Federal Court of Australia

Kelly (Liquidator), in the matter of Halifax Investment Services Pty Ltd (in liquidation) v Loo (No 3) [2022] FCA 1544

ORDERS

THE COURT ORDERS THAT:

1.    The requirement for service of the Interlocutory Process dated 9 December 2022, the affidavit of Philip Alexander Quinlan sworn 9 December 2022 and the affidavit Peter James Gothard sworn 9 December 2022 on the defendants be dispensed with.

2.    Pursuant to s 499(3) of the Corporations Act 2001 (Cth) upon the resignation of the first plaintiff as liquidator of Halifax Investment Services Pty Ltd (In Liquidation) ACN 096 980 522 (Halifax AU), Peter James Gothard be appointed as a joint and several liquidator of Halifax AU.

3.    Pursuant to s 532(2) of the Corporations Act, to the extent necessary, leave be granted to Peter James Gothard to be appointed as a joint and several liquidator of Halifax AU.

4.    Pursuant to r 9.08 of the Federal Court Rules 2011 (Cth), the first plaintiff cease to be a party to this proceeding.

5.    Pursuant to r 9.05 of the Rules, Peter James Gothard be added as a plaintiff in his capacity as joint and several liquidator of Halifax AU.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    By interlocutory process filed on 9 December 2022 the plaintiffs, Morgan John Kelly and Philip Alexander Quinlan in their capacity as joint and several liquidators of Halifax Investment Services Pty Ltd (in liquidation) (Halifax AU) (Liquidators) and Halifax AU, sought an order appointing Peter James Gothard as a joint and several liquidator of Halifax AU. The application was made because Mr Kelly intends to resign as a liquidator of Halifax AU, following his resignation from KPMG, the firm of which both of the Liquidators are partners, effective 19 December 2022.

2    On 13 December 2022 I made orders substantially in the form of the orders sought by the Liquidators in their interlocutory process. These are my reasons for making those orders.

background

3    Mr Kelly has resigned from KPMG and will cease to be a partner of that firm with effect from 19 December 2022. Mr Kelly has agreed to resign as one of the Liquidators of Halifax AU by 19 December 2022 and has signed a resignation form to that effect which is to be dated upon the Court making the orders that were sought by the Liquidators.

4    As at 19 December 2022, Mr Kelly will cease to be covered by KPMG’s insurance policy.

5    Mr Gothard, who the Liquidatros sought be appointed as the second Liquidator of Halifax AU, in effect replacing Mr Kelly upon his resignation, is a registered liquidator, a partner of KPMG, a chartered accountant, a fellow of the Australian Restructuring Insolvency and Turnaround Association and a fellow of INSOL International. He has over 30 years’ experience specialising in insolvency and restructuring in Australia, the US and Asia, is the Asia Pacific head of restructuring services for KPMG and has worked with Mr Quinlan at KPMG, and prior to that, the firm known as Ferrier Hodgson, since 2007.

6    Since about July 2022, when Mr Gothard understood that Mr Kelly was leaving the KPMG partnership, he has reviewed documents relevant to the ongoing liquidation of Halifax AU and undertaken tasks to familiarise himself with the liquidation. Neither Mr Gothard’s time to familiarise himself with the liquidation of Halifax AU or the costs of the application to appoint Mr Gothard as one of the Liquidators has been charged to the liquidation. Those costs are to be met by KPMG.

7    According to Mr Quinlan it is both best practice, and ordinary practice for KPMG, for two liquidators to be appointed to matters of the size and complexity of the Halifax liquidation.

8    Mr Quinlan also considered that there were practical advantages to maintaining two liquidators of Halifax AU:

(1)    it enables any matter to be authorised or determined by either in the event that the other is absent or unavailable; and

(2)    there is an ability to divide tasks between them in the liquidation, for example where there are upcoming deadlines in the remaining work streams.

9    Like Mr Quinlan, Mr Gothard is of the view that it is appropriate, convenient, cost effective and in the interests of the creditors and investors of Halifax AU that he be appointed as a second liquidator of Halifax AU, working with Mr Quinlan.

