Huntingdale Village Pty Ltd (Receivers and Managers Appointed) ATF Huntingdale Village Unit Trust v Perpetual Nominees Ltd [No 3]
[2015] WASC 433
•19 NOVEMBER 2015
HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ATF HUNTINGDALE VILLAGE UNIT TRUST -v- PERPETUAL NOMINEES LTD [No 3] [2015] WASC 433
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 433 | |
| Case No: | COR:223/2009 | 28 OCTOBER 2015 | |
| Coram: | LE MIERE J | 19/11/15 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Mr Carey's application unsuccessful | ||
| B | |||
| PDF Version |
| Parties: | HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ATF HUNTINGDALE VILLAGE UNIT TRUST SILKCHIME PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF SILKCHIME UNIT TRUST VANNIN PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF HAY FAMILY TRUST WARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF WARWICK ENTERTAINMENT UNIT TRUST PARAGON APARTMENTS LTD (RECEIVERS AND MANAGERS APPOINTED) PERPETUAL NOMINEES LTD MARK ANTHONY KORDA DAVID JOHN WINTERBOTTOM WESTPOINT CORPORATION PTY LTD (IN LIQ) OREN ZOHAR |
Catchwords: | Discovery Applications to discover documents Costs Taxation of costs |
Legislation: | Civil Judgments Enforcement Act 2004 (WA) Corporations Act 2000 (Cth) |
Case References: | Sheahan v Carrier Air Conditioning (1997) 198 CLR 407 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
SILKCHIME PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF SILKCHIME UNIT TRUST
Second Plaintiff
VANNIN PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF HAY FAMILY TRUST
Third Plaintiff
WARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF WARWICK ENTERTAINMENT UNIT TRUST
Fourth Plaintiff
PARAGON APARTMENTS LTD (RECEIVERS AND MANAGERS APPOINTED)
Fifth Plaintiff
AND
PERPETUAL NOMINEES LTD
First Defendant
MARK ANTHONY KORDA
Second Defendant
DAVID JOHN WINTERBOTTOM
Third Defendant
WESTPOINT CORPORATION PTY LTD (IN LIQ)
Fourth Defendant
OREN ZOHAR
Fifth Defendant
Catchwords:
Discovery - Applications to discover documents - Costs - Taxation of costs
Legislation:
Civil Judgments Enforcement Act 2004 (WA)
Corporations Act 2000 (Cth)
Result:
Mr Carey's application unsuccessful
Category: B
Representation:
Counsel:
First Plaintiff : Mr A Metaxas
Second Plaintiff : Mr A Metaxas
Third Plaintiff : Mr A Metaxas
Fourth Plaintiff : Mr A Metaxas
Fifth Plaintiff : Mr A Metaxas
First Defendant : Ms E Carlean
Second Defendant : Mr J A Thomson SC
Third Defendant : Mr J A Thomson SC
Fourth Defendant : No appearance
Fifth Defendant : Mr J A Thomson SC
Solicitors:
First Plaintiff : Metaxas & Hager
Second Plaintiff : Metaxas & Hager
Third Plaintiff : Metaxas & Hager
Fourth Plaintiff : Metaxas & Hager
Fifth Plaintiff : Metaxas & Hager
First Defendant : Minter Ellison
Second Defendant : King & Wood Mallesons
Third Defendant : King & Wood Mallesons
Fourth Defendant : No appearance
Fifth Defendant : King & Wood Mallesons
Case(s) referred to in judgment(s):
Sheahan v Carrier Air Conditioning (1997) 198 CLR 407
1 LE MIERE J: On 2 July 2014 I ordered the plaintiffs and Mr Norman Carey jointly and severally to pay the second, third and fifth defendants' (the Receivers') costs of two interlocutory proceedings. Mr Carey now applies to suspend the enforcement of that costs order pursuant to s 15 of the Civil Judgments Enforcement Act 2004 (WA). I will start by outlining the events giving rise to the costs order.
