Fuller & Anor and Sadler & Anor

[2017] FamCA 243

FAMILY COURT OF AUSTRALIA

FULLER AND ANOR & SADLER AND ANOR [2017] FamCA 243

FAMILY LAW – COSTS – Costs of Court appointed receivers – Where the appointment of receivers was terminated by the full court – Where termination of receivers does not invalidate their entitlement to claim for remuneration, expenses, and costs – Issue whether the work undertaken after a stay was granted should be remunerated – Decided it would be unjust to look back in this way and eliminate some sections of work on the basis that it need not have been done – Where it was alleged each of the three trusts should be attributed the work undertaken for it – Decided the receivers’ entitlement extends to all of the assets as a group – Ordered the Court Receivers costs be paid as quantified

Cameron v Cole (1944) 68 CLR 571
Central Commodity Services Proprietary Limited [1984] 1 NSWLR 25
Boehm v Goodall [1911] 1 Ch 155
Mellor v Mellor [1992] 1 WLR 517

APPLICANTS: Mr Fuller & Mr Martini

FIRST RESPONDENT: Ms Sadler

SECOND RESPONDENT:	Mr Sadler
FILE NUMBER:	NCC	1976	of	2012

DATE DELIVERED: 21 April 2017

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Cleary J

HEARING DATE: 12 April 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:	Mr Golledge
SOLICITOR FOR THE APPLICANT:	Matthews Folbigg Pty Ltd

COUNSEL FOR THE FIRST RESPONDENT: Mr Levick

SOLICITOR FOR THE FIRST

RESPONDENT:

O’Hearn Lawyers

COUNSEL FOR THE SECOND RESPONDENT:

N/A

SOLICITOR FOR THE SECOND

RESPONDENT:

Arnold Lawyers

Orders

1. The Applicants’ remuneration for acting as Court Receivers pursuant to the orders made in this Court on 21 July 2016 (“the July 2016 orders”) be approved in the sum of $30,725.30.

2. The Applicants’ expenses and legal costs for acting as Court Receivers pursuant to the July 2016 orders be approved as follows:

   (i)Expenses $2,779.56;

   (ii)Legal costs for acting as Court Receivers as assessed or agreed on a solicitor and client basis from:

   (a)6 April 2016 to 11 August 2016;

   (b)21 October 2016 to, and inclusive of date of interlocutory hearing (12 April 2017).

3. A declaration that the Applicants are entitled to be indemnified from the assets of the Sadler Family Trust, the I Superannuation Fund and the H Trust (“the Trusts”) in respect of their remuneration expenses and costs.

4. A declaration that the Applicants have a charge over the assets of the Trusts as security for payment of their remuneration and proper expenses as well as the costs of this Application in a Case and of the reasonable costs and expenses of enforcing their right of indemnity.

5. The Application in a Case filed 6 December 2016 and Responses filed in Court by the husband on 12 April 2017 and by the wife on 17 February 2017 are otherwise dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym  Fuller and Anor & Sadler and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCC1976/2012

Mr Fuller & Mr Martini

Applicants

And

Ms Sadler

First Respondent

And

Mr Sadler

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an Application in a Case by former court receivers for approval by the Court of the following claims:

   (1)Remuneration in the sum of $30,725.30;

   (2)Expenses in the sum of $2,770;

   (3)Legal costs in the sum of $51,089.39; and

   (4)Declarations in respect of indemnity from and a charge over the assets of the trusts whose assets they were appointed to receive.

2. The Response of the wife to the Application in a Case was that in the event that remuneration for the receivers was approved, it be apportioned between the trusts in a ratio to which the work was performed.  Likewise, in respect of legal costs.

3. The Response of the husband to the Application in a Case was for an order that the wife pay the remuneration of the receivers and any costs. It was conceded that s 117 of the Family Law Act 1975 (Cth) was not the appropriate power for such an order.

4. The issues to be determined were as follows: 

   (1)Should the sum sought for legal costs include costs incurred by the receivers as a party to the appeal to the Full Court of the Family Court;

   (2)Should remuneration be payable for work undertaken by the receivers in the period either after the Notice of Appeal had been served or, after the stay had been consented to; and

   (3)Should all three trusts be equally affected by an order for payment of remuneration, expenses, and costs, or should payment be attributed in proportion to work undertaken on each individual trust.

Short history of this application

1. On 18 May 2016 the wife filed an Application in a Case seeking an order (inter alia) that receivers be appointed over the property and income of three named entities (the Trusts). 

2. On 21 July 2016 an order was made accordingly in this Court.

3. Third parties affected by the order for the appointment of receivers appealed.  (They will be referred to as the appellants.) 

