FEDERAL COURT OF AUSTRALIA

Fourteen Consulting Services Pty Ltd (in liq) v A.O.B Holding Pty Ltd (in liq) (No 3) [2024] FCA 146

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to the applicants to file in Court, an amended interlocutory process dated 22 February 2024 (Amended Interlocutory Process).

2.    The Amended Interlocutory Process be heard instanter.

3.    The Amended Interlocutory Process be determined on an ex parte basis.

4.    Australian Lending and Finance Pty Ltd (provisional liquidator appointed) (ACN 608 620 622) (ALF) is to be wound up on grounds of insolvency.

5.    Darren John Vardy, of Insolvency Options Pty Ltd, Suite 38, 3 Box Road, Caringbah NSW 2229, is to be appointed liquidator of ALF.

6.    Pursuant to s 579E(1) of the Corporations Act 2001 (Cth) (Corporations Act), ALF is to be added to the NPC Pooled Group of companies as created and defined in Order 47 of the orders made by Justice Halley in these proceedings on 20 December 2023 (the NPC Pooled Group), for the purposes of s 579E of the Corporations Act.

7.    The following be costs in the liquidation of the NPC Pooled Group:

(a)    the applicant’s costs of and incidental to the Amended Interlocutory Process; and

(b)    the applicant’s costs of and incidental to the interlocutory process filed 22 December 2023.

8.    These orders be entered forthwith.

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

REASONS FOR JUDGMENT

HALLEY J:

A.     INTRODUCTION

1    By an amended interlocutory process filed on 22 February 2024 (amended interlocutory process), Darren John Vardy sought orders for the winding up of Australian Lending and Finance Pty Ltd (in provisional liquidation) (ALF), his appointment as a liquidator of ALF and a pooling order for ALF pursuant to s 579E of the Corporations Act 2001 (Cth) (Corporations Act).

2    Mr Vardy is the liquidator of the first plaintiff, Fourteen Consulting Services Pty Ltd (in liquidation) (ACN 626 923 297) (Fourteen), the second plaintiff, Boon Business Consultants Pty Ltd (in liquidation) (ACN 634 124 315) (Boon) and each of the defendants (other than the thirty-sixth defendant, ALF in respect of which Mr Vardy has been appointed as provisional liquidator).

3    The amended interlocutory process was supported by detailed affidavit evidence from Mr Vardy. In addition, Mr Vardy relied on affidavits of publication and lodgement with the Australian Securities and Investments Commission (ASIC) from Dominique Hajjar, affidavits of service of William Pattinson and Alexander Taylor and an affidavit of Oliver Warney, annexing a copy of Mr Vardy’s consent to act as a liquidator of AFL.

4    On 22 February 2024, I made orders substantially in the terms of the relief sought in the interlocutory process. By way of summary, those orders comprised:

(a)    orders pursuant to s 459A or s 461(1)(k) of the Corporations Act that ALF be wound up and Mr Vardy be appointed liquidator; and

(b)    an order pursuant to s 579E of the Corporations Act that ALF be added to the pooled group created by and defined in orders of the Court on 20 December 2023 for the purposes of s 579E of the Corporations Act (Current Pooled Group).

5    There was no opposition of which Mr Vardy was aware to any of the relief claimed in the amended interlocutory process.

6    These are my reasons for making those orders.

7    In my view, this is a matter in which it is appropriate to deliver short form reasons. The relief sought was extensive but was largely consensual, the relevant legal principles are well established, the application was supported by comprehensive written submissions from experienced counsel, the relevant context and explanation for the relief sought was the subject of detailed evidence, and interested parties were notified of the hearing in which the orders were made.

B.     BACKGROUND

8    For present purposes it is sufficient to provide the following background to the relief sought in the interlocutory process.

9    On 15 March 2023, Fourteen was wound up by an order of the Supreme Court of New South Wales and Mr Vardy was appointed liquidator.

10    On 19 May 2023, Boon was wound up by an order of this Court and Mr Vardy was appointed liquidator.

11    On 29 August 2023, ALF entered into a document styled as a “Retainer Deed” with Accolade Advisory Pty Ltd (ACN 604 214 100) (Accolade Advisory) in its own capacity and as trustee of the Accolade Advisory Trust (a former advisor to ALF), Marginata Securities Pty Ltd (ACN 610 129 630) (Marginata) in its own capacity and as trustee of the Marginata Securities Trust (a former advisor to ALF), and Reliance Financial Services Pty Ltd (ACN 146 317 919) (Reliance).

12    The public examination of various persons took place before Registrar O’Connor between 6 November 2023 to 10 November 2023.

13    Mr Vardy has also carried out a series of informal examinations and received a large number of documents pursuant to the orders for production.