The Costs Order
2 The plaintiffs are companies forming part of the Westpoint Group. The group was founded by Mr Carey who is a director of each of the plaintiff companies and of Westpoint Corporation Pty Ltd which is now in liquidation. In September 2005 each of the plaintiff companies and Westpoint Corporation granted a fixed and floating charge over the whole of their assets and undertakings or, in the case of Silkchime Pty Ltd, specific assets, in favour of the first defendant, Perpetual Nominees Ltd as custodian of the ING Mortgage Pool (ING), as security for funds advanced pursuant to a loan agreement. Westpoint Corporation and the plaintiffs defaulted under the loan agreement. On 24 January 2006 ING appointed the Receivers as receivers and managers of various entitles, including the plaintiffs and Westpoint Corporation.
3 In September 2009 the plaintiffs commenced these proceedings against ING and the Receivers alleging misconduct by the Receivers. The proceedings were commenced in the Victorian registry of the Federal Court of Australia and subsequently transferred to this court. The plaintiff companies commenced and prosecute this action on the instructions of Mr Carey.
4 The Receivers applied to disallow amendments to the plaintiffs' reamended statement of claim. I decided that the amendments to paragraphs of the reamended statement of claim should be disallowed and on 2 December 2009 ordered that the plaintiffs have leave to amend their statement of claim. On 2 July 2014 I ordered that the plaintiffs should give security for the Receivers' costs of the action and the proceedings should be stayed until security was provided.
5 King & Wood Mallesons represented the Receivers on their application to disallow amendments to the reamended statement of claim and their application for security for costs. Mallesons rendered invoices to the Receivers for their work. The Receivers paid the invoices with funds from the bank account maintained by the Receivers in respect of the receivership of Westpoint Corporation.
6 On 2 July 2014 I ordered that the plaintiffs and Mr Carey jointly and severally pay the Receivers' costs of their application for security for costs and of their application to disallow amendments to the reamended statement of claim (the Costs Order). On 16 April 2015 those costs were assessed and allowed at $73,061. Mr Carey now applies for orders that the enforcement of the Costs Order be suspended on the ground that the costs have been paid by the plaintiffs.
Receivers issue bankruptcy notice
7 The Receivers issued a bankruptcy notice to Mr Carey which was served on his solicitors on 6 August 2015. The bankruptcy notice claimed that Mr Carey is indebted to the Receivers for $73,061.68, which is the amount assessed under the Costs Order. Mr Carey applied to the Federal Court to set aside the bankruptcy notice on the ground, amongst others, that the amount claimed in the bankruptcy notice was paid before the bankruptcy notice was issued. Mr Carey is also applying to extend the time to comply with the bankruptcy notice, on the grounds that he has applied to this court to stay enforcement of the Costs Order, which is the basis for the bankruptcy notice on the ground that the costs claimed have been paid and the time to comply should be extended until his application to set aside the bankruptcy notice has been heard and until this court has heard and determined his application to suspend enforcement of the Costs Order. Counsel for the parties informed the court that the proceedings in the Federal Court have been adjourned pending the hearing of this application.
The current application
8 On 26 August 2015 Mr Carey commenced this application to suspend the enforcement of the Costs Order. The application is made on the grounds that the costs have been paid by the plaintiffs as attested by the affidavit of Mr Carey sworn 26 August 2015.
Carey applies for production of documents by Receivers
9 This application first came before the court on 10 September 2015. Mr Carey applied for orders that the Receivers produce certain documents including the loan ledger for the loan from ING to Westpoint Corporation and the plaintiff companies. In his affidavit sworn on 9 September 2015 on behalf of the Receivers Mr Morgan stated that the Receivers do not maintain a loan ledger for the loan. Counsel for Mr Carey stated that in light of that evidence Mr Carey did not press for an order that the Receivers produce the loan ledger.
10 Mr Carey's solicitors then requested that ING produce a copy of the loan ledger for the loan from ING to the plaintiff companies. On 15 September ING's solicitors informed Mr Carey's solicitor that the copy of the ledger requested would not be provided and added that ING considered that Mr Carey had all the information he is arguably entitled to from the relevant Form 524s and elsewhere. Mr Carey then requested that his application be listed for further hearing so that he could apply for an order that ING produce the loan ledger.
