F & G Nominees Pty Ltd v Coxon
[2007] WASC 113
•28 MAY 2007
F & G NOMINEES PTY LTD -v- DIANE MARY COXON AND GORDON HOWARD ROBBINS as Executors of the Will of CYRIL HOWARD ROBBINS & ORS [2007] WASC 113
| (2007) 34 WAR 55 | |||
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 113 | |
| Case No: | CIV:2669/2004 | 2 MARCH 2007 | |
| Coram: | LE MIERE J | 28/05/07 | |
| 17 | Judgment Part: | 1 of 1 | |
| Result: | Controller entitled to retain the sum of $500 000 Costs reserved | ||
| A | |||
| PDF Version |
| Parties: | F & G NOMINEES PTY LTD (ACN 008 834 517) DIANE MARY COXON AND GORDON HOWARD ROBBINS as Executors of the Will of CYRIL HOWARD ROBBINS CARROODA PTY LTD (ACN 008 785 573) HELEN KAYE BOYD LINDSAY BRIAN ROBBINS |
Catchwords: | Equity Court-appointed controller of property sale proceeds Whether controller entitled to an indemnity against possible legal proceedings Whether indemnity secured by creation of equitable lien Whether controller entitled to retain funds to satisfy costs of legal disputes |
Legislation: | Property Law Act 1969 (WA), s 126 |
Case References: | Australian Securities & Investments Commission; Re Lanepoint Enterprises Pty Ltd v Lanepoint Enterprises Pty Ltd [2006] FCA 1493 Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd [2001] NSWSC 791; 39 ACSR 622 Hewett v Court (1983) 149 CLR 639 Nicobar Pty Ltd v Abrokiss (2003) 48 ACSR 259 Re Application of Central Commodities Services Pty Ltd [1984] 1 NSWLR 25 Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171 Shirlaw v Taylor (1991) 31 FCR 222 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
DIANE MARY COXON AND GORDON HOWARD ROBBINS as Executors of the Will of CYRIL HOWARD ROBBINS
First Defendants
CARROODA PTY LTD (ACN 008 785 573)
Second Defendant
HELEN KAYE BOYD
Third Defendant
LINDSAY BRIAN ROBBINS
Fourth Defendant
(Page 2)
Catchwords:
Equity - Court-appointed controller of property sale proceeds - Whether controller entitled to an indemnity against possible legal proceedings - Whether indemnity secured by creation of equitable lien - Whether controller entitled to retain funds to satisfy costs of legal disputes
Legislation:
Property Law Act 1969 (WA), s 126
Result:
Controller entitled to retain the sum of $500,000
Costs reserved
Category: A
Representation:
Counsel:
Plaintiff : Mr M N Solomon & Ms M Breisch
First Defendants : Mr T M Retallack
Second Defendant : No appearance
Third Defendant : Mr J A Thomson
Fourth Defendant : Mr J A Thomson
Solicitors:
Plaintiff : DLA Phillips Fox
First Defendants : Maxim Litigation Consultants
Second Defendant : No appearance
Third Defendant : Mallesons Stephen Jaques
Fourth Defendant : Mallesons Stephen Jaques
(Page 3)
Case(s) referred to in judgment(s):
Australian Securities & Investments Commission; Re Lanepoint Enterprises Pty Ltd v Lanepoint Enterprises Pty Ltd [2006] FCA 1493
Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd [2001] NSWSC 791; 39 ACSR 622
Hewett v Court (1983) 149 CLR 639
Nicobar Pty Ltd v Abrokiss (2003) 48 ACSR 259
Re Application of Central Commodities Services Pty Ltd [1984] 1 NSWLR 25
Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171
Shirlaw v Taylor (1991) 31 FCR 222
(Page 4)
1 LE MIERE J: Brian Keith McMaster ("the Controller") has applied by chamber summons for an order that he be entitled to retain the sum of $500,000 (which is otherwise owing to the plaintiff), in order to satisfy any legal fees and other costs and expenses on a full indemnity basis, which the Controller has incurred or incurs in relation to any proceedings or allegations against the Controller by the plaintiff, or any person claiming through the plaintiff. In the alternative, the Controller seeks an order that in the event that the plaintiff commences any proceedings against the Controller, then at the same time that a writ is filed by the plaintiff in such proceedings, the plaintiff be required to provide security for costs in the amount of $500,000.
