In the matter of Australian Hotel Acquisition (in liquidation) and Other Companies
[2011] NSWSC 1441
•24 November 2011
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Australian Hotel Acquisition (in liquidation) and Other Companies; [2011] NSWSC 1441 Hearing dates: 24/11/2011 Decision date: 24 November 2011 Jurisdiction: Equity Division Before: Acting Justice Windeyer Decision: Orders made in terms of paragraphs 5, 6, 7, 9, 10, 11 of the short minutes of order
Catchwords: CORPORATIONS- Companies in liquidation - Trustees of unit trust prior to liquidation - Office of trustee vacated on liquidation - Liquidator continuing to act in connection with trust assets - Position as bare trustee - Whether correct to carry on activities - Whether remuneration should be allowed Legislation Cited: Corporations Act 2001
Trustee Act 1925Cases Cited: Burton Holdings Pty Ltd v The Federal Commissioner of Taxation [2011] FCA FC 79
CGU Insurance Limited V OneTel Limited [2010] HCA 21
Grime Carter & Co Pty Ltd v Whites Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158
G B Nathan & Co Pty Ltd; Re [1991] 24 NSWLR 674
In The Application of Sutherland [2004] 50 ACSR 297
Lord; Re [2005] NSWSC 1044Category: Principal judgment Parties: Australian Hotel Acquisition Limited;
David John Frank Lombe in his capacity as Liquidator of Australian Hotel Acquisition Limited (receivers and managers in liquidation) and 6 other companiesRepresentation: Counsel:
Mr J Stevenson SC, Ms V Whittaker (Plaintiff)
Mr B Katekar (Barcroft Holdings Limited) (creditor)
Solicitor:
Sparke Helmore (Plaintiff)
File Number(s): 2011/00335763
Judgment
The one matter remaining for decision in this action concerns the costs and expenses incurred by the administrators and liquidators of AHA and Ce'Nedra and the remuneration of those administrators and liquidators.
The fact is that Mr Lombe, one of the administrators, may have been overlooked and the application is made by him alone but taking a practical view I think this problem should be passed by.
The question arises because under the trust deeds of the AHA Unit Trust and the Ce'Nedra Unit Trust the position of AHA and Ce'Nedra as trustee was automatically vacated upon appointment of administrators and, perhaps, by appointment of receivers.
No new trustee has been appointed. The trust deeds provided that the power to appoint rested with the unit holders. REAL held all the units in the AHA trust. HPIA held all the units in the Ramada Trust. There was some correspondence between Mr Lombe and the liquidators of REAL as to whether a new trustee was required for AHA, but nothing eventuated.
The position then is that the companies in administration and then in liquidation held the trust assets as bare trustees, but subject to the receivership. The administrators or liquidators continued to run the trust businesses as if the trusteeships had not come to an end.
Meetings of creditors of AHA and Ce'Nedra appear in reality to have been meetings of creditors of the trust. Those meetings of creditors have approved certain payments for expenses and remuneration of the administrators and liquidators and at least in the case of Ce'Nedra distributions for payment of remuneration have been made on the basis of a priority claim.
Although the originating process seeks orders under s 511(1) or 579G(1)(e) of the Corporations Act or advice under s 63 of the Trustee Act 1925 to the effect that the administrators and liquidators were justified in making payments and are justified in making payments for expenses and remunerations not yet paid it is clear having regard to my decision on pooling that s 579G is not relevant. Section 63 of the Trustee Act would not, I think, be an appropriate means of obtaining remuneration not normally allowed to a trustee.
Some cases in which expenses and remuneration have been allowed have been brought by liquidators in summonses for directions, for example, Grime Carter & Co Pty Ltd v Whites Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158 and Re: G B Nathan & Co Pty Ltd [1991] 24 NSWLR 674. In The Application of Sutherland [2004] 50 ACSR 297 Campbell J held that it was pursuant to the inherent jurisdiction of the Court that remuneration could be allowed, and Young CJ in Eq in the case of Re: Lord [2005] NSWSC 1044 was of the same view.
I should say, however, that in each of those three cases the office of trustee had not been vacated. Leaving that aside, which ever position is correct and it appears the inherent jurisdiction is the appropriate power, there is power to order remuneration in appropriate circumstances.
The question then is how the position of the companies as bare trustees bears on this matter.
It is necessary to point out although there is no contradictor that the work done by the liquidators needed to be done by someone. This relates in particular to the Parramatta hotel.
There was a right under the AHA Trust Deed for the trustee to claim remuneration in each year on the basis of 2.5 percent of the value of the trust assets. Whether that right would be of any value if the liabilities of the fund were greater than its assets is not something that needs be decided here and, in any event, such a right under that deed would not enure carry over to a bare trustee. The clear position is, I think, that once the office was vacated the assets formerly held by the companies as trustees pursuant to the trust deeds became held by those companies as bare trustees.
To some extent the entitlement to remuneration and expenses depends on the obligations of those companies as bare trustees. In CGU Insurance Limited V OneTel Limited [2010] HCA 21 a joint judgment of the High Court held while a trusteeship under a deed might have been terminated, the trustee was still under an obligation to vindicate the rights connected to the trust property. In some cases, of course, that would be limited to handing over the trust assets to the beneficiaries but in the case of trusts such as those involved here that could not be done without further work. Dealing with the receivers, obtaining the surplus after sale of Surfers Paradise and work in connection with the Parramatta assets needed to be done. Burton Holdings Pty Ltd v The Federal Commissioner of Taxation [2011] FCA FC 79 supports this view.
Insofar as meetings of creditors have approved the expenses and remuneration of the administrators and liquidators, as those creditors were trust creditors not company creditors this goes a long way to justify the orders sought.
The obligations of a bare trustee to do what is required to preserve trust assets assists the claim. It could not be suggested that it was not appropriate to have a professional person such as Mr Lombe carrying out the necessary work nor that such a person would be prepared to do that work without proper remuneration. In those circumstances it is appropriate for the fees which would be charged for ordinary liquidation work should be allowed in respect of Mr Lombe as liquidator of the company acting as bare trustee.
The result of this I consider is that insofar as the expenses and remunerations have been approved by the creditors and whether these have been paid or not they should be approved as paid or for payment. So far as future remuneration is concerned, the evidence is that the trust creditors of Ce'Nedra would be paid in full while the trust creditors of AHA will not be paid in full.
I have said earlier that it seemed appropriate that future remuneration be approved by those creditors and by REAL. In view of the consent which has been put into evidence by the liquidator of REAL today, it does not seem to me that any future consent of REAL is required and the orders which have been proposed make provision for any remuneration not yet approved to be approved by creditors before payment.
In those circumstances, the orders which have now been put forward should be made.
Orders
The Court makes orders in terms of paragraphs 5, 6, 7, 9, 10, 11 of the Short Minutes of Order initialled and dated 24 November 2011.
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Decision last updated: 25 November 2011
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