Citadel Financial Corporation Pty Ltd v Elite Highrise Services Pty Ltd (No 2)

[2014] NSWSC 1769

Supreme Court

New South Wales

Medium Neutral Citation:	Citadel Financial Corporation Pty Ltd v Elite Highrise Services Pty Ltd (No 2) [2014] NSWSC 1769
Hearing dates:	8 December 2014
Date of orders:	08 December 2014
Decision date:	08 December 2014
Jurisdiction:	Equity Division - Duty List
Before:	Brereton J
Decision:	Order of 3 December 2014, as varied on 4 December 2013, be varied further.
Catchwords:	PROCEDURE – application to vary order – where variation of order required to prevent sale of property the subject of security interests prior to the hearing of an interlocutory application – consideration of interests of and potential prejudice to third parties and the receiver – held, order varied.
Category:	Procedural and other rulings
Parties:	Citadel Financial Corporation Pty Limited ACN 106 654 844 (plaintiff/applicant) Elite Highrise Services Pty Limited (Receivers and managers appointed) ACN 155 992 573 (first defendant/first respondent) Murray Roderick Godfrey and David Nicholas Iannuzzi in their capacity as receivers and managers of Elite Highrise Services Pty Limited (receivers and managers appointed) ACN 155 992 573 (second defendant/second respondent) CML Payroll Pty Limited ACN 150 688 476 (third respondent) Skyline Apartments Pty Limited ACN 001 451 332 and Pacific Hoardings Pty Limited ACN 134 060 950 (fourth respondent)
Representation:	Counsel: H Somerville (plaintiff/applicant) B Sewell (solicitor) (second defendant/second respondent) R McGrath (solicitor) (fourth defendant/fourth respondent) Solicitors: Bridges Lawyers (plaintiff/applicant) Sewell & Kettle (second defendant/second respondent) McGrath Solicitors (fourth defendant/fourth respondent)
File Number(s):	2013/372920

Judgment (ex tempore)

1. HIS HONOUR: When these proceedings first came before me on Wednesday afternoon, interim relief was granted. I indicated that the plaintiff would probably not have obtained such relief but for the consent to certain parts of it by the receivers. That enabled arrangements to be put in place for orderly preparation for an interlocutory hearing on Friday, 12 December.

2. However, the applicant's case was strengthened by matters which compensated, in part, for the flimsy evidence of a security interest that it had advanced. One was that the fourth respondent, which supported the applicant, had a registered security interest in 900 tonnes of scaffolding materials which had priority, in time, over the applicant's interest and which, to date, the receiver has not disputed. The second was that a sale by the receiver on 3 December was contrary to an assurance the receiver had given the applicant that he would not sell any scaffolding prior to 4 December, save in certain circumstances which did not appear to be relevant.

3. The orders to which the parties then agreed included an injunction restraining the sale of any further scaffolding beyond that which the receiver had already sold, an order requiring the receiver to preserve the proceeds of any sale that had already taken place and an order prohibiting the removal of any scaffolding from the property at Kurnell at which it was located. All of those orders were expressed to operate until 12 December, when it was and is envisaged that there would be an interlocutory hearing.

4. The receiver, however, took the view, apparently, that the third order did not prevent him from allowing scaffolding that had already been sold being removed from the Kurnell property. When it became apparent on 4 December that that was in fact happening and that the applicant considered that to be in contravention of the order, the receiver applied to the court for a variation of the order to make clear that such removal was permitted. On that application, on 4 December the respondent indicated that the main reason it sought to prevent removal of the unsold scaffolding was to permit inspection of it in order to enable that to happen, but the sold scaffolding otherwise to be removed. I varied the order to provide that it would not be a contravention of it for the receiver to allow sold scaffolding to be removed from the Kurnell property after 8 December.

5. The applicant has now inspected the property and obtained some evidence but suggests that the sold scaffolding includes scaffolding the subject of their claimed security interest. The receiver contends, on the basis of what is said to be a text from the receiver of a report received from the auctioneer, that the purchaser will pull out of the contract if there is further delay in delivery. The present question is whether, in light of the evidence, slim as it is, should the sold scaffolding include scaffolding to which either the applicant or the fourth respondent has a claim, its removal should be prohibited until the interlocutory hearing on 12 December.

6. Against doing so is the circumstance that it interferes with the rights of the third party purchaser under the contract, who does not appear to have been given any notice of the present application. It may also result in the loss of the sale, which may prove to be to the detriment of creditors, in circumstances that the proceeds of sale would have to be preserved, which would provide a significant measure of mitigation. The receiver might also be exposed to liability to the purchaser.

7. In favour of prohibiting removal until 12 December is that the sale in the first place appears to have been contrary to an assurance given by the receiver to the applicant; that there is some, again albeit slight, evidence to suggest that the sale may be at a relatively low price and, thus, that not much, if anything, may be lost if the sale is lost and, indeed, another sale may produce a better result; that concerns about the receiver's liability to the purchaser should not loom large, given the receiver's unexplained departure from his apparent assurance to the applicant; and the pendency of the so far undisputed claimed security interest of the fourth respondent.

8. Ultimately, it seems to me that arrangements were made on 3 December to enable a proper interlocutory hearing to be heard on 12 December. Although I sanctioned departure from that, I thought to the advantage of the receiver, with the variation of 4 December when it was clear that there were competing claims to the sold scaffolding, it is now clear that there are competing proprietary claims to the sold scaffolding, and any purchaser should have been on notice from the PPSR of the claims of the applicant and the fourth respondent. Quite how, in those circumstances, they could be sold as unencumbered assets, I am not sure.

9. It seems to me that an orderly resolution of this matter would be better served by prohibiting further movement of the scaffolding until 12 December, and that if that results in the loss of the contract, that is a matter which the receiver has largely brought on his own head. Upon the undertaking of Mr Noel Parker, solicitor, to pay the appropriate filing fees, I grant leave to the applicant, Citadel Financial Corporation Pty Ltd, to file a notice of motion in the form initialled by me, dated this day and placed with the papers. I direct that the motion be returned instanter. The court orders that order 3, made on 3 December, 2014, as varied on 4 December, 2014, be varied by amending the date 8 December, 2014 at the end of the proviso to 12 December, 2014.

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Decision last updated: 20 March 2015