Australian Securities and Investments
Commission v Dunner [2013] FCA 872
Accessibility Links
.
FEDERAL COURT OF AUSTRALIA
IN THE
FEDERAL COURT OF AUSTRALIA
|
|
|
Plaintiff
|
|
AND:
|
Defendant
|
DATE
OF ORDER:
|
|
WHERE
MADE:
|
THE COURT ORDERS THAT:
1. The parties confer, and file a minute of order
reflecting these reasons by 4:00 pm on 20 September 2013.
2. If
agreement cannot be reached, then each party file and serve a separate minute
of order by 4:00 pm on 20 September 2013.
Note: Entry
of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
VICTORIA DISTRICT REGISTRY
|
|
GENERAL
DIVISION
|
VID 327 of 2012
|
BETWEEN:
|
AUSTRALIAN
SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
|
AND:
|
ANDREW
LEONARD DUNNER
Defendant
|
JUDGE:
|
MIDDLETON
J
|
DATE:
|
30
AUGUST 2013
|
PLACE:
|
MELBOURNE
|
REASONS
FOR JUDGMENT
INTRODUCTION
1 This
proceeding is an inquiry into the conduct of a receiver and manager and
liquidator under ss 423 and 536 of the Corporations Act 2001 (Cth) (‘the
Act’), carried out pursuant to orders made by consent. The proceeding was
originally commenced by originating process filed by the plaintiff (‘ASIC’) on
26 April 2012 (as subsequently amended).
2 The
inquiry concerns the conduct of the defendant, Mr Dunner, as liquidator and
controller of 12 companies:
1. Polymertechnik
Pty Ltd (deregistered) ACN 122 433 550;
2. Polymertechnik
Foam Pty Ltd (deregistered) ACN 122 433 587;
3. Regen
Polymers Pty Ltd (deregistered) ACN 128 884 266;
4. Barra
Trans Pty Ltd (deregistered) ACN 109 201 587;
5. Bartech
International Pty Ltd (deregistered) ACN 086 553 586;
6. Red
Earth Facade Systems Pty Ltd (in liquidation) ACN 094 326 753;
7. Rayunit
Pty Ltd (in liquidation) ACN 062 998 378;
8. Emberford
Pty Ltd (in liquidation) ACN 007 394 881;
9. Blacktop
Profiling Pty Ltd (in liquidation) ACN 101 679 047;
10. R.A.M.
Investments (Vic) Pty Ltd (in liquidation) ACN 104 797 784;
11. Environmental
Polymer Holdings Pty Ltd (deregistered) ACN 122 431 832; and
12. EPFE
Pty Ltd (deregistered) ACN 122 433 694.
3 The
full inquiry (including as to the appropriate orders) was conducted in one
hearing before me pursuant to the agreement of both parties.
4 It
is convenient to commence by setting out, by way of background, the legal
principles to be applied in inquiries into the conduct of liquidators and
controllers.
APPLICABLE LEGAL PRINCIPLES
Inquiries under ss 423 and 536
5 Sections
423 and 536 empower the Court to inquire into the conduct of a controller or liquidator
(respectively) in connection with the performance of their duties, functions
and powers, and to take such action as it thinks fit.
6 Section
423 of the Act provides:
(1) If:
(a) it
appears to the Court or to ASIC that a controller of property of a corporation
has not faithfully performed, or is not faithfully performing, the controller’s
functions or has not observed, or is not observing, a requirement of:
(i) in
the case of a receiver – the order by which, or the instrument under which, the
receiver was appointed; or
(ii) otherwise
– an instrument under which the controller entered into possession, or took
control, of that property; or
(iii) in
any case – the Court; or
(iv) in
any case – this Act, the regulations or the rules; or
(b) a
person complains to the Court or to ASIC about an act or omission of a
controller of property of a corporation in connection with performing or
exercising any of the controller’s functions and powers;
the Court or ASIC, as the case may be, may inquire
into the matter and, where the Court or ASIC so inquires, the Court may take
such action as it thinks fit.
(2) ASIC
may report to the Court any matter that in its opinion is a misfeasance,
neglect or omission on the part of a controller of property of a corporation
and the Court may order the controller to make good any loss that the estate of
the corporation has sustained thereby and may make such other order or orders
as it thinks fit.
(3) The
Court may at any time:
(a) require
a controller of property of a corporation to answer questions about the
performance or exercise of any of the controller’s functions and powers as
controller; or
(b) examine
a person about the performance or exercise by such a controller of any of the
controller’s functions and powers as controller; or
(c) direct
an investigation to be made of such a controller’s books.
7 Section
536 of the Act provides:
(1A) In this section: liquidator
includes a provisional liquidator.
(1) Where:
(a) it
appears to the Court or to ASIC that a liquidator has not faithfully performed
or is not faithfully performing his or her duties or has not observed or is not
observing:
(i) a
requirement of the Court; or
(ii) a
requirement of this Act, of the regulations or of the rules; or
(b) a
complaint is made to the Court or to ASIC by any person with respect to the
conduct of a liquidator in connection with the performance of his or her
duties;
the Court or ASIC, as the case may be, may inquire
into the matter and, where the Court or ASIC so inquires, the Court may take
such action as it thinks fit.
(2) ASIC
may report to the Court any matter that in its opinion is a misfeasance,
neglect or omission on the part of the liquidator and the Court may order the
liquidator to make good any loss that the estate of the company has sustained
thereby and may make such other order or orders as it thinks fit.
(3) The
Court may at any time require a liquidator to answer any inquiry in relation to
the winding up and may examine the liquidator or any other person on oath
concerning the winding up and may direct an investigation to be made of the
books of the liquidator.
The nature of the inquiry
8 Section
536 is concerned with aspects of the conduct of liquidators that are likely to
attract sanctions for what might broadly be described as disciplinary reasons (Northbourne
Developments Pty Ltd v Reiby Chambers Pty Ltd & Ors (1989) 19 NSWLR
434, dealing with the predecessor provision to s 536, being s 420 of the
Companies (New South Wales) Code). Section 423 is a similar provision concerned
with the conduct of controllers (which term is defined by the Act to include a
receiver, a receiver and manager, and anyone else who is in possession or has
control of property of a corporation for the purpose of enforcing a security
interest). In Re S & D International Pty Ltd (in liquidation) (receivers
and managers appointed) [2009] VSC 225 at [210], Robson J held that the two
provisions are “virtually identical”. The case law regarding s 536 may
therefore be taken as applying to s 423.
9 I
note that in his judgment in BL & GY International Co Ltd v Hypec
Electronics Pty Ltd (2010) 79 ACSR 558 at 567 and following, Barrett J
provided a useful summary of the purpose of s 536 by reference to a number of
key authorities.
10 By
way of overview, it was said by the NSW Supreme Court of Appeal in Hall v
Poolman (2009) 75 NSWLR 99 that s 536 “is a broadly expressed supervisory
jurisdiction over the conduct of persons in control of the affairs of a
corporation, in circumstances where normal market forces and the exercise by
shareholders of their rights to control are attenuated or non-existent” (at 119
[53]). Therefore, the power conferred by the section is not to be narrowly
construed or confined by fine distinctions (Hall v Poolman (2009) at 119
[54]).
11 Prior
to these cases, in the context of discussing s 278 of the Companies Act 1961
(Vic) (a predecessor provision of s 536), Marks J in Commissioner for Corporate
Affairs (Vic) v Harvey
[1980] VR 669 said (at 688):
It is clear that the inquiry is not confined to
matters raised in the report or in an affidavit supportive of an application. I
think that where other aspects of the liquidator’s conduct emerge in the course
of an inquiry then any embarrassment to him can be met in the usual way by
permitting any necessary adjournments and giving of directions.
12 His
Honour also said (at 670):
It follows that once the court is apprised of any
matter bearing on the conduct of a liquidator it has jurisdiction to inquire
into that conduct and the ambit of the inquiry is for the Court to determine.
That ambit may well include, if the Court considers it prudent to do so,
inquiry into other liquidations, current or complete, with which the liquidator
is or has been concerned.
13 This
case was cited with approval by the Full Federal Court in Ah Toy v Registrar
of Companies (1986) 10 FCR 356 at 358, and by Dodds-Streeton J in ASIC v
Edge (2007) 211 FLR 137; [2007] VSC 170 at 156-158 [70]-[77].
14 As
Barrett J noted in BL (2010) 79 ACSR 558 at 569 [42] and following,
proceedings conducted pursuant to s 536 normally involve three stages. The
first stage involves the court deciding, upon an application being made,
whether an inquiry into a liquidator’s conduct is warranted. If found to be
warranted, an inquiry is ordered to take place. The task of the court at the
second stage is to make a judgment about the liquidator’s conduct, “viewed in
the light of the whole of the requirements applying to liquidators and taking
account, of necessity, of the circumstances of the particular winding-up” (at
570 [44]). This inquiry is structured so as to be adversarial in nature, with
the liquidator “enjoying all the usual safeguards and protections” (BL
(2010) 79 ACSR 558 at 569 [43]).
15 If,
as a result of the inquiry, the court decides the liquidator’s conduct is
deficient in some way, the third stage under s 536 is to decide whether to make
an order in respect of that conduct (BL (2010) 79 ACSR 558 at 570 [45]).
16 As
I have already mentioned, by agreement of the parties this normal three stage
process was undertaken at the one hearing.
17 Pursuant
to both ss 423 and 536, the court may “take such action as it thinks fit”. This
power has been held to extend to orders cancelling a liquidator’s registration
(and providing that a liquidator may not reapply for such registration for a
specified period of time), and orders for compensation (Edge (2007) 211
FLR 137; [2007] VSC 170 at 160 [88] and 227 [613]). In that case,
Dodds-Streeton J also opined that in appropriate circumstances, an order could
be made for review of a liquidator’s remuneration (even where there was a valid
resolution approving the remuneration), although her Honour noted that such power
should be exercised having regard to the supervisory purpose of s 536 (at 222
[568]). Her Honour ultimately determined that where remuneration is drawn by a
liquidator without valid approval, the court may make orders for payment of the
remuneration into court. The liquidator may then apply to the court for
approval of remuneration (at 229 [623]). This aspect of her Honour’s judgment
will be discussed further in due course.
Obligations and duties of liquidators and controllers
The role of the liquidator
18 As
noted by Dodds-Streeton J in Edge (2007) 211 FLR 137; [2007] VSC 170 at
151 [40]-[42], the role of a liquidator of a company essentially involves:
(a) identifying,
taking possession of and realising the company’s assets;
(b) investigating
and determining claims against the company; and
(c) applying
the assets to the satisfaction of those claims in accordance with the
legislative scheme.
19 In
Re Contract Corporation (Gooch’s Case) (1871) LR 7 Ch App 207,
James LJ provided a broad summary of the role of a liquidator at 211:
In truth, it is of the utmost importance that the
liquidator should, as the officer of the Court, maintain an even and impartial
hand between all the individuals whose interests are involved in the
winding-up… It is his duty to the whole body of shareholders, and to the whole
body of creditors, and the Court, to make himself thoroughly acquainted with
the affairs of the company; and to suppress nothing, and to conceal nothing,
which has come to his knowledge in the course of his investigation, which is
material to ascertain the exact truth in every case before the Court.
20 Justice
Street (in Equity) stated in Re Allebart Pty Ltd (in liquidation) [1971]
1 NSWLR 24 (at 26-27) that:
[w]hen it is ordered that a company be wound up on
the ground of inability to pay debts, the Court appoints an official liquidator
to take administrative control of the company's affairs and to investigate the
past history of the company itself and those associated with it. A court winding
up involves more than a mere realization of the assets and distribution of
proceeds. The official liquidator is an officer of the Court, and as such he
has public responsibilities to investigate past activities connected with the
company, and, in appropriate cases, to initiate such further proceedings, civil
or criminal, connected therewith as the circumstances may dictate. It is his
duty to discover not only breaches of the Companies Act, but also conduct
falling short of the requisite standards of commercial morality. In every
instance the winding up of an insolvent company pursuant to an order of the
Court is attended with these obligations resting upon the official liquidator.
The due course of such a winding up involves his taking such steps in relation
thereto as are necessary to discharge the duties and obligations resting upon
him.
21 Also
in Re Allebart Pty Ltd [1971] 1 NSWLR 24, Street J said (at 26):
A court winding up involves more than a mere
realization of the assets and distribution of proceeds. The official liquidator
is an officer of the Court, and as such he has public responsibilities to
investigate past activities connected with the company, and, in appropriate
cases, to initiate such further proceedings, civil or criminal, connected
therewith as the circumstances may dictate. It is his duty to discover not only
breaches of the Companies Act, but also conduct falling short of the
requisite standards of commercial morality.
22 In
Edge (2007) 211 FLR 137; [2007] VSC 170 at 151 [44], Dodds-Streeton
J said:
The extensive powers vested exclusively in the
liquidator entail a corresponding vulnerability in the creditors, members and
the public. The liquidator is a fiduciary on whom high standards of honesty,
impartiality and probity are imposed both by the Act and the general law. As an
officer of the company, the liquidator has a statutory duty of care, diligence
and good faith.
23 In
terms of specific functions of a liquidator that are particularly relevant in
this proceeding, I note that a liquidator receives the report as to the
company’s affairs (‘RATA’) made out and verified by the directors and the
secretary pursuant to s 475(1), and may require an additional report or
information under s 475(2) or (3).
The role of a receiver or receiver and manager of
company property
24 A
receiver or receiver and manager’s primary concern is to gather in, manage and
realise the assets charged, with a view to liquidating the secured creditor’s
debt (Fraser v ASIC (2007) 159 FCR 424 at 435 [36]). For the purposes of
the following discussion, I shall refer collectively to receivers and receivers
and managers simply as ‘receivers’, unless the context otherwise requires.
25 The
primary duty of a receiver is to the mortgagee or chargee under the mortgage or
charge in respect of which they were appointed (ASIC v Lanepoint Enterprises
Pty Ltd [2006] FCA 1493 at [39]; see also Fraser (2007) 159 FCR 424
at 262 [36]).
26 Undoubtedly,
it is a receiver’s responsibility to ensure that they have been validly
appointed, and to be fully aware of the powers conferred upon them, and of the
nature and extent of the property over which they have been appointed.
General duties and powers of insolvency practitioners
27 Insolvency
practitioners are subject to standards imposed by:
(a) Pt
2D.1 of the Act (as officers of a corporation, because administrators,
liquidators and receivers are all included in the definition of “officer” in
s 9 of the Act);
(b) equitable
principles applicable to fiduciaries, including a duty to avoid conflicts of
interest; and
(c) industry
codes.
28 As
officers, liquidators and receivers are subject to the same statutory duty of
care and diligence as directors under s 180 of the Act.
29 Specifically
in relation to liquidators, I note that a liquidator is appointed and paid to
exercise a particular professional skill, and a high standard of care and
diligence is required in the performance of their duties (Pace v Antlers Pty
Ltd (in liquidation) (1998) 80 FCR 485 at 497).
30 In
Pace (1998) 80 FCR 486 at 499, Lindgren J stated that a liquidator:
must exhibit care (including diligence) and skill to
an extent that is reasonable in all the circumstances. ‘All the circumstances’
will include the facts that a liquidator is a person practising a profession,
that a liquidator holds himself or herself out as having special
qualifications, training and experience pertinent to the liquidator’s role and
function, and that a liquidator is paid for liquidation work. ‘All the circumstances’
will also include the fact that some decisions and courses of action which a
liquidator is called upon to consider will be of a business or commercial
character, as to which competent liquidators acting with due care, but always
without the benefit of hindsight, may have differences of opinion.