2 The $500,000 sum constitutes a portion of the net proceeds from the sale of land in Golden Bay, to which proceeds the plaintiff is entitled by virtue of a consent order of this Court dated 6 April 2006, which will be discussed further below.
The action
3 The circumstances leading to this application are conveniently set out in the affidavit of Guy Shenton French, the solicitor with the conduct of these proceedings on behalf of the plaintiff, sworn on 2 March 2007. The plaintiff company is the trustee of the Conti Family Trust. The plaintiff and the defendants jointly owned a large tract of land located in Golden Bay, Western Australia. The plaintiff had a half-share in the land. On 24 December 2004 the plaintiff issued the writ of summons in these proceedings by which it sought an order pursuant to s 126 of the Property Law Act 1969 (WA), directing a sale of the land.
4 The parties subsequently reached an agreement that the land, excluding certain parcels of land, be sold. I will refer to the land to be sold as "the Golden Bay land". The parties filed a written consent to the making of orders under O 43 r 16 to give effect to their agreement. On 6 April 2006 a Registrar made an order in accordance with the terms of the consent ("the Consent Order").
5 The Consent Order included the following:
"1 … [the Golden Bay land] be sold by order of the Court pursuant to Order 53 Rule 2 of the Rules of the Supreme Court 1971.
2 Brian Keith McMaster … (Controller) be appointed by the Court to sell the Golden Bay Land in such manner as
- the Controller thinks fit, for the best price that can be obtained, in accordance with the orders set out below.
- …
4 If all parties unanimously agree in respect of any matter concerning the Golden Bay Land (or any lot or lots which form part of the Golden Bay Land), the parties may direct the Controller and, subject to order 42 below, the Controller must act in accordance with the unanimous direction of the parties."
6 The Consent Order required the Controller to invite proposals from professional agents in relation to the sale of the Golden Bay land that were to contain, amongst other things, particulars and conditions of sale including remuneration. The Consent Order includes an order that the Controller appoint a professional agent or agents to conduct the sale of the Golden Bay land ("appointed agent"). The Consent Order included an order that the Controller be entitled to be paid remuneration on a specified basis and "reimbursed for costs and disbursements (including the costs of obtaining valuations) incurred by the Controller in the course of discharging the Controller's obligations and exercising the Controller's powers under the terms of these orders".
7 The Consent Order included an order that, subject to the terms of the Consent Order the Controller will be authorised by the parties to draw down funds from the facilities held with St George Bank under specified account numbers ("St George facilities") to pay, amongst other things, the Controller's costs. The Controller's costs include the reimbursement for costs and disbursements to which I have referred earlier. The Consent Order provides for the Controller to provide to each of the parties monthly reports which include the amount proposed by the Controller to be withdrawn from the St George facilities in the next month in the payment of the Controller's costs. Leave is granted to each of the parties to file a motion within 14 days of receipt of a monthly report objecting to an amount proposed by the Controller to be withdrawn from the St George facilities in payment of the Controller's costs and seeking an assessment by a Registrar of that part of the Controller's costs to which there is an objection raised. If no motion is filed by any party within 14 days of receipt of a monthly report by the parties, then the Controller is deemed to be authorised by each of the parties to withdraw from the St George facilities the amount set out in the monthly report. Each party was given
(Page 6)
- liberty to apply at any time in relation to the Controller's costs. Order 28 provides that the Controller's costs shall be subject to review by the court.
8 The Consent Order provided for the proceeds of sale of the Golden Bay land to be dealt with. First, the fee payable to the appointed agent is to be paid as a first priority from the proceeds of sale of the Golden Bay land. After the payment of the appointed agent's fees, the sums of money owed to St George Bank under the St George facilities are to be paid from the proceeds of the sale. All proceeds of sale after the repayment of the appointed agent's fees and St George Bank must be paid by the Controller into an interest-bearing trust account opened by the Controller with St George Bank. The Consent Order then provides for the distribution of proceeds of sale of the Golden Bay land to the parties. The proceeds of sale and any interest accrued on those proceeds after deduction of the appointed agent's costs and the repayment of the St George facilities are to be distributed by the Controller to the parties in specified shares. The Controller was granted liberty to apply to the Court for directions.