Carey seeks information from ING
11 The matter was listed for further hearing on 21 September 2015. That morning Mr Carey's solicitor received an affidavit sworn by Mr Ayres, a solicitor for ING, in which he swore that ING had informed him that it had not identified or located the loan ledger. Mr Ayres further stated that subject to any appropriate claim for legal professional privilege, ING did not object to production of the loan ledger and urgent continuous efforts were being taken by ING to search for and locate the loan ledger. Mr Ayres further stated that when the loan ledger was identified by ING it would be produced to the court. Counsel for ING informed the court that ING should be in a position to produce the loan ledger within a relatively short time of the bank officer with knowledge of the matter returning to Australia on 30 September 2015. I ordered that Mr Carey's solicitors inform the solicitors for the Receivers within two days of receiving a copy of the loan ledger from ING. I made other directions in relation to hearing the application.
ING provides loan statement to Carey
12 On 9 October 2015 ING provided to the plaintiffs documents which Mr Morgan describes as the Loan Statement and Statement of Account which are attachments RHM1 and RHM2 to his affidavit sworn on 26 October 2015. The statements were sent to the plaintiffs' solicitor by ING's solicitor who stated that the Loan Statement and Statement of Account reflect all transactions, debits and credits to the relevant accounts for the period 28 September 2005 to 1 October 2015. ING said that it does not have a dedicated ledger as such in relation to the loan because all transactions within the mortgage pool are processed instead through a loans management system which include, amongst others, irrelevant loans.
13 The plaintiffs' solicitor, Mr Metaxas, reviewed the documents and wrote to ING's solicitors on 14 October 2015. Mr Metaxas stated:
The Form 524 lodged by the Receivers with ASIC for Westpoint Corporation Pty Ltd (WPC) for the period 24/1/6 to 23/07/01 records the amount owing under instrument at date of appointment as $34,144,733.65. That amount is similar to the balance in the One Path Loan Statement which was $34,144,733.54. The Form 524 for Bayview Port Melbourne Pty Ltd (BVPM) for the same period records the amount owing under instrument at date of appointment as $39,086,742.18. As regards those matters:
(a) What does your client contend the loan balance to have been as at 24/01/06; and
(b) Is there a separate loan statement for BVPM and if so please send it to me.
14 ING's solicitors responded by email on 15 October stating that ING declined to respond to the queries raised. Mr Metaxas responded in an email on 16 October stating that much if not all of the information he sought would be in documents in ING's possession and if ING would not respond to the requests then Mr Metaxas' clients would be obliged to seek an order for production of those documents.
15 On 21 October Mr Metaxas spoke by telephone to Mr Ayres. After the discussion Mr Metaxas sent an email in which he confirmed that their discussion was to the effect that his client believes that the amount advanced was not the amount recorded in the Loan Statement and it should have been about $5,000,000 more and he understood the error to have been as a result of an additional amount advanced to pay out a registered security on the Bayview development in Port Melbourne.
Carey asserts Westpoint Corporation indebted to plaintiffs
16 On 23 October Mr Metaxas sent an email to the Receivers' solicitors stating that he was seeking information from Mr Ayres about the amount of the advance by ING. Mr Metaxas then referred to an analysis undertaken by his clients which demonstrates that the transfer of money to Westpoint Corporation from the other entities occurred after 2006 so that at all times Westpoint Corporation has been indebted to the other entitles. Mr Metaxas stated that Westpoint Corporation remains indebted to the plaintiffs for amounts that need to be calculated. Mr Metaxas said that there is a further issue relating to the ING loan facility being funded by two lenders, ING and Treasury Custodians, and said that he needed the loans statements from Treasury Custodians. Mr Metaxas concluded by stating that 'having regard to the amount of time required by my clients to assess the Receivers' records my clients will be seeking an adjournment on 28 October'. The Receivers responded later that day, 23 October, stating that they were considering the request for an adjournment and to assist that consideration requested that Mr Metaxas provide further information about the analysis referred to in his email. Mr Metaxas responded later that day making observations about his analysis of the Receivers' records and its significance.