31 Both
the Institute of Chartered
Accountants in Australia
(‘ICAA’) and the Insolvency Practitioners Association of Australia (‘IPA’) have
published standards of conduct for insolvency practitioners. Specifically, the
codes relied upon by ASIC in this proceeding (collectively referred to as
‘Codes’) are:
1. Professional
standard ‘APES 330 Insolvency Services’ issued by the Accounting Professional
and Ethical Standards Board of the ICAA (‘APES 330’);
2. ‘Code
of Professional Practice for Insolvency Practitioners’ issued by the IPA, most
of which was operative between 31 December 2007 and 31 December 2010 (‘2008 IPA
Code’); and
3. ‘Code
of Professional Practice for Insolvency Practitioners’ (2nd ed) issued by the
IPA, operative from 1 January 2011 (‘2011 IPA Code’).
32 In
Re Monarch Gold Mining Co Ltd; Ex parte Hughes (2008) WASC 201 at
[37]-[40], Sanderson M stated (in the context of considering the ‘Code of
Practice for Insolvency Practitioners’, which I note is not one of the Codes
specifically in contemplation in this proceeding):
37 A code of conduct such as
this has no legal status. That is to say, a failure to comply with the terms of
the code would not render a practitioner liable for prosecution under the
Corporations Act or any other statute. It may lead to disciplinary proceedings
by the Insolvency Practitioners Assn but that is a different issue...
38 But the importance of
codes such as this is not to be underestimated. Administrators and insolvency
practitioners generally are said to act under the supervision of the court.
That is right; but the court’s ability to supervise an insolvency practitioner
is, in a very real and practical sense, limited. In this day and age,
insolvency practice is highly specialised and administrations or liquidations
are frequently extremely complex. While it is doubtless comforting to
stakeholders that courts have a supervisory role, comfort can also be drawn
from the fact that ASIC play a role and that insolvency practitioners are
adhering to a detailed code of conduct. This case provides a good example of
the importance of the role of ASIC and the importance of the code of conduct...
40 It is also important that
the administrators paid close attention to their obligations under the code of
practice. It shows that the code is something more than a public relations
exercise designed to assuage the concerns of those involved with insolvency
practitioners. That being so, it seems to me that it is appropriate to make the
directions sought. It emphasises the importance to be attached to adherence to
the code. It must necessarily add to the status of the code and assure the
public generally that the courts regard adherence to its terms as a matter of
utmost importance.
Approval for remuneration
33 Section
473(3) of the Act (“General provisions about liquidators”) provides that a
liquidator is entitled to receive such remuneration as is determined by
resolution of the creditors or by the Court, or by agreement between the
liquidator and the committee of inspection.
34 Section
14.3 of the 2008 IPA Code (“Remuneration drawn inappropriately”) states that:
[i]f a Practitioner becomes aware that fees have
been improperly taken, because, for example, the correct process has not been
followed, the Practitioner must immediately repay the amount in question
into the administration account. Remuneration may then only be redrawn on
approval being obtained.
(Emphasis in original)
35 The
corresponding provision in the 2011 IPA Code, s 16.3, states that:
[i]f a Practitioner becomes aware that fees have
been improperly taken, because, for example, the correct process has not been
followed, the Practitioner must immediately repay the amount in question into
the administration account. Remuneration may then only be redrawn on approval
being obtained and an explanation as to why the fees were improperly taken must
be provided to creditors at that time. Fees and expenses incurred in rectifying
inappropriately drawn fees must be borne by the Practitioner.
36 Paragraph
8.13 of APES 330 states that:
[a] Member in Public Practice shall only draw
Professional Fees once the proper resolution, order, or authority has been
obtained from the Approving Body and in accordance with the terms of approval.
A Practitioner must not seek to be
remunerated for work:
• outside the scope of the
powers of the Practitioner; or
• carried out before the
Practitioner was appointed.
These restrictions are a threshold test before
applying the ‘necessary and properly performed’ test.
(Emphasis in original)
Although remuneration must not be claimed for
work done before the Practitioner was appointed, there may be circumstances
where the pre-appointment work was necessary for the administration and would
have had to be done in any event. The Practitioner must seek court
approval for any such claim. It is not sufficient in itself to obtain approval
from a committee or from the creditors. While a court will generally require
creditor’s approval for remuneration to be sought first, claims for
remuneration in these circumstances require court approval.
(Emphasis in original)
39 The
equivalent provision in the 2011 IPA Code is section 14.5.
40 These
Codes apply either according to their terms or in substance to the activities
of Mr Dunner. In many respects, both in relation to remuneration and other
activities, the Codes expressly state obligations which were otherwise imposed
upon Mr Dunner under the law. Without reference to the Codes, I would have come
to the same conclusions in relation to Mr Dunner as I have later reached
in these reasons.
Maintaining records of the administration
41 Section
531 of the Act (“Books to be kept by liquidator”) provides:
A liquidator or provisional liquidator must keep
proper books in which he or she must cause to be made entries or minutes of
proceedings at meetings and of such other matters as are prescribed, and any
creditor or contributory may, unless the Court otherwise orders, personally or
by an agent inspect them.
42 Regulation
5.6.01 of the Corporations Regulations 2001 (Cth) (‘Regulations’)
(“Matters for entry in liquidator’s or provisional liquidator’s books”)
provides:
For section 531 of the Act, the prescribed matters
are those that are required to give a complete and correct record of the
liquidator’s or provisional liquidator’s administration of the company’s
affairs.
Mr Dunner’s background
43 At
the time of the hearing, Mr Dunner had been practising in insolvency for at
least 26 years. ASIC records disclose that he was first registered as a
liquidator on 10 February 1986. Mr Dunner was registered as an official
liquidator on 21 August 1992. He became a member of the ICAA on 9 August 1977,
and is a member of the IPA.
44 At
the time of hearing, Mr Dunner had been in sole practice since 1993 as the
proprietor of the firm “Andrew Dunner & Associates”. In this capacity he
had two primary staff to assist him: an accountant (Mr Stephen Burns) and
another person not qualified as an accountant (Mr Matthew Giliberto). He has
also received occasional assistance from ‘consultants’ including a chartered
accountant (Mr Bruce Simmons). He has no administrative support staff – in the
hearing before me, Mr Dunner gave evidence that in his practice, “[e]veryone
does their own computer entries.”
Summary of ASIC’s allegations
45 ASIC
complains about the performance by Mr Dunner of his duties and exercise of his
powers as liquidator and controller of the companies that are the subject of
this inquiry.
46 Among
other things, ASIC alleges that Mr Dunner has failed to investigate the
circumstances of companies to which he was appointed, paid remuneration to
himself which was not validly approved, and communicated inaccurately or
unsatisfactorily with creditors, including as to the work done and anticipated
to be charged. The amount of remuneration alleged to have been paid to Mr
Dunner in relation to these companies when not validly approved totals
$613,737.90. There is also alleged to be an additional amount of $48,500 which
was paid to Mr Dunner as receiver and manager of Regen Polymers, which ASIC
asserted Mr Dunner was not entitled to retain, as it was paid to him pursuant
to a void charge.
47 The
allegations made by ASIC against Mr Dunner can be conveniently divided
according to the companies (or groups thereof) to which they relate. My analysis
of these allegations is set out below under the following headings:
1. Di
Pietro group of companies;
2. Stevenson-Treseder
companies;
3. Barra
Trans Pty Ltd;
4. Bartech
International Pty Ltd;
5. Red
Earth FaƧade Systems Pty Ltd;
6. Blacktop
Profiling Pty Ltd; and
7. R.A.M.
Investments (Vic) Pty Ltd.
48 A
number of issues arise for consideration in respect of each company or group of
companies. Before commencing this analysis, it is convenient to summarise the
evidence primarily relied upon by each party in respect of these issues.
The evidence relied upon
49 According
to their closing submissions, the principal affidavits relied on by ASIC in
respect of the relief sought at the hearing are:
1. the
affidavits of Mr Scott Robert Purdon (an officer of ASIC) sworn on 26 April
2012, 26 July 2012 and 16 January 2013;
2. the
affidavit of Mr Rajani Helaluddin sworn on 10 January 2013 (producing banking
records in relation to the Di Pietro group of companies);
3. in
relation to the Stevenson–Treseder companies:
3.1 the
affidavit of Mr (Bernard) Murray Treseder sworn on 17 January 2013;
3.2 the
affidavit of Ms Meredith Treseder sworn on 16 January 2013;
3.3 the
affidavit of Mr David Raj Vasudevan sworn on 14 January 2013;
3.4 the
affidavit of Mr Andrew Charles Stevenson sworn on 12 January 2013; and
4. affidavits
of the following unsecured creditors of Blacktop:
4.1 the
affidavit of Mr Kenneth Keith Kerr sworn on 16 January 2013; and
4.2 the
affidavit of Mr John Anthony Patten sworn on 22 January 2013.
50 None
of ASIC’s witnesses was cross-examined.
51 Mr
Dunner filed a statement of position dated 7 December 2012 in relation to the
allegations made by ASIC in the proceeding. Mr Dunner also swore five affidavits,
on 13 July 2012, 26 July 2012, 14 September 2012, 21 November 2012
and 30 January 2013. A number of character references were also filed with the
Court on behalf of Mr Dunner.
ALLEGATIONS CONCERNING THE Di Pietro group of
companies
52 This
section concerns the external administration of companies associated with
Mr John Di Pietro (collectively referred to as the ‘Di Pietro group
of companies’), being:
(a) Regen
Polymers Pty Ltd (deregistered) ACN 128 884 266 (‘Regen Polymers’);
(b) Polymertechnik
Pty Ltd (deregistered) ACN 122 433 550 (‘Poly’);
(c) Polymertechnik
Foam Pty Ltd (deregistered) ACN 122 433 587 (‘Poly Foam’);
(d) Environmental
Polymer Holdings Pty Ltd (deregistered) ACN 122 431 832 (‘EPH’); and
(e) EPFE
Pty Ltd (deregistered) ACN 122 433 694 (‘EPFE’).
53 The
allegations made by ASIC in respect of the Di Pietro group of companies
principally relate to Mr Dunner’s appointments to and conduct of the
receiverships and liquidations of these companies, the investigations he was
required to carry out and the remuneration he drew in these capacities. The
background facts relating to the external administrations of the Di Pietro
group of companies as set out in ASIC’s closing submissions are admitted by Mr
Dunner. Where appropriate, I reproduce those submissions here.
Was Mr Dunner invalidly appointed as receiver and
manager of Regen Polymers, EPFE and EPH, and did he fail to investigate the
validity of charges granted?
54 In
2008, Mr Di Pietro was the sole director and secretary of each of Regen
Polymers, EPFE and EPH when a charge was created by each company in his favour
(described further below; and collectively referred to as ‘Charges’). Less than
six months after their creation, Mr Dunner was appointed by Mr Di Pietro
pursuant to these Charges as receiver and manager of each company. The relevant
details relating to each company can be summarised as follows.
(a) Mr
Di Pietro was the sole director and secretary of Regen Polymers from
12 December 2007 to 12 June 2011. A charge in favour of Mr Di Pietro was
created (at the earliest) on 1 May 2008 (‘Regen Polymers Charge’). Mr Dunner
was appointed receiver and manager of Regen Polymers on 23 October 2008. He was
appointed liquidator of the company on 4 February 2009 (which appointment
concluded on 2 June 2011).
(b) Mr
Di Pietro was the sole director and secretary of EPFE from 12 June 2008 to
25 March 2010. A charge in favour of Mr Di Pietro was created (at the
earliest) on 12 June 2008 (‘EPFE Charge’). Mr Dunner was appointed
receiver and manager of EPFE on 23 October 2008.
(c) Mr
Di Pietro was the sole director and secretary of EPH from 12 June 2008 to
25 March 2010. A charge in favour of Mr Di Pietro was created (at the
earliest) on 12 June 2008 (‘EPH Charge’). Mr Dunner was appointed receiver
and manager of EPH on 23 October 2008.
55 These
facts, along with those set out in the affidavit of Mr Purdon dated 26 April
2012, are said to give rise to the following two general questions:
1. Was
Mr Dunner validly appointed as receiver and manager to each of these companies?
2. Did
Mr Dunner fail to investigate the validity of the Charges held by Mr Di Pietro
in respect of each of these companies?
56 Section
267 of the Act (“Charges in favour of certain persons void in certain cases”)
in substance provides that a charge will be void where it is created by a
company in favour of a person who is an officer of that company, and within six
months of the creation of the charge, the chargee purports to take a step in
its enforcement without obtaining the leave of the court. I accept that any
appointment of a receiver under such a charge would be invalid.
57 Despite
originally characterising the failure to obtain the necessary court approval in
respect of each of these Charges as an ‘oversight’ unintended to produce any
undue preference for the chargee (namely, Mr Di Pietro), Mr Dunner no longer
contests that the Charges (and his appointments pursuant to them) are invalid.
Accordingly, ASIC submitted that the Court should find that Mr Dunner’s
appointments to those companies were invalid. I am satisfied that it is
appropriate to make these findings in the circumstances.
58 In
respect of ASIC’s allegation that Mr Dunner failed to investigate the validity
of the Charges granted to Mr Di Pietro, ASIC submitted that there is nothing in
the documents produced by Mr Dunner that are before the Court to indicate that,
in his capacity as receiver and manager of any of Regen Polymers, EPFE and EPH,
he investigated adequately (or at all) whether any of the Regen Polymers
Charge, the EPFE Charge or the EPH Charge were void. Mr Dunner does not dispute
this.
59 In
fact, it was further accepted by Mr Dunner during cross-examination that he
also failed to investigate these matters adequately or at all after he became
liquidator of Regen Polymers (whereas previously, Mr Dunner claimed that he had
made “numerous inquiries” of Mr Di Pietro and the solicitor for Regen Polymers
to verify the validity of the Regen Polymers Charge and other documents,
despite no evidence of such inquiries or investigations having been provided).
60 Also
during cross-examination, Mr Dunner conceded that he was not familiar with the
terms or effect of s 267 at the time of his appointments to the Di Pietro group
of companies.
61 The
policy behind s 267 was described by Young J in Jesseron Holdings Pty Ltd Ī½
Middle East Trading Consultants Pty Ltd (1994) 13 ACSR 455, in a passage at
457 of that judgment (part of which was read to Mr Dunner during cross-examination)
which merits repeating:
Section 267 of the Corporations Law was enacted
because it was common experience that a company which was in financial trouble
would give a charge to an insider shortly before winding up. The company went
into liquidation and was left without sufficient assets to fund a liquidator to
challenge the charge. As a result, it was perceived that in many instances,
insiders such as directors were able to claim successfully that they were
secured creditors and take priority over the company’s ordinary creditors. The
solution that was found to this problem was to introduce a provision into the
Corporations Law which turned the tables, presumed such charges to be invalid
and left it to the insider to establish the charges’ validity.
62 In
cross-examination Mr Dunner said that he did not share the ‘common experience’
referred to by Young J, and he did not accept (on the grounds of not having had
that specific experience) that a director purporting to act under a charge
“should ring alarm bells”.
63 However,
I note that in other external administrations, Mr Dunner did raise (but
ultimately did not pursue) the validity of charges granted in favour of Mr
Di Pietro by Poly and Poly Foam, both companies in respect of which Mr Dunner
was appointed voluntary administrator and then liquidator. In the
Administrator’s Reports for Poly and Poly Foam, both dated 7 November
2008, Mr Dunner advised:
Another issue relative to the debenture charge of Mr
Di Pietro, is at the time of the registering of the charge, was the company
solvent pursuant to section 267(3)(a) of the Corporations Act. Given the issues
referred to later in this report, I believe that the solvency of the company
could be said to be questionable and further investigation will be conducted to
establish the extent of the claim under this charge.
64 Mr
Dunner said that these reports were prepared by his staff and he reviewed them,
but he did not read s 267.
65 In
light of this evidence (and the agreement of Mr Dunner himself), I find that
Mr Dunner failed to investigate adequately (or at all) whether any of the
three Charges were void because of s 267 of the Act. These failures were
serious breaches of his duty as a receiver and manager – both because of the
importance of the duty, and, in respect of the breach concerning Regen
Polymers, because of the following actions that Mr Dunner took as receiver and
manager of that company:
(a) Mr
Dunner paid Mr Di Pietro (as secured creditor) in excess of $250,000 from the
assets of Regen Polymers, being funds which would otherwise have been available
to unsecured creditors; and
(b) Mr
Dunner received $48,500 (exclusive of GST) in fees and expenses as receiver and
manager of Regen Polymers.
