The Bankrupt Empires - The Creditors Strike Back-On the Asset Trail. Investigation and Preservation of Assets - An Australian Perspective

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1 The Bankrupt Empires - The Creditors Strike Back-On the Asset Trail Investigation and Preservation of Assets - An Australian Perspective Presented to A Conference of the Insolvency, Restructuring and Creditor's Rights Section of the International Bar Association Salzburg, Austria 1-3 May 2005 The Clayton Utz contact for this paper is Quentin Solomon on qsolomon@claytonutz.com Clayton Utz Lawyers Level Collins Street Melbourne VIC 3000 Australia T F MELWORKDOCS\151\

2 The aim of this paper is briefly to examine the steps and procedures available in order to identify, recover and preserve the property of an insolvent company (and a company approaching insolvency) in Australia. We will discuss in turn the steps that can be taken when: (c) (d) formal insolvency proceedings are yet to commence; a company has entered into voluntary administration; a company has entered into a deed of company arrangement; and a company is liquidated. We will also touch briefly on some cross-border issues that arise in relation to the property available to creditors in the winding up of a company. As we will see, once a company has commenced formal insolvency proceedings in Australia, the rights of individual creditors actively to seek identification and recovery of the assets of a company are limited and the task of identifying, preserving and recovering assets of the company is generally left to the administrator or liquidator of that company. 1. Before Formal Insolvency Proceedings Commence 1.1 Investigation In the circumstances contemplated by the Mock Case Study, we are contemplating a substantial entity/group which is facing an immediate liquidity crisis. Typically in Australia, the immediate reaction would be driven by the block of bank creditors. The first step is to identify the immediate crisis and take such steps as may be required to shore up the entity until such time as fuller investigations can be made. This may involve the extension of liquidity lines. At this time, an independent investigating accountant would typically be appointed to conduct a forensic examination of the entity/group. Specialist accountants would normally undertake this role (for instance, Ferrier Hodgson/Kroll, McGrath Nicol (formerly KPMG), KordaMentha, Deloittes, PPB to name a few). This initial investigation would typically take several months, during which time matters may come to light which dictate an immediate move to formal insolvency proceedings (for instance, in the recent demise of the ION Group of companies, a major car parts manufacturer with Australian and US operations, within one week of the commencement of investigations it became apparent the group was not able to be salvaged and an administrator was appointed). These investigations will often quickly identify the possibility of fraud or other wrongdoing. In such instance we usually move to formal proceedings immediately. MELWORKDOCS\151\

3 1.2 Recovery of Assets In circumstances where it appears that: it is likely that a company's documents or other evidence are required for the purpose of litigation initiated by a creditor; there is a danger of a company (or its officers) disposing of or dissipating assets to frustrate any judgment that plaintiff may obtain, a creditor may obtain an order allowing for the seizure of documents likely to be destroyed and/or an order freezing assets so that any judgment obtained can be enforced. Anton Piller Orders An Anton Piller Order is an order requiring a defendant to allow a search to be made of the defendant s premises so that specified documents and materials may be inspected and taken away. It often involves additional orders such as an order that the intended defendant deliver up documents or verify certain information on affidavit. The English Court of Appeal case of Anton Piller KG v Manufacturing Processors and Others 1 established the inherent jurisdiction of the court to grant an Anton Piller Order. Lord Justice Ormrod set down the preconditions for the making of an Anton Piller Order as follows: (c) (d) There must be an extremely strong prima facie case on the merits; The defendant s activities must be proved to result in very serious potential or actual harm to the plaintiff s interests; There must be clear evidence that incriminating documents or materials are in the defendant s possession; and There must be a real possibility that such items may be destroyed before any application is made on notice to the defendant. This requirement of a real possibility of destruction has been relaxed to a requirement of some risk. Order 37 of the Victorian Supreme Court Rules provides that the Supreme Court may make an order for the inspection, detention, custody or preservation of any property, whether or not in the possession, custody or power of a party. Under this Order a person may be authorised to: 1 [1976] 1 All ER 779. MELWORKDOCS\151\

