Federal Court of Australia

Sino Group International Limited, in the matter of Toddler Kindy Gymbaroo Pty Ltd (in liq) v Toddler Kindy Gymbaroo Pty Ltd (in liq) [2023] FCA 904

ORDERS

THE COURT ORDERS THAT:

1.    The names of the parties be amended to reflect the fact that Toddler Kindy Gymbaroo Pty Ltd is in liquidation.

2.    Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), being Sch 2 to the Corporations Act 2001 (Cth), Mr Robert Scott Woods, a registered liquidator, be appointed as the liquidator of Toddler Kindy Gymbaroo Pty Ltd (in liquidation) in place of the current liquidators.

3.    The plaintiffs’ costs of the interlocutory process be costs in the liquidation.

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

REASONS FOR JUDGMENT

MOSHINSKY J:

1    By interlocutory process dated 28 July 2023, the plaintiffs (the Sino Creditors) seek an order for the appointment of a particular person, who is a registered liquidator, as the liquidator of Toddler Kindy Gymbaroo Pty Ltd (in liquidation) (the Company), in place of the current liquidators. The application is opposed by the fourth defendant (Ms Williams), one of the directors of the Company.

2    There is a lengthy procedural background to the application. This is set out in the judgments of the Full Court of this Court in Sino Group International Limited v Toddler Kindy Gymbaroo Pty Ltd [2023] FCAFC 110 and Sino Group International Limited v Toddler Kindy Gymbaroo Pty Ltd (in liq) (Final Orders) [2023] FCAFC 119.

3    On 14 July 2023, the Full Court ordered that a deed of company arrangement (DOCA) that had been entered into should be terminated. As a result of that decision, the deed administrators (Messrs Gideon Rathner and Matthew Sweeny) became the liquidators of the Company: Corporations Act 2001 (Cth), s 446AA.

4    At a hearing before the Full Court on 18 July 2023, an issue emerged as to whether the Court should appoint persons other than the deed administrators as the liquidators of the Company, and if so, who should be appointed. The Sino Creditors sought to have Mr Robert Woods of Deloitte appointed as liquidator of the Company. Ms Williams sought to have Messrs Daniel Juratowitch and Sam Kaso of Cor Cordis appointed. At the hearing, the deed administrators, by that stage the liquidators, informed the Court that they proposed to resign from office and considered themselves to be acting in a “caretaker” capacity until new liquidators were appointed to the Company, potentially at a creditors’ meeting convened to resolve their replacement. The Full Court considered that any application to appoint a new liquidator should be determined in the Court’s original jurisdiction.

5    In that context, the Sino Creditors filed their interlocutory process dated 28 July 2023, seeking the appointment of Mr Woods as liquidator of the Company in place of the current liquidators. The application is brought under s 499(2D) of the Corporations Act, further or alternatively under s 90-15 of the Insolvency Practice Schedule (Corporations), being Sch 2 to the Corporations Act (IPSC).

6    In support of the application, the Sino Creditors rely on three affidavits of Demian Walton, a partner of Rigby Cooke Lawyers, the solicitors acting for the Sino Creditors, dated 27 July 2023, 1 August 2023 and 2 August 2023.

7    Ms Williams opposes the application and seeks the appointment of Messrs Juratowitch and Kaso, who are registered liquidators, as liquidators in place of the current liquidators. Ms Williams relies on an affidavit of Wojtek Randla dated 1 August 2023.

8    The material before the Court includes consents to act from both Mr Woods and Messrs Juratowitch and Kaso.

9    The Sino Creditors and Ms Williams provided outlines of submissions in advance of the hearing today.

10    The current liquidators were represented at the hearing today but did not make substantive submissions. They do not take a position on the application. They do not oppose being replaced as liquidators.

11    There are two issues to be determined. The first is whether it is appropriate for the Court to make a decision on the appointment of a new liquidator (or liquidators) or whether this should be the subject of consideration by a meeting of creditors. The second issue is, if the Court decides that it is appropriate for the Court to decide the matter, who the Court should appoint.

12    Before considering those issues, I note that I consider that the appropriate power for the purposes of the application is s 90-15 of the IPSC. It is clear that the Court has power under that provision: see s 90-15(3)(c). Ms Williams does not challenge the proposition that the Court has power to make the order sought by the Sino Creditors under s 90-15 of the IPSC. I doubt whether s 499(2D) of the Corporations Act is available in the present circumstances, given the reference in that provision to “immediately” and the fact that the order setting aside the DOCA was made on 14 July 2023, some two weeks ago.

13    I turn now to the first issue. I consider it appropriate for the Court to make a decision on the appointment of a new liquidator (or liquidators) rather than deferring the issue to a meeting of creditors. If the issue were left to a meeting of creditors, there are likely to be disputed issues concerning voting rights, both as regards the Sino Creditors and related parties. This is likely to lead to some delay, and further potential disputation. I consider it preferable for the issue to be resolved as soon as possible so that the relevant person or persons can undertake their responsibilities.

14    I turn now to the second issue, namely who should be appointed as the new liquidator or liquidators.

15    Ms Williams raises two arguments against the appointment of Mr Woods. The first is that the persons proposed by Ms Williams (Messrs Juratowitch and Kaso) are likely to be more cost effective and better suited to the role. Ms Williams relies on the hourly rates set out in the consent to act documents signed by the liquidators proposed by each party. For example, in the schedule to Mr Woods’s consent to act, the hourly rate for a “DRS partner” is $675 and the hourly rate for a “DRS Manager 1” is $545. By comparison, in the consent to act signed by Messrs Juratowitch and Kaso, the hourly rate for a partner is $640 and the hourly rate for a manager is $520. I am not satisfied that the difference in likely cost between the two alternative proposals is of such significance as to favour one proposal over the other. In terms of relevant and appropriate experience, there is only limited material before the Court. It appears to me that all three persons are relevantly and appropriately experienced. I am unable to discern a relevant difference in this regard.

16    The second point raised on behalf of Ms Williams is that the Sino Creditors are “disgruntled” creditors, and this should count against their proposed appointee. On the basis of the submissions and material before the Court, I am not persuaded that the Sino Creditors are aptly described as disgruntled creditors. Apart from this submission, there is no suggestion that Mr Woods lacks independence. I accept that he is independent.

17    As between the proposals put forward by the Sino Creditors, on the one hand, and Ms Williams, on the other, a relevant consideration is the general policy against the appointment of a liquidator proposed by a director: see Unifor Office Systems Aust Pty Ltd v Brewer Partnership Pty Ltd [1999] NSWSC 137 at [6]-[7] per Hodgson CJ in Eq; see also Fitz Jersey Pty Ltd v Fraser [2018] NSWSC 1189; 129 ACSR 238 at [84] per Ward CJ in Eq (referring to a party’s submission, but with apparent acceptance of the proposition in Unifor). This is a consideration that tends against the appointment of the persons proposed by Ms Williams.

18    In light of the above, I consider it appropriate to make an order appointing Mr Robert Woods, a registered liquidator, as the liquidator of the Company, pursuant to s 90-15 of the IPSC. I will hear the parties on the precise form of order and on any ancillary or consequential orders.

Associate:

Dated:    3 August 2023

SCHEDULE OF PARTIES