9 Brian Keith McMaster was selected by the parties, and accepted appointment, as the Controller, to sell the Golden Bay land in accordance with the terms of the Consent Orders.
10 By letter dated 9 August 2006 McMaster informed the parties that he had received submissions from selling agents to sell the Golden Bay land. With that letter McMaster included a comparative table illustrating the terms of the different submissions including the commission rate that each agent proposed to charge. After much correspondence involving all of the parties, the plaintiff submitted that C B Richard Ellis Pty Ltd ("CBRE") should be appointed but that a fee of 0.85 per cent of the sale price achieved should be negotiated. This was to match the proposal received from Jones Lang La Salle in terms of commission fee. Subsequently, McMaster informed the plaintiff that he had appointed CBRE as selling agent but did not provide the plaintiff with a copy of the agency agreement.
11 The parties entered into a contract for the sale of the Golden Bay land by offer and acceptance and the required transfer papers were executed by the parties on or about 5 February 2007. Settlement was scheduled to take place on 6 February 2007. McMaster instructed Minter Ellison Lawyers to act in relation to the sale on his behalf and therefore on behalf of the vendor parties. On 5 February 2007, the day prior to the scheduled settlement, Minter Ellison circulated a draft settlement statement to the parties. The draft settlement statement required a bank
(Page 7)
- cheque to be provided by the purchaser at settlement in the amount of $973,424.30 payable to CBRE. The amount of $973,424.30 represented a commission fee comprising 0.5 per cent of the first $18.5 million of the sale price and 5 per cent of the balance of the sale price. The plaintiff maintains that a commission fee in relation to a $34 million property sale calculated at 0.5 per cent of the sale price achieved up to $18.5 million and at the rate of 5 per cent of any amount beyond $18.5 million is beyond reasonable commercial terms. Mr Paul Conti, the principal director of the plaintiff, who is a commercial real estate agent, says that the commission paid was much higher than a usual commission rate. On 6 February 2007 the plaintiff proposed that settlement should be postponed pending the clarification of the position concerning the CBRE commission fee. Minter Ellison informed the parties that McMaster requested that CBRE reduce its fee to 0.85 per cent of the sale price to which CBRE stated "no". On 7 February 2007 the plaintiff's solicitors informed Minter Ellison that the plaintiff considered that any contract with CBRE for greater than 0.85 per cent commission was beyond the scope of McMaster's authority and was in any event outside normal commercial terms. The plaintiff's solicitor went on to say that it reserved its rights in relation to that issue but in any event the settlement should proceed.
12 Settlement of the sale of the Golden Bay land was effected on the afternoon of 7 February 2007. McMaster paid $973,424.30 to CBRE in accordance with the agent's fee payable under the selling agency agreement entered into with CBRE.
13 On 14 February 2007 McMaster's solicitors wrote to the vendors of the Golden Bay land ("Vendors") stating that the proceeds of the sale were available for distribution in accordance with the terms of the Consent Order. However, the solicitors said that in light of serious allegations that had been made concerning his conduct in his capacity as Controller of the Golden Bay land, McMaster was not prepared to distribute any of the funds to any Vendor unless and until he received a release from each of the Vendors in the form of an executed copy of an enclosed deed of release. Each of the Vendors except the plaintiff executed the deed of release. McMaster paid to each of the Vendors, except the plaintiff, their share of the net proceeds of the sale. The plaintiff's solicitors demanded that McMaster pay to the plaintiff its share of the sale proceeds. On 28 February 2007 McMaster's solicitors informed the plaintiff's solicitors that McMaster intended to apply to the court, pursuant to par 42 of the Consent Order, for directions in relation to the balance of the net proceeds from the sale of the Golden Bay land.