4 enter any land or do any thing for the purpose of obtaining access to the property; take samples of the property; make observations of the property; conduct any experiment on or with the property; or observe any process. The Defendant may also be ordered to deliver certain documents or property to the Plaintiff. There are similar statutory rules in the other Australian jurisdictions 2. Applications for an Anton Piller Order may be made prior to the issue of proceedings, or after the issue of an originating process but before service of originating process. Secrecy is essential and the applicant for an Anton Piller Order will usually be required to give undertakings (as to costs and potential damages) both as a precondition for the granting of the order and within the body of the order. Mareva Injunction A Mareva Injunction prevents a defendant from disposing of or dissipating assets or removing them from the jurisdiction in order to frustrate any judgment a plaintiff may obtain against the defendant at trial. Section 37(3) of the Supreme Court Act 1986 (Vic) provides that the Court may grant an interlocutory injunction restraining a party from removing from Victoria or otherwise dealing with assets located within Victoria 3. The case which established the inherent jurisdiction of the courts to grant Mareva Injunctions was the 1975 English Court of Appeal case of Mareva Compania Naviera v International Bulkcarriers 4. In that case, Lord Denning said that in the face of the likelihood that defendants would dispose of or remove money from their bank account to frustrate any judgment the plaintiffs may obtain against them, it was just and convenient to order that an injunction should be granted to restrain them from removing or disposing out of the jurisdiction the money held 2 High Court Rules (Cth) O 49 r 3(1); Federal Court Rules (Cth) O 25 r 2, O 17 r 1; Supreme Court Rules (ACT) O 52 rr 1, 3; Supreme Court Rules (NT) r 37.01(1); Supreme Court Rules (NSW) Pt 28 r 2, Pt 25 r 8(1); Uniform Civil Procedure Rules 1999 (QLD) rr (see particularly ibid r 250(1)); Supreme Court Rules (SA) R 68.04; Supreme Court Rules 2000 (TAS) r 437; Rules of Supreme Court (WA) O 52 r 2. 3 There are no other specific statutory enabling provisions in any other Australian jurisdiction. However, the power to issue Mareva orders is drawn from the inherent jurisdiction of superior courts and other statutory provisions conferring broad powers on the courts. 4 [1980] 1 All ER 213. MELWORKDOCS\151\

5 in the bank. The decision was followed by the High Court of Australia in 1987 in Jackson v Stirling Industries 5. To obtain a Mareva Injunction, the following preconditions must be satisfied: (c) the applicant must have a good arguable case; and there must be assets located within the jurisdiction which are owned by the defendant; and there must be a real risk that those assets may be disposed of or dissipated before judgment can be enforced 6. The plaintiff is required to undertake to pay compensation to the defendant for any loss incurred as a result of the injunction (the cross-undertaking as to damages). A Mareva Injunction, like an Anton Piller Order, can create a significant restriction on a defendant s ability to operate commercially and is a serious stigma on the defendant s reputation. Courts will consequently refuse to grant a Mareva Injunction where a risk of dissipation cannot be established. In Sharman v Palmer, Evans J refused to grant a Mareva Injunction because he believed that the plaintiffs motivation for the application was a wish to secure the plaintiffs position and put pressure on the defendant to negotiate a settlement. Assets Outside the Jurisdiction In England it is accepted that the courts can make an order affecting assets outside the jurisdiction. The position in Australia, however, is not entirely clear. While Murphy J in Brereton v Milstein 7 decided that a Mareva Injunction would not extend to assets outside the jurisdiction, Brooking J in National Australia Bank v Dessau 8 followed the English approach. He held that s37(3) of the Supreme Court Act 1986 (Vic) is an enabling provision only, and the Supreme Court has inherent power to grant Mareva injunctions in respect of assets located outside Victoria regardless of whether those assets were ever within Victoria. 5 (1987) 162 CLR Mareva Compania Naviera v International Bulkcarriers. 7 [1988] VR [1988] VR 521 MELWORKDOCS\151\

