Kardiasmenos v Pioneer Management Pty Ltd - [2010] NSWSC 683

No judgment structure available for this case.

CITATION: Kardiasmenos v Pioneer Management Pty Ltd [2010] NSWSC 683

HEARING DATE(S): 08/06/10

JUDGMENT DATE :
30 June 2010

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: 1. I order that the notice of motion filed by Nick Kardiasmenos on 26 March 2010 be dismissed.
2, I direct that
1. Richard James Porter, within seven days, give to both Nick Kardiasmenos and my Associate notice in writing whether or not he presses for a costs order against Nick Kardiasmenos in respect of the notice of motion filed by Nick Kardiasmenos on 26 March 2010.
2. If such notice in writing states that Richard James Porter presses for a costs order, Nick Kardiasmenos deliver to Richard James Porter and to my Associate, within fourteen days after his receipt of the notice, a written statement of the grounds, if any, on which he opposes the making of the costs order.
3. If any such written statement of grounds is so delivered, any submissions of Richard James Porter in reply be reduced to writing and be delivered to Nick Kardiasmenos and my Associate within fourteen days after receipt of the written statement of grounds.

CATCHWORDS: CORPORATIONS - winding up - winding up by the court - application of assets by liquidator - order of application - TRUSTS - court previously recognised company in liquidation as holding land on trust for third party - funds remaining with company and liquidator in accordance with order - whether third party a creditor of company for rates and taxes on land paid by him - if so, whether secured or unsecured - whether third party beneficiary bound to indemnify company as trustee for rates and taxes

LEGISLATION CITED: Corporations Act 2001 (Cth), ss 473(2), 556(1), 556(2)
Land Tax Management Act 1956, s 47(1)
Local Government Act 1993, s 550(1)
Supreme Court (Corporations) Rules 1999, rule 9.4

CATEGORY: Principal judgment

CASES CITED: Ghana Commercial Bank v Chandiram [1960] AC 732
Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd [2004] NSWSC 1224; (2004) 213 ALR 373
Hardoon v Belilios [1901] AC 118
Kardiasmenos v Pioneer Management Pty Ltd [2009] NSWSC 1106
Mead v Watson [2005] NSWCA 133; (2005) 23 ACLC 718
Nick Kardiasmenos v Pioneer Management Pty Ltd [2005] NSWSC 770
Nick Kardiasmenos v Pioneer Management Pty Ltd [2005] NSWSC 778
Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290
Re Suco Gold Pty Ltd (1983) 33 SASR 99, Re French Caledonia Travel Service Pty Ltd [2003] NSWSC 1008; (2003) 59 NSWLR 361
Re Timeshare Resort Club Ltd [2010] FCA 673
Venetian Nominees Pty Ltd v Conlan (1998) WAR 96

PARTIES: Nick Kardiasmenos - Plaintiff
Pioneer Management Pty Ltd - Defendant

FILE NUMBER(S): SC 2002/064856

COUNSEL: Plaintiff in person
Mr G Lancaster - Liquidator

SOLICITORS: Plaintiff in person
Access Law Group - Liquidator

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY 30 JUNE 2010

2002/064856 NICK KARDIASMENOS v PIONEER MANAGEMENT PTY LTD

JUDGMENT

1 I am dealing with a notice of motion filed by the plaintiff, Mr Kardiasmenos, on 26 March 2010. The notice of motion, which was drawn by Mr Kardiasmenos himself, names the “person affected by orders sought” as Mr R J Porter, liquidator of Pioneer Management Pty Ltd (“Pioneer”). That company is the first defendant in the proceedings.

2 The history of the proceedings need not be recounted in its entirety. It is sufficient to note that the matters now sought to be agitated by Mr Kardiasmenos arise, in large measure, from

Nick Kardiasmenos v Pioneer Management Pty Ltd

(b) a decision of Senior Deputy Registrar Musgrave of 27 November 2008; and

Kardiasmenos v Pioneer Management Pty Ltd

3 A number of matters of background are uncontentious. Pioneer became subject to winding up by virtue of an order made by this court on 2 May 2005 under the Corporations Act 2001 (Cth). Mr Porter was appointed liquidator and has continued in that office. At the time the winding up order was made, Pioneer was already party to these proceedings in which Mr Kardiasmenos sought certain relief in respect of land (referred to as “the larger block”) of which Pioneer was the registered proprietor. Indeed, the first hearing before Smart AJ had taken place some five months before the winding up order was made.