(Page 8)
14 On 28 February McMaster filed the present application and served it on the plaintiff. On 1 March 2007 the plaintiff's solicitors wrote to the defendants' solicitors demanding that McMaster pay to the plaintiff the moneys due and owing to the plaintiff, less the sum of $500,000. The plaintiff's solicitors stated that in making that demand the plaintiff maintained its position that McMaster was not entitled to withhold any of the plaintiff's money. Later on 1 March the plaintiff's solicitor telephoned McMaster's solicitor. The plaintiff's solicitor informed McMaster's solicitor that the plaintiff would seek an injunction requiring McMaster to pay to the plaintiff the sums of money due to it. Later on 1 March McMaster's solicitor wrote to the plaintiff's solicitor stating that McMaster would not pay out any moneys to the plaintiff until McMaster's application to retain $500,000 on account of potential legal costs had been dealt with by the court.
15 The plaintiff's application for an injunction came before me on 2 March 2007. I then ordered that upon the plaintiff's undertaking as to damages, by midday Tuesday 6 March 2007 McMaster take all steps necessary to be taken by him to arrange for the payment of $14,500,000 to the plaintiff. I ordered that McMaster pay the other parties' costs of the application on an indemnity basis. I further ordered that McMaster was not entitled to make any deduction from the proceeds of the sale of the Golden Bay land on account of the costs order made that day, in the absence of any further order made by the court.
This application
16 McMaster now applies for an order that he be entitled to retain the sum of $500,000 from the proceeds of the sale of the Golden Bay land to satisfy any legal fees and other costs and expenses which he has incurred or incurs in relation to any proceedings or allegations against him by the plaintiff.
Legal basis of order sought
17 The Consent Order includes an order that McMaster will be entitled to be reimbursed for costs and disbursements incurred by him in the course of discharging his obligations and exercising his powers under the terms of the Consent Order (the Controller's Costs) and provides a protocol for the payment of the Controller's Costs. I have outlined that protocol earlier in these reasons.
(Page 9)
Equitable lien
18 In Shirlaw v Taylor (1991) 31 FCR 222, the Full Court of the Federal Court held that a court-appointed provisional liquidator had an equitable lien for expenses and remuneration arising in the course of his provisional liquidation analogous to that of a court-appointed receiver. At 230 the Court said:
"It is well settled that a receiver or receiver and manager appointed by the court has an indemnity over the assets of the company in question and is a secured creditor with a lien for his expenses, remuneration and costs … the powers of the court in that regard [are] derived not from any specific provision in the 1981 companies legislation, or its predecessors, but from the general equitable principle that such a receiver, as an officer of the court, working for the benefit of all who have legitimate interests in the assets, is entitled to look to the assets of the company of which he is a receiver to meet his remuneration and his liabilities and outgoings."
- An equitable lien has been defined as:
"[A]n equitable right, conferred by law upon one person, to a charge upon the real or personal property of another until certain specific claims have been satisfied." Butterworths, Halsburys Laws of England (4th ed reissue, 1997 Vol 28 [754]) cited by Fiona R Burns "The Equitable Lien Rediscovered: A Remedy for the 21st Century" (2002) 25(1) UNSWLJ 1 at 3.
20 In Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171 it was held that where a receiver, through efforts made, gets a fund into court, then the receiver's costs and expenses are a first-ranking claim on that fund. It has further been held in Re Application of Central Commodities Services Pty Ltd [1984] 1 NSWLR 25 that the claim is secured by an equitable lien over that fund.
(Page 10)
21 In Hewett v Court (1983) 149 CLR 639 at 646, Gibbs CJ observed that it was difficult to find a general principle which explained the variety of situations in which a lien had been created. However, he noted that while the traditional cases did not closely resemble the case before the court, their existence showed that "the rules governing the circumstances in which equity has considered that justice requires the recognition of the existence of a lien are not confined to one narrow category". Indeed, his Honour held that the list may not be a closed one. Deane J gave the following description of the major conditions for an equitable lien:
"(i) that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it …
(ii) that the property (or arguably property including that property …) be specifically identified and appropriated to the performance of the contract; … and
(iii) that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property (or, if it be appropriate, more than a particular portion thereof) to a stranger without the consent of the other party or without the actual or potential liability having been discharged. … they [the tests] are formulated as a statement of what is sufficient rather than of what is essential."
