Referee to a party or, in relation to a non-party, following issue of a subpoena by the Court (on application) returnable before the Referee; and

(i)    any evidence provided to the Referee by the parties or any third party must be provided:

(i)    orally on oath or affirmation; or

(ii)    in writing by way of affidavit.

11.    The Referee is not bound to conduct the Reference in accordance with the rules of evidence.

12.    The Referee may submit any question arising during the Reference in relation to the inquiry for the decision of the Court and shall thereafter conduct the Reference with any answer or direction by the Court.

Materials to be provided to Referee

13.    By the Commencement Date, the parties are to provide to the Referee copies of the following documents:

(a)    these Orders;

(b)    FCR Division 28.6;

(c)    the current pleadings in this proceeding;

(d)    the current pleadings in proceeding VID 749 of 2021; and

(e)    the Statement of Agreed Facts prepared pursuant to Orders 6 to 8 above.

14.    By 19 May 2023, or such later date fixed by the Referee, the parties may provide to the Referee and each other, including the defendants in proceeding VID 749 of 2021, any written submissions, limited to 20 pages, in respect of the materials listed in Orders 10(c), 10(d) and 13 above.

Counsel assisting Reference

15.    To assist the Referee in the preparation of the Report, a junior barrister be appointed by the Court as counsel assisting (Counsel Assisting) and the costs of Counsel Assisting, capped at a sum of $50,000 (inclusive of GST) (subject to further order), be costs in the Reference and be dealt with in the same way as the fees of the Referee.

16.    The identity of the Counsel Assisting be agreed by the parties or, failing agreement, be determined by the Court.

Referee's Report

17.    In the Report to the Court, the Referee:

(a)    must make a statement of all facts found by the Referee in forming the opinions expressed in the Report; and

(b)    may provide alternative opinions in the Report which depend upon how the Court determines any question submitted to the Court by the Referee.

18.    The Referee is to submit the Report to the Court in accordance with FCRs 28.61 and 28.66, addressed to the Victoria District Registrar, on or before 30 June 2023.

19.    If, for any reason, the Referee is unable to comply with orders for delivery of the Report provided for in Order 18 above, the Referee is to provide to the Associate to Justice O’Bryan a communication setting out the reasons for such inability and request an extension of the time within which to deliver the Report to the Court to a date when the Referee will be able to provide the Report.

Referee's fees and disbursements

20.    Without affecting the powers of the Court as to costs, and subject to further order, the parties to this proceeding and proceeding VID 749 of 2021, are to be liable for the fees payable to the Referee and Counsel Assisting up to the date of provision of the Report to the Court, including any disbursements incurred by the Referee and Counsel Assisting, as follows:

(a)    the plaintiffs are liable for 50% of the costs and disbursements incurred; and

(b)    the defendant in this proceeding and the defendants in proceeding VID 749 of 2021 (with the exception of the eleventh and twelfth defendants) are liable for the remaining 50% of the costs and disbursements in proportion to the plaintiffs’ claim against them.

21.    The fees and disbursements incurred by the Referee shall not, subject to further order, exceed a total of $350,000 (including GST).

Further directions and case management

22.    The Referee and the parties have liberty to apply to the Court for further directions in respect of any matter in relation to discovery or the Reference.

23.    The proceeding be listed for further case management on a date to be fixed.

24.    Costs be reserved.

25.    There be liberty to apply.

Annexure A

Definitions

In addition to the defined terms in these Orders, the following definitions are used in this Annexure:

(a)    Period means the period from 31 October 2016 to 25 May 2017.

(b)    Plaintiff Companies means the plaintiff companies in this proceeding and proceeding VID 749 of 2021, namely:

(i)    Careers Australia Group Limited (in Liquidation) ACN 122 171 840;

(ii)    Careers Australia Education Institute Pty Limited (in Liquidation) ACN 120 675 505;

(iii)    Australian School of Management Pty Limited (in Liquidation) ACN 138 545 605;

(iv)    Careers Australia Institute of Training Pty Limited (in Liquidation) ACN 122 082 204;

(v)    Global Learning Support Group Pty Limited (in Liquidation) ACN 169 155 480; and

(vi)    A.C.N. 097871 933 Pty Limited (formerly Workstar Pty Limited) (in Liquidation) ACN 097 871 933.