66 I
have already concluded that the Regen Polymers Charge is void by operation of
s 267. In consequence of this, ASIC seeks orders that Mr Dunner be
directed to repay $48,500 (plus GST), and that to facilitate that process,
Regen Polymers be reinstated and an independent liquidator appointed. In the
circumstances and having regard to the foregoing facts and conclusions, I am
prepare to make those orders.
Did Mr Dunner fail to pursue Mr Di Pietro for a RATA
in respect of Regen Polymers and EPFE, and did he fail to report the lack of a
RATA under the Act in each case?
67 As
receiver and manager of both Regen Polymers and EPFE (and then liquidator of
Regen Polymers), it was Mr Dunner’s obligation (arising from his general
duties) to seek the RATAs which Mr Di Pietro was required to submit in the
Regen Polymers and EPFE administrations as sole director of those companies.
ASIC submitted that not only did Mr Dunner fail to pursue Mr Di Pietro for
those documents, but he also failed to report the lack of RATAs to ASIC under
ss 422 and 533 of the Act.
68 Mr
Dunner does not dispute that apart from an initial formal request made by
letter in October 2008, and the apparent receipt of a draft RATA from Mr Di
Pietro’s son (which, on Mr Dunner’s own admission during cross-examination, had
to be further completed or investigated), he did not pursue a RATA from Mr
Di Pietro in respect of either Regen Polymers or EPFE. None has been filed
with ASIC or otherwise produced in respect of either company.
69 However,
Mr Dunner does take issue with the allegation that he failed to report the
absence of the RATAs to ASIC. ASIC submitted that Mr Dunner was required to
report to ASIC, in reports prepared as a receiver under s 422 (“Reports by
receiver or managing controller”) and as a liquidator under s 533 (“Reports by
liquidator”), any failure by Mr Di Pietro to produce a RATA.
Mr Dunner did not lodge any reports under s 422 in respect of his
receivership of either Regen Polymers or EPFE. In the s 533 report dated
11 August 2009 that was filed in relation to the Regen Polymers
liquidation, Mr Dunner did not advise that Mr Di Pietro had failed to submit a
RATA. In his statement of position dated 7 December 2012, Mr Dunner contended
that he was not required to do so, as there was no requirement or provision in the
s 533 report for “ticking a box relating to” the non-submission of a RATA.
70 However,
the online template for the s 533 report does provide for non-submission
of a RATA to be reported in the course of reporting possible misconduct. To
this end, there was evidence before me that Mr Dunner has previously reported a
failure to lodge a RATA in this way, in respect of another administration. The
reason that this box is not shown on the s 533 report prepared by Mr
Dunner for Regen Polymers is that he answered “no” to the question “Are you
reporting possible misconduct?”. If he had answered “yes” to this question, a
box would have appeared in the online template, relating to whether a past or
present officer of the company may have been guilty of a criminal offence under
sections of the Act including s 475 (“Report as to company’s affairs to be
submitted to liquidator”) – a provision which creates a strict liability
offence for directors who fail to provide a RATA to a liquidator when required
to do so. In cross-examination, after conceding that this was the case,
Mr Dunner suggested that, as an unsigned draft RATA had in fact been
received, “[i]nitially, when the form may have been completed, there may have
been no requirement” to make a report to ASIC on the issue.
71 ASIC
submitted that Mr Dunner’s failure to pursue and report the non-submission of a
RATA in respect of EPFE and Regen Polymers is a further aspect of a serious
failure on his part to investigate the affairs of the companies to which he was
appointed. I accept those submissions. Even if I were to accept Mr Dunner’s
evidence that at the time of filling out the relevant forms there was no
requirement to report the absence of a RATA to ASIC, such an obligation
certainly arose once the complete and final RATAs failed to materialise.
Did Mr Dunner fail to investigate the amounts secured
by the Regen Polymers, EPFE and EPH Charges?
72 In
summary, ASIC alleged that the information produced to Mr Dunner in relation to
any amount actually owing under the Regen Polymers, EPFE and EPH Charges was
conflicting or absent, and that he failed to investigate or confirm the amount
of the debts. Further, ASIC submitted that if there was in fact no amount owing
under these Charges, Mr Dunner’s purported appointments were likely to
have been invalid.
73 For
example, in relation to Regen Polymers, there is no evidence of an amount being
loaned as asserted in the Deed of Loan concluded in May 2008 between Mr Di
Pietro and Regen Polymers. The Deed records that at the request of Regen
Polymers, Mr Di Pietro advanced $6,000,000 to the company. Receipt of this sum
was expressly acknowledged by Regen Polymers in the Deed. However, during
cross-examination, Mr Dunner gave evidence that Mr Di Pietro’s solicitor (Mr Young)
had told him that this figure on the loan agreement was a “typographical
error”, and that the funds actually advanced were less than that. Further,
there were inconsistencies between this Deed, the Notice of Demand issued by
Mr Di Pietro in October 2008 for repayment of $635,800 (being the amount
in respect of which Regen Polymers was ostensibly indebted to him), Regen
Polymers’ bank records, a balance sheet for Regen Polymers which recorded that
in fact Mr Di Pietro owed money to the company (in the amount of $605,000), and
ledgers which purported to say that amounts paid or transferred to Mr Di Pietro
were to be taken as paid or transferred to another company.
74 Mr
Dunner broadly admitted these facts. When taken through each of these
inconsistencies in cross-examination, Mr Dunner typically acknowledged their
existence, yet was often unable to explain them. Overall in respect of Regen
Polymers, Mr Dunner’s oral evidence suggested that he simply accepted
explanations given by the Di Pietros and others regarding the differences
between loan account statements and other documents and the fact that
repayments to Mr Di Pietro were in fact to be allocated to related companies,
leaving the amount owed to Mr Di Pietro under the Regen Polymers Charge much
higher.
75 ASIC
submitted that in spite of these inconsistencies, and without any basis to be
confident of the amount of any debt ostensibly owed to Mr Di Pietro by Regen
Polymers, Mr Dunner made the first ‘dividend’ payment to Mr Di Pietro as
secured creditor on 27 November 2008. Further payments followed in the
ensuing months. As will be discussed further below, it was submitted that Mr
Dunner did not undertake even the most basic investigation as to Regen
Polymer’s relationship with “DS Trading”, a company which – bank records showed
– had received large payments from Regen Polymers. Mr Dunner asserted that he
was unaware that it was a company associated with Mr Robert Di Pietro, who is
Mr John Di Pietro’s son. As receiver of Regen Polymers, those investigations
were relevant to both the existence of the secured debt and the validity of Mr
Dunner’s appointment. I find that in breach of his obligations as a receiver of
that company (and later as a liquidator), Mr Dunner failed to properly carry
out such investigations.
76 In
relation to EPFE, the only document that evidences or otherwise relates to a
loan from Mr John Di Pietro to the company is a Notice of Demand for $148,516
plus interest, dated 9 October 2008. However, the statement for EPFE’s bank
account shows that on 8 October 2008 (the day before the Notice of Demand
was issued), EPFE received a cash deposit of $148,516 (being the exact amount
of the principal sum sought in the Notice of Demand), and paid $148,500 to
another entity by cheque that same day. Mr Dunner admitted these facts.
77 Similarly,
in relation to EPH, there is no information in respect of debts owed to
Mr Di Pietro by that company other than a Notice of Demand issued on
9 October 2008 by Mr Di Pietro for $50,000 plus interest, and a
listing of some payments made by Mr Di Pietro using his personal chequebook
which include reference to EPH (and which therefore may have been made on
behalf of that company). At a very high level, however, I note that the sum of
these payments that were apparently linked to EPH total more than $50,000.
78 Mr
Dunner ultimately accepted that he did not make adequate enquiries in respect
of these companies and the amounts secured by the Charges, and that he relied
too heavily on what he was told by the Di Pietro family. Mr Dunner asserted
during the hearing before me that he had carried out some investigations, but
these assertions were not supported by reference to any documents. I cannot
accept Mr Dunner’s suggestion that the investigations he undertook are evident
from the company’s books and records, as any such books or records in support
of his position were never specifically identified, or produced.
79 I
find that any inquiries carried out by Mr Dunner in his capacity as receiver
and manager or liquidator of these companies (as the case may be) were not
sufficient in light of the inconsistencies and ambiguities that were readily
apparent on the face of the documents available to him at the relevant time.
For example, in respect of Regen Polymers, although he enquired of Mr
Di Pietro’s solicitor and was told the amount in the Charge was a
typographical error, Mr Dunner should have questioned Mr Di Pietro about
the amounts alleged to be owing under the Charges, and whether the other transactions
described above related to the alleged loans. Even a rudimentary investigation
is likely to have identified these anomalies and thus prevented Mr Dunner from
paying amounts to Mr Di Pietro to which he was not entitled. Mr Dunner
ultimately conceded in cross-examination that it was “very unclear or murky” as
to the exact amount of any secured debt owed to Mr Di Pietro. Accordingly, Mr
Dunner’s evidence that the solicitor’s explanation did not concern him or cause
him to be sceptical was not, in all of the circumstances (including the
inconsistencies already highlighted), satisfactory conduct on the part of a
receiver or liquidator of Regen Polymers. The same can be said in respect of Mr
Dunner’s conduct as receiver and manager of EPFE and EPH.
80 Accordingly,
I find that the failure of Mr Dunner to conduct an adequate investigation of
the amount secured by each Charge constituted a serious breach of his duties in
respect of each company.
Should Mr Dunner have declined appointment as
liquidator of Regen Polymers because of an actual or perceived conflict of
interest?
81 Mr
Dunner was appointed liquidator of Regen Polymers by the Supreme Court of
Victoria in 2009, pursuant to an application made to the Court by Regen
Polymers in November 2008 for its own winding up and the setting aside of a
creditor’s statutory demand.
82 An
affidavit in support of this application was provided by Mr Di Pietro. Mr
Dunner provided a document entitled “Affidavit in support of application to set
aside statutory demand and wind up Regen Polymers (ACN 128 884 266)”, which
stated that he was “not aware of any conflict of interest which would make it
improper for [him] to act as liquidator or Provisional Liquidator”.
83 At
the time of the application (17 November 2008), Mr Dunner had acted as receiver
and manager of Regen Polymers (pursuant to his appointment by Mr Di Pietro) for
approximately one month, and was also liquidator of Poly and Poly Foam, and
receiver and manager of EPFE and EPH. Among other things, at the relevant time
Mr Dunner had information about potential debts between Regen Polymers and
Poly and Poly Foam (in particular, that Regen Polymers was a substantial debtor
of both Poly and Poly Foam). To this end, in the Administrator’s Reports prepared
by Mr Dunner in respect of both Poly and Poly Foam, he noted that:
The relationship of Regen Polymers Pty Ltd and this
company will be further investigated to establish the corporate obligations for
each company.
84 Neither
Mr Di Pietro’s affidavit in support, nor Mr Dunner’s consent to act, refers to
his ongoing appointment to these other Di Pietro companies at the relevant
time.
85 ASIC
submitted that Mr Dunner was obliged in each instance to consider whether there
were preference payments between those companies, or whether the loans or
transactions involved were otherwise voidable. It was further submitted that
the information available to Mr Dunner at the relevant time showed a real or
potential divergence of interests of those companies. In particular, ASIC
contended that during the time that Mr Dunner was receiver and manager of Regen
Polymers, he conducted himself in a manner at the direction of the secured
creditor (namely, Mr Di Pietro) that may in the ordinary course have required
investigation by a liquidator. ASIC further submitted that by the appointment
of Mr Dunner as liquidator, there was no independent investigation of the
validity of his actions as receiver, including his decision to pay more than
$250,000 to Mr Di Pietro.
86 Mr
Dunner disputed these contentions on the grounds that he believed and still
believes that:
(a) there
was no conflict of interest, the companies were all part of a “group” and the
accounting records were intermingled; and
(b) his
involvement with the companies was or ought to have been disclosed to the Court
by his legal representative at the hearing of the winding up application.
87 During
cross-examination, Mr Dunner initially said there was no discussion of “why it
might not be a good idea” for him to be appointed as liquidator of Regen
Polymers with the lawyer charged with conducting the application on behalf of
the Di Pietro interests (Mr Harris of Impex Lawyers). He later said that he did
discuss with Mr Harris the relationship between the companies and the prospect
of ensuring the Court was informed of these matters, but could not recall if Mr
Harris confirmed that this had been done. However, I note that insofar as Mr
Dunner said that at the relevant time he addressed the issue of whether it was
appropriate for him to be appointed as liquidator of Regen Polymers, in his
evidence he focused on the need for the Court to be expressly informed of his
role as a receiver and manager of that company – not his ongoing roles
in respect of other companies in the group.
88 A
liquidator appointed by the Court must be independent, and be seen to be
independent (see Re National Safety Council of Australia, Victorian Division
(1989) 15 ACLR 355; [1990] VR 29 at 360). As noted by the Full Court of
the Supreme Court of Victoria in that case at 360-361, it is of the greatest
importance that there should be no possibility of criticism attaching to one of
the Court’s own officers on the ground of a conflict of interest and duty. It
is also important to avoid the substantial injustice that may be done to
creditors of a company if certain relationships with other entities (such as
debtors, or related companies) cannot, are not or do not appear to be fairly,
promptly and independently investigated. I accept Mr Dunner’s evidence that
this instance represents the only time in his career that he was appointed by a
court as liquidator after already having been appointed as receiver and
manager. But accepting the appointment as liquidator of Regen Polymers placed
Mr Dunner in a position of actual or potential conflict of duty or interest.
Notwithstanding any lack of familiarity with this exact situation, as an
experienced liquidator, Mr Dunner ought to have been aware of the potential for
conflict in the circumstances, a potential made significantly more real in
these circumstances by the factors already discussed. To this end, he ought not
to have consented to the appointment – or, at the very least, he ought to have
personally taken steps to ensure that this potential conflict was disclosed to
the Court to enable an informed appointment to be made. I do not accept that it
was sufficient for him to simply rely upon the lawyer for the Di Pietro
interests to do so, if that is in fact what occurred.
Did Mr Dunner fail to comply with the Regulations and
2008 IPA Code in respect of the meeting of creditors of Regen Polymers on 21
May 2009 and, if so, is the resolution purportedly passed at that meeting
invalid?
89 The
minutes of the Regen Polymers creditors’ meeting held on 21 May 2009 state that
the creditors present approved liquidator’s remuneration of $32,200 (exclusive
of GST). However, this resolution was passed with proxies which ASIC contended
were defective.
90 The meeting was attended only by Mr Steven Marks, the
sole director of ‘SME’s [sic] R Us Pty Ltd’ (‘SRU’) (which, I understand, is a
firm of commercial business consultants). Mr Dunner gave evidence that Mr Marks
and his company were a source of work for him for approximately five years, and
that it was common, when Mr Marks wanted Mr Dunner to perform work for him or
accept an appointment, for Mr Marks to make an upfront payment to Mr Dunner of
$5,000 out of his own pocket. Further, it appears from the correspondence
exhibited to the affidavit of Mr Purdon of 26 April 2012 that Mr Marks was in
regular contact with Mr Dunner at the time that Mr Dunner was receiver and
manager (and then subsequently liquidator) of Regen Polymers, seeking payment
of funds to entities including Mr Di Pietro, Mr Dunner and himself.
91 It
was said that Mr Marks attended the meeting on 21 May 2009 in his capacity as
proxy for both SRU and Mr Di Pietro, and voted accordingly. However, ASIC
submitted that the documentary record (being the relevant proofs of debt or
claim and the proxies) does not demonstrate compliance with the Regulations, in
the following ways:
(a) Among
other things, reg 5.6.23 provides that a person is not entitled to vote as a
creditor at a meeting of creditors unless their debt claim has been admitted by
the liquidator or administrator (wholly or in part), or they have lodged
particulars or a formal proof of their debt or claim (whichever is required)
with the appropriate person. Regulation 5.6.24 provides that to be able to
vote, a secured creditor must provide particular information in their proof of
debt or claim, and prescribes both how that voting can occur, and its
consequences in respect of security held by those creditors.
