In the matter of FW Projects Pty Limited (in liquidation)

By an Amended Originating Process filed, by leave, on 28 June 2019, the Plaintiffs, Hindmarsh Construction Australia Pty Ltd (“Hindmarsh”) and Bellerive Homes Pty Ltd (“Bellerive”) seek interlocutory orders that the Second Defendant, Messrs Devine and Morelli as joint and several liquidators (“Liquidators”) of FW Projects Pty Limited (in liq) (“Company”) be restrained from disbursing the net proceeds of sale of an asset of the Company, lot 3 in Deposited Plan 1233744 (“Lot 3”), to the Third Defendant, Manassen Holdings Pty Ltd (“Manassen”) until further order. Hindmarsh and Bellerive also seek an interlocutory order that the Liquidators are to pay the proceeds of sale of that property into Court or a controlled monies account or otherwise secure them as directed by the Court until further order.

The Plaintiffs also seek an order, under s 90-15 of the Insolvency Practice Schedule (Corporations) contained in Sch 2 to the Corporations Act 2001 (Cth), removing Messrs Devine and Morelli as joint and several liquidators of the Company and appointing an independent liquidator to the Company. That order was sought in place of a previous order, which the Plaintiffs had pursued for a considerable period, seeking the appointment of Mr Ian Purchas as liquidator to the Company. The Plaintiffs also previously sought, but abandoned shortly before the hearing, orders for the appointment of a special purpose liquidator and restraining the Liquidators from retaining, and continuing to retain, Mills Oakley to provide legal advice and services to them in their capacity as joint and several liquidators of the Company. In the event, the Liquidators have indicated that they will retain new solicitors in place of Mills Oakley from the point of delivery of this judgment, if they are not removed from office.

The Plaintiffs also seek, as final relief, orders setting aside, under s 37A of the Conveyancing Act 1919 (NSW), an alleged alienation of the Company’s property by the entry into agreements dated 20 September 2018 (“Manassen Security Agreements”) between the Company, Manassen, Albert Investment Holdings Pty Ltd (“Albert Investment”) and S F Capital Pty Ltd (“SF Capital”), including a Deed of Amendment and Restatement dated 20 September 2018; Schedule 2 to that deed, being an Amended and Restated Facility Agreement; a General Security Deed; and mortgages in favour of Manassen. The Plaintiffs also seek an order under s 42 of the Real Property Act 1900 (NSW) setting aside the registration of the mortgages, which Counsel made clear is sought as consequential upon the relief sought under s 37A of the Conveyancing Act. This hearing did not determine questions of final relief as to those matters.

Both the Plaintiffs and Manassen made submissions as to transactions between the Company and Manassen, beyond what was necessary to establish a serious question to be tried; or determine whether interlocutory relief in respect of the proceeds of Lot 3 should be granted; or the Liquidators should be removed. I am conscious that this application is limited in its scope; that there are very likely to be further disputes between the parties, including a hearing as to the claims for final relief noted above; and it is appropriate that I do not determine any more than is necessary to determine whether interlocutory relief should be granted or refused in respect of the proceeds of Lot 3 and whether the Liquidators should be removed and new liquidators appointed.

The Plaintiffs relied on voluminous closing submissions, of some 332 paragraphs over 92 pages, on which Mr McInerney and Mr Karam relied to the exclusion of oral closing submissions, where the hearing was subject to time constraints. Those submissions overlapped with, but substantially expanded, submissions previously made by the Plaintiffs. While I have had regard to those submissions in their entirety, I have not referred to or determined many matters raised in them in this judgment, where those matters need not be determined in order to determine this application and are properly deferred for determination at a final hearing. This application is not properly treated as a trial run of a future trial.

The Plaintiffs read the affidavit dated 17 May 2019 of their solicitor, Mr Kon Nakousis. While no objection was taken to that affidavit, Counsel for other parties rightly noted that significant parts of that affidavit were in the nature of submissions. Mr Nakousis referred, on information and belief from Mr Hindmarsh, to the history of the contractual arrangements between Hindmarsh and the Company and subsequently between Bellerive and the Company; to disputes that had arisen in the course of the construction works; to subsequent adjudication proceedings and steps taken by Bellerive to enforce a judgment which it obtained in respect of the adjudication; and to several other proceedings between Bellerive and the Company.

Mr Nakousis also referred to the resolution passed for the voluntary winding up of the Company and to the volume of correspondence that subsequently passed between Mr Nakousis, on the one hand, and the Liquidators and Mills Oakley on the other. This evidence was presumably intended to establish, but did not establish for the reasons that I will note below, a failure by the Liquidators or their solicitors properly to respond to the Plaintiffs’ requests for information.

Mr Nakousis’ evidence (Nakousis 17.5.19 [99]) was also that:

The Plaintiffs rely on a second affidavit dated 29 May 2019 of Mr Nakousis which gave lengthy evidence, on information and belief, of conversations between Mr Hindmarsh and Mr Uzcilas, an adviser to Manassen, and Mr Rose. a director of Albert Investment. Those conversations largely relate to largely unsuccessful attempts by Mr Hindmarsh to persuade Mr Manassen to involve himself in resolving disputes involving the Plaintiffs, Albert Investment and the Company. That evidence has limited relevance to the matters in issue in this application.

By a third affidavit dated 21 June 2019, Mr Nakousis referred, in somewhat argumentative terms, to the information made available by the Liquidators to the Plaintiffs at 16 May 2019, in response to Mr Devine’s evidence that the Plaintiffs had not raised any concerns with the Liquidators regarding the Manassen Security Agreements until that date. There is force in both parties’ perspectives on this issue, so far as the Plaintiffs could not reasonably have been expected to have formulated such concerns until they had an opportunity to review the relevant documentation, but the fact is that the Liquidators were not on notice that they held such concerns until that date. That, of course, is not a complete answer to the proposition that the Liquidators could well have identified for themselves the issues which gave rise to concern on the part of the Plaintiffs, although that must also be understood in the context that the Liquidators were not dealing with only one issue in respect of the liquidation over this period.

Mr Nakousis also referred to the information requested by the Plaintiffs from the Liquidators in relation to the Company from 24 April 2019 and to the fact that the Liquidators had not given the Plaintiffs notice of their application for orders appointing them as receivers of the assets of the Freshwater Development Trust (“Trust”). Mr Nakousis also advanced criticisms of the Liquidators’ first report to creditors dated 3 May 2019, including that it did not disclose the fact that the application had been made to the Court to be appointed as receivers of the Trust on that day, and did not disclose the “existence of the Manassen Security Agreements”, although it referred to Manassen as a secured creditor of the Company. The affidavit also referred to further requests for information made by the Plaintiffs in respect of the Liquidators’ application for appointment as receivers to the assets of the Trust and the Manassen Security Agreements; the response to those requests; claims for legal professional privilege made by the Liquidators; and the Liquidators having declined to convene a meeting of creditors at the request of the Plaintiffs, on the basis that the demand for such a meeting was “vexatious”. That affidavit also referred to the Deed of Acknowledgement of Debt between Colin Biggers & Paisley Pty Limited (“CBP”) and the Company and to correspondence between the Plaintiffs and CBP in relation to that deed. The affidavit also responded to other aspects of Mr Devine’s evidence in somewhat argumentative terms.

By a further affidavit read on 28 June 2019, Mr Nakousis gave evidence of his recognising, during the hearing of this application, that there “may be” a challenge to the independence of Mr Purchas, who the Plaintiffs had previously proposed for appointment as liquidator in place of the Liquidators. It is not necessary to address, for present purposes, whether the probability of such a challenge should have been apparent from the Plaintiffs’ initial dealings with Mr Purchas, which would have provided the basis for it, or at least from the point at which Manassen served a Notice to Produce seeking production of the documents that would evidence those dealings.

Mr Nakousis also referred to inquiries made of Mr Kogan and Ms Sozou who had indicated they would be prepared to consent to act as liquidators, provided the Plaintiffs provided initial funding in the order of $50,000 and to his having obtained instructions that the Plaintiffs would do so. He also referred to an offer of funding by Karellas Investments Pty Ltd (“Karellas”), another party that is in an adverse interest in litigation against the Company. Mr Nakousis’ evidence (Nakousis 28.6.19 [12]) was that:

I assume that that evidence accurately reflected Hindmarsh’s position and Karellas’ position as at the date of Mr Nakousis’ affidavit. By the next day, the Plaintiffs’ position had shifted, so that that Hindmarsh would provide funding conditioned, in effect, upon the replacement liquidators not applying it in respect of certain claims against Bellerive. I will return to that matter below.

Mr Nakousis was cross-examined by Mr Cheshire who appeared for the Liquidators and by Mr Shearer who appeared for Manassen. The Plaintiffs again provided a detailed summary of that cross-examination in their closing submissions, which it is not necessary to repeat. No substantial issue of credit arises in respect of Mr Nakousis, where his evidence of contentious matters was largely limited to what he had been informed by persons associated with the Plaintiffs, and his evidence of dealings with the Liquidators and their solicitors relates to matters that were largely recorded in documents.

The Liquidators relied on the affidavit dated 17 June 2019 of Mr Trent Devine, who is one of the Liquidators. Mr Devine there referred to the fact that, as early as 24 January 2019, some months before the appointment of Messrs Devine and Morelli as liquidators of the Company, Mr Morelli had been contacted by Mr Uzcilas “for general advice on the nature of administration of insolvency”. He referred to a meeting between Mr Morelli and Mr Uzcilas on 26 March 2019 but did not give evidence of its content, no doubt because he was not present at it. There was no explanation of why Mr Morelli had not been called to give evidence, including as to that meeting, and it was apparent that Mr Morelli had a greater involvement than Mr Devine in significant aspects of the liquidation. I infer, in those circumstances, that the evidence that Mr Morelli could have led in the defence of the Liquidators’ position would not have assisted them. In many cases, that inference would have had a significant impact on the outcome of the proceedings, although it ultimately does not do so here.

Mr Devine gave evidence of matters which were commonly discussed between a “referrer” and an insolvency practitioner before a matter was placed into administration or liquidation (Devine 17.6.19 [18]) and his evidence was that he participated in telephone conversations with representatives of Mills Oakley (then acting for the Company and now acting for the Liquidators) to discuss matters of that kind in the period leading up to his appointment (Devine 17.6.19 [20]). Mr Devine referred to a conversation between Mr Morelli and Mr Uzcilas on 18 April 2019 (as to which Mr Morelli also did not give evidence) and to an email dated 18 April 2019 from Mr Morelli to Mr Uzcilas to which I will refer in the chronology of events set out below.

Mr Devine also referred to the circumstances in which the Liquidators applied for appointment as receivers of the Trust’s assets on 3 May 2019, after it became apparent that the trust deed provided for the Company’s automatic retirement as trustee of the Trust upon its entry into liquidation (Devine 17.6.19 [27]). Mr Devine’s evidence was that that application was brought by reason of uncertainty as to whether the Liquidators had power to deal with the assets held by the Company as trustee of the Trust and to avoid uncertainty for the Company, its creditors and the Liquidators. I will refer further to that application below.

Mr Devine also gave evidence as to the circumstances in which he initially engaged Mr Hodges of Mills Oakley to act for the Liquidators, notwithstanding that Mills Oakley had previously acted for the Company and another partner of Mills Oakley, Mr Ward, had referred the matter to the Liquidators (Devine 17.6.19 [34]ff). Mr Devine refers to having then had the initial impression, which was understandable although plainly not correct with the benefit of hindsight, that this would be a “relatively simple liquidation” based on the now contested assumption that the debts owed to Manassen (as secured creditor) were such that little would be left for unsecured creditors. Mr Devine also noted that (Devine 17.6.19 [36]):

It seems to me that these were significant matters, to which the Liquidators were entitled to give weight where the liquidation was then unfunded, but for a limited amount that Manassen would permit the Liquidators to retain from the sale of Lot 3 when that sale was implemented in the future, and a small payment that Manassen agreed to make to fund the Liquidators’ costs of appearing at the commencement of these proceedings, which did not extend to funding the Liquidators’ role in the proceedings on an ongoing basis. Mr Devine also pointed out that the Liquidators did not oppose the Plaintiffs’ proposal for a special purpose liquidator to be appointed to investigate the Manassen Security Agreements and had informed the Court of that position on 31 May 2019, and I accept that that is a matter that would have significantly reduced, although not in my view eliminated, the conflicts affecting Mills Oakley. In the event, that approach could not be taken because, shortly before the hearing, the Plaintiffs abandoned their application for the appointment of a special purpose liquidator.