Relevant Questions

1.    Were each of the Plaintiff Companies (or any of them) insolvent within the meaning of s 95A of the Corporations Act during the entire Period?

2.    If the answer to question 1 in respect of any of the Plaintiff Companies is no:

(a)    did any of those Plaintiff Companies become insolvent within the meaning of s 95A of the Corporations Act at any time during the Period; and

(b)    if so, on what dates during the Period were those Plaintiff Companies insolvent?

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

ORDERS

THE COURT NOTES THAT:

A.    On 25 May 2017, the first plaintiff, Martin Francis Ford, was appointed as administrator of Careers Australia Group Limited and certain of its subsidiaries (collectively, the Group). The Group includes the plaintiff companies in this proceeding and the plaintiff companies in proceeding VID 238 of 2020 (collectively the Plaintiff Companies). On 30 June 2017, Martin Francis Ford was appointed as liquidator of the Group (the Liquidator).

B.    Orders in substantially the same terms have been made in proceeding VID 238 of 2020.

THE COURT ORDERS THAT:

Discovery

1.    By 30 November 2022, the plaintiffs give non-standard discovery pursuant to r 20.15 of the Federal Court Rules 2011 (FCR) of all documents relevant to the solvency (including, for the avoidance of doubt, the financial position) of each of the Plaintiff Companies and the Group in the period from 1 July 2016 to 25 May 2017 (excluding any documents discovered to date in the proceeding).

2.    By 30 November 2022, the defendants give non-standard discovery to the plaintiffs of all documents relevant to the solvency (including, for the avoidance of doubt, the financial position) of each of the Plaintiff Companies and the Group in the period from 1 July 2016 to 25 May 2017, excluding:

(a)    documents already produced to the plaintiffs in Federal Court proceeding no. NSD 1381 of 2020 by any of the defendants who were served with a summons to produce at examination or notices for production in those proceedings pursuant to ss 596A or 596D(2) of the Corporations Act 2001 (Cth) (Corporations Act); and

(b)    emails to, from, CC or BCC an email address ending:

(i)    “@careersaustralia.edu.au”;

(ii)    “@asm.edu.au”;

(iii)    “@workstar.com.au”;

(iv)    “@globallearnings.support.com”; or

(v)    “@acae.edu.au”.

3.    By 30 November 2022, each party serve a verified list of all documents discovered (including for the avoidance of doubt, documents produced pursuant to the Orders made on 28 March 2022 in this proceeding and Orders made on 30 September 2021 in proceeding VID 238 of 2020), as required by FCR 20.16 and 20.17.

4.    The discovery referred to in Orders 1 and 2 is to be provided in an electronic format in accordance with the electronic discovery protocol agreed between the parties in this proceeding and proceeding VID 238 of 2020.

5.    The parties have leave to use in this proceeding any document discovered or otherwise produced on notice to produce or subpoena by the parties in proceeding VID 238 of 2020.

Statement of Agreed Facts

6.    By 16 December 2022, the plaintiffs provide the defendants to this proceeding, and the defendant in proceeding VID 238 of 2020, their proposed statement of agreed facts (Proposed Statement of Agreed Facts) (and, if necessary, assumptions) on the issue of insolvency to be provided to the Referee which is to include, by reference to document identification numbers, any documents relied on in support of the facts proposed to be agreed.

7.    By 28 February 2023, the defendants provide their responses to the plaintiffs' Proposed Statement of Agreed Facts, specifying whether they agree with each proposed fact and assumption, or otherwise put forward an alternative fact (or assumption) which is to include, by reference to document identification numbers, any documents relied on in support of the alternative facts (and if necessary, assumptions) proposed to be agreed.

8.    By 10 March 2023, the parties in this proceeding and proceeding VID 238 of 2020 are to agree on one document which contains the parties’ agreed facts (Statement of Agreed Facts).