6 Recent Australian cases have applied the Dessau approach and it seems that today a Mareva Injunction could extend to assets outside the jurisdiction both within Australia and overseas 9. Third Parties Mareva relief can also be sought against a third party such as the recipient of a company's assets. However, it was found in the High Court case of Cardile v LED Builders Pty Ltd that it would be a rare case indeed before an injunction of this sort would be granted 10. However, in Cardile, the High Court held that Mareva relief to restrain the activities of third parties might be appropriate where: The third party holds or is using or exercising a power of dissipation over assets of the defendant; and There is a process whereby the third party may be obliged to contribute to the funds or property of the judgment debtor to help satisfy the judgment. Post Judgment Mareva A Mareva Injunction is usually obtained prior to the issue of proceedings or after the issue of originating process but before the service of originating process. A Mareva Injunction can also be obtained after judgment in order to enable the judgment to be enforced. In Mercantile Group v Aiyela 11, a post judgment Mareva Injunction was obtained against an individual as a consequence of a judgment entered against her husband. Lord Justice Hoffman found that the Mareva Injunction against the judgment debtor s wife was incidental to and in aid of the enforcement of the plaintiff s substantive right in the husband s judgment debt. 2. Voluntary Administration The object of voluntary administration is to provide for a procedure for the reorganisation of companies that are insolvent or nearly insolvent. Unlike winding up procedures, voluntary administration looks to the possible survival of the company, rather than its ceasing to exist. The regime is stated specifically in the Corporations Act 12 as being to: 9 Australian Competition and Consumer Commission v Purple Harmony Plates Pty Ltd (No 3) (2002) 196 ALR 576; Southern Equities Corp Ltd (in liq) v Bond (No 3) [2000] SASC 318; Planet International Ltd (in liq) v Garcia [1989] 2 Qd R Cardile v LED Builders Pty Ltd (1999) 198 CLR [1994] 1 All ER Corporations Act 2001 (Cth). MELWORKDOCS\151\

7 maximise the chance of the company, or as much as possible of its business, continuing in existence; or if it is not possible for the company or its business to continue in existence - result in a better return for the company's creditors and members than would result from an immediate winding up of the company 13. Often a voluntary administration is initiated by a company's directors, who may do so if they think that the company is insolvent or likely to become insolvent, and that an administrator should be appointed. Frequently, this will be to protect the directors from breach of corporate duties and insolvent trading claims. An administrator may also be appointed by a creditor with a security over the whole, or substantially the whole, of the company's property or by a liquidator or provisional liquidator. With certain important exceptions, the rights of creditors against a company are limited once that company enters into voluntary administration. In the meantime, it is the administrator who is left to investigate the affairs of the company and to provide to the creditors of the company a report setting out whether it would be in the best interest of the company's creditors for the company to execute a deed of company arrangement, for the administration to end or for the company to be wound up 14. However, it is ultimately for the creditors, based on the report of the administrator, to resolve as to which of these three options will provide the best outcome for the creditors. Importantly, unlike US Chapter 11 bankruptcy proceedings, the administrator owes duties to the creditors as a whole, and is almost always an appointee chosen by, and acceptable to, the creditors. The administrator effectively displaces existing management-it is not a debtor driven process at all Investigation As will be discussed in further detail below, when a company enters into voluntary administration, there is little that can be done in terms of dealing with the company's property. However, the administrator appointed to manage the affairs of the company during the voluntary administration does have some powers in relation to the identification of assets of the company. Indeed, it is the duty of the administrator to, as soon as possible after the administration begins, investigate the company's business, property, affairs and financial circumstances and form an opinion about whether it would be in the creditors' best interests to execute a deed of company arrangement, end the administration or to have the company wound up 15. In order to assist the administrator in its role as investigator of the company's 13 Corporations Act s 435A. 14 Corporations Act s 439A(4). 15 Corporations Act s 438A. MELWORKDOCS\151\

8 affairs, the directors of the company are required to deliver the company's books together with a statement of about the company's property, affairs and financial circumstances 16. Note that under Australian corporations law, the definition of "books" is broad and includes a register, a document, any other record of information and financial reports or financial records however compiled recorded or stored. In addition to its particular powers as administrator in relation to obtaining information about a company's assets, an administrator has the power to ask an Australian court to summon a person for examination about the company's "examinable affairs". We will discuss in greater detail the nature of these examinations available under the Corporations Act when we consider the powers of liquidators in this regard. Recovery of Assets The Corporations Act creates various restrictions in order to protect the property of the company during a voluntary administration. For example, during the administration of a company (except in certain circumstances): (c) a person cannot enforce a charge on the property of the company; a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with; and the owner or lessor of property that is used or occupied by, or is in possession of the company cannot take possession of the property or otherwise recover it 17. So, the environment created by a voluntary administration is not one that allows for significant activity in terms of individual creditors identifying and recovering the assets of the company. There are, however, certain circumstances were creditors may attempt to recover assets of the company. These exceptions to the general moratorium include, amongst others, where: a secured creditor has a charge over the whole or substantially the whole of a company's assets and the charge is enforced before or during the "decision period" (ie within ten days of the administration commencing-although current recommendations from a Parliamentary review are that this period should be extended) 18 ; and 16 Corporations Act ss 438B(2) and 438B(3). 17 Corporations Act ss 440B, 440C and 440F. 18 Corporations Act s 441A. MELWORKDOCS\151\