ASIC contended that there is
no document containing the required particulars for either Mr Di Pietro or SRU,
nor record of any such documents in the minutes of meeting. Nor was a blank
proof of debt form sent to creditors along with the notice of meeting. Further,
a handwritten list of creditors of Regen Polymers (which was a document produced
by Mr Dunner) does not include SRU.
(b) Regulation
5.6.28 provides that a proxy is not entitled to vote unless the instrument of
proxy (completed in accordance with reg 5.6.29) has been lodged with the
appropriate person beforehand. In substance, s 21.5 of the 2008 IPA Code
provides that a practitioner must not accept a form of proxy that is
incorrectly completed in a way that the practitioner considers renders it
invalid or of doubtful validity. Practitioners must ensure that all legal
requirements as to the form of the proxy and instructions as to its completion
are complied with, and returned proxies should be carefully checked to ensure
that they are valid (s 21.5.1). The only proxy documents produced by
Mr Dunner in respect of this meeting are two proxies which are undated and
incomplete except for a signature. During cross-examination, Mr Dunner
identified one of those signatures as being that of Mr Marks.
(c) Regulation
5.6.16 provides in effect that a meeting of creditors must not act in approval
of remuneration unless a quorum of at least one or two people entitled to vote
(depending on how many people in total are entitled to vote) is present in
person or by proxy. ASIC submitted that the shortcomings in relation to Mr Di
Pietro’s attendance means there was no quorum.
92 Mr
Dunner contended that he was presented with “appropriate proxy forms” prior to
the commencement of the meeting (or that proxies were completed at the meeting
and provided to the chair), but could not explain why incomplete forms were on
file, and the allegedly completed forms were missing. He also contended that
supporting informal proofs of debt were tabled at the meeting and admitted, but
could not explain the absence of any copies of these documents.
93 I
note that although Mr Dunner gave evidence of having asked Mr Marks whether he
recalled providing completed proxies in respect of this meeting (to which the
answer was apparently in the affirmative), no affidavit from Mr Marks was
tendered in support of Mr Dunner’s position. Nor, it seemed, did Mr Dunner
undertake a thorough investigation of the matter with staff members who
assisted him with this liquidation.
94 Putting
to one side any confusion regarding the identity of the creditors on whose
behalf Mr Marks may have attended the 21 May 2009 creditors’ meeting, I find
that the voting power exercised by him pursuant to proxy was not properly
exercised. Despite Mr Dunner’s expressed position, I am satisfied that the
regulations and sections of the 2008 IPA Code referred to above were not
complied with.
95 Accordingly,
I find that Mr Dunner failed to properly discharge his duties as liquidator in
the circumstances, and the resolution passed at the meeting as to his
remuneration was invalid.
Did Mr Dunner draw liquidator’s remuneration in
excess of the approval given by creditors of Regen Polymers?
96 As
previously noted, the amount of liquidator’s remuneration purportedly approved
by creditors on 21 May 2009 was $32,200 (exclusive of GST). However, the total
amount of remuneration actually drawn by Mr Dunner in respect of that
liquidation was $62,195.21 (exclusive of GST). There is no record of approval
of further remuneration being granted in the Regen Polymers liquidation (nor
any record of a further creditors’ meeting at which such approval may have been
sought).
97 Mr
Dunner agreed during cross-examination that he was aware at all relevant times
that he was obliged to have prior approval for his fees. He gave evidence that
his practice had a process in place to record the existence of fee approvals
(and the amount thereof) on the files to which they related, through the use of
hand-written notes. However, this process “broke down” on occasion, in that
when bills were drawn, they were matched against the work in progress totals
for the file, rather than against the ledgers recording the creditor funding
approvals that had been obtained. Mr Dunner stated that subsequent
reconciliations would “sometimes” find that fees had been drawn in excess of the
amount approved by creditors.
98 I
consider that a system operating on the basis described by Mr Dunner is
inherently ineffective and unsatisfactory in ensuring that a liquidator
satisfies their obligations regarding payment of remuneration. That in itself
would constitute a failure to observe the standards expected of liquidators.
But in my view, Mr Dunner’s explanation of his practices went further, and
displayed a serious and systemic disregard for creditor funding approvals. His
evidence suggested instead a focus on the cash flow requirements of his
practice and whether there was cash available in the company accounts to be
applied to those requirements. This is demonstrated by the following exchange
with Senior Counsel for ASIC that took place during the cross-examination of Mr
Dunner:
MR WOODWARD SC: So you would have a process, would
you, where you would sit down with these ledgers or something like it and say,
“Well, this is getting a bit – the work in progress is getting a bit high. We
had better render some invoices.” Is that ?
MR DUNNER: –– No. The question comes is that the
work in progress can get very high, but if there’s no asset or fee to realise
the fees against that, you can’t draw. So once there are issues resolved on
that, we can then seek to draw that – yes. The system has failed in some
instances whereby fees may have been drawn because of the excessive values on
the work in progress.
MR WOODWARD SC: Do you recall occasions, or was it
part of your practice when you directed a staff member to draw an invoice – did
you tell them how much to draw it for – because it’s clearly not the full
amount owing?
MR DUNNER–– No. I did, yes.
HIS HONOUR: But how would you work out which amount?
Was it just how much you needed for your running your practice, or ?
MR DUNNER: –– Well, basically – yes.
HIS HONOUR: And cash flow needs?
MR DUNNER: –– Pay the wages, pay the rent.
HIS HONOUR: Yes?
MR DUNNER: –– Those sort of issues
MR WOODWARD SC: Did you ?
MR DUNNER: –– Pay the advertising bills.
MR WOODWARD SC: So you would just dip into various
administrations that had money at that time? Is that – I’m just trying to get a
sense ?
MR DUNNER: ––- No. Well, you can’t dip into ones
that don’t have money, so they’ve got to have funds available to draw against.
MR WOODWARD SC: And was there part of that process –
I don’t want to put a proposition to you, Mr Dunner, because this is important,
but was there a part of a process that – in the – as part of what you’ve
described, of sorting of checking, “Gee, we need some cash flow, so let’s send
an invoice for 10,000 to Rayunit this month,” or whatever it is, where you said
to your staff, “Just check we’ve got approval for that,” or anything of that
kind? Did you personally check what the approval level was?
MR DUNNER: –– I failed to follow through on some
occasions.
99 Mr
Dunner said he believed he sought approval from the creditors of Regen Polymers
for his remuneration, but could not explain the absence of documentary record
of said approval. No further detail of such approval was provided by Mr Dunner.
If such approval was in fact sought and obtained at a further creditors’
meeting, I note that the absence of records is contrary to Mr Dunner’s
obligation under s 531 of the Act to maintain proper records of his
administration. However, I am satisfied in the circumstances that no such
approval was sought or obtained.
100 Pursuant to my previous finding that
the approval sought from creditors on 21 May 2009 was not validly obtained, I
find that by drawing remuneration without appropriate creditor approval and not
repaying that excess, Mr Dunner has failed to comply with the Act, the 2008 IPA
Code, the 2011 IPA Code and APES 330. Mr Dunner said he was not aware of the
provisions of the Codes requiring the repayment of unapproved remuneration
(including the requirement in the 2011 IPA Code that remuneration be redrawn
only after making full disclosure), despite attending continuing professional
development sessions when the 2011 IPA Code was introduced. However, ignorance
of the law cannot absolve Mr Dunner of his responsibility to comply. In the
circumstances, I consider that it is appropriate to make orders for the
repayment by Mr Dunner of the unapproved remuneration drawn in the Regen
Polymers liquidation, in the amount of $62,195.21 (excluding GST).
Did Mr Dunner as liquidator adequately investigate
certain significant matters relating to Regen Polymers, and report to creditors
and ASIC in relation to those matters?
101 ASIC contends that Mr Dunner failed
in his duty as liquidator to investigate certain significant matters.
102 I have already concluded that Mr
Dunner failed to adequately investigate the validity of the Regen Polymers,
EPFE and EPH Charges. However, there are a number of other matters relating to
his time as liquidator of Regen Polymers that require comment.
103 As previously noted, there was a
disconformity between the records of Regen Polymers, Poly and Poly Foam as to
whether Regen Polymers owed or was owed a debt. I have already noted that in
his reports to creditors of Poly and Poly Foam, Mr Dunner stated that their
relationship with Regen Polymers would be “further investigated to establish
the corporate obligations for each company”. However, there is no documentary
record to indicate that Mr Dunner in fact investigated these issues,
either adequately or at all. Mr Dunner no longer disputes this. In the
circumstances, I am satisfied that Mr Dunner failed to investigate these
matters as he was required to do in his professional capacity as a liquidator.
104 Similarly, the bank statement for
Regen Polymers disclosed numerous large withdrawals for and transactions with
Mr Di Pietro in the weeks leading up to Mr Dunner’s appointment as receiver and
manager. Mr Dunner does not dispute that there is no documentation of any
investigation undertaken by him to determine if any of these payments were
recoverable in the liquidation.
105 ASIC submitted that a particularly
troubling example of Mr Dunner’s failure to act independently and to
investigate significant matters relates to the payments made by Regen Polymers
to DS Trading which, in the five weeks before Mr Dunner’s appointment as
receiver and manager, totalled several hundred thousand dollars. Mr Dunner gave
evidence that it was not until he was expressly told during cross-examination
at the hearing before me that he knew that the company “DS Trading” was owned
by Mr Robert Di Pietro. He stated that he never asked who or what that company
was. ASIC further submitted that it defies belief that, in all his dealings
with the Di Pietros in the course of purporting to regularise the accounting
records for large transactions to related companies, Mr Dunner did not learn
that the only other recipient of substantial sums (apart from Mr Di Pietro
himself) was related through Mr Robert Di Pietro.
106 To this end, in addition to general
payments made directly by Regen Polymers to DS Trading and Mr Di Pietro, ASIC
emphasised the following transactions:
(a) On
19 September 2008, Mr Di Pietro paid Regen Polymers a net amount of $205,000,
and Regen Polymers paid $244,000 to DS Trading. On that same day, Mr Di Pietro
received $244,000 from his son, Mr Robert Di Pietro.
Mr Dunner ultimately
accepted that ascertaining that DS Trading was associated with Mr Robert Di
Pietro would have made him “very suspicious”, and he could then have pursued
investigations into what happened to the funds paid to DS Trading. During
cross-examination Mr Dunner attempted to downplay the relative size of the
transactions and the ease with which he could have obtained access to relevant
banking information (for example, the bank account statements of DS Trading),
but ultimately accepted that the payments to DS Trading were the only payments
going to a company that he “knew nothing about”.
(b) On
2 October 2008, Mr Di Pietro paid Regen Polymers a net amount of $155,800. On
that same day, Regen Polymers paid $220,800 to DS Trading, and Mr Di Pietro
received $220,800 from his son.
(c) On
7 October 2008, Mr Di Pietro paid Regen Polymers a net amount of $5,000, and
Regen Polymers paid $123,000 to Trifon and Maria Gouvas (‘Gouvas’), whom
Mr Dunner gave evidence were “a disputed party with the Di Pietros”. He
did not offer any further detail. Also on that day, Mr Di Pietro received
$120,000 from the Gouvas account.
107 ASIC submitted that these
transactions had the possible effect of inflating the amount due to Mr Di
Pietro by Regen Polymers, and returning funds to him without them being recorded
as loan repayments. It was submitted that, therefore, Mr Dunner’s failure to
investigate the propriety of these transactions was serious, especially in view
of Mr Dunner’s decision to pay more than $250,000 to Mr Di Pietro under the
Regen Polymers Charge.
108 In the circumstances, I consider that
it is unlikely that Mr Dunner did not know of the connection between DS Trading
and the Di Pietros. However, I am not prepared to positively find that he did
have such knowledge and was therefore knowingly involved in what appear to have
been suspicious transactions, notwithstanding what ASIC characterised as an
evasiveness in giving evidence about whether the payments made to DS Trading
warranted investigation.
109 Nonetheless, I find that Mr Dunner’s
failure to ask anyone about DS Trading (for example, about the identity of its
controllers or what it did) when it received so many significant payments from
Regen Polymers in the weeks prior to his appointment as receiver and manager
was a breach of Mr Dunner’s duty as a liquidator to investigate the affairs of
that company. Indeed, in cross-examination, Mr Dunner ultimately acknowledged
that further inquiries should have been made and investigations carried out.
This was an appropriate concession to make. It appears that the standard
investigations one would expect a liquidator to carry out in the context of a
liquidation where the bank statements of a company show large payments being
made to possibly related parties were not conducted. The implications of this
failure to investigate were serious – the transactions were substantial, and
undertaken only very shortly before Mr Dunner’s appointment as receiver of
Regen Polymers. The transactions were also relevant to the amount (if any) that
should have been paid to Mr Di Pietro pursuant to the Regen Polymers Charge.
Accordingly, I find that Mr Dunner failed to exercise the critical
judgment required of a liquidator in respect of his appointments to Regen
Polymers.
Did Mr Dunner investigate adequately or at all the
sale of assets by EPFE and ensure that the proceeds of sale were received?
110 After the Notice of Demand was issued
to EPFE by Mr Di Pietro on 9 October 2008, on 14 October 2008 the company
entered into an agreement to sell certain assets to Mr Robert Di Pietro
for $170,000 plus GST. This occurred shortly before Mr Dunner was
appointed as receiver and manager of EPFE on 23 October 2008. In addition to
payment of the sale price, the sale contract indicates that in consideration
for a reduction of the amount owed by EPFE to Mr Di Pietro pursuant to the EPFE
Charge, Mr Robert Di Pietro agreed to pay a deposit of $17,000 directly to his
father. However, there is no document recording the receipt of the outstanding
proceeds of sale by EPFE, or confirming that the sale was ever completed.
Further, the final Form 524 (“Presentation of Accounts and Statement”) report
lodged by Mr Dunner with ASIC on 27 October 2009 in respect of EPFE states only
that $610 was paid to Mr Dunner for the period of his receivership for
remuneration and expenses. The Form 524 report contains no indication that the
proceeds of sale pursuant to the contract concluded with Mr Robert Di Pietro
were ever received.
111 Mr Dunner contends that he
investigated and ascertained that prior to his appointment as receiver and
manager, the monies due from Mr Robert Di Pietro under the sale contract had
been offset against monies owed by EPFE to Mr Di Pietro under the EPFE Charge.
This was said to explain why the Form 524 report filed by him at the end of his
receivership did not record the receipt of any such funds. However, Mr Dunner
has not identified any records of either that investigation, or the set off he
described.
112 In any event, the Notice of Demand
issued in respect of the EPFE Charge was for $168,516, inclusive of interest
purportedly owing as at the date of the demand. It was put to Mr Dunner in
cross-examination that offsetting the sale price of $170,000 against the EPFE
Charge would have exceeded the amount demanded by Mr Di Pietro under that
Charge, thereby removing any basis for Mr Dunner to be appointed as receiver.
Mr Dunner accepted this, and said that on the basis of this realisation, he
subsequently retired. However, he could not explain why, having come to this realisation
in or about October 2008, he waited until October 2009 to resign from this
appointment.
113 However, ASIC submitted that Mr
Dunner’s failure to investigate in respect of EPFE went further than the
proceeds of the sale due to be paid by Mr Robert Di Pietro. Specifically, ASIC
pointed to a number of transactions that occurred on 8 October 2008, shortly
before Mr Dunner was appointed. On that date, Mr Di Pietro paid $148,516 to
EPFE, EPFE paid $148,500 to Gouvas, and ASIC submitted that Mr Di Pietro
received $136,500 from Gouvas. ASIC submitted that these transactions had the
possible effect of inflating the amount due to Mr Di Pietro from EPFE, by
returning funds to him without them being recorded as loan repayments.