Adjournment application
17 Mr Carey's application to suspend the enforcement of the Costs Order came on for hearing on 28 October 2015. Counsel for Mr Carey, Mr Metaxas, moved for an adjournment of the hearing. Mr Carey sworn an affidavit on 28 October 2015 in support of his application for an adjournment. In his affidavit, after setting out the communications between his solicitors and the solicitors for ING and the Receivers, Mr Carey addresses the significance of the information requested by his solicitor. Mr Carey says that he has engaged a qualified accountant to prepare an accounting for the receiverships based on the Form 524 reports and the Loan Statements obtained from ING. Mr Carey says that without knowing the correct opening balance for the loan it is not possible to finalise this work. He said that when he has the missing information the plaintiffs will adduce evidence as to the state of Westpoint Corporation's cash position as at the relevant dates, that is the dates on which each of Mallesons' invoices were paid, on the basis of payments from the plaintiffs to Westpoint Corporation and payments from Westpoint Corporation to the plaintiffs or any of them.
Adjournment application refused
18 The court has a discretion to adjourn any hearing. I refused Mr Carey's application to adjourn the hearing of his application to suspend the enforcement of the Costs Order for a number of reasons. First, the adjournment application was made on the day set down for the hearing of the substantive application. The court and the other parties had set aside time for the hearing of the application. An adjournment would have delayed the final resolution of the matter and added to the costs. The ultimate aim of court proceedings is justice. However, speed and efficiency are aspects of justice and the court must have regard to procedural justice to the defendants as well as Mr Carey.
19 Secondly, there is not a sufficient reason for the adjournment. Mr Carey sought the adjournment for the purpose of obtaining information from ING. The information is the amount owing under the loan agreement, and secured by the charges, on 24 January 2006, that is when the Receivers were appointed. In his affidavit sworn on 28 October 2015 Mr Carey says that he requires that information so that, with the assistance of a qualified accountant, he can produce a balance sheet for each of the plaintiff companies at any relevant date. In my opinion that will not establish the matters on which Mr Carey's application to suspend the enforcement of the Costs Order are based. The application is based on the claim that the costs payable under the Costs Order have been paid by the plaintiffs. That contention is based upon the claim that Mallesons' invoices were paid by the Receivers from funds they held on constructive trust for the plaintiffs. In my opinion, that cannot be established by drawing balance sheets for the plaintiff companies and Westpoint Corporation at any particular date.
20 Thirdly, Mr Carey has sufficient information available to him for the purposes of the grounds he has advanced for setting aside the enforcement of the Costs Order which he has set out in his affidavit sworn on 26 August 2015. Mr Carey has available to him the Form 524 reports lodged by the Receivers with ASIC in relation to each of the plaintiff companies and Westpoint Corporation. Those reports set out each payment made and received. Mr Carey also has available to him ING's statement of the loan account.
21 Fourthly, Mr Carey seeks the adjournment not for the purpose of obtaining any specified document but for the purpose of obtaining information from ING. Mr Carey has pursued applications to obtain documents and has obtained the documents he sought. It is not consistent with the principles of case management to further adjourn and therefore delay the resolution of Mr Carey's application to enable him to carry out further enquiries and investigations into the balance of the loan account between ING and Westpoint Corporation and the plaintiff companies at different times. Mr Carey's case is based on payments he alleges were made by the plaintiff companies. The Form 524 reports and loan account statements available to him disclose each of the receipts by the Receivers and payments by the Receivers in respect of Westpoint Corporation and each of the plaintiff companies.
22 Fifthly, for the reasons I set out below Mr Carey's application will not succeed whether the loan balance at the relevant time was as stated by ING or is incorrect for the reasons suggested by Mr Carey in his affidavit of 28 October 2015.
Basis of Mr Carey's application
23 Mr Carey's application for suspension of the Costs Order states that the grounds of the application are that the costs taxed and allowed have been paid by the plaintiffs as attested by his affidavit sworn on 26 August 2015. In that affidavit Mr Carey annexes a letter of 23 April 2015 from his solicitors, Metaxas & Hagar, to Mallesons and says that the statements in the letter that the costs ordered to be paid had been paid are true sofar as he was able to determine based upon his review of the Receivers' reports filed at ASIC and the information as to what legal work was done which was attached to the bill of costs for taxation. The letter states that the bill of costs refers to the work carried out between October and December 2010 which is set out in the letter. The letter then states that the Form 524 reports lodged by the Receivers for the period 24 July 2010 to 23 July 2013 record the payments made to Mallesons by the companies in receivership which are then set out. The letter asserts that those payments were made from the cash resources of the plaintiffs and included payment of the costs.