9 a chargee or receiver has, before the beginning of the administration of the company, for the purpose of enforcing a charge on the property, taken steps such as entering into possession of the company's property or entered into an agreement to sell such property Deed of Company Arrangement As discussed above, one option that the creditors of a company have during a voluntary administration is to resolve that the company enter into a deed of company arrangement. The deed of company arrangement is a document which records the terms of a restructuring of a company and which "completes" the process of the voluntary administration (rather than the administration ceasing or the company proceeding to liquidation). The deed must set out various provisions including the nature and duration of any moratorium period which the deed provides and the extent to which the company is to be released from its debts. It must also set out the property which is to be available to pay creditors 20. The purpose of this requirement is to define in advance what property should be available for distribution, and what should be retained for the company's use during the term of the deed. It extends to property existing both before and after the execution of the deed 21. A deed of company arrangement binds all the creditors of a company. It prohibits a creditor from bringing or maintaining any proceeding or enforcement process against the company or its assets except with the leave of the Court. Further, a creditor may not bring an application to wind up the company 22. The position of secured creditors is not so tightly restricted. While a secured creditor who needs the assistance of the Court in order to enforce a security will require leave, a creditor entitled to exercise a 'self-help' remedy without court assistance will be entitled to do so unless the deed provides otherwise and that creditor voted in favour of the deed 23. However, an administrator may still apply to the Court for orders to prevent or restrict the circumstances in which a creditor may enforce a security 24. The Court may only do this if it is satisfied that the interests of the creditor will be adequately protected, and that enforcing the security would have a material adverse effect on achieving the purposes of the deed. 19 Corporations Act s 441B. 20 Corporations Act s 444A(4). 21 Elliott v Water Wheel Holdings [2004] FCAFC Section 444E, Corporations Act Section 444D(2), Corporations Act 2001; J & B Records Ltd v Brashs Pty Ltd (1995) 36 NSWLR 172; Lam Soon Australia Pty Ltd v Molit (No 55) Pty Ltd (1996) 70 FCR Section 444F, Corporations Act MELWORKDOCS\151\

10 The Federal Court of Australia considered an application by a deed administrator to prevent a creditor acting on a security in Hamilton v National Australia Bank 25. In that case, a company executed a deed which was subject to the condition precedent that the Bank release its second ranked charge over the company's assets. The Bank refused to do this. The administrators applied to the Court for orders amending the deed to remove the condition precedent, and preventing the Bank from enforcing the charge. Lehane J granted the orders, noting that the Bank's position jeopardised the deed, and that since the second ranked charge was of no real value, the Bank's position would be no worse off if it could not deal with the security. In Meehan v Stockmans Australian Cafe 26, the Federal Court considered an application for leave to continue proceedings against a company which was in administration. The applicants argued that the litigation was at an advanced stage, that the case was ready for trial, and that substantial sums spent on preparation would be wasted if they could not continue. The Judge noted that factors in favour of granting leave to continue proceedings included the amount and seriousness of the claim, and the complexity and the stage of the proceedings. The existence of an insurance indemnity and the likelihood that a liquidator would ultimately reject a claim anyway and thereby necessitate an appeal were also factors. In the end, the Court held that there were no exceptional circumstances in this case, and that any disadvantage to the applicants was outweighed by the prejudice likely to be suffered by the creditors generally if the trial were to proceed. 4. Liquidation Insolvent companies can be wound up voluntarily, by a resolution of shareholders followed by a resolution of creditors. Insolvent companies are, however, more commonly wound up by order of a Court. The Federal Court of Australia and the Supreme Courts of each State and Territory have power to order the winding up of a company where the company is insolvent or it is just and equitable to do so. Liquidation ensures that the assets of a company are distributed equitably among creditors and facilitates an independent investigation into the affairs of the company and increases the potential for redress for creditors against those who breached their obligations or the law. A classic example is the current liquidation of the HIH Insurance Group. 4.1 Investigation Company's officers required to help liquidator The Corporations Act requires officers and former officers of the company to do whatever the liquidator reasonably requires the officer to do to help in the winding up. For instance, officers 25 (1996) 14 ACLC 1, (1997) 15 ACLC 62. MELWORKDOCS\151\