Mr Devine also referred (Devine 17.6.19 [41]ff) to the preparation of the Liquidators’ first report to creditors and responded to the Plaintiffs’ several criticisms of that report, which I will address below. In particular, Mr Devine rebutted the suggestion that the Liquidators sought approval to destroy the books and records of the Company within six months, which seems to me to have involved a plain misreading by the Plaintiffs of the terms of that report. Mr Devine also pointed out that, at the time of preparation of that report, the Plaintiffs had not raised their concerns regarding the Manassen Security Agreements with the Liquidators (Devine 17.6.19 [45]) although, in fairness to the Plaintiffs, the Plaintiffs had not then had access to the relevant documents. Mr Devine also pointed out that that report disclosed Manassen’s agreement that the Liquidators could apply $100,000 from the funds received on the sale of Lot 3 to fund the costs and expenses of the liquidation (Devine 17.6.19 [47]).

Mr Devine also addressed the voluminous requests for production of documents by the Plaintiffs, and set out the substantial steps taken by the Liquidators to respond to those requests. I will address that question further below. Mr Devine also addressed the approach that was taken by the Liquidators in respect of legal documents subject to a claim for legal professional privilege, which I will also address below.

Mr Devine also outlined the work undertaken since the appointment of the Liquidators, which is consistent with that which would be expected in the early part of a liquidation (Devine 17.6.19 [142]), although I note that it is inevitable that the Liquidators’ ability to perform that work will here have been disrupted by the extent of documentary requests made by the Plaintiffs, diverting their efforts and their solicitors’ efforts to compliance with those requests, and the demands of this application.

Mr Devine also addressed the concerns raised by the Plaintiffs in respect of the Manassen Security Agreements, which he pointed out were first raised with the Liquidators by a letter from the Plaintiffs’ solicitors on 16 May 2019; referred to a proof of debt subsequently lodged by Manassen, which the Liquidators have not yet adjudicated; and responded to the Plaintiffs’ allegation that the Liquidators had failed to investigate the Manassen Security Agreements and earlier transactions or intended not to do so pointing out, inter alia, that the Liquidators had then been in office for less than two months and were in the process of obtaining the Company’s records relating to its financial affairs; that this application involved a contest as to that issue, since Manassen contended that the Plaintiffs did not have an arguable case in relation to the Manassen Security Agreements; that the Liquidators were then unfunded, and not in a position to carry out a detailed investigation of matters raised by the Plaintiffs or to commence proceedings in relation to them; and that the Liquidators had informed the Court on 31 May 2019 that they would not oppose the appointment of a special purpose liquidator, provided the Plaintiffs would fund that liquidator.

Mr Devine’s affidavit also set out the significant number of legal proceedings and disputes involving the Company, including disputes involving Karellas, which has emerged, together with the Plaintiffs, as offering funding for the appointment of an alternate liquidator to the Company. Mr Devine also set out the position in respect of the proposed sale of Lot 3; the Company’s assets; the extent of the Company’s creditors; the expenses of the liquidation and the limited availability of funding for the liquidation.

By a further affidavit dated 26 June 2019, Mr Devine referred to the process adopted in respect of claims for legal professional privilege by the Company, and in particular the issues which arose at a hearing before Ward CJ in Eq, when the Plaintiffs’ Counsel first informed the Court that the Plaintiffs no longer proposed the appointment of a special purpose liquidator; the Liquidators then formed the view that the question of claims to legal professional privilege could not be left for decision by any special purpose liquidator; orders were then made by Ward CJ in Eq by consent for the production of a narrower range of documents; and documents were produced by the Liquidators that had previously been subject to a claim for legal professional privilege.

Mr Devine also there referred to the position taken by the Liquidators in respect of the claim by Manassen and his evidence was that the Liquidators have not reached a final view as to whether Manassen is a creditor or a secured creditor and referred to it as a “secured creditor” in the first report to creditors because it claimed that status. Mr Devine also noted (Devine 26.6.19 [21]-[22]) that, notwithstanding his earlier evidence that the Liquidators were substantially unfunded:

Mr Devine was cross-examined at some length. The Plaintiffs provided a very full summary of Mr Devine’s cross-examination in their closing submissions, to which I have had regard, but which I do not consider it necessary to repeat. There is force in the Plaintiffs’ criticism that Mr Devine had limited knowledge of a number of the matters addressed in his affidavits, which would better have been addressed by Mr Morelli. There were also difficulties with aspects of Mr Devine’s evidence, which were likely to have been exacerbated by the fact that Mr Morelli had been involved in significant aspects of the dealings with Manassen. The Plaintiffs submit that the Court should not accept Mr Devine’s evidence in cross-examination except where he made admissions against interest. It is not necessary to reach such a finding, where many of the matters which were addressed in Mr Devine’s evidence are dealt with in documentation or are matters of opinion or submission, and I would not reach that finding in any event. I would, however, approach Mr Devine’s evidence with a degree of caution, reflecting the fact that he had a more limited involvement in the relevant matters than Mr Morelli. I have referred above to the lack of any explanation as to why Mr Morelli did not give evidence in the proceedings.

I do not accept the Plaintiffs’ submission that Mr Devine had given “no proper consideration” to the duties of a liquidator in the liquidation of the Company. It does not seem to me to have been established that Mr Devine had acted irresponsibly, or improperly, in respect of the matters for which he had had responsibility in the liquidation. I also do not accept the Plaintiffs’ more colourful criticisms of Mr Devine’s evidence as variously “not plausible”, “unreliable”, “re-constructing as he went along” or “deliberately obfuscating”, while again recognising that the utility of his evidence was limited by the limits of his involvement in the dealings with Manassen.

Manassen relied on the affidavit dated 27 May 2019 of its solicitor, Mr David McIntosh, only a part of which was read, which sought to establish, on information and belief from Mr Manassen, that Manassen:

By a second affidavit dated 29 May 2019, Mr McIntosh set out the history of financial arrangements between Manassen as lender, Albert Investment and SF Capital and the Company, including several drawdowns by Albert Investment in its capacity as trustee of a trust which involved payments made by direction to the Company. Mr McIntosh referred to two alleged defaults, by reason of failure to repay the loan to Manassen, in December 2017 and July 2018, and to additional documentation executed in April 2018 and September 2018, including the Manassen Security Agreements. Mr McIntosh also referred to the registration of the General Security Deed that was then executed on the Personal Property Securities Register on 21 September 2018 and to the registration of various dealings against properties described in the mortgage in its favour, including in respect of Lot 3. Mr McIntosh also gave evidence of a notice of demand issued to the Company for amounts due and owing under the terms of the facility agreement, as amended, on 22 December 2018 (McIntosh 29.5.19 [42]; Ex P8, 334–335) and of a further demand issued on 30 April 2019 to the Company (McIntosh 29.5.19 [43]; Ex P8, 336–337).

Manassen also relied on a third affidavit of Mr McIntosh dated 27 June 2019, which responded to a suggestion that Manassen had agreed to pay Mills Oakley’s fees or provide an indemnity to a director or directors of the Company. Mr McIntosh’s evidence, on information and belief from Mr Uzcilas and Mr Manassen, was that they had not been provided with or made aware of the existence of a draft deed prepared by Mills Oakley dealing with that matter and that Manassen had not agreed to, or entertained the possibility of, providing the directors of the Company or Mills Oakley with any such indemnity or guarantee or pay Mills Oakley’s costs.

Mr McIntosh was cross-examined, and the Plaintiffs provide a detailed summary of his cross-examination in their closing submissions, as to which one paragraph was not pressed. It is not necessary to repeat that summary, given the findings which I have reached on other grounds in respect of the issues involving Manassen. No substantial issue of credit arises in respect of Mr McIntosh where his evidence of contentious matters (like that of Mr Nakousis in respect of the Plaintiffs) was largely limited to what he had been informed by persons associated with Manassen, and his evidence otherwise relates to matters that were largely recorded in documents.

CBP, which was heard in these proceedings pursuant to r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW), relied on the affidavit dated 31 May 2019 of Mr Peter Harkin, a partner in that firm, which referred to the professional relationship between CBP and the Company; CBP’s repayment of an amount of $200,000 to the Company, at the Company’s request, when the Company claimed it had paid that amount to CBP earlier than it had intended; and the terms of entry into the Deed of Acknowledgement of Debt between CBP, the Company and a third party in respect of that arrangement. Mr Harkin also referred to the fact that CBP had lodged a caveat over a number of titles, including that of Lot 3, which would presumably need to be removed in order to permit a sale of that lot.

By way of broad factual background, the Company undertook a substantial development at Freshwater in New South Wales, as trustee of the Trust. It appears that companies associated with Messrs Rose and a director of SF Capital, Mr Fowler, were interested in that trust. Hindmarsh and Bellerive were engaged to design and construct that development and each claim to be creditors in the liquidation of the Company. The Company initially entered into a contract with Hindmarsh for the design and construction of the development in April 2016.

Prior to the entry into financing arrangements between Albert Investment, the Company and Manassen, a third party, Wintech Enterprises Pty Ltd (as lender) (“Wintech”), Albert Investment as borrower, the Company as guarantor and Mr Rose as guarantor, entered into a Cash Advance Facility Agreement, by which Wintech agreed to lend $6,850,000 plus capitalised interest to Albert Investment to be contributed by it as equity to the Company, and then applied by the Company to assist in funding development costs (as defined) in relation to the project (as defined) and for payment of interest. Under the terms of that agreement, the Company unconditionally and irrevocably guaranteed the due and punctual payment of the loan (cl 9.1) and indemnified Wintech against any loss or liability sustained in connection with any failure of an obligor to duly and punctually pay the guaranteed money to Wintech (cl 9.3). That agreement provided for “security documents” (as defined) to be given, including a general security deed executed by the Company in favour of Wintech and a mortgage to be given by the Company in favour of Wintech in respect of the project property.

On 9 May 2016, Manassen as lender, Albert Investment as borrower, SF Capital and the Company entered into a Facility Agreement (“2016 Facility Agreement”) (McIntosh 29.5.19 [5]) which provided for Manassen to lend $10 million to Albert Investment, to be applied in a specified manner including to repay previous borrowings of Albert Investment from Wintech. That agreement specified the “Approved Purpose” as follows:

The Final Repayment Date provided under the 2016 Facility Agreement was 22 December 2017. By cl 11.1, the Company indemnified Manassen for all losses suffered by reason of any default, including a failure to pay any relevant amount on time. Manassen points out the subsequent drawdowns under that facility included substantial amounts paid directly to the Company. I note, however, that the obligations owed by Albert Investment and the Company to Manassen were at that point unsecured.

Works on the project commenced in May 2016. On 1 November 2016, the Company and Bellerive entered into a further contract in respect of the design and construction of the development, which provided for a contract sum (as defined) of $11,272,089.45 plus GST, with provisional sums (as defined) of $131,054 (Nakousis 17.5.19 [10]). It appears that Hindmarsh and Bellerive subsequently entered into a “construction management contract” by which Bellerive engaged Hindmarsh to carry out work under the contract (Nakousis 17.5.19 [12]).

The Plaintiffs accept that, on 22 December 2017, Albert Investment failed to repay the principal and interest owed to Manassen under the 2016 Facility Agreement, this being the first Final Repayment Date referred to in cl 2.2(d) of a later Deed of Amendment and Restatement (Ex P3, 920) to which I refer below.

Disputes and litigation subsequently arose between the Company on the one hand and the Plaintiffs on the other, in which the Plaintiffs obtained an adjudication and judgments in their favour, but faced practical difficulties with enforcing those judgments against the Company. In late February 2018, Bellerive submitted a payment claim to the Company pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW) and, on 1 May 2018, an adjudicator determined the amount due by the Company to Bellerive, which was subsequently increased to $1,110,063.83 including GST by an amended adjudication certificate issued on 11 May 2018. Judgment in the amount of $1,166,550.71 in favour of Bellerive was registered in this Court on 18 May 2018. Bellerive therefore took several steps to seek to enforce that judgment, without substantial success (Nakousis 17.5.19 [25]ff).

By a Deed of Amendment, Acknowledgment and Confirmation dated 12 April 2018 (“April 2018 Deed of Amendment”), Manassen granted a period of forbearance by extending the time for repayment which was then overdue from 22 December 2017 to 31 July 2018, and increased the “Commitment” under the facility agreement to over $12.5 million. It is common ground that, on 31 July 2018, Albert Investment failed to repay the principal and interest owed to Manassen under the 2016 Facility Agreement, this being the second Final Repayment Date referred to in cl 2.2(d) of the Deed of Amendment and Restatement (Ex P3, 920). Subject to potential challenges to that transaction identified by the Plaintiffs, to which I refer below, the Company was then liable for payment of the entire amount outstanding on demand, but that liability was also an unsecured liability.

On 17 and 18 September 2018, N Adams J heard an application by the Company to stay execution of the judgment debt arising from the adjudication, pending determination of other proceedings relating to bank guarantees given by Bellerive and claims by the Company relating to alleged construction defects (Nakousis 17.5.19 [48]).