4 On 20 July 2005, Smart AJ made declarations and orders which included the following:

“1. Declare that the larger block (being Lot 10 DP 700704) known as Lot 10 Whitechapel Road Ambervale) is held on trust by Pioneer Management Pty Ltd (In Liq) for the plaintiff, Nick Kardiasmenos.

4. Note that on settlement of the sale and payment of the sum of $50,000 into the joint account in the names of the solicitors for the plaintiff and the solicitor for the Liquidator, the Liquidator will execute in registrable form and deliver a withdrawal of his caveat to the solicitor for the plaintiff or his nominee.

5. Declare that the equitable interest of the plaintiff in the larger block takes priority over any interest held by the fourth defendant, Sai Meng Lee.”

5 The upshot of the 20 July 2005 judgment was thus that Mr Kardiasmenos was recognised as beneficially entitled to the land (with Pioneer holding the land upon trust for him) but that Mr Kardiasmenos’s interest was subject to an equitable lien in favour of Pioneer for recoupment of the items referred to in order 2. In relation to the last-mentioned element, Smart AJ followed Re Suco Gold Pty Ltd (1983) 33 SASR 99, Re French Caledonia Travel Service Pty Ltd [2003] NSWSC 1008; (2003) 59 NSWLR 361 and Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd [2004] NSWSC 1224; (2004) 213 ALR 373. Furthermore, Pioneer was ordered to execute a transfer of the land to Mr Kardiasmenos, subject to his undertaking in order 3. That undertaking contemplated sale of the land by Mr Kardiasmenos and retention by him of $50,000 out of the sale proceeds, with that sum being paid by Mr Kardiasmenos into a controlled moneys account for application towards the several items referred to in order 2.

6 The Registrar’s decision of 27 November 2008 concerned the remuneration of Mr Porter as liquidator of Pioneer. Senior Deputy Registrar Musgrave fixed the remuneration at $20,661.10 and noted that “disbursements (including legal disbursements) are not to be claimed under these rules, as they do not form part of the remuneration of the office-holder”. His reference to “these rules” was obviously a reference to the Supreme Court (Corporations) Rules 1999 and, in particular, rule 9.4 thereof.

7 Mr Kardiasmenos later sought a review of the Registrar’s decision. He did so by filing a notice of motion in these proceedings on 22 December 2008. Mr Porter, in turn, filed an application on 13 March 2009 seeking an order for the payment of $25,000 (or such other sum as the court might determine) in part payment of his remuneration and orders and directions regarding the disbursement of moneys for his remuneration and expenses. On 16 October 2009, Smart AJ made orders recorded in his judgment of that date as follows:

“1. Dismiss the application of 22 December 2008 of Mr Kardiasmenos seeking the review of a decision of a Registrar determining the remuneration of the Liquidator of Pioneer Management Pty Limited (In Liquidation).

3. On the assumption that the Liquidator treats Mr Kardiasmenos as an unsecured creditor in respect of his payment of Council rates and land tax (and there is no appeal from the Liquidator’s determination), order that the Liquidator be authorised to appropriate $35,000 on account of his remuneration to date to himself and to pay all proper disbursements (including the costs of the petitioning creditor) out of the balance. If, on the other hand, the Liquidator treats Mr Kardiasmenos as a secured creditor in respect of either of these payments, then in respect of such payments it or they would have to paid out of such monies to Mr Kardiasmenos in priority to any payments to the Liquidator for his remuneration or disbursements. This does not preclude the Liquidator and Mr Kardiasmenos reaching a compromise on these issues to avoid further expense. This Order is without prejudice to the rights of the Liquidator to make application for further remuneration if so advised or seeking to obtain further monies to pay proper disbursements.

4. Order Mr Kardiasmenos to pay the costs of the Liquidator of the application to review the Registrar’s decision of 27 November 2008.