11 of the company are required to deliver company books to the liquidator and to provide such information about the company's business, property, affairs and financial circumstances as the liquidator reasonably requires 27. "Officers" of the company are defined in the Corporations Act broadly and include: a director or secretary of the company; a person: (i) (ii) (iii) who makes or participates in making, decisions that affect the whole or a substantial part of the company's business; who has the capacity to affect significantly the corporation's financial standing; or in accordance with whose instructions or wishes the directors are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the company), as well as, administrators, receivers and managers 28. The liquidator is also able to by written notice require that a person other than an officer deliver to the liquidator any books that are in the person's possession 29. Examinations Under Div 1 of Part 5.0 of the Corporations Act, a person can be summoned by a Court for examination upon application of the Australian Securities and Investments Commission ("ASIC") or another "eligible applicant" in relation to the "examinable affairs" of the company. "Eligible Applicants" are defined in the Act as being: (c) ASIC; a liquidator or provisional liquidator of the corporation; an administrator of the corporation; 27 Corporations Act s 530A. 28 Corporations Act s 9. MELWORKDOCS\151\

12 (d) (e) an administrator of a deed of company arrangement; or a person authorised in writing by ASIC to make an application to the court for an examination. In relation to the last category listed above, ASIC, in determining whether to grant an authorisation, will consider the relationship which the person seeking authorisation has to the relevant company and the external management of that company which is in progress. Contributories and creditors would normally have the appropriate connection with the company 30. The "examinable affairs" of the company are defined in the Act to mean: the promotion, formation, management, administration or winding up of the company; any other "affairs" (as defined in the Act) of the company, including: (i) (ii) (iii) the internal management of the proceedings of the body; and matters concerned with the ascertainment of the person who are or have been financially interested in the success or failure, or apparent success or failure of the body or are or have been able to control or materially to influence the policy of the company; and matters relating to or arising out of the audit of, or working papers or reports of an auditor concerning, any matters referred to in a preceding paragraph. (c) the "business affairs" of a "connected entity" (each term as defined in the Act) of the company, in so far as they are relevant to the company or its examinable affairs because of paragraph or, including matters concerned with ascertaining the companies with which the body is or has been connected 31. Section 596A of the Act concerns mandatory examinations and requires the Court to issue a summons if the person sought to be examined, is or was an officer of the Company within the last two years. The Court has no discretion on the issue of a summons provided the requirements of the section are established. 29 Corporations Act s 530B(4). 30 Re Excel Finance Corporation Ltd; Worthey v England (1994) 124 ALR 281 at 295. MELWORKDOCS\151\

13 Section 596B of the Act deals with discretionary examinations and empowers the Court in its discretion to issue a summons to a person who has taken part or been involved in the examinable affairs of the company and may be guilty of misconduct in relation to the company or may be able to provide information. The court is not to summon unless satisfied that: the person has taken or been concerned in examinable affairs of the company and has been or may have been guilty of misconduct in relation to the company; or the person may be able to give information about examinable affairs of the company. The Court can also require, as part of its summons, that a person produce at the examination specified books that are in the person's possession and relate to the company or to any of its "examinable affairs" Recovery and Preservation of Assets Where a company is wound up by order of a Court (as is most commonly the case) the liquidator of a company can apply to the Court for a number of orders in order to preserve or recover the assets of a company. Some of these powers are set out below. General Power to Recover The Court has a general power to require a person who is a contributory, trustee, receiver, banker, agent, officer or employee of the company to pay, deliver, convey, surrender or transfer to the liquidator or provisional liquidator, as soon as possible or within a specified period, any money, property or books in the person's hands to which the company is prima facie entitled 33. Note in this regard that a "contributory" is defined to include a person liable as a member or past member to contribute to the property of the company if it is wound up and (for a company with share capital) a holder of fully paid shares in the company. Order to Prevent Avoidance of Liability A liquidator (or a provisional liquidator of a company subject to an application for such a winding up) can apply to the Court for an order restraining departure from Australia of an officer or employee or related entity from taking out of Australia, any money or other property 31 Corporations Act ss 9, 53 and 53AA. 32 Corporations Act s 596D(2) 33 Corporations Act s 483. MELWORKDOCS\151\