Shortly thereafter, on 20 September 2018, Manassen, the Company and others entered into the Manassen Security Agreements, which, as I noted above, comprised a Deed of Amendment and Restatement, Schedule 2 to which comprised an Amended and Restated Facility Agreement; a General Security Deed; and a mortgage between the Company and Manassen. By the Deed of Amendment and Restatement, Manassen granted a further period of forbearance by further extending the time for repayment. The parties to that deed acknowledged, inter alia, that Albert Investment had failed to repay the amounts due under the original facility agreement, including as amended by the April 2018 Deed of Amendment, on 22 December 2017 and 31 July 2018, and the Company gave further guarantees, undertakings and indemnities. The Company was also required, as a condition precedent to the effective date of the Deed of Amendment and Restatement, to grant a general security deed and real property mortgage over specified property. On the grant of that security, Manassen became a secured creditor of the Company.

On 24 September 2018, N Adams J delivered judgment in respect of the application heard before her on 17 and 18 September 2018. Freezing orders were subsequently made by consent, including in respect of Lot 3, on 9 November 2018. Further issues arose in the litigation between the parties, which it is not necessary to address here.

On 5 December 2018, the Company and CPB entered into a Deed of Acknowledgement of Debt, by which the Company granted a security interest in favour of CBP in relation to outstanding invoices in the circumstances to which I referred above. No substantive challenge was made to those arrangements in this application, nor could it have been where the Plaintiffs did not join CBP as a defendant, although the Plaintiffs identified that matter as requiring further investigation by a liquidator to the Company. That matter is of some significance to whether the interlocutory relief sought by the Plaintiffs should be granted.

On 7 December 2018, the Company entered a contract for the sale of Lot 3 with a purchaser.

I have referred above to several communications between the Liquidators, Manassen and its advisers and the Company and its solicitors between January 2019 and their appointment as liquidator. On 25 March 2019, Mr Uzcilas sent an email to Mr Morelli (Ex P3, 1185-1187) stating that:

On 18 April 2019, Mr Devine sent an email to Mills Oakley, copied to Mr Morelli, recording Mr Morelli’s conversation with Manassen on that day, noting that the appointment as liquidator would happen on that day, and referring to “$100K for our fees from pending settlement and any further fees from any subsequent sale of larger property”.

A further email also dated 18 April 2019 from Mr Morelli to Mr Uzcilas summarised their discussion on that day, as follows:

The Company was then placed in a creditors’ voluntary liquidation by a resolution of its members on 18 April 2019 and Messrs Devine and Morelli were then appointed as its joint and several liquidators. A notice of appointment of the Liquidators, at a general meeting of members of the Company held on 18 April 2019, was lodged on 18 April 2019 (Ex P1, 579).

By letter dated 24 April 2019 to the Liquidators, the solicitors acting for Bellerive referred to the Liquidators’ appointment, which had apparently been identified by a company search, and to the nature of Bellerive’s claims against the Company. That letter also made the first of many requests for information from the Liquidators (Ex P1, 580). The Liquidators responded, on 26 April 2019 by forwarding a proof of debt form and noting that Mills Oakley, being the Liquidators’ solicitors, would respond to the balance of that letter (Ex P1, 600).

By an email dated 26 April 2019, Mr Uzcilas indicated Manassen’s position as to the Liquidators’ remuneration, which fell somewhat short of that proposed by Mr Morelli on 18 April 2019.

By a letter dated 29 April 2019, the Plaintiffs’ solicitors raised several matters which suggested a potential challenge to the Liquidators’ retainer of Mills Oakley, seeking confirmation by the Liquidators whether Mills Oakley was a creditor of the Company and, if so, in what amount; whether Mills Oakley intended to lodge a proof debt in respect of the Company; and whether Mills Oakley had given consideration to any potential or actual conflict of interest in acting for the Liquidators (Ex P1, 606).

By letter dated 30 April 2019 (Ex P1, 607), Mills Oakley advised the solicitors acting for the Plaintiffs that the Liquidators intended to comply with the requests for information made by them and were endeavouring to collate the necessary books and records in order to do so, and sought an extension of time to do so. Further correspondence requesting production of further documents followed.

By letter dated 1 May 2019 (Ex P1, 610), Mills Oakley responded to the questions raised as to its relationship with the Company and its Liquidators, indicating that it was a creditor of the Company and providing an estimate of its total claim in a substantial amount; noting its intention to lodge a proof of debt once its invoices had been finalised; and advising that:

By their report to creditors dated 3 May 2019, the Liquidators included a declaration of independence, relevant relationships and indemnities, which referred to Mr Morelli having been contacted by Mr Uzcilas on 24 January 2019; to the Company having been referred to Mr Devine by Mr Ward of Mills Oakley on 16 April 2019; to communications between Mr Morelli and Mr Uzcilas and others on 22 and 26 March 2019 and 16 and 18 April 2019, and more generally between the initial contact and the date of the Liquidators’ appointment. The Liquidators also outlined the content of those communications, in relatively general terms, as to:

That report also disclosed the expected sale of Lot 3, over which Manassen held a security and disclosed that:

A remuneration report contained within that report estimated the remuneration for the creditors’ voluntary liquidation of the Company would be at least $100,000 and noted that, in the event of expensive and time-consuming litigation and disputes, Mr Morelli anticipated that remuneration costs may exceed $250,000.

Also on 3 May 2019, the Liquidators applied to this Court for appointment as receivers of the assets of the Trust, where the trust deed provided for the Company’s automatic retirement as trustee of the Trust upon its entry into liquidation. Mr Devine’s affidavit in support of that application (Ex P5) referred to the fact that the Company held the relevant assets in trust and to the provisions for automatic retirement of the trustee on the Company’s entry into liquidation; to the Company’s assets, including property held as trustee of the Trust; to the execution of the Manassen Security Agreements on 20 September 2018, including execution of a mortgage and General Security Deed; and expressed the view that, in preliminary investigations, Mr Devine had “identified these transaction documents as being a potential source of liability in the nature of a guarantee” and also stated that:

That affidavit also referred to the several proceedings involving the Company, including litigation with Bellerive and with Karellas; to the letters received from the solicitors for the Plaintiffs seeking information in respect of the liquidation; to a demand by Manassen for repayment of over $24 million received on 30 April 2019; and stated that:

Mr Devine also there referred to matters that supported the appointment of the Liquidators as receivers of the Trust’s assets. It seems to me that Mr Devine’s affidavit brought the substance of the matters in issue to the attention of the Court in that application, although it would have been preferable had that affidavit also disclosed Manassen’s consent to the payment of the amount of $100,000 towards the Liquidators’ costs, on the sale of Lot 3. There is, also, a degree of tension between the reservation of the position in respect of Manassen’s claims in that affidavit and the Liquidators’ intent to satisfy those claims from Lot 3 later as notified to the Plaintiffs on 10 May 2019.

By letter dated 10 May 2019 from the Liquidators to Bellerive, the Liquidators referred to their appointment as joint and several receivers of the assets of the Trust and to the contract for the sale of Lot 3, and gave notice of the then proposed settlement of the sale of that lot on or after 24 May 2019 and stated that, following settlement, the Liquidators proposed to disburse the entire net proceeds of sale (after deduction of sale costs and agent’s commission) to Manassen in exchange for a discharge of its registered mortgage, specifying several reasons for that position. The information provided in that letter was incomplete, since it did not address the arrangement previously formed by the Liquidators and Manassen as to payment of the Liquidators’ costs, although that matter had previously been disclosed in the first report to creditors; did not address CBP’s claim under the Deed of Acknowledgement of Debt or the likely need to pay out CBP’s debt to obtain a discharge of CBP’s caveat. That letter also did not address any question as to the effectiveness of the Manassen Security Agreements, although I note also that the Plaintiffs had not yet raised their challenge to those agreements, and the Liquidators also appear to have undertaken no substantial inquiries to confirm their validity. In the event, there was no detriment to the Plaintiffs from that matter, because that letter squarely gave notice of the Liquidators’ proposed approach, and the Plaintiffs have had and taken full advantage of the opportunity to challenge that approach.

On 16 May 2019, Hindmarsh lodged a proof of debt with the Liquidators in the amount of approximately $1.3 million and on the same date Bellerive lodged a proof of debt with the Liquidators in the amount of approximately $3.26 million. The Plaintiffs commenced these proceedings on 17 May 2019.

As I noted above, the Plaintiffs seek orders that the Liquidators be restrained from disbursing the net proceeds of the sale of Lot 3 to Manassen until further order, and that the Liquidators are to pay the proceeds of sale of Lot 3 into Court or a controlled monies account or otherwise secure them in a manner as directed by the Court until further order. In seeking injunctive relief, the Plaintiffs rely on s 66 of the Supreme Court Act 1970 (NSW) and the Court’s power under r 25.3(3) of the Uniform Civil Procedure Rules 2005 (NSW) in respect of the preservation of property. The Liquidators did not seek to be heard as to whether an injunction should be granted in respect of the proceeds of sale of Lot 3, where Manassen was a contradictor in respect of that issue.

The Plaintiffs accept that they have the onus of establishing that they have a prima facie case in the sense that, if the evidence remains as it is, they have a sufficient likelihood of success to justify the preservation of the status quo pending the trial; that the Court will address the question whether the inconvenience or injury which the Plaintiffs would be likely to suffer if an interlocutory injunction were refused outweighs or is outweighed by the injury which Manassen or third parties would suffer if the injunction were granted; and discretionary considerations may also arise. The approach set out by the High Court in Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57 indicates that, in order to obtain interlocutory relief restraining the distribution of the proceeds of sale of Lot 3, the Plaintiffs must demonstrate a prima facie case or serious question to be tried as to their entitlement to the relief sought at a final hearing, and also that damages would not be an adequate remedy and that the balance of convenience favours the grant of an injunction or other order on an interlocutory basis. These considerations are interrelated so that, the stronger the Plaintiffs’ case for final relief, the less that may be required to tip the balance of convenience in their favour, and the weaker their case for final relief, the more that may be required to establish that the balance of convenience is in favour of the grant of interlocutory relief.

Turning now to the basis on which the Plaintiffs put this claim, they plead in paragraph 58 of their Amended Points of Claim that:

In paragraphs 61–63 of the Amended Points of Claim, the Plaintiffs plead that there are reasonable grounds for investigating certain matters arising out of those transactions. In paragraph 64 of the Amended Points of Claim, they also plead that, in causing the Company to enter into the Manassen Security Agreements, the Company’s directors breached certain statutory and fiduciary duties and caused the Company to be insolvent. In paragraph 65 of the Amended Points of Claim, the Plaintiffs plead that Manassen counselled or procured, or was otherwise involved in, the alleged contraventions by the directors of the Company of those duties. It is not necessary to address those allegations further, since they are not reflected in any relief sought in this application.

As I noted above, the final relief sought by the Plaintiffs are orders under s 37A of the Conveyancing Act setting aside the alienation of property of the Company effected by at least the Manassen Security Agreements and consequential orders under s 42 of the Real Property Act setting aside the registration on 21 March 2019 of a mortgage over Lot 3. The Plaintiffs refer to the case law as to the scope of s 37A of the Conveyancing Act, including Marcolongo v Chen [2011] HCA 3; (2011) 242 CLR 546 at [19]–[20]; Patel v Lal [2011] NSWSC 603 at [6]; and my summary of the applicable principles in Deputy Commissioner of Taxation v Peter Sleiman Investments Pty Ltd as trustee of the Sleiman Family Trust [2016] NSWSC 1657 at [43]–[44]. Although the Plaintiffs had originally indicated that they relied on the fraud exception under s 42 of the Real Property Act, their Counsel amended that position on 21 May 2019 to indicate that they relied on the in personam exception to indefeasibility, relying on Moustach Pty Ltd v Takchi [2015] NSWSC 1013 at [14]–[15] and Commissioner of Taxation v Oswal (No 6) [2016] FCA 762 at [40]–[58].

Section 37A of the Conveyancing Act relevantly provides that:

In Marcolongo v Chen above, the High Court observed (at [20], [31]–[32]) that the section is to be accorded a “liberal construction” and extends to prohibit conduct which may “delay, hinder or defraud” a creditor or potential creditor, and the Court may infer an intention by the transferor of property to defeat or delay creditors, even in the absence of direct evidence of that intention, where that outcome was the necessary consequence of a voluntary settlement. In Patel v Lal above at [6], Biscoe AJ observed that:

The Plaintiffs contend, as I noted above, that the entry into the Deed of Amendment and Restatement by the Company on 20 September 2018 was “as a volunteer, and for nil consideration”, and that the Company then assumed a contractual liability to pay approximately $11 million more than the value of its total assets, and became insolvent, or at least exposed to a grave risk of insolvency, if it was not already insolvent by reason of the judgment debt that it owed in favour of Bellerive.