5. Order that the costs of the application of the Liquidator filed 13 March 2009 be costs of the winding up.

6. Liberty to apply on seven days notice.”

8 As far as review of the Registrar’s determination of liquidator’s remuneration is concerned, therefore, it is clear that Smart AJ decided that Mr Kardiasmenos’s challenge to the Registrar’s decision was without merit but that there should be payment of $35,000 for remuneration up to the date of the order (some eleven months after the date of the Registrar’s decision) with that remuneration to be drawn from a special fund created out of the proceeds of the sale of the land. The result of the review of the liquidator’s remuneration must therefore be taken to be that there was a re-quantification by the court in the sum of $35,000 for the period up to 16 October 2009. This is made clear by paragraph 52 of the judgment of 16 October 2009.

9 The reference in order 2 of 16 October 2009 to moneys in a controlled moneys account of solicitors is a reference to the sum of $50,000 placed in such an account as mentioned in items 3(c) and 4 of the orders of 20 July 2005. Those moneys, together with accrued interest, were in due course transferred to Mr Porter in accordance with order 2 of 16 October 2009. More will be said about those moneys presently.

10 It is against this background that Mr Kardiasmenos advanced the claims with which I am now dealing, being claims for orders as follows:

“1. That Mr R J Porter (the liquidator) refund $21,613.48 plus interest ($5.37 per day from 6 November 2009) to the funds set aside by Acting Justice Smart in the judgement of 20 July 2005 and 16 October 2009.

2. That the Liquidator reimburses Mr Kardiasmenos $16,160.06 from the funds under his control to satisfy the agreement made on 28 September 2005 within 7 days.

3. That the surplus of the funds be paid to Mr Kardiasmenos being the ultimate beneficiary within 7 days.

4. That the costs of the Liquidator be his personal costs.

5. Costs.”

11 It will be seen that order 3 made by Smart AJ on 16 October 2009 contemplated two alternative possibilities and made different provision by reference to each. The first possibility was that Mr Porter, as liquidator, would treat Mr Kardiasmenos as an unsecured creditor “in respect of his payment of Council rates and land tax”. In that event, Mr Porter was authorised by order 3 to do two things: first, to appropriate out of the fund represented by the moneys in the controlled moneys account $35,000 on account of his remuneration to 16 October 2009 and, second, to pay all proper disbursements (including the costs of the petitioning creditor) out of the balance, that is, the balance of the fund after appropriation of the $35,000.

12 The alternative possibility addressed by order 3 was that Mr Porter would treat Mr Kardiasmenos as a secured creditor in respect of the council rates or the land tax or both. In that event, Mr Kardiasmenos was to be regarded as having a claim on the particular fund ranking ahead of Mr Porter’s entitlement to resort to the fund for his remuneration and disbursements.

13 I should explain the reference to payments by Mr Kardiasmenos for council rates and land tax. Mr Kardiasmenos negotiated a sale of Pioneer’s land to an arm’s length purchaser in 2005. To ensure that a clear title could be given on settlement of the sale to that purchaser, it was necessary for outstanding council rates and land tax to be paid. Because Pioneer was the registered proprietor of the land, these imposts represented debts of Pioneer, at least from the perspective of the revenue authorities. Mr Kardiasmenos paid these amounts out of his own funds. He paid $8,245.78l for rates and $7,443.28 for land tax.

14 The alternatives envisaged by Smart AJ’s order 3 of 16 October 2009 reflected two possibilities as to the consequences of Mr Kardiasmenos having made the payments for rates and land tax: either that he thereby became entitled to the benefit of a statutory charge or that he did not become so entitled (on either assumption, Mr Kardiasmenos became a creditor of Pioneer in respect of the sums paid by him). According to each alternative, the fact that Mr Kardiasmenos made the payments caused Pioneer to be indebted to him. That assumption underlies the whole of order 3.

15 Mr Porter proceeded on the basis that Mr Kardiasmenos was a creditor of Pioneer but did not become entitled to the benefit of any statutory charge. It is, I think, desirable to test the validity of that view (accepting, for the moment, the proposition that Mr Kardiasmenos’s payment of the rates and land tax caused Pioneer to become indebted to him). I say that because, while the matter is not raised in a direct way by Mr Kardiasmenos’s present application, it will assist in the quelling of the ongoing controversy for Mr Kardiasmenos and Mr Porter to have a decision of the court on the matter.