114 For the foregoing reasons, I accept
that Mr Dunner’s failure to investigate the propriety of the transactions
relating to the affairs of EPFE were serious. At a minimum, they directly
related to the validity of his appointment (which I have already found was not
adequately investigated by him). Further, the propriety of the payments made
shortly before Mr Dunner’s appointment as receiver and manager had a direct
bearing on whether subsequent amounts were required to be paid to the Di
Pietros, and what was to be made of the apparently outstanding proceeds of sale
from Mr Robert Di Pietro. Mr Dunner failed to adequately discharge his
responsibilities as a receiver and manager of EPFE.
Allegations in respect of the Stevenson-Treseder
companies
115 This section concerns companies
associated with Mr Craig Stevenson and Ms Meredith Treseder (collectively
referred to as the ‘Stevenson–Treseder companies’), being:
(a) Rayunit
Pty Ltd (in liquidation) ACN 062 998 378 (‘Rayunit’); and
(b) Emberford
Pty Ltd (in liquidation) ACN 007 394 881 (‘Emberford’).
116 Mr Stevenson and Ms Treseder are both
directors of these companies.
117 The background facts relating to the
Stevenson-Treseder companies as comprehensively set out in the affidavit of Mr
Purdon of 26 April 2012 are broadly admitted by Mr Dunner, with one exception –
he disputes the completeness of the record of communications between himself
and Ms Meredith Treseder and Mr David Vasudevan as set out in the affidavit of
Mr Purdon of 26 April 2012. I will return to this issue in due course.
118 The principal issues raised for
consideration in respect of these liquidations relate to Mr Dunner’s
remuneration, and his communication with company creditors and ASIC.
Did Mr Dunner invoice for time not spent on the
Rayunit liquidation?
119 In respect of the Rayunit
liquidation, Mr Dunner drew and paid an invoice dated 2 March 2011 which
included remuneration of $9,086.91 (exclusive of GST). This is reflected in the
Form 524 report lodged with ASIC by Mr Dunner on or around 30 March 2011.
However, this payment was not recorded on the Rayunit Account Ledger, which
purports to show a running balance of the work in progress (‘WIP’) on a
half-monthly basis. By 13 May 2011, if the amount paid pursuant to the 2 March
2011 invoice had been deducted, the WIP balance would have been $5,752.32. In
fact, at this time it was $7,839.23. Also at or around this time, Mr Dunner
drew and paid two further invoices totalling $12,000. Accordingly, when the 2
March 2011 invoice is taken into account, the invoices subsequently drawn and
paid exceeded the WIP recorded for this liquidation at that time.
120 Mr Dunner admitted these facts. But
in cross-examination he sought to characterise the fact of invoicing for time
not spent working on the Rayunit liquidation as “a small deficiency in the
account”, attributable to the 2 March 2011 invoice not being included in the
Rayunit Account Ledger.
121 ASIC did not allege that Mr Dunner
knew that the WIP was overstated. Nor do I consider that, without more, such a
conclusion is open to me on the evidence. It suffices to say that in the
circumstances, I am satisfied that Mr Dunner has received (and not repaid)
$9,086.91 in respect of the Rayunit liquidation to which he was not entitled,
and which should be repaid.
Were Mr Dunner’s reports to creditors and ASIC
accurate as to the value of work done and anticipated to be charged in the
Rayunit liquidation?
122 The evidence before me indicates a
systematic pattern of conduct on the part of Mr Dunner, whereby reports to
both creditors and ASIC were inaccurate (sometimes grossly inaccurate) in their
estimates of the work completed and anticipated to be charged in respect of the
Rayunit liquidation.
123 Mr Dunner’s report to the creditors
of Rayunit dated 23 June 2011 was inaccurate as to the amount of work already
performed. When compared with WIP records, Mr Dunner significantly
understated the amount and value of work undertaken in the period up to
31 March 2010, and overstated (albeit to a lesser extent) the amount and
value of work carried out in the subsequent period up to 31 May 2011.
124 For example, the report dated 23 June
2011 stated that a total of 175 hours had been spent on the liquidation in the
period up to 23 March 2010 (representing a total of $50,255, exclusive of GST).
However, the entries for the corresponding time period in the ‘Current Rayunit
WIP Report’ record that as at 31 March 2010, Mr Dunner and his staff had spent
762.7 hours on the liquidation (representing a total of $136,870.60, excluding
GST).
125 Similarly, that report stated that a
total of 214 hours had been spent on the liquidation in the period since 1
April 2010 (representing a total amount of remuneration of $74,580 (exclusive
of GST)). However, for the corresponding period, the Current Rayunit WIP Report
stated that Mr Dunner and his staff had spent 151.9 hours on the liquidation,
representing a total amount of $41,571.80 (excluding GST).
126 Mr Dunner acknowledged during
cross-examination that where the report referred to these hours as being a
“[s]ummary of work to be undertaken” (emphasis added) by him and his
staff for the relevant time periods, this was incorrect. The hours are in fact
a retrospective record of time actually spent on the liquidation.
127 It further became apparent during
cross-examination that the report had been insufficiently adapted from a
template such that it retained mention of various irrelevant tasks (such as
liquidator’s examinations, which were not held in respect of the Rayunit
liquidation) in the list of work to be performed, and misrepresented the work
which had been or would be done.
128 A similar issue was that Mr Dunner’s
estimates of his future fees to be incurred in the Rayunit liquidation in the
Form 524 reports lodged with ASIC are inconsistent with both the
contemporaneous position shown in his own time costing records, and the fees
subsequently drawn. For example, in the Form 524 report dated 26 March
2010, Mr Dunner estimated that $23,041.50 of further fees would be incurred in
the liquidation. However, the Rayunit Account Ledger stated that WIP in the
amount of $119,414.35 was outstanding as at 15 March 2010, and by the time
the next Form 524 report (dated 7 October 2010) was lodged, Mr Dunner had in
fact drawn remuneration of $83,004.35 (inclusive of GST).
129 Mr Dunner does not admit that the
discrepancies in records mean that his reports in respect of this liquidation
are inaccurate. He originally contended (without elaborating) that the
anomalies in the WIP records were a consequence of a computer crash or failure.
In cross-examination, however, Mr Dunner gave a different explanation:
MR DUNNER: […] The position is that the forms are
copied from a document – from one to another, and it’s a typographical error.
It hasn’t corrected – their copied. The document that’s being used as the base
– as like the template – has been used prior, in another administration, and it
wasn’t corrected, and I didn’t pick it up.
MR WOODWARD SC: So your explanation to his Honour is
that in this case, you used a template that was for a completely different
liquidation and forgot to update the amount of further fees that was appearing
in that document?
MR DUNNER: ---That’s correct.
MR WOODWARD SC: Okay. Let’s move on, Mr Dunner, to paragraph
122 – the form 5 524 dated 26 March stated that remuneration of 3000 was paid
to you – an estimated 23,000 of further fees, when – at a time when your
account ledger was showing that an amount of 119,000 worth of work in progress
was outstanding. The same question, Mr Dunner?
MR DUNNER: --- Same answer. It’s a typographical on
the system.
MR WOODWARD SC: So Mr Dunner, let me understand
this. This is 12 months later – well, not 12 months later, but six months
later, you’re doing another form 524?
MR DUNNER: ---That’s correct.
MR WOODWARD SC: You’re not saying you copied over
the previous one for Rayunit – the 28 September 15 one- because the figures are
different. So how is it that on a second occasion, you are showing an amount of
future fees that vastly understates what has already been done?
MR DUNNER: ---Again, it’s a typographical error.
Someone has picked up the wrong form to copy.
MR WOODWARD SC: Can we go down to paragraph 124 –
your 524 for the six months that – later on, 7 October – remuneration of 83,000
was paid to you during that period, and you say in the report that there were
no further fees to be paid. So this doesn’t have a number in it, Mr Dunner. It
actually has it – I think it’s a box ticked, or you say “no further fees to be
paid”, and the account ledger at that time shows that you, at that point in
time, had 68,000 still in there. What’s your explanation for that one, Mr
Dunner?
MR DUNNER: ---Again, there hasn’t been a
cross-reference between the two documents.
MR WOODWARD SC: When you say “there hasn’t been a
cross-reference” - - -?
MR DUNNER: ---The item’s left blank, because there
hasn’t been a – the ledger hasn’t been picked up.
MR WOODWARD SC: Yes. So that the – we can go to the
document at page 1190, but I’m instructed that the box – and you would be
familiar with this, it just says nil. For further fees, where the section says
what further fees do you estimate are to be paid, and someone has put in nil?
MR DUNNER: ---Yes. Well, hasn’t corrected – hasn’t
looked at the work-in-progress ledger.
MR WOODWARD SC: How is this happening, Mr Dunner?
How is this happening, that these repeated errors are being made in the forms
that are being filed?
MR DUNNER: ---It appears in this matter that there
are some issues. I would suggest if we looked at all the other forms, we would
hopefully find that there aren’t the issues in question.
130 This exchange demonstrates the
fundamental inadequacy of the systems employed by Mr Dunner to manage time
recording and charging of fees for work done on external administrations. I
find that Mr Dunner failed to take reasonable care (either himself or in
supervising his staff) to ensure that the reports made to creditors and to ASIC
were accurate.
131 ASIC asks the Court to find that Mr
Dunner breached his duties by giving deficient written reports. It is submitted
that the creditors’ remuneration resolution (which was based on these reports)
passed on 25 March 2009 was invalid as a consequence, and Mr Dunner was
therefore not authorised to take the remuneration purportedly authorised by the
resolution.
132 In this case, by failing to provide
accurate information in respect of time actually spent and to be spent on the
Rayunit liquidation, Mr Dunner contravened his obligation under s 499 of
the Act to provide sufficient information to enable creditors to make an
informed decision regarding the reasonableness of his remuneration. I am
satisfied that Mr Dunner’s approach of using pro forma report descriptions
(with minimal and often inadequate adaptation) seriously undermined the
legitimacy of creditors’ approval of remuneration at the meetings for which
such reports were prepared. This alone, in my view, would be sufficient to
require repayment of any remuneration received by Mr Dunner pursuant to the
impugned resolution. However, as will shortly become apparent, this is not the
only issue relating to the remuneration drawn by Mr Dunner in the Rayunit
liquidation.
Did Mr Dunner draw liquidator’s remuneration in
excess of approval by creditors of Rayunit?
133 On 25 March 2009, the total amount of
remuneration approved by the creditors of Rayunit was $21,134 (exclusive of
GST). But by 20 September 2011, the total remuneration drawn by Mr Dunner in
respect of the Rayunit liquidation was $183,867.02 (exclusive of GST). There is
nothing in the evidence before me that indicates that Mr Dunner obtained
approval from either the creditors of Rayunit or the Court for remuneration in
excess of $21,134, or that he has repaid any excess remuneration drawn. Although
materials were prepared in June 2011 for an annual general meeting of creditors
of Rayunit (which materials disclose that Mr Dunner had already drawn
$179,568.55 in fees, and sought approval from the creditors for a further
$124,380 (exclusive of GST)), there is no evidence that this meeting was ever
held.
134 Mr Dunner did not admit this
allegation. He contended that a notice was sent to creditors and a meeting
held, but did not give any detail about the timing of these events. Further, he
could not explain the absence of any supporting evidence (either in the Rayunit
liquidation file, or in the documentation filed with ASIC).
135 Whichever side of this allegation is
accepted, it is clear that Mr Dunner did not have in place an adequate system
for ensuring that remuneration paid to himself was within the scope of
approvals obtained from creditors. I have previously considered his evidence of
his system of handwritten notes of creditor approvals kept on the paper files
(but not recorded in the WIP ledger from which Mr Dunner ascertained the work
for which payment might be made). Compounding the effects of this profoundly
unsatisfactory system was Mr Dunner’s approach to responding to problems that
were identified. For example, upon identifying in or about June 2011 that
substantial amounts of money had been drawn in the Rayunit liquidation without
creditor approval, Mr Dunner apparently took steps that he described as seeking
“to improve better record keeping on [their] time-cost system” and trying to
“improve the review of the documentation”. However, apart from purchasing a new
software system, it is not apparent what these steps entailed (and there is no
evidence that the remuneration drawn in excess of creditor approval was repaid
by Mr Dunner, as required by the Codes in such circumstances).
136 In addition to this failure of
systems, ASIC submitted that Mr Dunner had a practice of ignoring the level of
creditor approval obtained in a given external administration. I accept that Mr
Dunner committed a serious breach of his duties and obligations in drawing
remuneration without confirming that the appropriate creditor approval had been
obtained (and not repaying it immediately upon discovering the error).
Accordingly, he has received and not repaid $162,733.02 of remuneration which
was not authorised by the creditors of Rayunit. This was not a case of isolated
oversight which was promptly disclosed and then ratified by creditors. Rather,
ASIC submitted – and I accept – that Mr Dunner has exhibited a pattern of
conduct which was driven by his own commercial demands for funds (as previously
noted in these reasons for judgment), and which involved a failure to pay
sufficient regard to the critical importance of obtaining creditor approval
before taking payment. In doing so, he placed his personal interests before the
interests of creditors, in breach of his duties as a liquidator.
137 Accordingly, I will order that the
excess remuneration be repaid, and Mr Dunner should have to justify to the
Court his entitlement to any part of this remuneration that he would seek to
recoup.
Did Mr Dunner fail to communicate properly and
accurately with the creditors of Rayunit?
138 Mr (Bernard) Murray Treseder gave
evidence in this proceeding on the basis that he and his wife are joint
creditors of Rayunit. His daughter, Ms Meredith Treseder (whom I have
already noted is a director of Rayunit), deposed to her recollection of the
basis for the debt owed to her parents. The gravamen of Mr Treseder’s complaint
is that he claims to have never received any substantive communication from Mr
Dunner regarding his claim.
139 Ms Treseder gave evidence that she
sought information from Mr Dunner on behalf of her father (including through Mr
David Vasudevan, a partner of the accounting firm Pitcher Partners) in relation
to the prospect and timing of a dividend. Ms Treseder first raised her parents’
claim to a debt in January 2009, and Mr Dunner indicated more than once
that he expected to pay a dividend to them. However, the evidence of both Ms
Treseder and Mr Vasudevan is that Mr Dunner failed to respond and
communicate constructively with them. Since initially bringing her parents’
claim to Mr Dunner’s attention in January 2009, Ms Treseder claims not to have
received any meaningful answer from Mr Dunner, save for an occasion where Mr
Dunner suggested the delay was due to a dispute with a secured creditor. Ms
Treseder gave evidence that in frustration, she eventually asked Mr Vasudevan
for assistance. In February 2011, Mr Vasudevan sent several emails asking
whether Mr Dunner required Mr Treseder to lodge a proof of debt, but
ultimately received no substantive response.
140 Mr Dunner contended that Mr
Treseder’s claim to be a creditor of Rayunit was unsubstantiated, and shortly
before the hearing in February 2013, produced a written agreement and
accounting records which depart from the Treseders’ recollection of the events
giving rise to the alleged debt. He initially contended that he had “had
numerous communications with all three parties”, and despite having
communicated his view to Mr Treseder, Ms Treseder and Mr Vasudevan, had
received no response (an assertion which is contrary to the unchallenged
evidence of these witnesses). However, Mr Dunner ultimately acknowledged in
cross-examination that he had not, in fact, directly contacted Mr Treseder
about the matter.
141 Mr Dunner does not suggest that he
asked for further material from the Treseders or Mr Vasudevan in light of the
terms of the written agreement (which differ from Ms Treseder’s
recollection of the agreement, a fact to which I ultimately ascribe little
import), or that he communicated with the Treseders or Mr Vasudevan in writing
about the alleged debt.