In response to the submission that the Company entered into the Manassen Security Agreements as a “volunteer”, Mr Shearer submits that the Company had received funds paid to it under the original financing arrangements; at the time of entry into the Manassen Security Agreements, the Company was liable to payment of the entire outstanding amount, in the order of $24 million, on demand by Manassen; that Manassen there agreed to grant a period of forbearance by extending the time for payment, where there had been a continuing default since 22 December 2017 and again from 31 July 2018; and that, if Manassen had refused to extend the final repayment date, the Company would immediately have been exposed to a call under the indemnity to repay the entire amount outstanding.

Mr Shearer also submits that the Plaintiffs’ claim in respect of the Manassen Security Agreements, as pleaded in paragraph 64 of the draft Statement of Claim is misconceived and its submissions take no account of the arrangements that preceded the Deed of Amendment and Restatement, the liabilities of the Company or the benefits that the Company received from the provision of the relevant finance. A number of the benefits to which Mr Shearer refers, in submitting that the Company was not a volunteer in respect of the Manassen Security Agreements, were derived from earlier arrangements rather than the Manassen Security Agreements. It seems to me that the Company did not enter into the Manassen Security Agreements as a volunteer, or for nil consideration, where they at least allowed a period of forbearance, including to the Company, by extending the time for repayment where the Company would otherwise have been exposed to a call under the indemnity in the previous agreements. It also does not seem to me that the evidence establishes that the consideration was not adequate, which depends upon an assumption, not supported by evidence, that the Company could not have realised its remaining properties, within an extended time for repayment, at least for a larger amount than could have been obtained in a receivership or liquidation without the benefit of that extension of time.

Mr Shearer also submits that, notwithstanding the extended meaning of “fraud” as adopted in s 37A of the Conveyancing Act, the Plaintiffs would need to show the existence of an intention to hinder, delay or defeat creditors, and that the Company had in that sense acted dishonestly and had an intent to achieve the specified prejudice to creditors, in order to obtain the interlocutory relief sought: Marcolongo v Chen above at [32], [57]. Mr Shearer submits that there is no evidence of any intent to defraud creditors on the part of the Company or of knowledge of any such intent by Manassen. Mr Shearer also points out that, to the extent the Plaintiffs rely on Mr Uzcilas’ summary of the relevant transactions, as set out in his email dated 25 March 2019 to which I referred in paragraph 48 above, that summary cannot create a claim that would not arise from the terms of the Manassen Security Agreements, as distinct from Mr Uzcilas’ understanding of them.

There may be a prospect that the Plaintiffs could establish, at a final hearing, that the Company’s entry into the Manassen Security Agreements was advantageous to Manassen and prejudicial to unsecured creditors as a whole, but the authorities indicate that that would not be sufficient, without some further element amounting to fraud in the relevant sense, to support relief under s 37A of the Conveyancing Act. In Abignano v Wenkart (1998) 9 BPR 16,765, Cohen J held that, although a mortgage was executed by the first defendant with the intention to thwart the plaintiffs’ prospects of recovering the amount of their judgment, and the effect of that mortgage was to give a preference to the second defendant as a creditor of the third defendant, a transaction that operated to give preference to another creditor was not voidable under s 37A of the Conveyancing Act. His Honour there referred to Glegg v Bromley [1912] 3 KB 474; [1911-13] All ER Rep 1138, where Vaughan Williams LJ observed (at 484) that “mere preference of one creditor over another” does not bring the case within the scope of a predecessor to that section “even though the parties may have been minded to defeat a particular creditor”; and Fletcher Moulton LJ (at 485) and Parker J took the same view; see also Re Sarflax Ltd [1979] Ch 592. His Honour held (at 16,778) that, despite finding that the first defendant had there taken the relevant steps to avoid paying the plaintiffs as his creditors, he was bound by authority to find that the transaction could not be avoided under s 37A of the Conveyancing Act. In Wentworth v Rogers [2004] NSWCA 430, the Court of Appeal again referred to earlier authorities, including Abignano v Wenkart above, in observing (at [63]) that s 37A of the Conveyancing Act did not affect an alienation of property which amounted merely to a preference of one creditor over another.

In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 89 ACSR 1 at [2638]–[2640], Drummond AJA (with whom Carr AJA agreed at [3096]) observed that an insolvent creditor that disposes of the whole of its assets to a creditor to which the debtor was indebted, at least to the value of the assets transferred, does not infringe the corresponding provision, even if the debtor intended to prefer that creditor over its other creditors, unless the debtor reserved some benefit for itself. His Honour there referred to New South Wales appellate decisions reaching the same result, including Abignano v Wenkart above and Wentworth v Rogers above. His Honour observed (at [2639]) that:

It seems to me that, at the highest, the evidence on which the Plaintiffs rely raises a serious question that the Company’s entry into the Manassen Security Agreements in September 2018 preferred the interests of Manassen over the interests of the other unsecured creditors of the Company, likely including the Plaintiffs. There is no indication that that transaction reserved any benefit for the Company, or of any intent to defraud even within the expanded meaning of s 37A of the Conveyancing Act, beyond the advantage of the transaction to Manassen which does not establish that intent. I am therefore not persuaded that, on the evidence as it stands, the Plaintiffs can establish a serious question to be tried under s 37A of the Conveyancing Act in respect of the grant of security to Manassen under the Manassen Security Agreements or their claim to consequential relief under s 42 of the Real Property Act.

I have not neglected the possibility that the Company may have, and the Plaintiffs (in a derivative claim) may be able to establish, a seriously arguable case that the entry into the Manassen Security Agreements, in the circumstances that existed on 20 September 2018, amounted to a breach of directors’ duties of the kind considered by the Court of Appeal of the Supreme Court of Western Australia in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) above and may give rise to a claim for knowing receipt or, possibly, knowing involvement against Manassen. The Plaintiffs raised claims of that kind as matters warranting further investigation by the Liquidators but did not seek to establish that they had a seriously arguable case in respect of them in order to support the injunctive relief claimed. It would not be appropriate to order such relief on a basis on which it was not sought, quite apart from the issue as to the balance of convenience that I address below.

Mr Shearer also submits that the balance of convenience does not favour the interlocutory relief sought by the Plaintiffs, where the proceedings concern an amount of money which will be received on the sale of Lot 3 and Manassen has sufficient financial means to meet any judgment against it, so that damages would ultimately be an adequate remedy; and, if required, Manassen is prepared to give an undertaking to repay any money received by it from the sale proceeds, if the Court ultimately determines that it is not entitled to receive those sums. That submission finds support in the cross-examination of Mr Nakousis, who fairly accepted in cross-examination that, if Manassen gave such an undertaking to the Court, he had no reason to believe that Manassen would not be in a position to honour it; he understood that Manassen is a company of substantial means; and he accepted that the Plaintiffs would not be prejudiced by that approach (T64).

It seems to me that the balance of convenience does not warrant the interlocutory relief sought by the Plaintiffs, having regard to the level of detriment to the Plaintiffs if that relief was not granted and to the Company and to third parties if it was. There seems to me to be little likelihood of detriment to the Plaintiffs if that relief is withheld, given the evidence that Manassen is an entity of substance, and the undertaking which Mr Manassen has offered to cause it to give it.

On the other hand, there is plainly detriment to CBP if the injunction sought is granted. CBP have a claim to an amount of $188,800 payable to them pursuant to a Deed of Acknowledgement of Debt with the Company, which, would be paid from a sale of Lot 3, unless the order sought by the Plaintiffs is made. The Plaintiffs did not seek to establish that there was a serious case to be tried to set aside the arrangements between the Company and CBP, although they identified those arrangements as a matter warranting further investigation by a liquidator.

The relief sought would potentially also prevent the completion of the sale of Lot 3, because either Manassen would not release its mortgage so as to permit a sale to proceed or CBP would not release its caveat to prevent a sale to proceed, if such relief were granted. A restraint of that sale, and an order that the monies be paid into Court, would also prevent the limited funding to the Liquidators, if they remain in office, which Manassen has accepted can occur from the sale proceeds. Those results seem to me to be to the disadvantage of the creditors generally, although they may potentially be to the advantage of at least Bellerive, if an unfunded liquidator would be less likely to continue the Company’s proceedings against Bellerive in respect of alleged defects in the construction work undertaken by it.

Where I am not persuaded that the Plaintiffs can establish a serious question to be tried on the basis claimed, and where the balance of convenience does not support that relief, and on condition that Manassen offers the undertaking to which I referred above, I will not grant the interlocutory relief sought by the Plaintiffs.

As I noted above, the Plaintiffs also seek an order, under s 90-15 of the Insolvency Practice Schedule (Corporations), removing Messrs Devine and Morelli as joint and several liquidators of the Company and appointing an independent liquidator to the Company. The Plaintiffs rightly point out that the question of removal of the Liquidators is now to be determined by reference to ss 90-15(1) and (3) of the Insolvency Practice Schedule (Corporations) rather than by reference to former s 503 of the Corporations Act. I have drawn, in the account of those principles that appears below, on my judgment in Re ACN 151 726 224 Pty Ltd (in liq) previously Ridley Capital Holdings Pty Ltd [2016] NSWSC 1801 and on the observations of Ward CJ in Eq in Re Atlas Construction Group Pty Ltd (in liq) [2018] NSWSC 1189; (2018) 129 ACSR 238, on which the Plaintiffs relied.

The matters relevant to an application for removal of a liquidator include not only whether that course would be for the benefit of the liquidation, and the body of persons interested in it, but also the need for confidence in the integrity, objectivity and impartiality of the winding up. In Multi-Core Aerators Ltd v Dye [1999] VSC 205 at [48]; (1999) 17 ACLC 1172, which was quoted by Bergin CJ in Eq in SingTel Optus Pty Ltd v Weston [2012] NSWSC 674; (2012) 90 ACSR 225, although held not to be applicable in that case, Warren J (as her Honour then was) noted that “rancour” between the parties would not be sufficient to require removal of a liquidator, particularly if hostility had emanated from the party seeking the removal, rather than from the liquidator, where removal on that basis “would provide a creditor with an opportunity to manipulate the liquidation of the company.” Nonetheless, I proceed on the basis that a loss of confidence based on reasonable grounds by the creditors may, although it will not necessarily, justify removal of a liquidator: Re St Gregory’s Armenian School (in liq) [2012] NSWSC 1215; (2012) 92 ACSR 588 at [30].

In AMP Music Box Enterprises Ltd v Hoffman [2002] BCC 996, in a passage that was also quoted with apparent approval by Bergin CJ in Eq in SingTel Optus Pty Ltd v Weston above at [164], Neuberger J (as his Lordship then was) observed that (at 1001–1002):

In Re St Gregory’s Armenian School (in liq) above Brereton J referred to AMP Music Box Enterprises Ltd v Hoffman above and SingTel Optus Pty Ltd v Weston above at [164] and observed (at [24]) that the onus of showing cause for removal of a liquidator is not “lightly discharged” and that:

It is also important that the Court should not overlook the professional consequences for a liquidator of an order for removal: SingTel Optus Pty Ltd v Weston above at [229]; Re St Gregory’s Armenian School (in liq) above at [26]. It will be harder to establish a case for removal of a liquidator where a liquidation is well advanced and he or she has become acquainted with the company’s affairs: Re Biposo Pty Ltd (1995) 17 ACSR 730 at 734; SingTel Optus Pty Ltd v Weston above at [165]. That proposition is, however, of lesser weight in the present case, where the early point at which this application was brought and the funding constraints affecting the Liquidators have the result that the investigations undertaken to date have been limited.

The Plaintiffs also rely on the decision in Citrix Systems Inc v Telesystems Learning Pty Ltd (in liq) (1998) 28 ACSR 529, dealing with the question who should be appointed as liquidator, in support of their application for removal of the Liquidators. It seems to me that that decision is plainly distinguishable, where the former liquidator in that case had there taken an emphatic view as to the relevant transaction and excluded the possibility of further investigations. The Liquidators have not taken that approach here and, indeed, have confirmed that they will undertake such further investigations, at their own cost, with the benefit of independent legal advice.

The Liquidators point to authority that it should not been seen as easy to remove a liquidator, even if his or her conduct is less than ideal, and the onus to establish removal of a liquidator is not lightly discharged. The Liquidators also submit that they would not automatically be removed for previous dealings with a creditor or director of a company, the provision of funding by a creditor, or the retention of the same lawyers as a creditor of the company. That submission is plainly correct, but does not establish that they would not, in an appropriate case, be removed for one or more of those reasons.