Reference Process

9.    Shaun Fraser of McGrathNicol is appointed referee (Referee).

10.    Pursuant to s 37P(2) and/or s 54A of the Federal Court of Australia Act 1976 (Cth):

(a)    the questions set out in Annexure A to this order (Relevant Questions) are referred to the Referee for the purposes of the Referee conducting an inquiry into the Relevant Questions (Reference) and providing a report to the Court stating, with reasons, the Referee's opinion on the Relevant Questions (Report);

(b)    the Reference will commence on 20 March 2023 (Commencement Date);

(c)    by 24 March 2023, the plaintiffs are to provide to the Referee (with a copy to the other parties to the Reference):

(i)    a statement of proposed findings of fact in respect of each of the Relevant Questions (see FCR 28.65(7)); and

(ii)    any documents and lay evidence in writing by affidavit they wish the Referee to consider in answering the Relevant Questions;

(d)    by 28 April 2023, the defendants and the defendant in proceeding VID 238 of 2020 (either jointly or separately) to provide to the Referee (with a copy to the other parties to the Reference):

(i)    a statement of proposed findings of fact in respect of each of the Relevant Questions (see FCR 28.65(7)); and

(ii)    any documents and lay evidence in writing by affidavit they wish the Referee to consider in answering the Relevant Questions;

(e)    each party to the Reference must do all things required of the party by the Referee to enable the Referee to form an opinion about the Relevant Questions, and not wilfully do, or cause to be done, any act to delay or prevent the Referee forming an opinion (see FCR 28.65(8));

(f)    the Referee is to implement such process for conducting the Reference as will, without undue formality or delay, enable a just, efficient, timely and cost-effective resolution of the Reference and allow completion of the Report, including, as the Referee considers it appropriate or necessary:

(i)    the making of inquiries to a person/entity on notice to the other parties (whether by telephone, videoconference or in writing); and

(ii)    the making of such directions to a party as the Referee considers appropriate for the conduct of the Reference on notice to the other parties (including but not limited to, directions to the parties to produce copies of any such documents, which the Referee considers will assist him to conduct the Reference);

(g)    without limiting Order 10(f) above, to the extent the Referee considers it necessary or appropriate for the Referee to obtain a submission from any party, the Referee may make any direction the Referee considers appropriate in relation to such submissions on notice to the other parties (and provide a copy of that direction and the said party’s submissions to the other parties to the Reference);

(h)    without limiting Order 10(f) above, to the extent the Referee considers it necessary or appropriate and on notice to the parties, the production of documents may be compelled by direction of the Referee to a party or, in relation to a non-party, following issue of a subpoena by the Court (on application) returnable before the Referee; and

(i)    any evidence provided to the Referee by the parties or any third party must be provided:

(i)    orally on oath or affirmation; or

(ii)    in writing by way of affidavit.

11.    The Referee is not bound to conduct the Reference in accordance with the rules of evidence.

12.    The Referee may submit any question arising during the Reference in relation to the inquiry for the decision of the Court and shall thereafter conduct the Reference with any answer or direction by the Court.

Materials to be provided to Referee

13.    By the Commencement Date, the parties are to provide to the Referee copies of the following documents:

(a)    these Orders;

(b)    FCR Division 28.6;

(c)    the current pleadings in this proceeding;

(d)    the current pleadings in proceeding VID 238 of 2020; and

(e)    the Statement of Agreed Facts prepared pursuant to Orders 6 to 8 above.

14.    By 19 May 2022, or such later date fixed by the Referee, the parties may provide to the Referee and each other, including the defendant in proceeding VID 238 of 2020, any written submissions, limited to 20 pages, in respect of the materials listed in Orders 10(c), 10(d) and 13 above.

Counsel assisting Reference

15.    To assist the Referee in the preparation of the Report, a junior barrister be appointed by the Court as counsel assisting (Counsel Assisting) and the costs of Counsel Assisting, capped at a sum of $50,000 (inclusive of GST) (subject to further order), be costs in the Reference and be dealt with in the same way as the fees of the Referee.

16.    The identity of the Counsel Assisting be agreed by the parties or, failing agreement, be determined by the Court.

Referee's Report

17.    In the Report to the Court, the Referee:

(a)    must make a statement of all facts found by the Referee in forming the opinions expressed in the Report; and

(b)    may provide alternative opinions in the Report which depend upon how the Court determines any question submitted to the Court by the Referee.

18.    The Referee is to submit the Report to the Court in accordance with FCRs 28.61 and 28.66, addressed to the Victoria District Registrar, on or before 30 June 2023.