142 I do not here evaluate the merits of
Mr Treseder’s claim to be a creditor of Rayunit. But it is clear from the
uncontested evidence of the Treseders and Mr Vasudevan that many attempts to
communicate with Mr Dunner were made, apparently with little substantive
success. Even if Mr Treseder’s claim was not one that could ultimately be
admitted in the Rayunit liquidation, as liquidator Mr Dunner had an obligation
to communicate properly and effectively with persons making claims in the
liquidation, and if necessary, inform them of the need for further
documentation to support their claim, or any significant doubts held by the
liquidator regarding their claim. I am satisfied on the evidence before me that
this did not occur, and that Mr Dunner was in breach of his duties in this
regard.
Did Mr Dunner draw liquidator’s remuneration in
excess of approval by creditors of Emberford?
143 The total amount of remuneration
approved by creditors of Emberford on 25 March 2009 was $55,165 (exclusive of
GST). But by 30 September 2011, the total remuneration drawn by Mr Dunner was
$81,253.20 (exclusive of GST). There is nothing in the evidence before me to
indicate that Mr Dunner obtained approval from creditors or the Court for
remuneration in excess of $55,165, or that he has since repaid any of the
excess remuneration drawn in the Emberford external administration.
144 Mr Dunner does not dispute these
allegations, but initially contended that a notice was sent to creditors and a
meeting held. However, he provided no details about the timing of such a
meeting, and he could not explain the absence of any supporting evidence,
either in the file for this liquidation or as filed with ASIC (including the
absence of any recorded attendance at such a meeting in his timesheet).
Ultimately, in cross-examination, Mr Dunner conceded that he believed that “no
meeting got held”.
145 I consider that Mr Dunner committed a
serious breach of his duties in drawing remuneration without ensuring the
requisite creditor approval had been obtained, and in not repaying the excess remuneration
upon discovery of the error. Accordingly, Mr Dunner has received (and not
repaid) $26,088.20 in remuneration in the Emberford liquidation which was not
authorised. I will order that this amount be repaid and Mr Dunner should have
to justify to the Court his entitlement to any part of this remuneration that
he would seek to recoup.
Did Mr Dunner fail to hold an annual meeting of
creditors for both Emberford and Rayunit, or fail to report as required to
ASIC?
146 If a creditors’ voluntary winding up
continues for more than one year, the liquidator must either convene a meeting
of the creditors to which an account of the liquidator’s acts and dealings and
the conduct of the winding up must be presented, or prepare and lodge a report
with ASIC on the liquidator’s dealings and the progress of the liquidation
(s 508 of the Act).
147 There is no record of Mr Dunner
holding an annual meeting of creditors or filing an annual report in respect of
Emberford, as required by s 508 of the Act, for the second year of the
liquidation. Mr Dunner originally contended that an annual meeting was held,
but could not explain the absence of any documentary record. He contended that
alternatively, the failure to hold a meeting and prepare and file all the
necessary papers was an oversight. However, ultimately, in cross-examination,
he admitted that he believed no meeting for Emberford was held.
148 Mr Dunner admitted that no such
meeting was held in respect of Rayunit.
149 I find that Mr Dunner failed to conduct
the appropriate meetings or to lodge reports as required by s 508. Even, if the
meetings were in fact held, I find that the absence of any records of such
meetings is contrary to Mr Dunner’s obligation under s 531 to maintain proper
records of his administration.
Allegations in respect of Barra Trans Pty Ltd
150 Mr Dunner was appointed as
administrator of Barra Trans Pty Ltd (‘Barra Trans’) on 8 September 2008.
His appointment in this regard ceased on 6 October 2008, when he was appointed
liquidator by resolution of creditors. His appointment as liquidator ceased on
28 February 2012.
151 The background facts relating to
Barra Trans as comprehensively set out in the affidavit of Mr Purdon of 26
April 2012 are admitted by Mr Dunner. The allegations made by ASIC in respect
of the administration and liquidation of this company principally relate to
remuneration drawn by Mr Dunner, and the adequacy of disclosure made to
creditors.
Were Mr Dunner’s liquidator’s reports inaccurate as
to the value of work done and anticipated to be charged, and therefore not in
compliance with s 499(6) of the Act?
152 ASIC alleged that Mr Dunner prepared
several reports for the Barra Trans committee of inspection which were
inaccurate as to work already performed, and work anticipated to be charged.
153 The evidence before me discloses the
following inaccuracies and discrepancies:
1. The
remuneration report prepared by Mr Dunner on or about 3 March 2009 records that
213 hours of work had been performed in the period 16 October 2008 to 2 March
2009, at a cost of $67,947 (Mr Dunner acknowledged in cross-examination that
where this report referred to work “to be undertaken”, that was incorrect, as
the report was in fact a record of work already undertaken). However, the
Barra Trans WIP Reports disclose that between 30 September 2008 and 28 February
2009, 631.2 hours of work was recorded, at a cost of $131,695.70.
2. The
remuneration report prepared on or about 18 November 2010 records that 439
hours of work had been performed during the period 3 March 2009 to 30 June 2010
at a cost of $106,000.50, whereas the Barra Trans WIP Reports disclose that
499.4 hours of work was recorded during this time, at a cost of $117.793.60.
3. This
18 November 2010 remuneration report also stated that a further 372 hours of
work would be carried out during the period 1 July 2010 to the completion of
the liquidation, at a cost of $92,380.50. However, the Barra Trans WIP Reports
disclose that only 49.7 hours of work worth $11,594 was performed between 1
July 2010 and 31 October 2010. Accordingly, these Reports show that in fact,
the amount of work required to complete the liquidation was minimal.
154 In addition to the fact that the
March 2009 remuneration report seriously understated the work that had been
carried out (whilst the November 2010 report seriously overstated the value of
work yet to be performed), ASIC emphasised the fact that the two reports
featured substantially similar descriptions of the kind of work undertaken or to
be undertaken by Mr Dunner.
155 In fact, the Barra Trans committee of
inspection met on 3 March 2009 and passed a resolution approving Mr Dunner’s
fees for the period 16 October 2008 to 2 March 2009 to a total of $67,947
(excluding GST). Further, on 26 November 2010, the Barra Trans committee of
inspection met again and passed a resolution approving Mr Dunner’s fees for the
period 3 March 2009 to 30 June 2010 to a total of $106,000.50 (excluding GST).
Mr Dunner’s fees for the period 1 July 2010 to the completion of the
liquidation were also approved to a maximum of $92,380 (excluding GST).
156 The question of whether Mr Dunner
drew remuneration in excess of creditor approval will be dealt with in due
course.
157 ASIC contended that the inaccuracy in
reporting was so severe in this case as to fall short of the requirement
prescribed by s 499(6) of the Act that a liquidator must provide the committee
of inspection with such information as will enable them to make an informed
assessment as to whether proposed remuneration is reasonable. As a result, it
was submitted, the committee’s resolutions purporting to approve Mr Dunner’s
remuneration are invalid.
158 Mr Dunner contended that he gave the
committee a detailed verbal report and the issue of his remuneration was
“discussed at great length” prior to the resolutions being passed. He further
asserted that the committee was able to make an informed decision regarding
approval of remuneration. However, Mr Dunner did not elaborate on what
information he allegedly provided.
159 In respect of the 3 March 2009
resolution (which purported to authorise remuneration for just over half of the
amount then outstanding per the WIP reports), in cross-examination Mr Dunner
gave evidence that he may have sought to get approval for the outstanding
remuneration “later”, and that at that time, it was not his intention to ‘write
it off’. He accepted that the 3 March 2009 remuneration report did not
accurately disclose that it related to only part of the work done (as,
putting aside the typographical error in the form of the words “to be”, that
report was headed “Summary of work to be undertaken for the period”, not “part
thereof”). He further accepted that it is important for creditors to understand
how much money has been spent by a liquidator by way of remuneration at any
given time. To this end, Mr Dunner also appeared to concede in
cross-examination that the report could have misled creditors, who might have
thought that at that point in the liquidation, he had only performed work to
the value of $67,947.
160 The obligations of a liquidator under
s 499(6) primarily relate to the contents of the reports required to be
provided to the committee of inspection or creditors at the time of
notification of a committee of inspection or creditors’ meeting, rather
than what additional information may be provided to creditors by a liquidator
at a subsequent time. There is a clear legislative intention that this report
effectively be self-contained and comprehensive, to enable the committee of
inspection or creditors to make an informed decision in all the circumstances.
On the basis of the foregoing, I find that Mr Dunner breached his duties as a
liquidator by giving deficient written reports to the committee of inspection.
Even if the reports were in fact orally supplemented by Mr Dunner at or shortly
before each meeting, this does not necessarily overcome the breach. A creditor
cannot make an informed decision about whether to attend and vote at a meeting
if the report provided upon notice of the meeting being issued is deficient in
material particulars, such as how much work has actually been undertaken (or is
likely to be undertaken) in a liquidation. Approval of remuneration given in
circumstances where the necessary information is seriously deficient (for
example, in the manner demonstrated here) is invalid. Any approval given at
such a meeting is diminished because, as explained by Dodds-Streeton J in Edge
(2007) 211 FLR 137; [2007] VSC 170 at 177 [189], in the absence of meaningful
reports and accounts which would permit scrutiny of Mr Dunner’s conduct, the
existence and extent of any dissatisfaction, loss or prejudice (on the part of
the committee of inspection or creditors) cannot be readily ascertained.
161 As to the 18 November 2010 report,
the fact that it overestimates the amount of work required to be undertaken to
complete the liquidation is just as much of an indication of its unreliability
and unsuitability as a document for informing the committee of inspection as
the 3 March 2009 report.
162 In the circumstances, it is
appropriate to direct Mr Dunner to repay the remuneration drawn in respect
of the Barra Trans liquidation, and justify to the Court his entitlement to any
remuneration he would seek to recoup.
Did Mr Dunner as liquidator of Barra Trans draw
payments in respect of the administration in excess of approval by creditors?
163 On 6 October 2008 (the date that Mr
Dunner was appointed as liquidator to Barra Trans), creditors of Barra Trans
approved remuneration for Mr Dunner as administrator totalling $33,441.39 (as
alleged by ASIC). However, the Barra Trans Account Ledger reveals that by 30
September 2008, WIP for the Barra Trans administration was already at least
$46,562.60. The Ledger also reveals that by 30 June 2010, the balance of this
WIP had been reduced by payments made to Mr Dunner to a total of $949.76.
164 The first issue raised by these facts
is that it appears that Mr Dunner was paid fees relating to the administration
of Barra Trans whilst carrying out the liquidation of that company. As
previously noted, both the 2008 IPA Code and the 2011 IPA Code provide that a
practitioner may not claim remuneration for work carried out before they were
appointed unless Court approval is first obtained. There is no evidence that Mr
Dunner sought Court approval for such payment in respect of work carried out
during the administration after he had been appointed liquidator. Nor did he
seek to write that amount off as unrecoverable.
165 The second issue raised by these
facts is that it also appears that Mr Dunner drew remuneration in excess of
approvals. It was a serious failure to take payment for remuneration without
checking that such approval had been obtained, such that he has received (and
not repaid) some $13,254 which was not authorised.
166 Mr Dunner accepts these facts. Prior
to the hearing, he contended that he had sought the requisite approval after
discovering the irregularity. However, in cross-examination, Mr Dunner
accepted that there was no record of him ever doing so.
167 It is therefore appropriate to order
Mr Dunner to repay this excess remuneration, and justify to the Court his
entitlement to any amount he would seek to recoup.
168 There seems to be some discrepancy in
the evidence on the figures referred to above, which will need to be reviewed
by the parties in the consideration of final orders for the repayment of the
excess remuneration by Mr Dunner.
Did Mr Dunner draw liquidator’s remuneration in
excess of approval by creditors?
169 On 6 October 2008, the total amount
of liquidator’s remuneration approved by creditors of Barra Trans was $88,350
(exclusive of GST). On 3 March 2009, a resolution of the committee of
inspection approved further remuneration of $67,947 (exclusive of GST), for the
period 16 October 2008 to 2 March 2009. By mid-March 2009, Mr Dunner had
received approximately $79,000 in remuneration. By 26 November 2010, when a
further approval was given by the committee of inspection for the period 1 July
2010 to the completion of the liquidation for a maximum of $92,380 exclusive of
GST, and Mr Dunner’s fees for the period 3 March 2009 to 30 June 2010 (in the
amount of $106,000.50 exclusive of GST) were ratified, Mr Dunner had
received payments totalling $268,743.50. Accordingly, before the resolutions
were passed on 26 November 2010, Mr Dunner had drawn $180,393.50 (exclusive of
GST) in excess of approval.
170 Mr Dunner initially contended that
the irregularity was an honest mistake, and that he obtained the necessary
approval (and subsequent ratification of his fees) after providing all relevant
information and explanations to the committee of inspection. However, the
papers provided to the committee of inspection for the purpose of the 26 November
2010 meeting do not identify the nature or cause of the supposed irregularity,
or provide an explanation. Neither is this information or explanation recorded
in the minutes of meeting (except insofar as the minutes use the term
“ratified” in the resolution relating to the remuneration for the period 3
March 2009 to 30 June 2010).
171 I am satisfied that in failing to
obtain approval prior to drawing remuneration in the Barra Trans liquidation in
the manner just described, Mr Dunner was in breach of his obligations as a
liquidator. I am not satisfied on the evidence before me that Mr Dunner
subsequently disclosed or recorded this failure to such an extent that it could
be said that the creditors resolved to ratify the error on 26 November 2010 on a
fully informed basis. Accordingly, this resolution is not valid, and it is
appropriate to order Mr Dunner to repay this excess remuneration and justify to
the Court his entitlement to any amount he would seek to recoup.
Allegations in respect of Bartech International Pty
Ltd
172 Mr Dunner was appointed as
administrator of Bartech International Pty Ltd (‘Bartech’) on 4 April 2008.
This appointment ceased on 5 May 2008 when he was appointed liquidator by
resolution of creditors. Mr Dunner’s appointment as liquidator of this company
ceased on 1 October 2011.
173 The background facts relating to
Bartech as comprehensively set out in the affidavit of Mr Purdon of 26 April
2012 are largely admitted by Mr Dunner, with a few exceptions that I will
address in the following sections.
Were Mr Dunner’s liquidator’s reports inaccurate as
to the value of work done and anticipated to be charged, and therefore not in
compliance with s 499(7) of the Act?
174 ASIC alleged that Mr Dunner prepared
several reports for the creditors of Bartech which did not accurately and
completely set out how the proposed remuneration was calculated, and what costs
were associated with each of the major tasks to be performed (or likely to be
performed) in the liquidation.
175 Mr Dunner prepared two reports to
creditors: one on or about 21 May 2009 (in respect of a meeting held on 9 June
2009, at which it appears – despite a contention to the contrary by Mr Dunner –
that there was no discussion of Mr Dunner’s remuneration as liquidator), and
one on 7 May 2010 (in respect of a meeting held on 31 May 2010, which
culminated in a resolution approving remuneration of $50,000 exclusive of GST).
Specifically, ASIC alleged that neither report accurately or completely set
out:
(a) sufficient
information as to:
(i) how the proposed
remuneration was calculated with regard to the time taken by Mr Dunner and
his staff to perform tasks at his firm’s scale of hourly rates at each employee
classification level;
(ii) the period of time
during which the work was undertaken; and
(iii) whether the work
listed in the report to creditors had previously been paid by virtue of the
creditors’ resolution made on 5 May 2008, which approved liquidator’s
remuneration capped at $54,575 (inclusive of GST); and
(b) the
costs associated with each of the major tasks to be performed (or likely to be
performed).
176 Mr Dunner initially contended that
prior to seeking and obtaining approval for fees, full details of the proposed
remuneration were provided to creditors, and they were well informed. However,
during cross-examination at the hearing, he ultimately appeared to admit ASIC’s
allegations in this regard.
177 ASIC contended that the inaccuracies
in these reports are so severe as to not meet the requirement imposed on
liquidators by s 499(7) of the Act of providing a report of such matters
as will enable creditors to make an informed assessment as to whether proposed
remuneration is reasonable. As a result, it was submitted, the resolution
passed on 31 May 2010 approving Mr Dunner’s remuneration in the sum of $50,000
(exclusive of GST) was invalid.