In paragraphs 96ff of their Amended Points of Claim in respect of prayers 5 and 6 of the Amended Originating Process (which seek the replacement of the Liquidators), the Plaintiffs plead events leading to the appointment of the Liquidators, which overlap with those which I have addressed in the background facts set out above. The Plaintiffs plead that, on or about 24 January 2019, Mr Uzcilas, who is (as I noted above) an adviser to Manassen, contacted Mr Morelli about the Company (Amended Points of Claim [96]). The Plaintiffs then plead the fact of discussions between Mills Oakley, representatives of the Company and Manassen in respect of various matters. The Plaintiffs also plead the email sent by Mr Uzcilas to Mr Morelli on 25 March 2019, which (as I noted above) referred to Manassen’s involvement in providing debt funding to a unitholder in the Company as trustee for the Trust and to its having, on 20 September 2018, “converted its debt from a unitholder level to the project level” (Amended Points of Claim [104]). The Plaintiffs also plead a meeting between Mr Morelli, Mr Uzcilas, Mr Manassen and a solicitor acting for Manassen on 26 March 2019.

The Plaintiffs also plead subsequent discussions of the possible appointment of the Liquidators as voluntary administrators to the Company, to be made by Manassen as secured creditor and that, on 16 April 2019, a solicitor of Mills Oakley who was acting for the Company referred it to Mr Devine (Amended Points of Claim [109]). The Plaintiffs also plead other phone calls, meetings and email communications between the Liquidators and other interested persons between late January 2019 and their appointment on 18 April 2019, and various topics which it is said were discussed (Amended Points of Claim [111]). That pleading appears to be largely based on information contained in the Liquidators’ declaration of independence, relevant relationships and indemnities contained in their first report to creditors dated 3 May 2019.

The Plaintiffs also plead the information provided to creditors in the Liquidators’ first report to creditors on 3 May 2019 and criticise the extent of disclosure of remuneration arrangements in that report. The Plaintiffs also plead the circumstances of an application brought by the Liquidators on 3 May 2019 to this Court, where they sought to be and were appointed as receivers without security over assets of the Trust, and were given liberty to apply for approval of their remuneration from the assets of that trust (Amended Points of Claim [122]).

The Plaintiffs also plead a letter dated 10 May 2019 from the Liquidators to Bellerive with respect to the proposed sale of Lot 3, which (as I noted above) gave notice that settlement of that sale was scheduled to take place on or after 24 May 2019; and that the Liquidators proposed to disburse the entire net proceeds of sale (after deduction of sale costs and agent’s commission) to Manassen in exchange for discharge of its registered mortgage; and referred to matters which appeared to support Manassen’s rights in respect of the property.

The Plaintiffs plead (Amended Points of Claim [124]) that the Liquidators’ first report to creditors and the letter dated 10 May 2019 to Bellerive:

The Plaintiffs also plead that they were not informed of the application to appoint the Liquidators as receivers of the Trust’s assets until 10 May 2019, and the Liquidators did not provide the documents supporting that application to the Plaintiffs until 17 May 2019 (Amended Points of Claim [126]).

The Plaintiffs’ Amended Points of Claim identify no less than 25 separate grounds for the removal of the Liquidators or the appointment of a special purpose liquidator (although, as I noted above, only the former and not the latter relief was sought at the hearing). Mr Shearer, perhaps unkindly, describes these 25 grounds as “scatter-gun contentions”. Each of these grounds is identified as aspects of a wider allegation that:

I will address the matters on which the Plaintiffs rely in categories, but I do not neglect the fact that they must be assessed both individually and as a whole. It is, however, also necessary to guard against the error of thinking that the grounds of an application must have substance because there are many of them.

In considering these matters, I recognise that a liquidator must be independent of the company, its directors and shareholders and individual creditors and must act impartially in the discharge of his or her duties and responsibilities: Re Allebart Pty Ltd (in liq) [1971] 1 NSWLR 24 at 30; Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; (2003) 45 ACSR 612 at [123]; Re ACN 151 726 224 Pty Ltd (in liq) previously Ridley Capital Holdings Pty Ltd above at [51]; Re Bellafountain Pty Ltd [2017] NSWSC 391; Re Ji Woo International Education Centre Pty Ltd [2019] NSWSC 93; (2019) 134 ACSR 448 at [39]. I also recognise that a prior involvement with a company in liquidation does not necessarily prevent a person’s appointment as liquidator, if that involvement is not likely to impede or inhibit him or her from acting impartially in the interests of all creditors, or give rise to a reasonable apprehension that he or she might be so inhibited or impeded: Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR 230 at 234; 12 ACLC 701; Re St George Builders Hardware Pty Ltd (1995) 18 ACSR 451 at 452; 13 ACLC 1801. The Plaintiffs also referred to the observations of Hodgson CJ in Eq (as his Honour then was) in Unifor Office Systems Aust Pty Ltd v Brewer Partnership Pty Ltd [1999] NSWSC 137; (1999) 17 ACLC 642, expressing a general preference that investigations into a company’s affairs should be undertaken by a person independent of the directors, and seeks to extend that proposition to a statement that the liquidators should not be chosen by directors of the company. There is, of course, no general practice or principle that the liquidators initially appointed by directors in a creditors’ voluntary winding up cannot continue as liquidators of the company.

The parties did not give any detailed attention to the Code of Professional Practice of the Australian Restructuring Insolvency and Turnaround Association, although Mr Devine referred to it in cross-examination and the case law has recognised that it provides useful guidance as to the need for independence in an insolvency practitioner: Bovis Lend Lease Pty Ltd v Wily above; Korda, in the matter of Ten Network Holdings Ltd (admins apptd) (recs and mgrs apptd) [2017] FCA 914 at [93]. I will not address the principles recognised in that Code, where the parties did not consider it necessary to do so, beyond noting that its approach seems to me to be broadly consistent with that adopted in the case law.

Several grounds relate to the Liquidators’ alleged failures to investigate specified matters. The first ground (Amended Points of Claim [133.1]) relates to an alleged failure to investigate whether the Manassen Security Agreements should be set aside at the suit of the Company under s 37A of the Conveyancing Act; for contravention of statutory and fiduciary duties owed by the directors of the Company; or for knowing involvement involving Manassen or, allegedly, Mills Oakley. I have addressed the claim under s 37A of the Conveyancing Act in dealing with the application for interlocutory relief above.

The second ground (Amended Points of Claim [133.2]) relates to a failure to investigate whether the Manassen Security Agreements should be set aside at the suit of the Liquidators as voidable transactions under Part 5.7B of the Corporations Act. The third ground (Amended Points of Claim [133.3]) relates to a failure to investigate whether the 2016 Facility Agreement should be set aside at the suit of the Company on several bases. In closing submissions, the Plaintiffs advanced detailed submissions as to the previous funding arrangements between National Australia Bank and the Company as trustee of the Trust and the 2016 Facility Agreement and advanced a contention that the 2016 Facility Agreement was liable to attack on several grounds. The Plaintiffs also advanced submissions as to the April 2018 Deed of Amendment and submit that there is a prima facie case that that agreement can be attacked on several grounds. The Plaintiffs also raised the question whether, if the Manassen Security Agreements were set aside and Manassen no longer held the status of a secured creditor, then payment obligations might not exist under the 2016 Facility Agreement or the April 2018 Deed of Amendment if no demands were made under those agreements; that the 2016 Facility Agreement “may” be invalid under s 37A of the Conveyancing Act and that invalidity would then extend to the April 2018 Deed of Amendment; and that it “may” be arguable that earlier agreements were superseded by the Manassen Security Agreements.

The eighteenth ground (Amended Points of Claim [133.18]) relates to a suggested failure to conduct any or any adequate investigation into the validity of the Manassen Security Agreements despite certain matters. The nineteenth ground (Amended Points of Claim [133.19]) is an alleged failure to conduct any or any adequate investigation as to whether the former directors of the Company acted in breach of their directors’ duties and whether any third parties may be liable under s 79 of the Corporations Act for involvement in such breaches, or whether the Manassen Security Agreements were liable to be set aside as voidable transactions. Mr Shearer in turn makes submissions, which it is not necessary to address given the findings I have reached on other grounds, as to the circumstances in which accessorial liability could be established on the part of Manassen.

The twentieth ground (Amended Points of Claim [133.20]) is a suggested failure to conduct any or any adequate investigation into whether Mills Oakley “counselled, procured or was otherwise involved in breaches of duty by the directors of [the Company] when entering into the Manassen Security Agreements”. The evidence to which I was taken, in the course of the application, did not indicate a basis for that serious allegation, even as identifying a topic for investigation. It seems to me that there is no basis for criticism of the Liquidators for failing to investigate it within the short period they have been in office, both for that reason, and for the other reasons noted below. The twenty-second ground relates to a suggested failure to investigate or give adequate consideration to seeking recovery of sums from Albert Investment or SF Capital pursuant to indemnities granted under the 2016 Facility Agreement.

It is not necessary to address the merits of the Plaintiffs’ several claims that the Company’s dealings with Manassen may constitute an uncommercial transaction under s 588FB of the Corporations Act; or may support claims of knowing involvement against Manassen in respect of contraventions of ss 181–182 of the Corporations Act by a director of the Company or liability under Barnes v Addy (1874) LR 9 Ch App 244, or claims for knowing involvement in respect of Mills Oakley. They are no doubt matters that may be investigated by a liquidator, and the Plaintiffs may seek to pursue them in a derivative claim if so advised. An assessment of their merit is not necessary to this application and should be deferred to a final hearing if they are pressed. A determination of the merits of those claims, beyond what was necessary to address the interlocutory relief sought by the Plaintiffs, is not necessary to and would not advance the question whether the Liquidators should be replaced.

The Plaintiffs also refer in submissions to financial records of the Trust which, as the Liquidators recognised in their application to appoint receivers to the Trust’s assets, did not note a liability owed by the Trust to Manassen at the point of the Liquidators’ appointment. It seems to me that little turns on those records, for present purposes, where it seems clear enough that the Manassen Security Agreements warrant further investigation, whether by the Liquidators or any liquidator appointed to the Company in their place, and there seems to be no serious suggestion that Manassen did not in fact advance funds to the Company at the direction of Albert Investment, in the manner referred to in the affidavit evidence.

In response to the Plaintiffs’ criticisms of their suggested failure to investigate the Manassen Security Agreements, the Liquidators point to the relatively short period since their appointment, on 18 April 2019, and to the fact that, on 16 May 2019, four weeks into the liquidation, the Plaintiffs first identified their “concern” about those agreements and, by 20 May 2019, the Plaintiffs had commenced this application in which the challenge to that transaction was contested, as between the Plaintiffs on the one hand and Manassen which contended (as I noted above) that the Plaintiffs’ challenge to the Manassen Security Agreements is not seriously arguable. The Liquidators submit that it was not unreasonable for them to wait for the determination of the question whether there is a serious question to be tried as to the Manassen Security Agreements in this application. There is substantial force in that submission, at least for the period since 16 May 2019, although it provides less assistance to the Liquidators in respect of their early proposal to distribute the proceeds of the sale of Lot 3 to Manassen, before they had undertaken any full analysis of the security interest claimed by it.

The Liquidators also submit that any need to remove them, by reason of any issues concerning the Manassen Security Agreements, is reduced by the fact that the Plaintiffs, in their draft Statement of Claim, seek to bring derivative proceedings to challenge those agreements which do not depend on any action taken by the Liquidators. So far as that challenge depends on s 37A of the Conveyancing Act, the need to replace the Liquidators in respect of it is also reduced by the fact that, as Manassen points out, the decision of the Full Court of the Federal Court in Israel Discount Bank Ltd v ACN 078 272 867 Pty Ltd (in liq) (formerly Advance Finances Pty Ltd) [2019] FCAFC 90 indicates that there is at least a significant prospect that the Liquidators do not have standing to bring that challenge, which would need to be brought by a creditor such as Manassen. The Full Court of the Federal Court there observed (at [68]-[69]) that a claim under s 37A of the Conveyancing Act could not be brought by the disponer company, which was not a person prejudiced by the transaction, and was inclined to the view that a liquidator also did not have standing to pursue such a claim, although recognising that matter was arguable.

The Liquidators also submit that the absence of substantial steps taken to challenge the Manassen Security Agreements is readily explicable by the fact that they are presently unfunded, or at least substantially unfunded, so that they do not have the means to pursue a challenge to that transaction without funding for it. The Liquidators also pointed out that they had advised the Court, on 31 May 2019, that they would not oppose the appointment of a special purpose liquidator who could investigate and bring any challenge to the Manassen Security Agreements, provided the Company was protected against adverse financial consequences of that challenge and it was funded by the Plaintiffs. As I noted above, the Plaintiffs subsequently did not press their application for appointment of a special purpose liquidator.

Mr Shearer submits that there is no basis for the appointment of a new liquidator to investigate the position in respect of the Manassen Security Agreements, because the Plaintiffs’ case in respect of those agreements is misconceived. I have noted above that there are significant obstacles to a claim, particularly by a liquidator, under s 37A of the Conveyancing Act, but noted the possibility that a claim may be available in respect of breach of directors’ duties and knowing involvement or knowing receipt, of the kind brought in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) above. For that reason, it does not seem to me that such a claim, albeit possibly formulated on an alternate basis, is necessarily “misconceived”.