22 McMaster was not appointed a receiver of the Golden Bay land. However, he was appointed by the Court to sell the land and is entitled by virtue of the court order to be reimbursed for his costs and disbursements incurred in the course of discharging his obligations and exercising his powers under the terms of those orders. His role and function is analogous to that of a court-appointed receiver. Furthermore, the general criteria articulated by Deane J in Hewett v Court for the existence of an equitable lien are satisfied in this case. I find that McMaster is entitled to an equitable lien over the proceeds of the sale of the Golden Bay land to secure the reimbursement of the Controller's costs to which he is entitled under the Consent Orders. Of course, McMaster will only be entitled to reimburse himself from that fund when he has presented the relevant
(Page 11)
- monthly report and the Vendors have made no objection to his claim or the Registrar has ruled in his favour or by reason of a further court order.
Retention fund
23 In Australian Securities & Investments Commission; Re Lanepoint Enterprises Pty Ltd v Lanepoint Enterprises Pty Ltd [2006] FCA 1493, two companies, Lanepoint and Bowesco, had threatened legal proceedings against the receivers and managers appointed to those companies. At [47] French J cited with approval the dicta of Young CJ in Nicobar Pty Ltd v Abrokiss (2003) 48 ACSR 259 at [60]:
"The general rule is that where a person who is a fiduciary or an officer of the court produces a fund through his own effort, he is entitled to an equitable lien over the fund in respect of defending himself against claims made against him for what he did in producing the fund."
24 At [48] French J observed that Lanepoint had threatened the receivers and managers with proceedings and that the company could hardly complain that the receivers and managers make provision to meet that threat out of the charged funds at least if such proceedings are instituted and turn out to be unsuccessful. At [49] French J said:
"In my opinion it was within the power of the receivers and managers in this case to retain a provision out of the fund charged against the threatened legal action by Lanepoint and by Bowesco."
Circumstances of this case
25 The plaintiff, by its solicitors, on 7 February 2007 informed McMaster that it considered that any contract with CBRE which provided for the payment of a commission beyond 0.85 per cent of the sale price was beyond the scope of McMaster's authority and in any event outside normal commercial terms. The plaintiff stated that it reserved its rights in relation to that issue. The plaintiff has subsequently confirmed that it reserves its rights in relation to the agreement entered into by McMaster with CBRE and the commission fees paid to CBRE. The plaintiff has maintained that position in the course of the present application.
26 I find that McMaster has a realistic apprehension that the plaintiff might institute proceedings against him in relation to his conduct of the sale of the Golden Bay land.
(Page 12)
27 It is within the power of McMaster to retain a provision out of the fund constituted from the proceeds of the sale of the Golden Bay land charged against the threatened legal action by the plaintiff: see Australian Securities & Investments Commission, Re Lanepoint Enterprises Pty Ltd v Lanepoint Enterprises Pty Ltd (supra) per French J at [49].
Disentitling conduct
28 The plaintiff submits that the court should refuse to permit McMaster to retain a provision out of the fund charged against the threatened legal proceedings because his conduct has fallen short of the standard required of a person appointed by the court under O 53 r 4. The plaintiff further says that the court should decline to grant an equitable remedy in McMaster's favour in circumstances where he has failed to do equity and come to the court with clean hands.
29 The plaintiff submits that a person appointed by the court under O 53 r 4 should be held to a high standard of conduct. In support of that proposition the plaintiff refers to the statement by the learned author of Civil Procedure Western Australia who states at par 53.3.1:
"The person having the conduct of the sale of land under the order of the court or those acting on his behalf are bound to conduct themselves to a very high standard, and if they fail to do so, the court may deprive him of contractual rights to which he would be entitled if he were a stranger selling out of court: Holliwell v Seacombe [1906] 1 Ch 426 at 431."