14    On 8 December 2023, Jackman J made orders appointing Mr Vardy as provisional liquidator of ALF.

15    On 20 December 2023, I made orders for the winding up of further companies and the appointment of Mr Vardy as a liquidator of those companies and a pooling order with respect to those companies and companies of which Mr Vardy had previously been appointed liquidator, together, referred to in these reasons as the Current Pooled Group, and other related orders: Fourteen Consulting Services Pty Ltd (in liquidation) v A.O.B Holding Pty Ltd (in liquidation) (No 2) [2023] FCA 1684.

16    On 22 December 2023, I made orders which, in summary, restrained Accolade Advisory, Marginata and Reliance from taking steps pursuant to the Retainer Deed, together with orders that each of those parties, and that Teddy Panella (the current director of ALF), McEvoy Legal Pty Ltd (McEvoy Legal) (ALF’s former solicitors), and Sam Cassaniti provide books of ALF in their possession to Mr Vardy.

17    On 24 January 2024, Jackman J made orders by consent between Accolade Advisory, Marginata, Reliance, Mr Panella, McEvoy Legal and Mr Cassaniti, which addressed the claims between those parties in connection with the Retainer Deed.

18    As a result of his investigations to date, Mr Vardy has concluded that having regard to the uncertainty as to the amount of a loan from Fifteen Investments Pty Ltd (Fifteen) to ALF, and the possibility that there may be a taxation liability with respect to the recovery from a third party debtor of ALF which does not appear to have been recorded or reported to the Australian Taxation Office (ATO), ALF and the Current Pooled Group ought properly to be a pooled group for the purposes of s 597E of the Corporations Act.

19    Mr Vardy gave evidence that:

(a)    he is not in possession of any financial management accounts which would enable him to conduct an assessment of the solvency of ALF on a balance sheet basis;

(b)    there is no evidence that ALF has complied with its taxation reporting and payment obligations, or of the total quantum of debts owing by ALF;

(c)    whilst ALF has assets (in the form of interests in real property), it owes at least $458,660.28 to Fifteen;

(d)    ALF has no source of income or ability to pay debts on its own account, other than by way of realisation of its interests in real property; and

(e)    he concluded in light of these matters, that ALF was insolvent on a cashflow basis from at least 17 August 2021, being the date after which ALF became liable as guarantor to repay a loan to a third party, and that ALF remains insolvent to date.

20    Each of Mr Panella, McEvoy Legal, Accolade Advisory, Marginata, Reliance and Mr Cassaniti consent to the winding up order being made.

21    Mr Vardy also gave evidence that the affairs of ALF have not been managed appropriately including because:

(a)    he has not been able to determine whether ALF has complied with its taxation obligations in respect of reporting and payment;

(b)    the former director of ALF, Chris Traill, appears to have been involved in a broader tax avoidance scheme conducted by the “NPC Group” (Scheme);

(c)    funds obtained by Fifteen from that Scheme appear to have been used by it to purchase shares in ALF;

(d)    books of ALF were located on a shared server maintained by Samuel Henderson;

(e)    Mr Henderson was a, or the, controlling mind of ALF, despite not being formally recorded as a director; and

(f)    the affairs of ALF otherwise appear to be intertwined with those of the broader Current Pooled Group, including by reason of the involvement of Mr Henderson, the financial linkages between ALF and Fifteen, the storage of ALF’s books on a shared server, and the use of nominee directors in common with other companies in the Current Group by ALF.

C.     WINDING UP OF ALF

22    Pursuant to s 459P of the Corporations Act, a creditor (including a contingent or prospective creditor) and a contributory can apply for an order under s 459A of the Corporations Act that a company be wound up in insolvency. Similarly, pursuant to s 462 of the Corporations Act, a creditor (including a contingent or prospective creditor) and a contributory can apply for an order under s 461 of the Corporations Act that a company be wound up if the Court is of the opinion that it is just and equitable that the company be wound up.

23    With respect to whether ALF ought to be wound up in insolvency, as set out above, there is an undisputed debt owing by it to Fifteen (a member of the Current Pooled Group).

24    A corporation is not solvent unless it is able to pay all its debts, as and when they become due and payable: s 95A of the Corporations Act. A conclusion of insolvency is usually an inference drawn from multiple factors: In the matter of Plutus Payroll Pty Limited & others [2017] NSWSC 1360 at [30] (Brereton J).

25    I was satisfied that based on Mr Vardy’s evidence outlined at [19] above, ALF is, and has since 17 August 2021 been, insolvent.

26    A company may also be wound up on just and equitable grounds, where there is a justifiable lack of confidence in the conduct and management of the company’s affairs and thus a risk to the public interest that warrants protection: Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) (2013) 93 ACSR 189; [2013] FCA 234 at [20]-[24] (Gordon J).

27    Fraud or misconduct are significant factors relevant to the exercise of the Court’s discretion to order winding up on the just and equitable ground: Deputy Commissioner of Taxation v A & S Services Australia Pty Ltd [2017] FCA 437 at [5] (Davies J).