Mr Shearer also points out, and I accept, that the fact that the Plaintiffs already propose to bring proceedings, in their own right, to set aside the Manassen Security Agreements reduces any need to replace the Liquidators in order to permit a new liquidator to bring such proceedings, and the utility of replacing the Liquidators for that purpose is undermined by the uncertainty as to whether a liquidator would have standing to bring such proceedings, arising from Israel Discount Bank Ltd v ACN 078 272 867 Pty Ltd (in liq) (formerly Advance Finances Pty Ltd) above.

It seems to me that these grounds do not, separately, together or together with other matters, warrant the removal or replacement of the Liquidators. It does not seem to me that the pre-appointment communications between the Liquidators and Manassen (which I address further below) could be said to be “likely to impede or inhibit the liquidator from acting impartially in the interests of all creditors or be such as would give rise to a reasonable apprehension on the part of a creditor that the liquidator might be so impeded or inhibited”, adopting the language of Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd above at 234. I would reach the same result to the extent that the applicable test has regard to the perspective of a reasonable fair-minded observer: Korda, in the matter of Ten Network Holdings Ltd above at [79]–[80].

It seems to me that the criticisms of the Liquidators’ failure to undertake substantive investigations in respect of the specified matters are weakened by the fact that the Liquidators have only been in office since April 2019, for less than three months, and had been in office for an even shorter period when this application was brought; they have been largely unfunded and, for the bulk of that period, been faced with voluminous requests for documents by the Plaintiffs and the need to respond to this application; and they could not reasonably have been expected to have substantially progressed an investigation of those matters in this period. The number of matters which the Plaintiffs identify for investigation and the complexity of the matters to be investigated themselves undermine any suggestion that they could have been investigated by an unfunded liquidator within this relatively short period. These grounds might have had greater force had the Plaintiffs allowed a fair opportunity for such investigations, uninterrupted by their attacks on the conduct of the liquidation, before bringing this application, and had such investigations not then been undertaken. Obviously enough, the Plaintiffs did not take that course. The case for a replacement liquidator to investigate these matters, or pursue claims arising from them (subject to funding to do so) is also substantially weakened by the fact that the Liquidators have now committed to funding an investigation of these matters and to retaining independent solicitors to do so.

The fourth ground (Amended Points of Claim [133.4]) relates to an alleged failure by the Liquidators substantively to respond, adequately or at all, to requests for access and production of documents made by the Plaintiffs to the Liquidators, some ten of which are specified. The ninth ground (Amended Points of Claim [133.9]) relates to a failure to produce certain books and records of the Company to the Plaintiffs earlier than the evening of 13 May 2019, including the Manassen Security Agreements. I recognise that Mr Devine accepted in cross-examination that the Manassen Security Agreements could have been provided to the Plaintiffs, as they had requested, before 13 May 2019 (T157).

The fourteenth ground (Amended Points of Claim [133.14]) relates to claims for legal professional privilege made in respect of the books and records of the Company. The twenty-fourth ground (Amended Points of Claim [133.24]) relates to a suggested failure to promptly respond to reasonable requests for information from the Plaintiffs.

The Liquidators respond to these criticisms by pointing to the volume of the Plaintiffs’ correspondence and requests for information and documents; the width of those requests; the fact that they were made at the time the Liquidators were attempting to carry out other tasks required of them in an unfunded liquidation; and the fact that the Liquidators did not respond in an adversarial way, but sought to provide documents, subject to issues of legal professional privilege and, in the case of one document, confidentiality. The Liquidators also point to the ultimate narrowing of the dispute as to privilege, at least in respect of documents relevant to the Manassen Security Agreements. The Liquidators submit that any complaints or delays in the production of documents or information, which they do not in any event accept are valid, also does not demonstrate a lack of independence and would not justify their removal.

In closing submissions, Mr Cheshire fairly points out that the Liquidators were appointed on Easter Thursday, immediately before a long holiday weekend; they received their first request for documents and information from the Plaintiffs on the second working day after their appointment; and they received ten further extensive requests for documents and correspondence over the next three weeks, prior to the commencement of the proceedings, and numerous further requests, notices to produce and subpoenas after the proceedings had been commenced. It seems to me that there is substantial force in that observation, and the criticisms of the conduct of the liquidation, and of the Liquidators’ response in respect of the production of documents, must all be considered in the context of the pressure which the Plaintiffs’ approach placed on the conduct of the liquidation. Mr Cheshire also points out that the Liquidators provided the Plaintiffs with a Dropbox link to relevant documents on 13 May 2019 and, by 21 May 2019, had provided a spreadsheet to the Plaintiffs of all the documents they then held, by then exceeding 7,000 documents. The Liquidators offered to provide documents which the Plaintiffs requested, subject to claims for privilege and confidentiality, and the Plaintiffs then responded by requesting every document held by the Liquidators.

Mr Cheshire points out, uncontroversially but importantly, that the Liquidators’ tasks in respect of the liquidation were not limited to responding to requests for documents and information from the Plaintiffs. He also submits, correctly, that there is no evidence that the Plaintiffs failed to secure any documents which were at threat of destruction, or that any documents have in fact been destroyed or lost in the early period of the liquidation, and requests for production of documents were made promptly after the Liquidators’ appointment, both to the Company’s director and its accountant. It appears that a substantial number of documents have been produced since that time. Mr Cheshire also addresses the steps taken by the Liquidators to produce documents, and the position taken in respect of claims to legal professional privilege, to which I have referred in dealing with the evidence above. Mr Cheshire submits that the Liquidators’ conduct in relation to the production of documents was reasonable in the circumstances and, if the Court identifies any deficiencies in that respect, it was not motivated by any bias towards Manassen or any condition imposed by it, and was not such as to justify the Liquidators’ removal.

It is possible to deal with these grounds briefly, although their pursuit involved a significant amount of documentation and some cross-examination of Mr Devine at the hearing. It does not seem to me that the criticisms of document production by the Liquidators have substance, in the context of the range of demands on them over the relevant period. The solicitors acting for the Plaintiffs engaged in an extended campaign of demanding information from the Liquidators and their solicitors, from 24 April 2019 onwards. The demands for information were wide-ranging, and were met by production of a significant volume of documentation, although there was some delay in production of that documentation. It seems to me that there is no reasonable basis for criticism of the Liquidators and their solicitors for their production of a substantial volume of documents in very difficult circumstances.

As to the criticisms of claims for legal professional privilege in paragraph 133.14, the Plaintiffs characterised the Liquidators’ claims for legal professional privilege in respect of the documents of the Company as giving the appearance of preferring the interests of Manassen and Mills Oakley to the interests of creditors and submit that “the evidence does not establish that the Liquidators were acting in good faith in the interests of creditors”, a formulation that potentially inverts the onus of proof where the Plaintiffs are alleging the contrary. The Plaintiffs also submitted that a critical issue was the extent to which it was open to the Liquidators to maintain a claim for privilege in relation to documents that came into existence prior to the Company being placed into liquidation. The Plaintiffs submitted that the Liquidators must establish that they had formed the view in good faith that maintaining a claim for privilege over the documents in question was or may be in the interests of creditors of the Company.

Assuming, without deciding, the correctness of that proposition, it seems to me that the Liquidators could properly take the course that they adopted, which was to maintain a claim for legal professional privilege until the point at which a special purpose liquidator would have an opportunity to determine whether to abandon that claim for privilege. That approach seems to me to be reasonably taken, given the time pressures imposed upon the Liquidators; the volume of documents to be produced; and the fact that the Plaintiffs had been seeking the appointment of a special purpose liquidator, until the late change of course which involved their abandoning that relief. This ground does not, separately, together or together with other matters, warrant the removal or replacement of the Liquidators.

I also do not accept the premise of the Plaintiffs’ contention in paragraph 133.24 that the number and volume of requests for information made by the Plaintiffs was reasonable in the circumstances and I have dealt with the suggested failure to respond to such requests above.

These grounds do not, separately, together or together with other matters, warrant the removal or replacement of the Liquidators.

The fifth ground (Amended Points of Claim [133.5]) relates to the Liquidators allegedly “seeking approval from creditors in the report to creditors dated 3 May 2019 for remuneration in the total sum of $100,000 to complete the liquidation, and to destroy the books and records of [the Company] within 6 months”. The Liquidators respond that they did not seek to, or propose to, destroy books and records within six months of the date of the first report to creditors. This allegation must fail, because the report to creditors did not seek that approval.

The twelfth and thirteenth grounds (Amended Points of Claim [133.12]-[133.13]) relate to a suggested failure to secure or preserve books and records of the Company. The Liquidators respond, and I accept, that there is no evidence of any relevant threat of destruction of such books and records, and the Liquidators took steps which have brought a substantial number of documents, including documents held by a director of the Company, under their control. It seems to me that more aggressive steps would likely have been disproportionate and, so far as they required orders of a Court, not permitted without cause for them.

These grounds do not, separately, together or together with other matters, warrant the removal or replacement of the Liquidators.

The Liquidators identify, inter alia, paragraphs 133.6–133.8, 133.15–133.17 as relating to an allegation that they failed to act independently or to be seen to be acting independently by reason of their interactions with Manassen. I will deal with these paragraphs together and address that allegation here, although these paragraphs also raise a range of specific issues which I also address here.

The sixth ground (Amended Points of Claim [133.6]) relates to the Liquidators’ application to the Court to be appointed as receivers and managers of assets of the Trust without prior notice to creditors, including the Plaintiffs. The Plaintiffs’ submissions at the hearing in respect of that application travelled well beyond that matter.

The Plaintiffs point out that Mr Devine had referred, in his affidavit led in the application in support of that application, to a “danger that secured creditors of the Company will seek to take, or otherwise deal with, the assets of the [Trust]” (Ex P5 [68(e)]). They criticise that observation for failing to disclose that the same result would follow if the Liquidators attended to the sale of Lot 3, in their capacity as receivers of the Trust, and distributed the proceeds to Manassen. There is force in that criticism. Mr Devine accepted, in cross-examination, that the arrangement with Manassen to settle the sale of Lot 3 and pay the balance, after deduction of costs and the amount to be retained by the Liquidators, to Manassen was relevant to the Liquidators’ application for appointment as receivers of the Trust’s assets, and that it would have been preferable had he informed the Court by his affidavit of the arrangement but did not accept that his affidavit in support of that application was “misleading” (T151). In the circumstances, it also does not seem to me that the omission of reference to that matter in that affidavit was material, given the nature of that application, and the matters to which I refer below.

This ground does not, separately or together with other matters, warrant the removal or replacement of the Liquidators. First, applications for appointment of liquidators as receivers and managers of trust assets are commonplace and often have to be made with a degree of urgency. Second, and importantly, Rees J was prepared to deal with that application without notice to creditors, and it is to be inferred that she considered that orders could properly be made on that basis, as commonly occurs with insolvency applications, where they had the ability to move to set the orders made aside if so advised. No creditor has sought to do so. Third, and importantly, the Plaintiffs did not seek to establish any prejudice to the interests of the Plaintiffs or other unsecured creditors from that application, and there is no realistic prospect that unsecured creditors (as distinct from Manassen which claimed to be a secured creditor) could have been prejudiced by the appointment of the Liquidators as receivers and managers of the Trust’s assets.

A seventh ground (Amended Points of Claim [133.7]) relates to a suggested application to the Court on 10 May 2019 for directions to complete the sale of Lot 3, which is said to have “affirmed the Manassen Security Agreements without qualification or any consideration having been given to the rights of the creditors in the liquidation of [the Company]”. An eighth ground (Amended Points of Claim [133.8]) relates to the Liquidators’ suggested failure to notify the Plaintiffs earlier than 10 May 2019 of the Liquidators’ intention to complete the sale of Lot 3 “and affirm the Manassen Security Agreements”.

The Liquidators respond that, contrary to paragraph 133.7, there was no application for directions and no hearing on 10 May 2019. That appears to be correct. They also submit that, contrary to paragraphs 133.7–133.8, they have not affirmed or accepted the Manassen Security Agreements.

The seventh ground does not warrant the removal or replacement of the Liquidators, because it does not seem that any such application was made. As to the eighth ground, no basis has been shown for criticism of completion of the sale of Lot 3 as distinct from, for example, the Liquidators causing the Company to repudiate the sale contract for that property. The sale of that property did not amount to an affirmation of the Manassen Security Agreements, and a sale of that property did not necessarily require the sale proceeds to be paid to Manassen. It is not apparent that a delay in notification of that matter, in a complex liquidation, was material or caused any prejudice to the Plaintiffs. This ground does not, separately or together with other matters, warrant the removal or replacement of the Liquidators.