24 In essence, as I understand it, Mr Carey's case is as follows. On 2 July 2014 I ordered the plaintiffs and Mr Carey to pay the Receivers' costs of their disallowance application and their security for costs application. Those costs were awarded in respect of work done by the Receivers' solicitors, Mallesons, which is set out in their bill of costs filed on 13 November 2014 and taxed on 16 April 2015. Mallesons rendered invoices to the Receivers for that work. Those invoices were paid by the Receivers from a bank account opened in the name of Westpoint Corporation Pty Ltd (Receivers and Managers Appointed) in compliance with s 421 of the Corporations Act 2000 (Cth) (Westpoint Corporation Receivership Account). At the time each of the payments was made from the Westpoint Corporation Receivership Account Westpoint Corporation was indebted to the plaintiff companies, or some of them, as a result of loans from those companies to Westpoint Corporation. Westpoint Corporation held the amounts loaned to it by the plaintiff companies on constructive trust for those companies. Therefore, Mallesons' invoices have been paid by the plaintiffs.
Receivers oppose suspension order
25 The Receivers say that Mr Carey's argument cannot succeed for three reasons. First, apart from an amount of $3,680.15, the payments to Mallesons for the invoices rendered were made prior to the making of the Costs Order and a payment made prior to the Costs Order cannot be in satisfaction of the Costs Order. Secondly, any advances by the plaintiffs to the Westpoint Corporation Receivership Account were a loan and give rise to a debt and not a constructive trust. Thirdly, payments made by the Receivers from the Westpoint Corporation Receivership Account are payments made by the Receivers and not by or on behalf of the companies in receivership.
Payments before order might satisfy order
26 Counsel for the Receivers, Mr Thomson SC, submitted that the argument that payments that occurred prior to the Costs Order satisfied the liability to make a payment in satisfaction of the Costs Order suffers from a logical difficulty because a payment made prior to the order cannot be in satisfaction of the order. Mr Thomson further submitted that if the plaintiffs contended they had paid the costs ordered to be paid by the Costs Order they ought to have raised it before the order was made.
27 Counsel for Mr Carey, Mr Metaxas, submitted that the Receivers paid Mallesons for the work which was the subject of the costs order from the plaintiffs' money and the payment was on account of the costs and in satisfaction of the Costs Order. Mr Metaxas submitted that there are circumstances in which a payment made before a costs order may discharge the liability to pay the amount of the Costs Order.
28 Whether or not the plaintiffs had paid the Receivers' costs of the disallowance application and the security for costs application was not addressed by the parties before or at the time of the making of the Costs Order. A Receiver is entitled to deduct and retain his costs and expenses out of the proceeds of realisation of the charged assets. There may be circumstances in which the liability of a company to pay a receiver's costs in accordance with a costs order is discharged by a payment to the receivers, or the payment of the costs by the receivers out of the assets of the company, before the cost order was made. However, it is unnecessary to decide that question because the circumstances of the payment of Mallesons' costs by the Receivers does not discharge the liability of the plaintiffs, or Mr Carey, to pay the costs ordered to be paid by the Costs Order for the following reasons.
Costs not paid out of plaintiffs' assets
29 There is no evidence that the Receivers paid Mallesons' costs out of the assets of the plaintiff companies. The payments were made from the Westpoint Corporation Receivership Account. That account was opened by the Receivers in compliance with the duty under Corporations Act s 421(1) to open and maintain a separate bank account bearing their own names and the name of the corporation. Section 421(1)(c) provides that the receiver must ensure that no such account contains money other than money of the corporation that comes under the control of the receiver and the receiver must keep such financial records to correctly record and explain all transactions that the receiver enters into as the receiver.