- The quotation from Holliwell v Seacombe to which the learned author appears to be referring is:
"[In Powell v Powell Bacon VC] says in his judgment: 'This brings it to the ordinary case of a purchaser who, finding that he is entitled by law, on account of the invalidity of the proceedings in chambers, to be discharged from his contract, is entitled on coming here to be reinstated in exactly the same position that he stood in when he attended the sale, and to be indemnified against all the expenses he has been put to.' That is a rule laid down with reference only to sales by the Court and the discharge of purchases under sales by the Court, and without citing authorities, some of which have been cited in argument, it is always recognised that it is the bounden duty of the Court to uphold a very high standard of conduct as regards sales by the
- Court – more so indeed than would be the case in a sale by a stranger out of court."
30 I doubt that Holliwell v Seacombe is authority for the proposition cited in Civil Procedure Western Australia.
31 The Consent Order provides that McMaster is entitled to be reimbursed for costs and disbursements incurred by him in the course of discharging his obligations and exercising his powers under the terms of the orders.
32 The equitable right to an indemnity and a lien is a qualified one. The limits were discussed by Austin J in Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd [2001] NSWSC 791; 39 ACSR 622 at [71] – [74]:
"The equitable right to an indemnity and lien is a qualified one. Its limits, in the case of a trustee, were described by Lindley LJ in Re Beddoe; Downes v Cottam [1893] 1 Ch 547, at 558, as follows:
'I entirely agree that a trustee is entitled as of right to full indemnity out of his trust estate against all his costs, charges and expenses properly incurred: such an indemnity is the price paid by the cestuis que trust for the gratuitous and onerous services of trustees; and in all cases of doubt, costs incurred by a trustee ought to be borne by the trust estate and not by him personally. The words "properly incurred" in the ordinary form of order are equivalent to 'not improperly incurred'.
Bowen LJ said (at 562):
'The principle of law to be applied appears unmistakably clear. A trustee can only be indemnified out of the pockets of his cestuis que trust against costs, charges, and expenses properly incurred for the benefit of the trust - a proposition in which the word "properly" means reasonably as well as honestly incurred. While I agree that trustees ought not to be visited with personal loss on account of mere errors in judgment which fall short of negligence or unreasonableness, it is, on the other hand, essential to recollect that mere bona fides is not the test, and that it is no answer in the mouth of a trustee who has embarked in idle litigation to say that he honestly believed what his solicitor
- told him, if his solicitor has been wrong-headed and perverse. Costs, charges and expenses which in fact have been unreasonably incurred, do not assume in the eye of the law the character of reasonableness simply because the solicitor is the person who was in fault.'
- In Adsett v Berlouis (at 211) the Full Federal Court applied these observations to the administration of a bankrupt estate, even though the trustee in bankruptcy receives remuneration. Summarising the effect of Re Beddoe, the Court said (at 212-3):
'The critical question, in our view, is whether or not the conduct which gave rise to the burden of costs - whether costs ordered to be paid or costs incurred by the trustee in prosecution of the litigation - was proper in the sense explained in Beddoe; that is, whether the expenditure was reasonably, as well as honestly, incurred. Where, for example, the litigation was obviously misconceived or, even if it was otherwise reasonable to be undertaken, extravagant in the resources applied to it, we would not regard the expense incurred as proper; notwithstanding that the trustee may have acted honestly throughout. It is neither possible nor desirable to attempt to identify all of the situations in which costs expenditure would not be regarded as proper. Nor is it profitable to attempt a detailed rule covering all circumstances. But we issue the caution that the language in some authorities, many of which relate to gratuitous trustees, may mislead. Some of that language appears to require a degree of personal misconduct or wilful recklessness, as opposed to mere negligence, mistake or breach of the trustee's duty as set out above. We do not think that such a limitation can stand with cases such as Beddoe, which in our opinion correctly express the law. If the expense is one prudently and reasonably incurred in the discharge of the trustee's proper duties, there is a right under the general law to be indemnified out of the trust estate. If the expense is not so incurred or is unreasonable or unnecessary, there is no right under the general law to indemnity because the expense is not "properly incurred". The position is no different with a trustee in bankruptcy. Where the line is drawn, between an expense properly incurred and one not properly incurred, is to be determined
- on the facts of the particular case and in the exercise of judgment.'