The fifteenth ground (Amended Points of Claim [133.15]) relates to a suggestion that the Liquidators’ report to creditors on 3 May 2019 was misleading by not disclosing the nature and extent of indemnities provided by Manassen to fund the liquidation, arising from the correspondence between the Liquidators and Manassen. The Plaintiffs’ submissions as to the report to creditors at the hearing also travelled well beyond that claim.

Mr Devine was cross-examined, at some length, as to the reference to Manassen as a “secured creditor” in the report to creditors on 3 May 2019. He accepted in cross-examination that the report to creditors could or should have included further information as to the Liquidators’ then intent to complete the sale of Lot 3 within three weeks and the application to the Court to be appointed as receivers of the Trust’s assets (T147) and to the Liquidators not then having identified a reference to the Company’s liability under the Manassen Security Agreements in its accounts (T147).

I am not persuaded that that reference to Manassen as a “secured creditor” in the report to creditors was materially misleading, where Manassen claimed to have that status; the documents which then existed, on their face, would have supported that status; Mr Devine’s evidence was that he had received general advice as to the prima facie validity of those agreements, although he fairly accepted that he had not conducted any detailed investigation of those matters; the Liquidators had not then themselves identified the attacks on the validity of those documents which are now advanced by the Plaintiffs, and the Plaintiffs did not do so in correspondence with the Liquidators until a later date; and those attacks, at least so far as they depend on s 37A of the Conveyancing Act, have the difficulties to which I have referred above.

The Plaintiffs submit that the report to creditors failed to disclose the suggestion in the email dated 25 March 2019 between Mr Uzcilas and Mr Morelli that the entry into the Manassen Security Agreements converted a debt owed at unitholder level to project level. I am not persuaded that the report to creditors should have included such a statement, which, it seems to me, is a significant oversimplification of the effect of the Manassen Security Agreements. A statement in that form would have been premature and potentially misleading when made prior to a fuller investigation of the transaction. The Plaintiffs also submit that that report failed to disclose the “full extent” of the agreement between the Liquidators and Manassen in respect of funding for the liquidation from the sale of Lot 3. It seems to me that the substance of that funding arrangement was disclosed by the passage in the report to creditors to which I referred in paragraph 58 above. The Plaintiffs also submit that that report failed to disclose the application to be appointed as receivers to the Trust’s assets that was brought on the same day as that report was dated, and the information contained in the affidavit of Mr Devine in support of that application. I am not persuaded that an application by the Liquidators for appointment as receivers of the Trust’s assets, which is commonly made by a liquidator of a trustee company, was of such significance that the lack of reference to it in the report to creditors warrants the removal of the Liquidators, alone or together with the other matters.

The Plaintiffs, in closing submissions, submit that the Liquidators had misled creditors in the report to creditors dated 3 May 2019. I have addressed the various allegations of non-disclosure in that report above and I am not satisfied that there were material omissions from that report to creditors, still less that any such omissions would warrant the replacement of the Liquidators in the relevant circumstances. The Plaintiffs also contended that the Liquidators had misled the Court in respect of their application to be appointed receivers of the assets of the Trust. I have commented as to the evidence led in support of that application above. That allegation, which involves elements of impropriety, was not fairly pleaded in respect of the application to remove the Liquidators, and I should not and do not reach findings about it where the Liquidators have not had a fair or proper opportunity to respond to it.

The question of the Liquidators’ independence was squarely raised in paragraphs 133.16 and 133.17 of the Plaintiffs’ Amended Points of Claim. The sixteenth ground (Amended Points of Claim [133.16]) relates to an allegation that the Liquidators engaged in “numerous communications with [Manassen] prior to being appointed as Liquidators including providing advice in this period to [Manassen] regarding options available to it on such an appointment”. The seventeenth ground (Amended Points of Claim [133.17]) relates to an allegation that the Liquidators were “reliant upon [Manassen] for remuneration” which circumstances that required acceptance of its purported security and sale of property of the Company pursuant to that security.

In closing submissions, the Plaintiffs advanced the wider submission that, viewed objectively, the Liquidators’ conduct preferred the interests of Manassen, and acted against the interests of other creditors, including the Plaintiffs. In particular, the Plaintiffs submitted that the Liquidators had determined to accept the validity of the Manassen Security Agreements, from the date of their appointment, without making proper inquiry as to those matters. I have referred to the manner in which the challenge to the validity of those arrangements arose above.

The Liquidators respond that it was not unreasonable for them to correspond with Manassen as the major secured creditor (although I interpolate that a dispute as to its security has now been exposed), to seek funding from it where the liquidation was otherwise unfunded, and no issue had at that stage been raised as to the status of Manassen as a secured creditor. They point out that the proposed funding from the sale of Lot 3, and Manassen’s consent to it, was disclosed in their initial report to creditors. They submit that it was appropriate to seek to sell the Company’s assets and to seek appointment as receivers and managers to the Trust’s assets to permit that to occur.

Mr Cheshire also responds to the allegation that the Liquidators have aligned themselves with Manassen’s claim to be a secured creditor by also pointing out, with substantial force, that the Liquidators’ personal interests are in fact aligned with those of unsecured creditors, because their costs and expenses would more likely be paid, as a priority claim in the liquidation, if the security claimed by Manassen is not valid. Mr Cheshire also points to the communications between the Plaintiffs and Mr Purchas prior to his proposed appointment, not to criticise those communications, but to point to the fact that they were analogous to the communications that occurred between Manassen and the Liquidators. There is also significant force in that submission. Mr Cheshire also submits that the Liquidators had a legitimate interest in seeking to establish that there was a source of funding available to them, before agreeing to their appointment in a voluntary liquidation, and that it would be necessary for them to engage with Manassen, so far as it claimed to be a secured creditor of the Company, for that purpose.

Mr Cheshire also submits, correctly, that Manassen has not itself funded the Liquidators’ activities; to the extent that it will permit them to retain a minimum of $100,000 from the sale of Lot 3, they would have been entitled to rely upon their entitlement to their costs of securing and realising that asset in any event, referring to the principle in Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171 as applied in Stewart v Atco Controls Pty Ltd (in liq) (2014) 252 CLR 307. Mr Cheshire also rightly submits that Manassen has not sought to impose any conditions that restrict the Liquidators’ performance of their role. I pause to note that that position is plainly preferable to the approach adopted by Hindmarsh in respect of the Plaintiffs’ proposal for the appointment of an alternative liquidator, which I will address below.

Mr Cheshire submits that the Liquidators’ conduct in relation to the Manassen Security Agreements was reasonable in all the circumstances; and, if the Court identifies any deficiencies in that conduct, the Liquidators were not motivated by an bias towards Manassen or any condition imposed by it; and any such deficiency was not such as would justify the Liquidators’ removal. Mr Cheshire also points out that the appointment of a special purpose liquidator, which had originally been sought by the Plaintiffs and is now no longer sought, would have addressed any issue in that respect. Mr Cheshire also draws attention to Mr Devine’s evidence that, now that the Plaintiffs have abandoned their claim for the appointment of a special purpose liquidator, the Liquidators will fund legal advice on the Manassen Security Agreements and associated matters, which will not be obtained from Mills Oakley (Devine 17.6.19 [40]; Devine 26.6.19 [21]) and will not oppose leave being granted to the Plaintiffs to pursue claims in respect of the Manassen Security Agreements and associated matters, as proposed in the Plaintiffs’ draft Statement of Claim, provided that no financial burden is imposed on the Company by the pursuit of those claims.

Mr Shearer submits, by reference to Mr Devine’s evidence, that no bias or preference of the interests of Manassen on the part of the Liquidators has been established, and he points out that the Plaintiffs’ earlier assertion that the Liquidators were funded by Manassen is not correct as a matter of fact. In particular, he points out that Manassen has not committed to funding the Liquidators, and has not in fact funded them, but merely agreed to their receiving a specified amount from the sale of Lot 3, when the sale of that property is ultimately completed. Mr Shearer points out, as did Mr Cheshire, that the Liquidators were likely to be entitled to recover costs and expenses in respect of that sale in any event under the case law to which I referred above. I have not neglected the fact that the amount recoverable by the Liquidators, under the arrangement with Manassen, may be greater than the amount that would be recoverable on that basis.

It does not seem to me that either the Liquidators’ initial discussions with Manassen, or the arrangement as to funding, warrant their removal as Liquidators. Those initial discussions appear to be of a preliminary character and, as Mr Cheshire points out, of a similar character to the Plaintiffs’ discussions with Mr Purchas. It does not seem to me that the Plaintiffs’ criticism of the Liquidators’ attempt to secure funding from the sale of assets that Manassen claimed were subject to its security is justified. Any liquidator that is appointed to a company that has a creditor with security over all or substantially all of its property, or a person claiming to be such a secured creditor, may be dependent upon that creditor’s consent to its access to such property for funding. The limited consent provided by Manassen was not conditional, in fact or by any implication that can be reasonably drawn in this application, on the Liquidators’ accepting Manassen’s claim for security.

Paragraphs 133.10–133.11 and 133.21 of the Amended Points of Claim relate to an allegation that the Liquidators failed to act independently or to be seen to be acting independently by their engagement of Mills Oakley. The Plaintiffs’ tenth ground (Amended Points of Claim [133.10]) relates to the Liquidators’ retaining Mills Oakley to act as their solicitors in respect of the liquidation of the Company, notwithstanding that (the Plaintiffs contend) Mills Oakley were a creditor in the liquidation of the Company; had previously acted for the Company on instructions from its director and controlling mind in respect of the negotiation, drafting and execution of the Manassen Security Agreements and had previously acted for the Company on instructions from its director in several pieces of litigation. The eleventh ground (Amended Points of Claim [133.11]) relates to the retainer of Mills Oakley as solicitors for the Liquidators after the Plaintiffs had raised a concern as to that matter. That criticism adds nothing to the Plaintiffs’ substantive criticism of the retention of Mills Oakley. If the Liquidators were properly entitled to retain Mills Oakley in the first place, that position would not change merely because the Plaintiffs did not approve of that decision. The twenty-first ground (Amended Points of Claim [133.21]), which appears to overlap with the other grounds, relates to the Liquidators retaining and continuing to retain Mills Oakley where that firm acted for the Company prior to its liquidation; took instructions from the former directors of the Company; was a significant creditor in the liquidation and had advised the Company in relation to the Manassen Security Agreements and on “liquidation strategy”.

In dealing with this issue, it seems to me that the Court should be conscious of the approach adopted in the more common situation where a question as to a liquidator’s independence arises from his or her retainer of a solicitor who acted for a substantial creditor, rather than for the company prior to the liquidation. In that context, some case law has expressed a view that it is “generally undesirable” for the liquidator to retain the same solicitors as a substantial creditor; however that is not “an absolute rule” and whether such an arrangement offends the requirement for independence of the liquidator will depend upon the circumstances: Re Bellafountain Pty Ltd above at [40], [44]: Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 1613 at [14]; Re 77738930144 Pty Ltd (in liq) (formerly Commercial Indemnity Pty Ltd) [2017] NSWSC 452, where Gleeson JA observed that there was no invariable rule that a liquidator may not retain solicitors who had previously acted for a substantial creditor and the question was whether such an arrangement prejudiced the liquidator’s independence: GDK Projects Pty Ltd v Umberto Pty Ltd (in liq) [2018] FCA 541; Re Ji Woo International Education Centre Pty Ltd above at [39]ff.

The Liquidators submit that the fact that Mills Oakley had acted for the Company and was a creditor in respect of unpaid fees would not of itself be relevant to cause concern, particularly in an unfunded liquidation where a different solicitor, who did not previously act for the Company, is acting. They recognise that Mills Oakley could not give advice in relation to its debt, or any suggestion that Mills Oakley was involved in wrongdoing in relation to the Manassen Security Agreements and associated matters, and submit that that issue would be resolved by the appointment of a special purpose liquidator, which the Plaintiffs no longer seek. It seems to me that the issue in respect of Mills Oakley was somewhat wider, where it appears to have advised the Company and possibly its directors in respect of the Manassen Security Agreements, and to have advised the Company in respect of other issues that may be the subject of scrutiny in the liquidation, and its ability to advise as to the Manassen Security Agreements generally or those other issues was also compromised.