30 Mr Carey submits that the Receivers paid Mallesons' invoices with the plaintiffs' funds or assets notwithstanding that the invoices were paid with funds from the Westpoint Corporation Receivership Account. The plaintiffs' argument is set out in an email from Mr Metaxas to Mallesons' solicitors which is annexure NPC26 to Mr Carey's affidavit sworn 28 October 2015:
The analysis thus far undertaken by my clients demonstrates that the transfer of money to Westpoint Corp from the other entities occurred after 2006 so that at all times Westpoint Corp has been indebted to the other entities. If Westpoint paid the other entities what it appears to have owed them from time to time then Westpoint would not have had funds in its statutory account with which to pay the costs of the disallowance application and the plaintiffs would have had funds to pay those costs. The money was paid out of the Westpoint account only because the receivers chose to pay Mallesons rather than the plaintiffs, amongst others. Westpoint remains indebted to the plaintiffs for amounts that need to be calculated.
(a) What has happened is that the assets of the plaintiffs and other entities have been sold and the proceeds used to pay the costs of the receivers and their solicitors for WPC so that as at January 2009 the realisation of WPC's assets had generated $4,765,657 but the expenses incurred in so doing were $8,041,531. As at the same date Warwick's assets had realised $9,795,800 and the expenses incurred in the process were $1,458,790.
(b) When money was paid by the receivers from say Warwick to WPC so that WPC could pay its liabilities which exceeded the value of its assets that was not a loan. The money paid to WPC was held on a constructive trust of which Deane J said in Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583: 'Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle'.
(c) So when WPC paid Mallesons it did so as trustee for the entities who provided the funds so that payment could be made. It follows that the plaintiffs have paid the costs.
31 I do not accept that argument. The Receivers have submitted to ASIC, at six monthly intervals, a Form 524 'Presentation of Accounts and Statement' for Westpoint Corporation and each of the plaintiff companies. The plaintiffs have access to all of the Form 524 reports for the plaintiff companies and Westpoint Corporation which the Receivers have lodged. Mr Carey has annexed some of the Form 524 reports to his affidavit.
32 Shortly after their appointment as receivers and managers of each of the plaintiff companies and of Westpoint Corporation, in compliance with Corporations Act s 421, the Receivers have maintained a bank account with the ANZ Bank in relation to each of the plaintiff companies (Plaintiffs Receivership Account/s) and Westpoint Corporation (Westpoint Corporation Receivership Account). The funds received into the receivership bank accounts include proceeds from realisation of secured assets, income received from secured assets, refunds of expenses and GST, payments in respect of employees under the Federal Government's GEERS or FEG programme and advances from the secured creditor, ING, to pay costs incurred by the Receivers in connection with the relevant receivership. In the case of the Westpoint Corporation Receivership Account the receipts also include payments received from other chargors including the plaintiff companies, representing the reimbursement by those companies of Receivers' fees and disbursements incurred in connection with the receiverships of those companies, which fees or disbursements were initially paid by Westpoint Corporation on behalf of those companies.
33 Since August 2006 Mr Morgan has been involved in lodging the Form 524 reports. Mr Morgan says that the Receivers have from time to time transferred funds between the Plaintiffs Receivership Accounts and the Westpoint Corporation Receivership Account to provide funds where there were insufficient funds in a particular company's receivership bank account to meet expenses. Those transfers have been effected by a cheque or electronic funds transfer. Such transfers are described in the Form 524 as 'loan to Secured Creditor' in the case of a 'paying company' and 'Loan from Secured Creditor' in the case of a 'receiving company'. Mr Morgan says that the reason for applying this description to the transactions is that the receivers of the paying company are making a loan to the secured creditor (in its capacity as chargee of the receiving entity) and the receivers of the receiving company are receiving a loan from the secured creditor (as chargee of the paying company) for the same amount and at the same time. The entries cancel out on consolidation of the Form 524 accounts for Westpoint Corporation and the chargors. Mr Morgan says that no interest is charged or paid on the amounts described as 'Loan to Secured Creditor' and 'Loans From Secured Creditor' shown in the Form 524 accounts lodged with ASIC for Westpoint Corporation and the chargors.