178 I accept these submissions, and find
that Mr Dunner breached his duty by failing to give reports to creditors that
complied with this section of the Act. As the resolution passed on 31 May 2010
in respect of Mr Dunner’s remuneration was therefore not valid, it is
appropriate to order that the remuneration paid pursuant to this invalid
approval be repaid immediately. Mr Dunner should then be required to justify to
the Court his entitlement to any remuneration he would seek to recoup.
Did Mr Dunner as liquidator draw payments in respect
of the Bartech administration in excess of approval by creditors?
179 On 5 May 2008, creditors of Bartech
approved remuneration for Mr Dunner as administrator totalling $16,813.40
(inclusive of GST). There is no record of any subsequent resolution of
creditors approving further remuneration of Mr Dunner as administrator.
However, at the date of this approval, WIP for the administration was already
at least $30,974.50 (excluding GST), being $14,161.10 more than what had been
approved by creditors. As at 4 March 2009, the balance of the administration
WIP had been reduced by payments to $3,324.92. The excess accrued into Mr
Dunner’s account of work as liquidator, and was paid to the extent of
$10,836.18 as remuneration in respect of the liquidation. There is no record of
Mr Dunner seeking Court approval during the liquidation for payment for work
performed during the administration.
180 As with the Barra Trans
administration and liquidation, these facts raise two issues: the fact that Mr
Dunner apparently drew remuneration without the appropriate approval being in
place, and the fact that during the liquidation, Mr Dunner apparently received
payment for work performed during the administration without first obtaining
Court approval.
181 Mr Dunner asserted that the
remuneration drawn was within the ambit of the remuneration approved for the
administration, and therefore in accordance with the relevant resolution, but
gave no further detail or explanation. However, in cross-examination, he
accepted that as the documents do not show that any approval was specifically
obtained either from creditors (for the full amount of remuneration ultimately
paid) or the Court (for the payment of administration fees during the
liquidation) in respect of these administration fees, it may be concluded that
the remuneration was not validly approved.
182 Therefore, I find that Mr Dunner
should have sought approval from the creditors for remuneration for work
undertaken in respect of the administration prior to drawing it. He also should
have sought Court approval for the payment of this remuneration during the
liquidation, as required by the 2008 and 2011 IPA Codes (or alternatively,
should have written that amount off as unrecoverable). In failing to do so, Mr
Dunner committed a serious breach of his obligations. As he has received and
not repaid $10,836.18 which he was not authorised to receive, it is appropriate
to order that he repay this amount. Mr Dunner should then be required to
justify to the Court his entitlement to any remuneration he would seek to
recoup.
Did Mr Dunner draw liquidator’s remuneration in
excess of approval by creditors?
183 On 5 May 2008, the amount of
liquidator’s remuneration approved by creditors of Bartech was $54,575
(inclusive of GST). But in the period up to 31 May 2010, Mr Dunner received
payments totalling approximately $108,513.20 (inclusive of GST). The total
further amount of liquidator’s remuneration approved by creditors of Bartech on
31 May 2010 was $55,000 inclusive of GST. By that point, the total amount
approved by creditors in the Bartech liquidation was $109,575 (inclusive of
GST). No further approvals were granted. However, the total amount of
remuneration drawn by Mr Dunner by 30 June 2011 was $130,576.85 (inclusive of
GST). There is nothing in the evidence before me to suggest that Mr Dunner
specifically sought approval from creditors or the Court for this further
amount, or that he has since repaid any excess remuneration.
184 Mr Dunner at first asserted that the
remuneration taken was within the ambit of approvals and in accordance with the
relevant resolutions, but gave no further detail or explanation. He has since
conceded “on reviewing the documentation” that no resolution regarding
remuneration was passed.
185 Accordingly, I find that Mr Dunner
committed serious breaches of his obligations as a liquidator in taking payment
for remuneration without seeking creditor approval, and that he has received
(and not repaid) $76,001.85 (inclusive of GST) which was not authorised.
Accordingly, it is appropriate to order that he repay this amount. Mr Dunner
should then be required to justify to the Court his entitlement to any
remuneration he would seek to recoup.
Allegations in respect of Red Earth Facade Systems
Pty Ltd
186 Mr Dunner was appointed administrator
of Red Earth Facade Systems Pty Ltd (‘Red Earth’) on 12 November 2008, and ceased
to act in this capacity on 16 December 2008 when he was appointed liquidator
pursuant to creditors’ resolution.
187 The background facts relating to Red
Earth as comprehensively set out in the affidavit of Mr Purdon of 26 April 2012
are admitted by Mr Dunner, except insofar as he contends that he provided
additional information to a meeting of creditors on 22 January 2010.
Were Mr Dunner’s reports inaccurate as to the value
of work done and anticipated to be charged, and therefore not in compliance
with s 499(7) of the Act?
188 ASIC alleged that as liquidator of
Red Earth, Mr Dunner prepared a report to creditors dated 5 January 2010 which
did not accurately or completely set out how his proposed remuneration of
$60,000 inclusive of GST was calculated, and the costs associated with each of
the major tasks to be performed or likely to be performed, as required by
s 499(7) of the Act.
189 Specifically, it was said that the
report did not set out:
1. such
information as to enable the creditors to assess the reasonableness of the
proposed remuneration (as Mr Dunner did not provide any information as to how
it was calculated with regard to the time taken by Mr Dunner and his staff to
perform tasks at his firm’s scale of hourly rates at each employee
classification level); or
2. the
costs associated with each of the major tasks to be performed, or likely to be
performed.
190 A resolution approving the proposed
remuneration was passed at the meeting held on 22 January 2010.
191 Mr Dunner initially gave evidence
that he tabled WIP timesheets and remuneration calculations at “creditors’
meetings before the remuneration resolutions were put and voted on”, but this
evidence did not specifically address either the meeting held on 22 January 2010
or the particular shortcomings of the report identified by ASIC. Ultimately in
cross-examination Mr Dunner conceded that the report was inadequate, and
accepted that the WIP sheets did not contain any information about the nature
of the work actually done.
192 ASIC contended that the inaccuracies
in the report were so severe as to not meet the requirement imposed on
liquidators by s 499(7) of providing a report of such matters as will
enable creditors to make an informed assessment as to whether proposed
remuneration is reasonable. It was submitted that the resolution passed at the
22 January 2010 meeting purportedly approving Mr Dunner’s remuneration was
accordingly invalid.
193 I accept these submissions, and find
that Mr Dunner breached his duties as a liquidator by giving a deficient report
under s 499(7). On the basis that the resolution purportedly passed on 22
January 2010 was invalid for this reason, the remuneration drawn by Mr Dunner
in reliance thereon was not authorised. Accordingly, it is appropriate to order
that he repay this amount. Mr Dunner should then be required to justify to the
Court his entitlement to any remuneration he would seek to recoup.
Did Mr Dunner draw liquidator’s remuneration in the
Red Earth liquidation before obtaining creditors’ approval ?
194 As previously noted, on 22 January
2010 the creditors of Red Earth passed a resolution approving Mr Dunner’s
remuneration as liquidator. However, before this occurred, Mr Dunner drew
$21,156.10 (exclusive of GST) in liquidator’s remuneration. The information
given to creditors in respect of the 22 January 2010 meeting did not disclose
that he had already paid himself that amount.
195 Mr Dunner admitted these facts, and
said that he did not “see the relevance or importance of this allegation in
this process.” However, his statement of position did not dispute the
allegation, and in cross-examination he stated that he did not want to add
anything to the documents relating to this allegation.
196 On the evidence before me, I find
that Mr Dunner committed a serious breach of his obligations in taking payment
for remuneration without first obtaining creditor approval (or checking that
such approval had been obtained). Accordingly, I find that he has received and
not repaid $21,156.10 (exclusive of GST) which was not authorised, and is
required to repay that amount. Mr Dunner should then be required to justify to
the Court his entitlement to any remuneration he would seek to recoup.
Allegations in respect of Blacktop Profiling Pty Ltd
197 Mr Dunner was appointed liquidator of
Blacktop Profiling Pty Ltd (‘Blacktop’) by resolution of members on 31 March
2011.
198 The background facts relating to
Blacktop as comprehensively set out in the affidavit of Mr Purdon of 26 July
2012 are largely admitted by Mr Dunner, except that Mr Dunner disputes the
allegation that, as at 26 July 2012, minutes in respect of further meetings of
creditors or committees other than the meeting conducted on 11 April 2011 had
not been lodged with ASIC. ASIC has since accepted that an annual meeting of
creditors of Blacktop was held on 9 July 2012, at which a resolution for
approval of Mr Dunner’s remuneration was passed.
Did Mr Dunner draw liquidator’s remuneration in
excess of approval by creditors?
199 The amount of liquidator’s
remuneration approved by creditors of Blacktop on 11 April 2011 was
$114,847.50 (excluding GST). In the period up to 31 March 2012, Mr Dunner
received payments totalling $182,695.08 (exclusive of GST).
200 Mr Dunner contended that creditor
approval for his remuneration was obtained, but was unable to explain the lack
of any documentary evidence for any further meetings conferring such approval.
However, he then produced documentation in relation to a subsequent annual
meeting of creditors held on 9 July 2012, at which a resolution for
ratification of the unauthorised remuneration was passed.
201 ASIC contended that the notice of the
9 July 2012 meeting failed to identify the proposed resolution, although it was
disclosed in the report to creditors (but without stating that remuneration had
already been paid to Mr Dunner; a fact that Mr Dunner stated in
cross-examination was orally disclosed at the meeting). The description of work
undertaken in the liquidation featured in this report was again substantially
identical to the earlier report issued in respect of the 11 April 2011 meeting.
202 Notwithstanding the resolution for
ratification (which I find was affected by significant shortcomings in the
disclosures it purported to contain), ASIC submitted that Mr Dunner
committed serious breaches of his obligations by taking excess payment of
$67,847.58 in remuneration without first obtaining creditor approval, or
checking that such approval had been obtained. I accept those submissions. I
further find that Mr Dunner was in breach of his duty in not repaying the
amount of remuneration received in excess of creditor approval upon discovery
of that fact. Accordingly, it is appropriate to order that he repay the amount
taken in excess of approval. Mr Dunner should then be required to justify to
the Court his entitlement to any remuneration he would seek to recoup.
Did Mr Dunner fail to call an annual meeting of
creditors for Blacktop or report to ASIC?
203 As already noted, having been
provided with a copy of the relevant materials since the hearing in February
2013, ASIC now accepts that an annual meeting of creditors was held on 9 July
2012, which was within time under the Act.
204 However, each of ASIC and two other
creditors did not receive notice of this meeting, and there is no record of the
meeting being advertised in accordance with reg 5.6.14A of the Regulations. Mr
Dunner maintained that the relevant materials were mailed, but I accept that it
is significant that at least three creditors did not receive notice of the
meeting.
205 Accordingly, ASIC submitted that
insufficient care was taken by Mr Dunner to ensure that all creditors received
notice of the meeting. I accept this submission.
Allegations in respect of R.A.M. Investments (Vic)
Pty Ltd
206 Mr Dunner was appointed as
administrator of R.A.M. Investments (Vic) Pty Ltd (‘RAM’) on 6 May 2008. This
appointment ceased on 2 June 2008, and Mr Dunner was appointed liquidator of
RAM by resolution of creditors on 3 June 2008.
207 The background facts relating to RAM
as comprehensively set out in the affidavit of Mr Purdon of 26 July 2012 are
largely admitted by Mr Dunner, except that he does not accept the correctness
of the calculation relied upon by ASIC in respect of the remuneration he
received in respect of this liquidation by mid June 2012 (about which more will
be said shortly).
Did Mr Dunner draw liquidator’s remuneration in
excess of the amount approved by creditors?
208 The amount of liquidator’s
remuneration approved by creditors of RAM on 3 June 2008 was $52,000
(exclusive of GST). However, Mr Dunner’s Form 524 report dated 18 June
2012 stated that as at 3 June 2012, he had been paid $101,990.90 (inclusive of
GST). After ASIC’s evidence was filed in this proceeding, on 31 August 2012, Mr
Dunner provided an annual report to creditors of RAM which stated that for that
period of time, he had in fact been paid remuneration of $76,231.70 (excluding
GST).
209 Mr Dunner contended that the figure
stated in the Form 524 report of 18 June 2012 was a typographical error, but
did not definitively state what the correct figure is, or provide documentary
records in support of a revised estimate.
210 ASIC submitted that even if the lower
figure in the recently filed annual report is correct (which, it is contended,
is not substantiated by Mr Dunner’s evidence), that amount exceeds the approved
remuneration by $24,231.70. In cross-examination, Mr Dunner ultimately
accepted this position.
211 On the basis of the foregoing, I find
that Mr Dunner committed a serious breach of his obligations in taking payment
for remuneration without obtaining creditor approval (or checking that such
approval had been obtained), and failing to repay said excess remuneration upon
discovery of the error. I further find that he has received and not repaid at
least $24,231.70 (exclusive of GST) which was not authorised. Accordingly, it
is appropriate to order that he repay this amount. Mr Dunner should then be
required to justify to the Court his entitlement to any remuneration he would
seek to recoup.
Relief sought
212 The precise terms of the orders
proposed in ASIC’s closing submissions filed in this proceeding in March 2013
were substantially as follows:
THE COURT DECLARES THAT:
1 There are grounds for
cancellation of the registration of Mr Dunner as an official liquidator by the
Australian Securities and Investments Commission (ASIC) pursuant to s 1291(1)
of the Act.
2 Mr Dunner is not a fit and
proper person to remain registered as a liquidator.
THE COURT ORDERS THAT:
3 Within seven days, pursuant
to section 1290(1) of the Act, the defendant request ASIC to cancel his
registration as a liquidator and an official liquidator by lodging with ASIC a
properly completed ‘Form 905A’, together with the prescribed fee.
4 The defendant be prohibited
for a period of [xx] years from applying [without leave of the Court] to ASIC
to become registered as a liquidator.
5 For the purpose of enabling
the order made in paragraph 7 below, the company Regen Polymers Pty Ltd
(deregistered) ACN 128 884 266 be reinstated, and [insert name] be appointed as
liquidator of the company.
6 The defendant pay to the
liquidator of Regen Polymers within 28 days the sum of $48,500 (plus GST).
7 The defendant pay into
court within 28 days the sum of $613,737.90 (plus GST) in respect of the
defendant’s remuneration for each of the administrations and liquidations set
out in the schedule to these orders.
8 The defendant within 30 days
of complying with paragraph 7 above, but in any event no later than [90 days]
from the date of these orders, may make any application to the Court to
determine and fix the appropriate remuneration of the defendant in each such
administration or liquidation in the same manner as if it were exercising its
powers under s 425(1) or s 473(3)(b)(ii) of the Act, and for payment of such
amount out of the sum paid into court pursuant to paragraph 7 above.
9 Any amount not the subject
of any application made under paragraph 8 above be paid:
(a) if
the respective company remains in liquidation, to the liquidator of the
company; and
(b) otherwise,
to a registered liquidator appointed by the Court as receiver of those funds.
10 The receiver appointed as provided
in paragraph 9(b) above:
(a) will
have powers to hold in a fund and administer the amounts received (Fund), but
with no powers or responsibility with respect to the liquidation of the
companies in respect of which the Fund is held;
(b) will
make reasonable inquiries to identify any creditors of the companies in respect
of which the Fund is held, and call for proofs of debts;
(c) subject
to subparagraph (d) below, will distribute the amount held in the Fund for each
respective company (after deduction of fees and expenses as provided below) pro
rata to each ascertained creditor of that company whose proof is accepted,
subject to the priorities set out in s 556 of the Act;
(d) will
have discretion not to make payment if the amount of such payment is $50.00 or
less; and
(e) before
distribution, may deduct from the Fund fees and expenses incurred (subject to
any amount fixed by the Court), to be borne ratably by each company for which
there are monies in the Fund, in the proportion that the amount of the monies
for each company bears to the total amount in the Fund.