Mr Cheshire addresses the complaints made in respect of the retainer of Mills Oakley at some length, and points out that the Plaintiffs’ initial complaint appears to have focused upon Mills Oakley being a creditor of the Company; and no issue as to the Manassen Security Agreements which might have raised concern as to their role arose until 16 May 2019; and no allegations were made by the Plaintiffs against Mills Oakley until they served their draft Statement of Claim on 28 May 2019. Mr Cheshire also points out that the Plaintiffs initially sought, but then did not pursue, an order restraining Mills Oakley from acting. That, it seems to me, is of limited significance, where it was a matter for the Liquidators to satisfy themselves as to the appropriateness of Mills Oakley’s retainer. Mr Cheshire also submits that the Liquidators’ proposal to fund independent legal advice on the Manassen Security Agreements, not taken from Mills Oakley, and not to oppose derivative leave to the Plaintiffs to pursue claims in respect of these matters, provided that no financial burden was imposed on the Company, would have the result that Mills Oakley had no involvement in advising as to these matters. Mr Cheshire submits that the Liquidators’ conduct in retaining Mills Oakley was reasonable in the circumstances; if the Court found any deficiency in it, the Liquidators were not motivated by any bias towards Manassen or any condition imposed by Manassen; and that deficiency was not such as would justify the Liquidators’ removal. This position has since developed further, so far as the Liquidators now do not propose to retain Mills Oakley, if they remain in office.

Mr Shearer also points out, and I accept, that the Liquidators’ use of the same counsel or solicitors as a creditor does not necessarily establish a threat to the Liquidator’s independence, and submits that the same proposition would apply in respect of a liquidator’s use of a company’s former counsel or solicitors.

It seems to me that there is force in the Plaintiffs’ criticism of the retainer of Mills Oakley, although I recognise that the decision that the Liquidators faced was a difficult one. On the one hand, I accept that the Liquidators then had little access to funding, and there was a substantial advantage in the retention of Mills Oakley, using a different partner to the partner who had previously acted for the Company, where the firm would have had familiarity with the Company’s affairs and, perhaps more importantly, held the documents necessary for the conduct of the relevant proceedings and were prepared to act on a basis that did not involve immediate payment by the Liquidators.

On the other hand, Mills Oakley was a very substantial creditor in the liquidation of the Company, and the amount of its debt was likely to cause greater risk to its objectivity than a smaller debt. There also seems to me to be a substantial risk that Mills Oakley’s objectivity would have been at risk, by reason of its substantial involvement in advising the Company and likely also its directors as to earlier transactions that were likely to require investigation by the Liquidators, including but not limited to the entry into the Manassen Security Agreements. I do not consider that the fact that Mills Oakley had previously acted for the Company in several proceedings, including proceedings brought by Bellerive against the Company or by the Company against Bellerive was a matter that should have disqualified them from acting for the Companies or the Liquidators in those proceedings. Indeed, it seems to me that there would have been considerable advantage to the Company in continuing to retain Mills Oakley in those proceedings, which appear to have had a long and difficult history.

The Plaintiffs also advanced submissions as to invoices issued by Mills Oakley to the Company prior to the appointment of the Liquidators, including in February 2019. It is not necessary to address those submissions, particularly where the Liquidators have confirmed that they will terminate the retainer of Mills Oakley from the delivery of this judgment, if they remain in office, and the choice of solicitor would otherwise be a matter for an incoming liquidator. I note that Mills Oakley also prepared a draft deed of guarantee and indemnity to be provided by Manassen in favour of directors of the Company and Mills Oakley on or about 10 April 2019. I have referred above to Mr McIntosh’s evidence, on information and belief from Mr Manassen and Mr Uzcilas, that that document was not made available to Manassen and was not accepted by Manassen. It is also not necessary to address it further, where there is no suggestion of a continued retainer of Mills Oakley by the Liquidators or that it was executed by Manassen.

It seems to me that it would have been preferable had the Liquidators engaged an independent firm of solicitors at an earlier point. However, the retainer of Mills Oakley does not warrant their replacement, particularly where they committed (in the course of the hearing) to retaining an independent firm from the point of delivery of judgment in the proceedings. On balance, I am not persuaded that this ground, separately or together with other matters, warrants the removal or replacement of the Liquidators.

The twenty-third ground (Amended Points of Claim [133.23]) relates to a failure to investigate whether or not the Deed of Acknowledgement of Debt made between the Company and CBP is amenable to being set aside under s 37A of the Conveyancing Act or is a voidable transaction under Part 5.7B of the Corporations Act. The Liquidators take no position as to this transaction, where CBP has itself appeared at the hearing although it has not been joined as party to it, and indicates that they will review the position in the light of any findings in this application.

In closing submissions, the Plaintiffs advanced detailed submissions as to the Deed of Acknowledgement of Debt between CBP and the Company referring, inter alia, to the possibility of a challenge to that transaction as an unfair preference within the scope of s 588FA or as an uncommercial transaction within the scope of s 588FB of the Corporations Act. No such challenge was identified in the Amended Points of Claim in support of the application; CBP was not joined as party to the proceedings, so as to be bound by their outcome, although it has been heard under r 2.13 of the Supreme Court (Corporations) Rules without becoming party to the application; the Plaintiffs sought to do no more than indicate that that was a matter which required investigation by the Liquidators, in support of their application for removal of the Liquidators; and it is not appropriate that I should determine the substance of any claim which may in future be brought against CBP, in these circumstances. The prospect of such a claim does not provide a basis for the removal and replacement of the Liquidators.

The twenty-fifth ground (Amended Points of Claim [133.25]) relates to the Liquidators’ refusal of the request made by the Plaintiffs on 17 May 2019 to convene a meeting of creditors. I note that r 75-250 of the Insolvency Practice Rules (Corporations) 2016 (Cth) deals with directions to external administrators to convene a meeting, for the purposes of s 75-15 of the Insolvency Practice Schedule (Corporations). That rule provides, inter alia, that a direction to the external administrator of a company to convene a meeting of the creditors is not reasonable if the external administrator, acting in good faith, is of the opinion that, inter alia, complying with the direction would substantially prejudice the interests of one or more creditors or a third party and that prejudice outweighs the benefits of complying with the direction; there is not sufficient available property to comply with the direction; or the direction for the meeting is vexatious. The parties did not address the scope of the requirement to call a meeting at the request of creditors or the scope of the exceptions to it under the Insolvency Practice Schedule (Corporations) and Insolvency Practice Rules, and I proceed on the basis that they did not consider it sufficiently material to the outcome to do so.

I recognise that Mr Devine was not particularly persuasive, in cross-examination, as to the basis of the characterisation of the Plaintiffs’ call for a creditors’ meeting as “vexatious” (T116) for the purposes of that rule. Mr Cheshire submits that the Liquidators’ decision to decline to convene a meeting of creditors was reasonable given the existence of these proceedings; the challenge to their appointment; the Plaintiffs’ repeated requests for documents; the fact that the liquidation was at an early point when that request was made; and their lack of funding. Mr Cheshire also submits that, if the Court identifies any deficiency in this respect, it was not motivated by any bias towards Manassen or any condition imposed by it, and was not such as to justify the Liquidators’ removal.

It seems to me that the Liquidators’ refusal to convene this meeting was justified, for the purposes of r 75-250 of the Insolvency Practice Rules (Corporations), given the very early stage of the liquidation and the short period that had then elapsed since its commencement. Even if the request for that meeting was not “vexatious” within the meaning of that rule, it seems to me that the liquidation was then unfunded, as Mr Devine pointed out in cross-examination, and there was necessarily not sufficient available property available to the Liquidators to comply with the direction to call that meeting for the purposes of that rule. The Liquidators calling the meeting at that point would arguably have also wasted time and resources in a manner that would substantially prejudice the interests of creditors generally and that prejudice would arguably have outweighed the benefits of complying with the direction, although I do not reach a final view as to that matter where the parties did not address it in submissions. This ground does not, separately or together with other matters, warrant the removal or replacement of the Liquidators.

I have referred above to Mr Nakousis’ evidence as to the basis on which the Plaintiffs initially proposed to fund replacement liquidators. Mr Cheshire points, with considerable force, to the difficulty that the Plaintiffs seek to replace the Liquidators, because they would be indirectly funded from assets over which Manassen has security, but the proposed replacement liquidators would be directly funded by Hindmarsh (but not Bellerive) and Karellas, which each have ongoing litigation against the Company, and that proposed funding is limited in its amount. Mr Cheshire did not have the opportunity to address a further difficulty with that funding, namely the limit imposed by Hindmarsh on its use, which only emerged in the Plaintiffs’ reply submissions and which I address below.

The funding arrangements proposed by Hindmarsh in respect of the alternate liquidators that it sought to have appointed were varied in the Plaintiffs’ reply submissions to indicate that Hindmarsh (as distinct from Bellerive) would provide $50,000 funding for initial investigations; may consider further funding if it was necessary to preserve the interests of all creditors; and:

It should be noted that, first, that variation was not explained by evidence; second, the proposition that Hindmarsh would not fund particular steps would place a significant limit on the role of the proposed replacement liquidator; and, third, the suggestion that Bellerive is attending to the rectification of the “properly identified defects” is also unsupported by evidence. The Plaintiffs’ reply submissions also qualified the position in respect of Karellas, by indicating that it would provide $50,000 funding for preliminary investigations but that “it is not clear what Karellas’ position is as to other matters”. There is also no evidence as to whether the Plaintiffs had sought the views of Mr Kogan and Ms Sozou as to this limitation, or whether they would have withdrawn their consent to appointment had they been advised of it.

The conditions imposed by Hindmarsh upon the funding of Mr Kogan and Ms Sozou would have undermined their independence and tends strongly against their appointment in place of the Liquidators, whose access to funding from a sale of Lot 3 is not conditioned in a manner that imposes a restriction upon their independence. It seems to me that, quite apart from the other findings that I have reached above, the fact that the proposed replacement liquidators’ independence would have been compromised in this manner would have been sufficient reason not to remove and replace the Liquidators.

In closing submissions, the Plaintiffs also advanced submissions as to a matter raised in paragraph 7 of their Amended Points of Claim in respect of an inquiry into the conduct of the Liquidators. That matter was not in issue in this hearing and I also do not propose to address it, where other parties have not had a proper opportunity to address it.

For completeness, I should note that Mr Cheshire also advanced submissions as to the Plaintiffs’ motivations for commencement of these proceedings. Mr Cheshire points out that there was difficulty with the proposition that these proceedings were commenced because the Liquidators did not provide an undertaking in relation to the proceeds of sale of Lot 3, when the Manassen Security Agreements were challenged, because the Plaintiffs first contacted Mr Purchas about the Company’s liquidation on 23 April 2019, before the Plaintiffs contacted the Liquidators in respect of the liquidation, and there was continuing correspondence between the Plaintiffs and Mr Purchas until the proceedings were commenced. Those matters tend to suggest that the Plaintiffs were considering a possible application to appoint an alternate liquidator before the matters on which they now rely to attack the Liquidators’ conduct had developed.

Mr Cheshire points to Mr Nakousis’ evidence that the Plaintiffs were unhappy, understandably, about the circumstances in which the Company had failed to meet the judgment in their favour, and had been placed in liquidation, although that does not provide any explanation for their investigation of the appointment of an alternate liquidator from the commencement of the liquidation. It is also puzzling that the Plaintiffs have been prepared to incur significant costs in seeking interlocutory relief in respect of the proceeds of sale of Lot 3, where the net realisations from the sale of that property are likely to be relatively modest, and quite possibly less than the parties’ collective costs of this application.

Mr Cheshire submits that the Plaintiffs’ complaints against the Liquidators are “manufactured” or are at least not the real substance of their reason for bringing the application for the Liquidators’ removal, and submits that that undermines their complaints. Mr Cheshire also points out that it is also puzzling why the Plaintiffs withdrew their claim for the appointment of a special purpose liquidator only shortly before the hearing, and that the Plaintiffs never sought to explain that decision. He also points to a number of other aspects of the Plaintiffs’ conduct which are not explained, which it seems to me is not necessary to address.

It seems to me that Mr Cheshire rightly draws attention to aspects of the Plaintiffs’ approach to this application that are, to put it neutrally, puzzling. Mr Cheshire also referred to the case law cautioning against the replacement of a liquidator, where that would create the opportunity to manipulate the liquidation, or by a creditor with an “ulterior motive”. Mr Shearer points to the fact of proceedings brought by the Company against Bellerive alleging defects in works conducted by it in respect of the development, and points to the need to remember that those who apply to remove a liquidator “may well themselves have an ulterior motive” and submits that that concern “is not hypothetical” in this case. It is not necessary to find whether the application was brought for a collateral purpose or to frustrate the proceedings in respect of alleged construction defects, given the findings that I have reached on other grounds. I do not reach findings as to that question.

The Plaintiffs’ application for interlocutory relief should be dismissed with costs. I am inclined to a preliminary view that, in the particular circumstances, the Plaintiffs should also pay CBP’s costs of the application, although this is the exception rather than the rule in respect of parties heard under r 2.13 of the Supreme Court (Corporations) Rules. The parties should bring in agreed short minutes of order to give effect to this judgment, including as to costs and the orders to be made to progress the Plaintiffs’ claims for final relief, within 7 days, or, if there is no agreement between them, their respective draft short minutes of order and short submissions as to the differences between them.