14 of the company or of the officer, employee or related entity 34. A Court will only make an order in this regard if: the company is being wound up; the Court is satisfied that there is at least a prima facie case that the officer, employee or related entity is or will become liable: (i) (ii) to pay money to the company, whether in respect of a debt, by way of damages or compensation or otherwise; or to account for property of the company; and (c) the Court is also satisfied that there is substantial evidence that the officer, employee or related entity: (i) (ii) has concealed or removed money or other property, has tried to do so, or intends to do so; or has tried to leave Australia or intends to do so; in order to avoid that liability or its consequences; and (d) the Court thinks it necessary or desirable to make the order in order to protect the company's rights against the officer, employee or related entity 35. Warrant to Arrest ASIC, a liquidator or a provisional liquidator can apply to the court to issue a warrant for the arrest of: a person (not just an officer or related entity) about to leave Australia in order to avoid: (i) (ii) (iii) paying money payable to the company; being examined; or complying with a court order or other obligation under the external administration provisions of the Corporations Act; 34 Corporations Act s 486A (1). 35 Corporations Act s 486A (2). MELWORKDOCS\151\

15 (c) a person who has concealed company property; or a person who has destroyed, concealed or removed company books. Power to Arrest Absconding Contributories The Court may, on proof of probable cause for believing that a contributory is about to leave Australia, or otherwise to abscond or to remove or conceal any of his or her property for the purpose of evading payment of calls or of avoiding examination respecting affairs of the company, may cause the contributory to be arrested and held in custody and the books and movable personal property of the contributory to be seized and safely kept until such time as the Court orders Availability of Property in Winding Up: Cross Border Issues 5.1 The availability of overseas property to Australian creditors While the definition of 'property' in s9 of the Corporations Act does not explicitly refer to overseas property, it seems that overseas property is contemplated by an Australian liquidation. In determining whether overseas property is available to Australian creditors there are a number of important principles of private international law that come into play. First there is a distinction drawn between a debtor's movable and immovable property. Title of immovable property is governed by the law of place where the property is situated, so overseas immovable property will not vest in an Australian liquidator. The liquidator would have to apply to the overseas court for an order dealing with the title or proceeds of sale. Movable property on the other hand will be treated as having been validly assigned to the Australian liquidator. Secondly, even where the property is assigned to the liquidator, the liquidator still takes the property subject to such rights (such as securities) as are validly created according to the law applicable where the property is situated. Thirdly, it seems clear that avoidance provisions, such as preferences and transfers at an undervalue, and the doctrine of relation back, will not apply to overseas property, unless the principles of private international law in the jurisdiction of the country in which the property is situated happen to give effect to Australian law. 36 Corporations Act s 487. MELWORKDOCS\151\

16 5.2 The availability of Australian property to foreign creditors Special provisions in the Corporations Act provide for the possibility of winding up proceedings in Australia that are ancillary to a principal winding up that is occurring overseas 37. Where a registered foreign company is wound up in its place of origin, the local Australian agent is required to notify ASIC. The liquidator or ASIC may then apply to the Australian court for an order that a local Australian liquidator be appointed. The local liquidator must, through newspaper advertisements in Australian States or Territories in which the company carried on business within six years before the liquidation, invite creditors to make claims. The local liquidator in the ancillary winding up is required to remit property recovered in Australia to the principal liquidator overseas. This would then enable the principal liquidator to ensure an equal sharing among creditors of the company's property 38. The purpose of the ancillary winding up is to collect local assets and settle a list of local creditors. The local creditors are entitled to share in the proceeds of the winding up pari passu with foreign creditors. However, in determining foreign creditors' rights, the local laws will apply so that, for instance, a charge that is not registered in the local jurisdiction will be ineffective and, it seems, local priority creditors are entitled to be paid out before the proceeds are remitted to the principal liquidator. * The assistance of Catherine Stuart, Stuart Gregory and Elliot Raleigh in the preparation of this paper is gratefully acknowledged. 37 Corporations Act ss 601CL(14)-(16). 38 Corporations Act s 601CL(15)(c). MELWORKDOCS\151\