11 The defendant pay ASIC’s
costs of the proceeding.
213 Shortly before the hearing in
February 2013, Mr Dunner sought to request that ASIC cancel his registration as
a liquidator and an official liquidator under s 1290. However, it became
apparent during the hearing that Mr Dunner had not submitted the correct form
to initiate that process: rather than submitting a liquidator resignation form,
it appears that Mr Dunner in fact filed a notice advising that the
practice name “Andrew Dunner & Associates” had ceased as at 8 February
2013. Subsequent to this, Mr Dunner submitted the correct resignation form to
ASIC, as a result of which ASIC indicated that it would no longer press
proposed order 3. Further, ASIC submitted that the wording of order 1 should be
changed from “there are grounds for cancellation” to “the matters which were
the subject of this inquiry provided grounds”.
214 A number of issues in respect of the
appropriate orders to make require further consideration, including the
prohibition from practice proposed to be imposed on Mr Dunner, the way in which
the orders regarding remuneration will operate, and the fate of the
administrations being managed by Mr Dunner until earlier this year. I will
consider each in turn. Other matters may arise upon publication of these
reasons, which may need to be addressed before final orders are made by the
Court.
Prohibition from practice
215 In relation to Mr Dunner’s registration,
ASIC seeks orders that he be prohibited from practice for an appropriate period
of time, submitted to be between five and seven years. At the hearing, Mr
Dunner indicated his preparedness to consent to an order not to practice for a
period not exceeding three years. Accordingly, the principal point for the
Court’s determination is the duration of the prohibition order to be imposed.
216 In determining the appropriate
duration of such a prohibition order, there are numerous relevant considerations.
217 ASIC submitted that on the basis of
the matters set out in these reasons for judgment, Mr Dunner failed to carry
out and perform adequately and properly his duties as a liquidator, an
administrator and a receiver. It is also submitted that, as a result of those
failures, Mr Dunner is not a fit and proper person to be registered.
218 Withdrawing a liquidator’s
registration operates directly to protect the public from the work of that
person. It also operates generally by deterring other liquidators from acting
in a similar fashion.
219 ASIC submitted – and I accept – that
there is a compelling public interest in the maintenance of a system which
recognises that registration as a liquidator is a privilege, the continuance of
which is conditional upon diligent performance of its attendant duties. It is
also important to demonstrate to the public that there exists a regulatory
regime applicable to liquidators which is effective in maintaining high
standards.
Duration of prohibition
220 ASIC submitted that, having regard to
the considerations discussed above, the Court should indicate the level of its
disapproval of Mr Dunner’s conduct by nominating a number of years during which
Mr Dunner is effectively prohibited from practice. As I have indicated, ASIC
nominated a period of prohibition in the range of five to seven years. By
contrast, Mr Dunner stated that he would consent to orders preventing him from
practising for three years, and that the period nominated by ASIC was
excessive. I understand that a number of character references filed with the
Court on behalf of Mr Dunner in April 2013 are intended to support his
submissions on this issue.
221 ASIC submitted that the evidence
establishes a basis for a substantial period of prohibition, having regard to
the following conduct and circumstances in particular:
(a) serious
deficiencies in investigation, particularly in relation to the Di Pietro group
of companies where there was a failure to undertake even the most cursory of
investigations;
(b) Mr
Dunner was unfamiliar with important and fundamental provisions of the Act and
the Codes of the professional associations of which he is a member, and which
relevantly governed his responsibilities;
(c) Mr
Dunner displayed a disregard for the significance of whether or when creditors
had approved his remuneration, and took remuneration when dictated by his own
self-interest;
(d) Mr
Dunner demonstrated significant lack of care and attention in the preparation
of numerous reports to creditors and in preparing for, convening and holding
meetings of creditors (a failing which ASIC submitted was not merely a few
isolated examples occurring over a long period of time, but rather, a systemic
failure in his practice);
(e) at
its lowest, the evidence indicates a systematic failure of systems and
procedures within Mr Dunner’s practice; at its highest, it indicates a gross
disregard for the duties and responsibilities of a liquidator, administrator
and receiver;
(f) Mr
Dunner was typically not frank and forthcoming in his explanations by affidavit
or in the witness box, preferring in many instances to avoid or deflect the
focus of the allegations made against him, which in ASIC’s submission is
contrary to what should be expected from a liquidator, administrator and
receiver and officer of the court;
(g) the
amount of unapproved remuneration is substantial and Mr Dunner has not made any
attempt to repay any funds to date;
(h) Mr
Dunner’s conduct has adversely impacted the interests of creditors and was
contrary to his fiduciary duties; and
(i) there
has been no contrition or genuine acknowledgement by Mr Dunner of his failures.
222 Accordingly, ASIC submitted, it is
appropriate that a substantial period of prohibition be imposed to reflect the
seriousness of Mr Dunner’s conduct, both by reference to the need to protect
the public from further conduct by Mr Dunner, and general deterrence purposes.
223 On the subject of the mechanism by
which such prohibition should be effected in this case, ASIC submitted that in Edge
(2007) 211 FLR 137; [2007] VSC 170, Dodds-Streeton J made a kind of
declaratory order that ASIC had grounds to cancel Mr Edge’s registration
pursuant to s 1291(1) of the Act. The cancellation was then effected by ASIC
pursuant to that declaration.
224 In opposition to the course proposed
by ASIC, Mr Dunner submitted that as he filed a resignation form with ASIC on
13 February 2013, it is not necessary for the Court to either make a
declaration or order cancelling Mr Dunner’s registration as an official
liquidator, or find that he is not a fit and proper person to remain as a
registered liquidator. Rather, he will simply consent to an order that he will
not practice for a period not exceeding three years.
225 By contrast, ASIC submitted that it
is still appropriate and desirable that the Court make a finding (and
declaration) similar to that made in Edge (2007) 211 FLR 137; [2007] VSC
170, to the effect that there are grounds for cancellation of the registration
of Mr Dunner as an official liquidator by ASIC pursuant to s 1291(1). It
is ASIC’s submission that there are also grounds for the Court to find that Mr
Dunner is not a fit and proper person to remain as a registered liquidator.
ASIC submitted that these declarations are appropriate to mark the Court’s
disapproval of Mr Dunner’s conduct, and as a foundation for the other orders.
226 As a basic point, to maintain the
cancellation of Mr Dunner’s registration for the period of time to be
determined by the Court, the appropriate mechanism is for the Court to make
orders prohibiting Mr Dunner from applying to renew his registration for that
period of time. Any application for registration by a prospective liquidator
must be made to ASIC in the ordinary course. The main question (apart from the
duration of this prohibition, to which I will turn shortly) is whether the
order should provide that Mr Dunner may apply to ASIC for registration prior to
the expiry of the order’s duration if he first obtains the leave of the Court.
227 In the circumstances, I consider that
it is appropriate to make orders substantially in the form sought by ASIC,
prohibiting Mr Dunner from applying to ASIC for registration as a liquidator
for a fixed period of years without first obtaining leave of the Court. In my
view, despite the objections of Mr Dunner, this is the preferred form of order
to make, as it gives Mr Dunner the option of applying to ASIC before the expiry
of the period nominated if he has first obtained leave of the Court. I
appreciate this may add to the normal process in terms of cost and time, but
the seriousness of the conduct of Mr Dunner indicates to me that this is an
appropriate approach.
228 I do not consider that the
prohibition orders should also be accompanied by a declaration to the effect
that there are grounds for the cancellation of Mr Dunner’s registration or he
is not a relevant fit and proper person. Mr Dunner’s actions have obviated the
need for an order effecting such cancellation. The orders of the Court and
these reasons will indicate the seriousness of the breaches of obligations and
duties committed by Mr Dunner as a liquidator, receiver and administrator.
229 I have considered the submissions of
Mr Dunner to the effect that apart from this proceeding, he has had an
“unblemished” record as a liquidator, insolvency practitioner and accountant.
He further submitted that in this proceeding, he has co-operated with ASIC,
complied with their requests and demands, made a number of concessions and admissions
in his evidence and elected not to cross examine any of ASIC’s witnesses (or
call his own witnesses), all of which greatly reduced the length and cost of
the proceeding. It was further said that Mr Dunner’s recognition of the
seriousness of the allegations against him was reflected in his decision to
voluntarily cease practising as a liquidator prior to the hearing in February
2013 (although to this end, I note and accept ASIC’s submission that the sudden
and unexpected manner in which Mr Dunner resigned as liquidator from all of his
external administrations on 8 February 2013 did not reflect a responsible
approach to managing his position). Overall, Mr Dunner sought to emphasise that
the “failures” that are the subject of this proceeding can largely be
attributed to error or poor administration.
230 These submissions may be correct.
However, even if one accepts the characterisation of Mr Dunner’s conduct as
merely being a function of “error or poor administration”, it is clearly not
conduct befitting a liquidator and an officer of the Court. For that reason, it
could be considered inherently unsatisfactory. However, such a characterisation
does not adequately convey the gravity of the matters before me. The conduct in
question indicates a systemic failure of administration and internal protocols,
as well as (in a number of instances) extremely poor professional judgment. In
this way, Mr Dunner has failed to satisfy the high standards of conduct
required of his offices.
231 I have considered Mr Dunner’s
submission that, as there is no evidence of any complaint from any creditor in
any of the relevant external administrations, there is no evidence that his
conduct has in fact adversely affected creditors. For the purpose of addressing
this submission, I note the comments of Dodds-Streeton J in Edge (2007)
211 FLR 137; [2007] VSC 170 at 177 [189] are apposite here:
It is specious to contend that there were no
complaints about the conduct of the liquidations or administrations, or that
the breaches caused no actual loss or prejudice. … Second, in the absence of
meaningful reports and accounts which would permit scrutiny of Mr Edge’s
conduct, the existence and extent of any dissatisfaction, loss or prejudice
cannot be ascertained. The contraventions not only cumulatively constitute a
pattern of wide-scale, long-term non-compliance, but also have serious
implications for each individual company involved...
Marks J’s reference to:
the cloistered nature of the work which a liquidator
performs and the unique hold on vital information to which he succeeds [so
that] if he becomes minded to keep the information to himself, he is
exceedingly well placed …
is apposite in this context.
232 I also reject Mr Dunner’s attempt to
argue that the period of prohibition sought by ASIC in this proceeding is
excessive having regard to the nature of the matters alleged against him, and
to the outcome of ASIC’s recent investigation into the conduct of another
liquidator. Each case turns on its own facts.
233 In the circumstances, I consider that
the period of time of prohibition imposed on Mr Dunner should extend until
11 February 2018, being a period of five years from the commencement of the
hearing.
234 I note that if it were not for the
substantial co-operation given by Mr Dunner during this proceeding, and his
ultimate acceptance of his own shortcomings, I would have made the period of
time of prohibition substantially longer.
Remuneration
Remuneration as liquidator
235 In relation to Regen Polymers,
Rayunit, Emberford, Barra Trans, Bartech, Red Earth, Blacktop and RAM, ASIC
seeks orders for payment into Court of the remuneration drawn by Mr Dunner
without appropriate approval or authorisation, followed by assessment by the
Court of appropriate remuneration to be paid to Mr Dunner in respect of each
external administration (if ultimately applied for by him).
236 The process I will order be
undertaken involves an order that Mr Dunner repay a determined amount in
respect of the external administrations in question, with leave to apply to the
Court for justification of an entitlement to recoup remuneration where
appropriate. ASIC submitted that in order to cost-effectively cater for such an
application, rather than having the funds paid separately to each of the relevant
companies (potentially with different replacement liquidators), the proposed
process contemplates payment into a fund administered by a receiver appointed
by the Court. The receiver can then remit any surplus funds (namely, those not
justified to be repaid to Mr Dunner upon any such application being made by him
to the Court within the time prescribed by the orders) to the relevant company.
I accept this to be the appropriate process to be undertaken.
237 ASIC made no submissions as to
whether work was in fact done, or performed to an extent which supports the
fees that have been charged by Mr Dunner in these external administrations. I
accept that regardless of whether I am satisfied that the work was in fact done
by Mr Dunner in respect of the external administrations in question, the funds
ought to be repaid as they were not drawn in the appropriate manner. For the
foregoing reasons, I am satisfied that this conclusion can be drawn in respect
of each of the impugned external administrations, either because no approval
for remuneration was obtained, or because the approval obtained was invalid.
238 Mr Dunner objects to the orders that
require him to justify the amounts in respect of which he may seek
reimbursement, on the basis that there is no evidence either that he has not
performed the work charged for, or that he has charged excessively. He further
submitted that the orders proposed will effectively require him to prepare an
itemised account for each administration that is the subject of this
proceeding, which will cause him to incur substantial cost.
239 It may be that a fully itemised
account is not necessary – it will depend upon the basis of remuneration Mr
Dunner seeks. In any event, I consider that this process is necessary in the
circumstances. The wording of the relevant provisions of the Codes leaves me in
no doubt that such action is required. A similar process was adopted by
Dodds-Streeton J in Edge (2007) 211 FLR 137; [2007] VSC 170, and I note
and accept her Honour’s comments at 229 [624]-[628] regarding the Court’s
extensive powers to take such action as it thinks fit. Finally, I do not accept
that any costs incurred by Mr Dunner in obtaining the Court’s approval for
remuneration in this manner should be paid by ASIC. Mr Dunner is responsible
for the failure to properly draw the remuneration in question in the first
instance, and thus he must bear the cost of putting things right.
240 Finally, as previously noted, in
relation to the companies which have been deregistered, I am prepared to make
orders (as necessary) for their reinstatement as sought by ASIC, to enable the
orders in relation to the remuneration to be repaid to have effect.
Remuneration as receiver of Regen Polymers
241 In relation to the remuneration paid
to Mr Dunner as receiver and manager appointed under the Regen Polymers Charge,
ASIC submitted that the funds should be repaid to the company without provision
for Mr Dunner to seek approval. I have already found (and Mr Dunner
admits) that the Charge pursuant to which Mr Dunner purported to exercise
powers as receiver and manager and take remuneration from the company’s assets
was void. In the circumstances, ASIC submitted that there is no justification
for Mr Dunner receiving or retaining the payment, and he must repay it to the
company. I accept this submission, and note that I also make ancillary orders
for the reinstatement of Regen Polymers, and appointment of a liquidator, to
enable the company to receive the repayment.
Current administrations
242 In relation to each of the external
administrations that are the subject of the inquiry and which remained current
at the time of the February 2013 hearing, Mr Dunner has already resigned as
liquidator and replacement liquidators have been appointed.
243 In addition, shortly before the
hearing in February 2013, apparently without notice to ASIC, Mr Dunner resigned
from his position as liquidator or controller of nearly 190 administrations
then under his responsibility. In consequence of Mr Dunner’s mass resignation,
it was necessary for ASIC to arrange for replacement liquidators or controllers
to be appointed to each company. ASIC made the relevant application before me
in April 2013, and I consequently made orders appointing replacement
liquidators and controllers in the manner proposed.
244 Subsequently, a number of the
appointments made by ASIC in this manner had to be vacated and replacements
appointed, for reasons including conflicts of interest. I made orders to this
effect on 6 June 2013.
Costs
245 The final issue is that of costs.
ASIC submitted that as the Court has conducted the inquiry into Mr Dunner’s
conduct as originally sought by ASIC, it is entitled to its costs following the
event. Mr Dunner resists this conclusion on the basis that he was not given the
opportunity to avoid the costs associated with this proceeding, as ASIC did not
respond to or accept his offers to cooperate. I see no basis not to follow the
ordinary rule that costs follow the event, and will make an order that Mr
Dunner pay the costs of the proceeding.
CONCLUSION
246 I will order that the parties confer,
and file a minute of order reflecting these reasons by 4:00pm on 20 September
2013. If agreement cannot be reached, then each party file and serve a separate
minute of order by 4:00pm on 20 September 2013.
Associate:
No comments:
Post a Comment