- In my respectful opinion, those observations (applied to liquidators by Templeman J in the Bell Group case and Merkel J in the City & Suburban case) accurately describe the limits to which the equitable right to indemnity and lien are subject, not only in the cases of a trustee in bankruptcy and liquidator but also in the case of an administrator under a deed. I see no relevant distinction, having regard to their functions as remunerated professionals."
33 In Cresvale v Cresvale, Austin J held that the observations in Adsett v Berlouis applied also to the administrator of a company arrangement. In my opinion the same observations apply to McMaster in this case. I see no relevant distinction between McMaster and a trustee, liquidator or court-appointed receiver having regard to their functions as remunerated professionals.
34 Whether or not McMaster would be entitled to be reimbursed for any costs and expenses incurred in defending any litigation against him by the plaintiff will depend upon the findings of the court in the course of such litigation. The material before me does not enable me to form any opinion as to the likelihood that McMaster would be found to be entitled to reimbursement. In any event, it would not be appropriate to embark upon such a task at this time.
35 The conduct of McMaster in not paying to the plaintiff the sum of $14.5 million until required to do so by an order of this Court does not disentitle McMaster to be reimbursed for his costs and expenses of defending any future litigation brought against him by the plaintiff. It is McMaster's conduct in relation to the conduct of the sale that would be in question in such litigation and it is that conduct as well as McMaster's conduct in defending the proceedings that is relevant to whether or not McMaster would be entitled to reimbursement for his costs and expenses in defending such litigation.
Quantum of retention
36 McMaster's application is supported by an affidavit sworn by his solicitor, Leith Ayres, on 8 March 2007, in which Mr Ayres makes an estimate of the legal fees and other costs and expenses that McMaster might incur if the plaintiff commenced proceedings against him and he defended the proceedings. Mr Ayres deposes that he is unable to calculate
(Page 16)
- with any degree of certainty the legal fees and other expenses that the Controller might incur because of the uncertain nature of the litigation. Notwithstanding that, Mr Ayres has prepared a draft bill of anticipated costs which outlines his estimates of the legal fees and other costs and expenses that McMaster may potentially incur in the circumstances outlined. Mr Ayres deposes that he has prepared the draft bill of anticipated costs on a conservative basis, meaning that he has deliberately erred on what he considers to be the higher side of the likely legal fees and other costs and expenses. The draft bill totals $624,367.00. Some of the major items are:
| $20,165 |
| $33,000 |
| $63,525 |
| $113,036 |
| $69,545 |
| $30,943 |
| $131,065 |
| $40,000 |
| $30,000 |
37 The nature of the plaintiff's threats implicit in its reservation of its rights gives little indication of the scope of any proceedings that might be brought. The sum of $500,000 seems high, but in light of the uncertainty of the proceedings that might be brought it is not possible to say that the sum involves any gross overestimate. The plaintiff has not commenced proceedings and has declined to elaborate upon the nature of the proceedings it might bring. In those circumstances it can hardly complain that the estimate made by McMaster's solicitors of likely costs of such litigation is excessive.
(Page 17)
Conclusion
38 I will make an order that McMaster is entitled to retain the sum of $500,000 from the net proceeds from the sale of the Golden Bay land to which the plaintiff is entitled by virtue of the Consent Order dated 6 April 2006 (Plaintiff's Proceeds) to satisfy any legal fees and other costs and expenses which McMaster has incurred or incurs in relation to any proceedings or allegations against him by the plaintiff or any person claiming through the plaintiff.
39 Such an order does not authorise or entitle McMaster to withdraw any amount from the proceeds of the sale of the Golden Bay land to satisfy any legal fees or other costs and expenses which he has incurred or incurs in relation to any proceedings or allegations against him by the plaintiff or any person claiming through the plaintiff.
40 McMaster seeks an order that his costs and expenses of this application be paid from the Plaintiff's Proceeds on a full indemnity basis. I decline to make such an order. Whether or not McMaster is entitled to be indemnified against any legal fees and other costs and expenses which he incurs in relation to any proceedings or allegations against him by the plaintiff depends upon the findings that might be made in the course of such proceedings, if commenced. The costs of this application should be reserved.
2
7
1