19.    If, for any reason, the Referee is unable to comply with orders for delivery of the Report provided for in Order 18 above, the Referee is to provide to the Associate to Justice O’Bryan a communication setting out the reasons for such inability and request an extension of the time within which to deliver the Report to the Court to a date when the Referee will be able to provide the Report.

Referee's fees and disbursements

20.    Without affecting the powers of the Court as to costs, and subject to further order, the parties to this proceeding and proceeding VID 238 of 2020 are to be liable for the fees payable to the Referee and Counsel Assisting up to the date of provision of the Report to the Court, including any disbursements incurred by the Referee and Counsel Assisting, as follows:

(a)    the plaintiffs are liable for 50% of the costs and disbursements incurred; and

(b)    the defendants in this proceeding (with the exception of the eleventh and twelfth defendants) and the defendant in proceeding VID 238 of 2020 are liable for the remaining 50% of the costs and disbursements in proportion to the plaintiffs’ claim against them.

21.    The fees and disbursements incurred by the Referee shall not, subject to further order, exceed a total of $350,000 (including GST).

Further directions and case management

22.    The Referee and the parties have liberty to apply to the Court for further directions in respect of any matter in relation to discovery or the Reference.

23.    The proceeding be listed for further case management on a date to be fixed.

24.    Costs be reserved.

25.    There be liberty to apply.

Annexure A

Definitions

In addition to the defined terms in these Orders, the following definitions are used in this Annexure:

(a)    Period means the period from 31 October 2016 to 25 May 2017.

(b)    Plaintiff Companies means the plaintiff companies in this proceeding and proceeding VID 238 of 2020, namely:

(i)    Careers Australia Group Limited (in Liquidation) ACN 122 171 840;

(ii)    Careers Australia Education Institute Pty Limited (in Liquidation) ACN 120 675 505;

(iii)    Australian School of Management Pty Limited (in Liquidation) ACN 138 545 605;

(iv)    Careers Australia Institute of Training Pty Limited (in Liquidation) ACN 122 082 204;

(v)    Global Learning Support Group Pty Limited (in Liquidation) ACN 169 155 480; and

(vi)    A.C.N. 097871 933 Pty Limited (formerly Workstar Pty Limited) (in Liquidation) ACN 097 871 933.

Relevant Questions

1.    Were each of the Plaintiff Companies (or any of them) insolvent within the meaning of s 95A of the Corporations Act during the entire Period?

2.    If the answer to question 1 in respect of any of the Plaintiff Companies is no:

(a)    did any of those Plaintiff Companies become insolvent within the meaning of s 95A of the Corporations Act at any time during the Period; and

(b)    if so, on what dates during the Period were those Plaintiff Companies insolvent?

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

REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

1    The first plaintiff is the liquidator of Careers Australia Group Limited (CAG) and certain of its subsidiaries (collectively, the Careers Group). The liquidator has commenced two proceedings in this Court seeking to recover moneys for the benefit of the creditors of CAG and the subsidiaries of CAG that are the plaintiffs in the two proceedings (plaintiff companies): proceeding VID 238 of 2020, which I will refer to as the Preference Proceeding, and proceeding VID 749 of 2021, which I will refer to as the Directors Proceeding. An outline of the allegations in the two proceedings was given in my previous judgment, Ford v Commissioner of Taxation, in the matter of Careers Australia Group Limited (in liq) (No 2) [2022] FCA 1151 (Ford No 2).

2    In Ford No 2, I concluded that (at [44]-[46]):

44    … the next step that should be taken in both proceedings is the completion of discovery by all parties on the issue of insolvency. I have not received submissions concerning the time required by the parties to complete that step or an appropriate form of orders. I will therefore direct the parties to confer and provide agreed or, failing agreement, competing orders to give effect to my conclusions regarding discovery.

45    Following the completion of discovery by all parties on the issue of insolvency, the next step that should be taken is the referral of the question of insolvency of the plaintiff companies, as alleged by the plaintiffs in their pleadings, to a suitable referee for inquiry and report. Prior to the case management hearing, the plaintiffs provided draft orders for a referral. However, the defendants did not direct detailed submissions to the form of those orders. Also, the timing of the referral will be dependent on the completion of discovery on the issue of insolvency. In the circumstances, I will direct the parties to confer in relation to the following matters concerning the referral:

(a)     the selection of a referee;

(b)     the questions to be answered; and

(c)     the date on which the reference is to commence and the date by which the referee is to report,

and provide agreed or, failing agreement, competing orders to give effect to my conclusions regarding a referral.