4. On 17 August 2016 the appellants filed an Application in a Case seeking a stay of the July 2016 orders. 

5. On 22 August 2016 the July 2016 orders were stayed by consent of all parties.

6. On 29 August 2016 the appeal was heard.

7. On 21 September 2016 judgment of the Full Court was delivered.  The appellants were successful in the appeal, and the order for appointment of the receivers was, accordingly, set aside. The appointment of the receivers was terminated by those orders.

Analysis

1. On behalf of the applicants it was properly submitted that the setting aside by the Full Court of the original order appointing the receivers did not adversely affect or invalidate the entitlement of the receivers to claim for remuneration, expenses, and costs incurred during the period of the receivership and afterwards.  Court appointed receivers are entitled to look to the Court for appropriate orders to be made in that respect.

2. This Court was taken, helpfully, to relevant case law on this point and others.  In particular, the decision of the High Court in  Cameron v Cole (1944) 68 CLR 571 at [582]quotes:

   All sales and dispositions of property and payments duly made, and all acts theretofore done by the official receiver, trustee, or other person acting under their authority, or by the Court, shall be valid where a sequestration order is annulled under the Bankruptcy Act.

The issues

1. The first issue to determine is the challenge to the legal costs sought by the receivers in respect of their involvement in the appeal. 

2. The receivers instructed solicitors and counsel to appear, mainly in respect to a reputational issue involving an allegation that there was a conflict of interest between the two receivers appointed.  On behalf of the receivers, it was successfully argued that there was no such conflict, and nothing improper in the appointment of the two receivers.  It was argued, before me, that costs arising from this aspect of the appeal arose from the receivership.

3. I do not accept that submission. But for the reputational issue the interveners could simply have abided the decision of the Full Court without the need for legal representation at all.

4. That is not to say that it was not a proper course for the receivers to take in their own professional interests. (The Full Court addressed that aspect in some detail, despite the appeal succeeding overall). Rather it is a reflection on who should bear the cost of the work

5. I do not consider that the cost of this work undertaken on behalf of the receivers should be visited on the parties in these proceedings. This aspect had no bearing on the parties’ dispute with each other and the appellants.  Accordingly, although an order will be made approving legal costs the order is for defined periods, excluding the period of work undertaken in respect of the appeal. The relevant period for exclusion was helpfully agreed in principle by counsel.

6. The second issue is whether the work undertaken after the Notice of Appeal was provided (which is the husband’s argument) or arguably after the stay was consented to by all parties, should be remunerated. 

7. In this respect, it was argued on behalf of the receivers that they could hardly have been expected to simply cease all work once the stay had been granted; that there were obligations arising in respect of the assets of the trusts, such as insurance and other matters to be routinely attended upon. I accept that is so.

8. It could be said, looking back in retrospect in the knowledge of termination of the receivership, that the receivers could have done less than they did after the stay order was made.

9. However, since there is no challenge mounted to the quality and costing of the work of the receivers overall, I have come to the conclusion that it would be unjust to look back in this way and eliminate some sections of work on the basis that it need not have been done.  There is no proper basis for that.  Accordingly, an order will be made approving the claim for remuneration in its entirety. 

10. The third issue was in respect of the submission on behalf of the wife that each of the three trusts should have attributed to it the work undertaken by the receivers in respect to that particular trust and not as an overall lump sum.

11. The Court was taken to case law, in particular Central Commodity Services Proprietary Limited [1984] 1 NSWLR 25 at [27], a decision of Needham J then sitting as a judge in the Equity Division which reported:

    A receiver’s right to remuneration is not dependent upon the ability of the estate to answer all claims made upon it.

12. The decision , in Boehm v Goodall [1911] 1 Ch 155 at [161] cited internally was this:

    Such a receiver and manager is not the agent of the parties.  He is not a trustee for them, and they cannot control him.  He may, as far as they are concerned, incur expenses or liabilities without their having a say in the matter.  I think it is of the utmost importance that receivers and managers in this position should know that they must look for their indemnity to the assets which are under the control of the Court.  The Court itself cannot indemnify receivers, but it can and will do so out of the assets, so far as they extend, for expenses properly incurred, but it cannot go further.

13. In the decision of Mellor v Mellor [1992] 1 WLR 517 at [527] , Nourse J said this:

    In my judgment, the receiver’s right to be indemnified out of the assets of which he is appointed a receiver extends to all the assets of which he is so appointed, and does not simply attach to those assets which, in the course of his receivership, he is able to bring within his grasp.

14. This is particularly apposite within this case where there are three trusts and differential accounts were set up in the name of each trust, with work undertaken identified  accordingly.

15. However I do not consider that the trusts should be treated separately in this way for the purposes of securing payment.  The receiver’s entitlement extends to all of the assets as a group, and the receivers should not be in a position of finding that there are insufficient assets within any one of the trusts such that work attributed to that trust was then left unpaid. 

16. Orders are made accordingly.

I certify that the preceding twenty nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered on 21 April 2017.

Associate:

Date:  18 April 2017