28    I was satisfied that the matters identified by Mr Vardy, that are summarised at [21] above were sufficient to support an order that ALF be wound up on just and equitable grounds.

29    For these reasons, I was satisfied that an order be made winding up ALF on the grounds of either insolvency or on just and equitable grounds and Mr Vardy be appointed liquidator. Mr Vardy, by his counsel, informed the Court during the hearing of the amended interlocutory process that his primary contention was that ALF should be wound up on the grounds of insolvency.

D.     POOLING ORDER

30    Mr Vardy also sought an order that the Current Pooled Group and ALF constitute a “pooled group” for the purposes of s 579E of the Corporations Act (Revised Pooled Group). Such an order is designated by s 9 of the Corporations Act as a “pooling order”.

31    Accordingly, if a pooling order is made in respect of ALF and the Current Pooled Group, all of the companies in that pooled group will be jointly and severally liable for the debts of, and claims against, each of them, with debts owing among the companies themselves extinguished. In this way, the assets available in each winding up become applicable towards satisfaction of the external debts of all of the companies.

32    I am satisfied that each of the six preconditions for the making of a pooling order identified in In the matter of Kirby Street (Holding) Pty Limited (2011) 87 ACSR 84; [2011] NSWSC 1536 at [7] (Barrett J) is satisfied.

33    First, the Revised Pooled Group comprises 37 companies and thus constitutes a group of 2 or more companies.

34    Second, each of the companies in the Revised Pooled Group is now in the process of being wound up. I note that as a result of the orders that were made on 22 February 2024, this includes ALF.

35    Third, at least one of the conditions in subparagraphs (i) to (iv) of s 579E(1)(b) is satisfied, namely subparagraph (iv).

36    Mr Vardy gave evidence that there is likely “particular property” that is owned by “one or more” of the companies in the Revised Pooled Group, being (a) $200,000 advanced by Fifteen to Australian L and F (formerly known as Dinimus Credit Fund Management Company Pty Ltd), guaranteed by ALF (and two former directors of ALF), on or about 16 August 2018 and (b) the share purchase price of $900,000 advanced in several instalments between 18 December 2018 and 10 July 2019 pursuant to a share sale agreement between Fifteen and Australian L and F of 50 shares in ALF, were likely paid from revenue received by Fifteen, whether directly or indirectly, as part of the broader Scheme that property was used, or was for use, by any or all of the companies in the Revised Pooled Group.

37    Fourth, as to 579E(12) of the Corporations Act, Mr Vardy gave evidence that:

(a)    the members of the Revised Pooled Group were involved in the operations of other members of the Revised Pooled Group, including by reason of the large number of inter-company loan accounts;

(b)    the controlling mind of each of the members of the Revised Pooled Group was the late Mr Henderson;

(c)    the conduct of the companies in the Revised Pooled Group, and of the late Mr Henderson, to the ATO and state revenue offices, being the largest unrelated creditors of the Revised Pooled Group, was consistent in that they sought to avoid the payment of monies to those creditors;

(d)    the winding up of each of the members in the Revised Pooled Group is directly or indirectly attributable to the winding up of Fourteen and Boon, as that resulted in Mr Vardy uncovering the Scheme;

(e)    the existence of the Scheme shows that the activities and business of the members of the Revised Pooled Group was intermingled; and

(f)    there are administrative advantages and savings from the making of the pooling order.

38    Fifth, having regard to the matters set out above, in my view, it was “just and equitable” that the pooling order be made.

39    Sixth, the Court was not precluded by s 579E(10) of the Corporations Act from making the Revised Pooling Order because no eligible unsecured creditor would be materially disadvantaged, and the only eligible unsecured creditor that could potentially be said to be materially disadvantaged, being the ATO, did not oppose the making of the order. For present purposes, the only eligible unsecured creditors are, in summary terms, unsecured creditors of one or more members of the Revised Pooled Group where those creditors are not themselves members of the Revised Pooled Group: s 579(10)(a) of the Corporations Act.

40    Further, Mr Vardy has given notice of these proceedings and the hearing date to creditors of each of the members of the Revised Pooled Group under s 579J of the Corporations Act. Creditors have thus been given an opportunity to make their views known. Mr Vardy did not receive any objection to a pooling order being made from any creditor of any of the members of the Revised Pooled Group and no creditor appeared at the hearing to oppose the making of the orders sought in the amended interlocutory process.

41    For the foregoing reasons, I was satisfied that an order should be made that the Revised Pooled Group constitutes a “pooled group” for the purposes of s 579E of the Corporations Act.

DISPOSITION

42    For the reasons set out above, I was satisfied that orders should be made substantially in the form sought in the amended interlocutory process.

Associate:

Dated:    27 February 2024

SCHEDULE OF PARTIES