34 The money paid by the plaintiffs to Westpoint Corporation is a loan. There is no constructive trust. Furthermore, it is not possible to trace any of the payments from the Plaintiffs Receivership Accounts into the money in the Westpoint Corporation Receivership Account that was paid by the Receivers to Mallesons in satisfaction of their invoices. Money paid in from the Plaintiffs' Receivership Accounts into the Westpoint Corporation Receivership Account was mingled with other moneys deposited into that account and moneys were withdrawn from the Westpoint Corporation Receivership Account from time to time to pay various expenses. There is no evidence that the money in the Westpoint Corporation Receivership Account, or any part of it, at the time the Receivers withdrew funds to pay Mallesons account were moneys deposited into that account from the Plaintiffs Receivership Accounts.
The Sheahan v Carrier Air Conditioning argument
35 The Receivers further argue that payments made from a bank account opened in compliance with Corporations Act s 421 are payments made by the Receiver and are not payments made by the company or on behalf of the company in receivership. The argument is based upon the decision of the High Court in Sheahan v Carrier Air Conditioning (1997) 198 CLR 407. The issue in Sheahan arose in the context of a claim by a liquidator to recover, as preferences under s 565 of the Corporations Act, payments made by a Receiver to two creditors. A company, TOC, had contracted with Jennings to install air conditioning equipment. TOC had, in turn, subcontracted with Carrier and AirCon. TOC owed Carrier and AirCon for work done. It also owed the ANZ Bank which debt was secured by a charge in favour of the bank. The bank appointed a receiver over the undertaking and assets of TOC. The receiver opened a bank account as required by s 421 of the Corporations Law, which is materially the same as s 421 of the Corporations Act. The proceeds recovered by the receiver from realising TOC's assets were paid into this account. TOC was unable to claim payment from Jennings until relevant work was completed by Carrier and AirCon. Carrier and AirCon refused to complete the work unless and until they were guaranteed payment of their outstanding debts. The receiver paid from the receiver's account amounts to Carrier and AirCon so that they would complete the work. TOC was subsequently wound up. The liquidator sought to recover the payments to Carrier and AirCon on the ground that they were preference payments. Under s 565 payments could only be challenged as preferences if they had been made either by the company or by an agent of the company. TOC was insolvent and the funds available to the receiver would be insufficient to pay the bank. The majority of the High Court held that Carrier and AirCon did not receive a preference. This was essentially because the payments were held to have been made by the receiver and not by TOC. This conclusion was drawn after considering the effects of s 421 and the terms of the debenture under which the receiver was appointed, which set out how money realised by the receiver was to be applied. The first priority was 'payment of all … outgoings, which such receiver or the bank shall think fit to pay'. Finally, after meeting various other priorities, payment was to be made to the bank and the surplus, if any, to TOC. The majority found:
The effect of s 421, in combination with cl 22 of the Debenture, at least goes so far as to oblige the receiver to account for and to apply the proceeds in the account in accordance with the terms of the Debenture. It is unnecessary to determine whether the receiver held the chose in action represented by the s 421 account as a trustee, 'in the full sense', for the Bank. It is sufficient for the purposes of this case that the moneys in the account out of which the three payments in question were made were in no sense the moneys of TOC or moneys held to the order or disposition of TOC (430).
36 Counsel for Mr Carey, Mr Metaxas, sought to distinguish Sheahan on the ground that in Sheahan TOC was insolvent and there would be no surplus in the receivership bank account to be paid to TOC whereas in this case there might be a surplus due to the plaintiff companies, or some of them, on the completion of the receiverships. I do not accept that as a point of distinction with Sheahan. The majority in Sheahan did not decide that the payments out of the receivership bank account were not payments by or on behalf of TOC on the ground that there was no surplus belonging to TOC. Indeed, their Honours made no conclusive finding that there would be no surplus paid to TOC on the completion of the receivership, although it was very unlikely. At [430] their Honours said:
Whilst the evidence is not fully explicit on the matter, it is to be inferred that on all material times there was little prospect of there being any surplus to 'belong to TOC' in terms of cl 22 [of the Debenture].
37 In my view the payments made by the Receivers from the Westpoint Corporation Receivership Account were not paid by or on behalf of the plaintiff companies and therefore did not discharge the liability of the plaintiffs or Mr Carey to pay the Receivers' costs ordered to be paid by the costs order.
Conclusion
38 Mr Carey's application for orders that the enforcement of the costs order made by the court on 2 July 2014 be suspended must be dismissed.
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