10    Mr Gothard explained that to date the Liquidators have been assisted with the day to day carriage of the liquidation of Halifax AU by staff members, each of whom will remain as employees of KPMG following Mr Kelly’s resignation as one of the Liquidators and his retirement from the KPMG partnership. Those staff members will continue to maintain the day to day carriage of the liquidation of Halifax AU under the guidance of Mr Quinlan. In these circumstances, Mr Gothard expects that the transition in relation to the change in liquidators will be relatively seamless and cost effective and that he and Mr Quinlan will be able to progress the liquidation without delay.

11    Finally, it is a condition of Mr Quinlan’s registration as a liquidator that he can only be appointed where another registered liquidator is also appointed and that person is not subject to a condition that restricts the circumstances in which they can act in that role. Mr Gothard’s registration as a liquidator does not contain such a condition and thus he can act as a second liquidator of Halifax AU together with Mr Quinlan.

statutory framework and legal principles

12    Section 499(3) of the Corporations Act 2001 (Cth) provides:

(3)    If a liquidator, other than a liquidator appointed by, or by the direction of, the Court resigns:

(a)    the Court; or

(b)    ASIC; or

(c)    the creditors;

may fill the vacancy by the appointment of a liquidator.

13    Section 532(2) provides that:

(2)    Subject to this section, a person must not, except with the leave of the Court, seek to be appointed, or act, as liquidator of a company:

(a)    if the person, or a body corporate in which the person has a substantial holding, is indebted in an amount exceeding $5,000 to the company or a body corporate related to the company; or

(b)    if the person is, otherwise than in his or her capacity as liquidator, a creditor of the company or of a related body corporate in an amount exceeding $5,000; or

(c)    if:

(i)    the person is an officer or employee of the company (otherwise than by reason of being a liquidator of the company or of a related body corporate); or

(ii)    the person is an officer or employee of any body corporate that is a secured party in relation to property of the company; or

(iii)    the person is an auditor of the company; or

(iv)    the person is a partner or employee of an auditor of the company; or

(v)    the person is a partner, employer or employee of an officer of the company; or

(vi)    the person is a partner or employee of an employee of an officer of the company.

14    The benefit of creditors maintaining a liquidation within the same firm upon resignation of one of the incumbent liquidators has long been recognised: see In the matter of Arresso Consulting Pty Ltd [2019] NSWSC 997 at [8] and the authorities cited therein.

15    From a costs perspective it is beneficial that essentially an administrative rearrangement necessitated by the retirement of one of the liquidators is effected through a short application to the Court, even though it is possible to effect such a change via a resolution of creditors: see Free & Ors [2010] NSWSC 1079 at [6].

Consideration

16    For the following reasons I was satisfied that the orders sought by the Liquidators should be made:

(1)    from a practical perspective, in the event that the orders were not made by the Court Halifax AU would have been required to convene a meeting of its creditors at a cost. The cost of the application before me was borne by KPMG;

(2)    as set out by Mr Quinlan there are a number of advantages to having two liquidators continue in the administration of the liquidation of Halifax AU. In particular it ensures that there is always a liquidator available to perform tasks and provides appropriate checks and balances as well as the ability to divide tasks;

(3)    there is efficiency in both liquidators being from the same firm, in this case KPMG;

(4)    Mr Gothard has for some time been familiarising himself with the liquidation of Halifax AU with such work being undertaken at KPMG’s costs and not at the cost of its creditors or investors;

(5)    the existing KPMG team which has the detailed knowledge of Halifax AU’s operations and the history of the liquidation will continue to work on the liquidation together with Mr Quinlan and Mr Gothard, once appointed. This continuity will not only be to the benefit of the liquidation but will ensure that Mr Gothard can become familiar with the liquidation in a cost effective and efficient way;

(6)    while Halifax AU’s liquidation is at a relatively advanced stage, there remain a number of tasks to undertake which will benefit from having two liquidators appointed; and

(7)    for the reason set out at [11] above, Mr Quinlan could not continue in the role of Liquidator alone.

17    The Liquidators also sought an order pursuant to s 532(2) of the Corporations Act. This was because KPMG has outstanding claims for remuneration and disbursements exceeding $5,000 against Halifax AU. As has been recognised an order pursuant to 532(2) in the terms sought by the Liquidators is commonly granted in applications for replacement of liquidators: see Re Arresso Consulting at [9]-[11]. Further there is no prejudice to any interested party as a result of the outstanding remuneration and disbursement claims.

conclusion

18    For those reasons I made the orders sought by the Liquidators.

Associate:

Dated:    20 December 2022

SCHEDULE OF PARTIES