46    The orders proposed by the parties should include the following requirements:

(a)     that the parties will seek to agree a statement of agreed facts to be provided to the referee at the commencement of the reference;

(b)     that evidence must be given to the referee either orally on oath or affirmation or in writing by affidavit, but the referee is not bound to conduct the reference in accordance with the rules of evidence;

(c)     that the referee and the parties have liberty to apply to the Court for further directions in respect of any matter in relation to the reference; and

(d)     that the referee may submit any question arising on the reference for the decision of the Court and provide alternative opinions which depend upon how the Court determines any question submitted to the Court.

3    In accordance with the orders made on 28 September 2022, the parties have conferred about orders for discovery and referral of the question of insolvency. Between 28 October 2022 and 3 November 2022, the parties filed competing forms of orders and brief submissions indicating their respective positions.

4    The parties are agreed as to the form of discovery orders in both proceedings, which are in materially the same terms. On 3 November 2022, the third, fourth, fifth, eighth and eleventh defendants in the Directors Proceeding notified the Court of an amendment to order 2(b) in the Directors Proceeding which had been agreed as between the plaintiffs and those defendants. My understanding is that the plaintiffs agreed generally in respect of that amendment, which narrows the range of documents to be discovered by the defendants in both proceedings, and that amendment has been made to the orders.

5    The parties disagree about certain aspects of the orders for referral of the question of insolvency: the identity of the proposed referee, the form of questions for determination by the referee, and certain of the orders governing the referral procedure. The parties have filed and served competing forms of proposed orders and written submissions. I have resolved the areas of disagreement as explained below.

6    I note that, on 3 November 2022, the Court published the Referee and Assessor Practice Note which provides guidance on the Court’s practice and procedure relating to orders of referral and orders for the appointment of an assessor, including the standard terms of such orders. The parties did not have the benefit of that practice note when preparing their proposed orders and submissions. I consider that the orders proposed by the parties are consistent with the standard form of orders annexed to the practice note.

Identity of referee

7    The plaintiffs, supported by the first, third, fourth, fifth, sixth, seventh, eighth, eleventh and twelfth defendants in the Directors Proceeding support the appointment of Shaun Fraser of McGrathNicol as the referee. The Commissioner, supported by the second and tenth defendants in the Directors Proceeding, supports the appointment of Michael Hill of McGrathNicol as the referee. The ninth defendant in the Directors Proceeding is indifferent.

8    The curriculum vitae of Messrs Fraser and Hill were provided to the Court. Each is a partner of McGrathNicol; each is a registered liquidator (and otherwise has similar professional qualifications); each has substantial experience in administrations, receiverships and liquidations. The plaintiffs and the Commissioner acknowledge that both are experienced insolvency practitioners and suitable candidates.

9    The plaintiffs submit that Mr Fraser is the more appropriate candidate on the basis that his expertise is as a dedicated insolvency practitioner with over 30 years’ experience (whereas Mr Hill is both a registered liquidator and a forensic accountant). The third, fourth, fifth, eighth and eleventh defendants in the Directors Proceeding further submit that Mr Fraser’s experience is weighted toward insolvency and restructuring, whereas Mr Hill’s experience is weighted toward expert loss calculations, valuations and forensic investigations. The sixth, seventh and twelfth defendants in the Directors Proceeding adopt that submission.

10    The Commissioner submits that Mr Hill’s experience and expertise make him the more appropriate candidate.

11    I do not accept that Mr Hill is the more appropriate candidate, and it is unnecessary to express a view whether Mr Fraser has more relevant experience. Both candidates are eminently suitable and either could be appointed. In those circumstances, the Court will appoint Mr Fraser as his appointment is supported by the larger number of parties to the proceeding.

Reference questions

12    The plaintiffs, supported by the third, fourth, fifth, eighth and eleventh defendants in the Directors Proceeding, have proposed questions in the following form:

1.    Were each of the Plaintiff Companies (or any of them) insolvent within the meaning of section 95A of the Corporations Act during the entire Period?

