Australian Securities and Investments Commission v Franklin (liquidator), in the matter of Walton Constructions Pty Ltd [2014] FCAFC 85

Australian Securities and Investments Commission v Franklin (liquidator), in the matter of Walton Constructions Pty Ltd [2014] FCAFC 85

The existence of a material referral relationship between the liquidators' firm and the Mawson Group, which had influenced their appointment and was involved in transactions requiring investigation, gave rise to a reasonable apprehension that the liquidators might not act with independence and impartiality. Accordingly, the liquidators should be removed. The administrators did not contravene s 436DA as the declarations made satisfied the statutory requirements, and additional disclosures regarding investigations were not required by the section.

Parties
Appellant: Australian Securities and Investments Commission; First Respondent: Glenn J Franklin; Second Respondent: Stirling L Horne; Third Respondent: Jason G Stone; Fourth Respondent: Walton Construction Pty Ltd (ACN 060 900 218) (In Liquidation); Fifth Respondent: Walton Construction (Qld) Pty Ltd (ACN 100 833 225) (In Liquidation)
Jurisdiction
Australia
Judgment Date
18 July 2014
Procedural Posture
Appeal / Disposition of Appeal With Orders; Reasons for Judgment
Outcome
ASIC granted leave to commence the appeal against the fourth and fifth respondents; order made for removal of Messrs Franklin, Horne and Stone as liquidators of Walton Construction Pty Ltd and Walton Construction (Qld) Pty Ltd; parties to confer and file minutes of orders; otherwise, appeal dismissed.
Legal Topics
Liquidator Removal, Apprehended Bias, Independence of Liquidators, Disclosure Obligations Under S 436 DA, Conflict of Interest
Corporations Law Insolvency Law Liquidator Removal Apprehended Bias Independence of Liquidators Disclosure Obligations Under S 436 DA Conflict of Interest

Case Brief

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Parties

Australian Securities and Investments Commission

Appellant

Glenn J Franklin

First Respondent

Stirling L Horne

Second Respondent

Jason G Stone

Third Respondent

Walton Construction Pty Ltd (ACN 060 900 218) (In Liquidation)

Fourth Respondent

Walton Construction (Qld) Pty Ltd (ACN 100 833 225) (In Liquidation)

Fifth Respondent

Procedural Posture

Appeal / Disposition of Appeal With Orders; Reasons for Judgment

Legal Issues

  1. 1 Whether the primary judge erred in holding that there was no apprehended lack of independence or impartiality of the liquidators under s 503 of the Corporations Act 2001 (Cth)
  2. 2 Whether the administrators contravened s 436DA by failing to make adequate declarations regarding relationships and conflicts of interest

Ratio Decidendi

The existence of a material referral relationship between the liquidators' firm and the Mawson Group, which had influenced their appointment and was involved in transactions requiring investigation, gave rise to a reasonable apprehension that the liquidators might not act with independence and impartiality. Accordingly, the liquidators should be removed. The administrators did not contravene s 436DA as the declarations made satisfied the statutory requirements, and additional disclosures regarding investigations were not required by the section.

Court Disposition

ASIC granted leave to commence the appeal against the fourth and fifth respondents; order made for removal of Messrs Franklin, Horne and Stone as liquidators of Walton Construction Pty Ltd and Walton Construction (Qld) Pty Ltd; parties to confer and file minutes of orders; otherwise, appeal dismissed.

Orders

  • Leave is granted to ASIC to commence the appeal against the fourth and fifth respondents.
  • The parties are to confer and file and serve minutes of orders necessary to give effect to the conclusion that Messrs Franklin, Horne and Stone be removed as liquidators of Walton Construction Pty Ltd and Walton Construction (Qld) Pty Ltd, and as to costs, by 22 July 2014.