Court rejects bid to investigate liquidator over deregistered IT company

The Supreme Court of Victoria has refused an application by a self-represented former investor seeking an inquiry into the conduct of the liquidator of Project Collaboration Pty Ltd, finding that the complaints were unfounded, misconceived and directed largely at vindicating private grievances rather than serving any public interest in the supervision of liquidators.

The decision arose from an application by Jacqueline Power against Peter Gountzos of SV Partners, the liquidator of Project Collaboration. Power alleged that Gountzos failed to investigate alleged director fraud and misconduct connected with the collapse of the company, to correct ASIC records, to report matters under section 533 of the Corporations Act, to adjudicate her asserted creditor claim, and to pursue potential claims against the company’s former directors.

Project Collaboration was an IT business that distributed and marketed software for technology companies in the mining and construction industries. Power was the sole director of Freefall Pty Ltd, which invested $100,000 in Project Collaboration in 2012 for a 10% shareholding, later reduced to 7.14%. Freefall brought proceedings in 2017 seeking to wind up Project Collaboration on just and equitable grounds and later amended its claim to seek oppression relief against the company’s directors.

The company and its directors later sought to have Project Collaboration wound up, saying the company was no longer trading and its assets had been exhausted defending the proceeding. In April 2020, the Court ordered that the company be wound up and appointed Gountzos as liquidator, while dismissing Freefall’s oppression claims. Power and Freefall later pursued separate claims against lawyers involved in earlier litigation, but that proceeding was summarily dismissed.

Power’s present application was initially framed as a judicial review application, but the Court held that Order 56 did not apply because a liquidator is not a judicial or public authority or holder of public office. Associate Justice Gobbo therefore treated the application as having been brought under sections 90-10, 90-15 and 90-20 of the Insolvency Practice Schedule, which allow the Court to inquire into an external administration and make orders in relation to it.

The Court found a threshold standing problem. Power brought the proceeding personally, but Freefall, not Power, had been a shareholder of Project Collaboration. Although Power pointed to costs orders and creditor status, Associate Justice Gobbo was not satisfied that she had shown she was a person with a financial interest in the external administration for the purposes of section 90-20. That finding alone was enough to dismiss the application.

The Court nevertheless considered the complaints in detail and found each lacked merit. Associate Justice Gobbo emphasised that an inquiry into a liquidator’s conduct is discretionary and directed to regulation, supervision, discipline and correction of liquidators in the public interest. It is not a mechanism for dissatisfied litigants to repackage private grievances, reopen earlier disputes or require an unfunded liquidator to pursue claims at their direction.

The central complaint concerned what Power described as the “working capital issue”. Project Collaboration had entered into a software distribution arrangement with 4Projects, later associated with Viewpoint, under which an addendum required Project Collaboration to maintain minimum working capital of $100,000. Power alleged that directors had misrepresented the company’s working capital position, contributing to termination of the software licence, loss of enterprise value and the company’s failure. She argued that the liquidator should have investigated and pursued claims based on those allegations.

The Court held that those allegations largely sought to revisit matters arising from earlier litigation, including the winding-up proceeding. Associate Justice Gobbo accepted that the liquidator had reviewed material provided by Power, issued demands under section 530A for company books and records, sought information from external advisers, prepared reports to creditors, made ASIC lodgements, and prepared a confidential section 533 report.

The company’s liquidation was assetless and unfunded. Gountzos incurred more than $73,000 in recorded remuneration, costs and expenses, but received only $825 in remuneration. He repeatedly told Power that he could not obtain legal advice or pursue further investigations without funding, sought funding from ASIC and Power, and offered to assign potential causes of action to Power if his remuneration and costs were paid. Neither funding nor an assignment progressed.

Section 545 of the Corporations Act was central to the Court’s analysis. Associate Justice Gobbo held that, except for certain statutory lodgements, a liquidator is not required to incur expenses in a winding up where there is insufficient available property. The Court found that section 545 answered complaints that Gountzos should have undertaken public examinations, obtained further legal advice or commenced proceedings against former directors in an unfunded liquidation.

The Court also rejected Power’s complaint that Gountzos failed to correct the report on company activities and property. Associate Justice Gobbo noted that a ROCAP is completed by company directors, not the liquidator, and that any falsity in its contents lies with the director or secretary who completed it. There was no obligation on the liquidator to correct the ROCAP in the manner alleged by Power.

Power’s allegation that Gountzos failed to lodge a section 533 report also failed. The liquidator’s evidence was that he had lodged a confidential report with ASIC. The Court held that section 533 did not require him to continue lodging further reports simply because Power believed later information, including alleged misstatements about her residency or creditor status, should have been reported. Section 533(2) permits further reports if the liquidator thinks fit, but does not impose the mandatory ongoing obligation Power asserted.

The Court rejected the submission that Gountzos was required to ask the directors “one question” about the financial information relied on in one of the previous proceedings. Associate Justice Gobbo held that Power’s position was simplistic and misunderstood the compulsory examination regime. Section 596A does not require a liquidator to conduct examinations in every liquidation; the mandatory feature of that section concerns the Court’s obligation to issue a summons once a proper application is made by an eligible applicant. Whether to pursue examinations remains a matter involving funding, proportionality, utility and prospects of benefit to creditors.

The Court also rejected Power’s allegations that Gountzos ignored her communications or was biased. The evidence showed at least 38 communications from Power or her former lawyer to the liquidator or his office between June 2020 and April 2022, many of which received substantive responses. Associate Justice Gobbo found that the liquidator and his staff repeatedly engaged with Power, explained the need for funding and independent legal advice, and discussed possible assignment of claims.

The Court concluded that Gountzos’ approach had been cautious and reasonable. Power had not identified any statutory duty breached by the liquidator, and her repeated reliance on section 90-15(4) did not assist because that provision lists matters the Court may consider, rather than creating the duties she alleged. The Court therefore refused the application.

Read the decision here.

Nicole Papaleo, Barrister at the Victorian Bar, and Lander & Rogers represented the liquidator.