2.    If the answer to question 1 in respect of any of the Plaintiff Companies is no:

(a)    did any of those Plaintiff Companies become insolvent within the meaning of section 95A of the Corporations Act at any time during the Period; and

(b)    if so, on what dates during the Period were those Plaintiff Companies insolvent?

13    The Commissioner, supported by the second, sixth, seventh, tenth and twelfth defendants in the Directors Proceeding, has proposed that separate questions be asked in respect of each of the plaintiff companies. In my view, the plaintiffs’ questions require the issue of insolvency to be determined in respect of each of the plaintiff companies and therefore the Commissioner’s proposed reformulation achieves nothing.

14    The first defendant in the Directors Proceeding has proposed a slight change in the formulation of the questions with the aim “that they are drafted in a manner which does not pre-suppose the question of insolvency during the Relevant Period”. In my view, the plaintiffs’ questions do not pre-suppose insolvency at any time and therefore the first defendant’s reformulation achieves nothing.

15    The ninth defendant was again indifferent as to the competing formulation of the reference questions.

16    I consider the plaintiffs’ form of reference questions to be appropriate and make orders in those terms.

Counsel assisting the referee

17    The plaintiffs, supported by the third, fourth, fifth, eighth and eleventh defendants in the Directors Proceeding, have proposed that junior counsel be appointed to assist the referee (to the extent necessary) in the conduct of the reference. The Commissioner, supported by the first, second, sixth, seventh, ninth, tenth and twelfth defendants in the Directors Proceeding, oppose the making of an order to that effect.

18    The plaintiffs submit that the reference has the potential to raise legal issues relevant to the solvency of the plaintiff companies that are not straightforward, so as to warrant the appointment of junior counsel. One such matter is the nature and timing of any obligation to refund monies to the Department of Education. While the orders will enable the referee to navigate any legal issues by referring a question to the Court for determination and/or by expressing alternative conclusions in his or her report, the assistance of junior counsel may assist the referee to consider and engage those options if necessary, including to communicate effectively with the Court if required. The plaintiffs further submit there is no “harm” in appointing junior counsel to assist the referee where it is up to the referee to decide whether to use that assistance, and the proposed costs of junior counsel are capped at a relatively modest sum of $50,000 (half of which sum is to be borne by the plaintiffs).

19    The Commissioner submits that, having regard to the extensive experience of the referee, it is difficult to envisage what role and assistance counsel could sensibly add to the reference. Whether any of the plaintiff companies was insolvent is a question of fact that is well within the expertise and experience of an insolvency practitioner. Consequently, any counsel involvement would result in added unwarranted cost and may potentially interfere with the referee’s ability to conduct the reference in the manner he sees fit.

20    Paragraph 2.11 of the Court’s Referee and Assessor Practice Note states that:

Depending upon the complexity of the proposed inquiry, when appointing a subject matter referee, the Court may appoint an independent barrister to provide assistance to the referee to ensure:

(a)     the referee’s report addresses the correct questions and is expressed in such a way as to maximise its usefulness; and

(b)     the inquiry is conducted in accordance with the requirements of procedural fairness.

21    I accept the submissions of the plaintiffs that, in the circumstances of this case, orders enabling the referee to utilise the assistance of junior counsel are likely to be beneficial to the conduct of the reference. I accept that the determination of the insolvency questions may require certain legal issues to be resolved. While the referee will be able to refer any such questions to the Court for resolution, I agree with the plaintiffs that junior counsel may be able to assist the referee in framing the issues and considering the best option for addressing them. The fees will be capped at a modest level. In my view, the likely benefits outweigh the cost.

Other issues

22    There were some other relatively minor differences between the competing orders of the parties. I have considered the differences and made orders in a form that I consider to be appropriate. I note that I have allowed the defendants an additional week in which to respond to the plaintiffs’ proposed statement of agreed facts.

23    Order 3 made on 28 September 2022 in each of the proceedings requires the parties to confer with respect to orders for the completion of discovery on issues arising in the proceeding other than the issue of insolvency and, by 25 November 2022, file and serve agreed orders with respect to such discovery or, failing agreement, competing orders and accompanying outline submissions. Any dispute on the further orders for discovery will be dealt with on the papers.

24    I will not list the proceedings for further case management at this time. If any problem emerges in the process of discovery or the reference, the parties have liberty to apply.

Associate:

Dated:    25 November 2022

SCHEDULE OF PARTIES