Weston in his capacity as liquidator of Starcom Group Pty Ltd (in liq) v Rajan

• Jurisdiction: Australia Federal only
• Judge: STEWART J
• Judgment Date: 09 September 2019
• Neutral Citation: [2019] FCA 1455
• Court: Federal Court
• Date: 09 September 2019

FEDERAL COURT OF AUSTRALIA

Weston in his capacity as liquidator of Starcom Group Pty Ltd (in liq) v Rajan [2019] FCA 1455

File number:	NSD 437 of 2017
Judge:	STEWART J
Date of judgment:	9 September 2019
Catchwords:	PRACTICE AND PROCEDURE – adoption of referee’s report – question of solvency of company during a specified time period – report adopted
Legislation:	Corporations Act 2001 (Cth) s 588M Federal Court of Australia Act 1976 (Cth) ss 37P(2), 54A Federal Court Rules 2011 (Cth) r 28.67
Cases cited:	Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 CPB Contractors Pty Ltd v Celsus Pty Ltd (No 2) [2018] FCA 2112; 364 ALR 129 Seven Sydney v Fuji Xerox [2004] NSWSC 902 Quick v Stoland Pty Ltd [1998] FCA 1200; 87 FCR 371
Date of last submissions:	22 August 2019
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	64
Counsel for the Plaintiffs:	S C Ipp
Solicitor for the Defendants:	T Ponnambalam of Tabitha D. Ponnambalam

ORDERS

		NSD 437 of 2017
BETWEEN:	PAUL GERARD WESTON IN HIS CAPACITY AS LIQUIDATOR OF STARCOM GROUP PTY LTD (IN LIQUIDATION) ACN 002 053 545 First Plaintiff ; STARCOM GROUP PTY LTD (IN LIQUIDATION) ACN 002 053 545 Second Plaintiff
AND:	JEGA MUTTUCUMARU RAJAN Second Defendant ; MARIAPILLAI PATHMANABAN Third Defendant

JUDGE:	STEWART J
DATE OF ORDER:	9 september 2019

THE COURT ORDERS THAT:

1. The Referee’s Opinion and Report of Inquiry by Mark Roufeil dated 5 July 2019 is adopted in whole.

2. The costs arising from the defendants’ opposition to the adoption of the referee’s report are reserved, but in the event that no order is subsequently made in relation to these costs, they are to be costs in the cause of the principal proceeding.

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

REASONS FOR JUDGMENT

STEWART J:

Introduction

1. On 21 December 2018, Lee J made orders pursuant to ss 37P(2) and 54A of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and Div 28.6 of the Federal Court Rules 2011 (Cth) (FCR) referring the following question to a referee: whether Starcom Group Pty Ltd was insolvent in the period 1 October 2009 to 1 August 2011 (the relevant period).

2. The orders provided that the referee was to consider and implement such manner of conducting the reference as would, without undue formality or delay, enable a just, efficient, timely and cost-effective resolution. The referee was empowered to make enquiries, direct communications and enquiries, require the attendance of any person or the production of any document by subpoena and make directions.

3. Mark Roufeil, a Chartered Accountant and a registered liquidator, was appointed referee. The referee was initially required to report by 4 March 2019, but required and was granted extensions of time for reasons that are not presently relevant.

4. The referee ultimately reported on 8 July 2019 by way of a report (dated 5 July 2019) confirmed by affidavit. The plaintiffs seek adoption of the report under s 54A(3) of the FCA Act and r 28.67 of the FCR. The second and third defendants resist adoption of the report on the basis that the referee has made certain errors to which I will shortly return. As an aside, I mention that on 8 November 2017, Lee J dismissed the proceeding as against the first defendant by consent. I shall accordingly refer to the second and third defendants, who are commonly represented, as the defendants.

5. On the relevant question, the referee concluded that Starcom was insolvent from 1 October 2009 until 1 August 2011. Starcom was placed in liquidation on 1 August 2011. The defendants, on the other hand, say that Starcom was insolvent only from 31 March 2011. There is thus a period of about 18 months’ difference between the parties, and common ground of about 4 months.

6. By consent, on 18 July 2019 I ordered that the parties file submissions in support of their contentions with regard to the adoption of the report; first the defendants and then the plaintiffs in response. At the request of the parties, I have decided the application to adopt the report on the papers in Chambers without oral submissions. In doing so, I have considered the parties’ written submissions as well as the reports and evidence referred to by them in their written submissions.

7. The question referred to the referee arises because in the proceeding the plaintiffs seek the recovery of losses resulting from the insolvent trading of Starcom under s 588M of the Corporations Act 2001 (Cth). The period in which the company was trading whilst insolvent is obviously critical to that claim.

Principles with regard to the adoption of the referee’s report

8. In CPB Contractors Pty Ltd v Celsus Pty Ltd (No 2) [2018] FCA 2112; 364 ALR 129, Lee J (at [25]-[38]) surveyed the history of the use of referees that led to the express power for referees to be appointed by this Court by the insertion of s 54A into the FCA Act in 2009. His Honour (at [67]) adopted the summary by McDougall J in Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 (at [7]) of the principles applicable to the adoption of a referee’s report under s 54A(3) of the FCA Act. That summary is based on a survey of the relevant authorities and is slightly adapted from McDougall J’s own earlier identification of the relevant principles in Seven Sydney v Fuji Xerox [2004] NSWSC 902 at [11] to [13].

9. McDougall J’s summary of the relevant principles in Chocolate Factory refers to Pt 72 r 13 (repealed) of the Supreme Court Rules 1970 (NSW) (replaced in NSW by r 20.24 of the Uniform Civil Procedure Rules 2005 (NSW) in similar wording) which, like s 54A(3) of the FCA Act, provided for the court to adopt, vary or reject a referee’s report in whole or in part. Like Lee J, I consider that the principles identified and then summarised by McDougall J apply equally to the exercise of the court’s power under s 54A(3). No contrary submission was made in this case.

10. From the above principles, I extract the following by way of limited and necessarily incomplete further summary as being most relevant to the resolution of the limited disputes about the referee’s report in this case:

• Section 54A conveys a discretion on the court to adopt, vary or reject a referee’s report.

• To the extent that a party’s dissatisfaction with the report is a question of law, or the application of legal standards to established facts, that matter must be considered and determined afresh by the court.

• Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the court would have a disposition towards acceptance of the report.

• The court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions they did, particularly where the disputed questions are in a technical area in which the referee enjoys appropriate expertise.

The referee’s method and approach to the reference

11. The referee recorded the approach that he took to the reference. He read, considered and independently analysed all the...