16 The possibility (referred to in order 3 of 16 October 2009) that Mr Kardiasmenos might properly be regarded by the liquidator as “a secured creditor in respect of either of these payments” (that is, “his payment of Council rates and land tax”) has regard to statutory provisions under which these imposts are charged on the land to which they relate. By force of s 550(1) of the Local Government Act 1993, rates levied under that Act in respect of particular land “are a charge on the land”. Under s 47(1) of the Land Tax Management Act 1956, land tax “shall until payment be a first charge upon the land taxed”.

17 In certain circumstances, a person who satisfies in full a secured debt payable by someone else preserves the security for his own benefit and, by virtue of the payment, becomes a creditor entitled to that security. As the Privy Council said in Ghana Commercial Bank v Chandiram [1960] AC 732 at 745:

“It is not open to doubt that where a third party pays off a mortgage he is presumed, unless the contrary appears, to intend that the mortgage shall be kept alive for his own benefit.”

18 Intention is all-important. Can it be said in the present case that Mr Kardiasmenos, in making the payments of council rates and land tax to facilitate the settlement of the land beneficially owned by him by means of the transfer executed by Pioneer, intended that the statutory charges upon the land sold should be kept alive for his own benefit? The answer is plainly “no”.

19 The contract for sale to the arm’s length purchaser no doubt required that an unencumbered title be delivered to that purchaser on completion. For that to be achieved, the land had to be freed from the charges by which it was encumbered by operation of the Local Government Act and the Land Tax Management Act. That position could only be achieved by payment of the outstanding rates and land tax. Mr Kardiasmenos’s intention was, of necessity, that the payments made by him should put an end to the charges affecting the land. Otherwise, the sale could not be completed. Mr Kardiasmenos cannot have had any intention whatsoever that the charges should remain alive after he had made the payments. He made the payments for the clear and specific purpose of getting rid of the charges. (Nor, I might add, is there any suggested basis on which the statutory charges affecting the land could be said somehow to have attached to the proceeds of sale).

20 It follows that if Mr Kardiasmenos, by reason of the making of the payments, became a creditor of Pioneer, he did not thereby attain the status of a secured creditor of Pioneer.

21 The fact that the court recognised Mr Kardiasmenos as the beneficial owner of the land and Pioneer as a trustee for him had another effect to which it is now necessary to refer. A trustee has, in general, a right to be indemnified by the beneficiary for liabilities property incurred. As Lord Lindley said for the Privy Council in Hardoon v Belilios [1901] AC 118, “the plainest principles of justice require that the cestui que trust who gets all the benefit of the property should bear its burdens unless he can shew some good reason why his trustee should bear them himself”.

22 In the present case, Mr Kardiasmenos was recognised by the court as the person who “gets all the benefit of the property”. That was the effect of order 1 of the 20 July 2005. The lien recognised by order 2 of 20 July 2005 was not inconsistent with the full beneficial ownership residing in Mr Kardiasmenos. He was therefore required, by principles of equity, to bear the burdens of the property, including those for council rates and land tax, unless he could show some good reason why Pioneer should bear them itself. No such reason can be suggested. The decision of 20 July 2005 did not recognise any interest of Pioneer in the land or indicate any basis for benefit to Pioneer out of the land, except for the ordinary incidents of trusteeship derived from the cases mentioned at paragraph [5] above and reflected in order 2 of that date.

23 There is accordingly good reason to question the assumption that Mr Kardiasmenos, by paying the council rates and land tax charged on the land, became a creditor of Pioneer. The more accurate characterisation of events, in my view, is that he thereby performed his equitable obligation, as beneficiary, to bear the burdens of the trust property and therefore to indemnify the trustee against those burdens. On that basis, the making of the payments by Mr Kardiasmenos did not cause any right against Pioneer to accrue to him.

24 On 23 October 2009, Mr Porter, as liquidator of Pioneer, received from the controlled moneys account a total of $59,941.82 (being the original $50,000 plus interest earned thereon). The moneys were received into a St George Bank account opened by Mr Porter as liquidator. On 4 November 2009, the following payments were made out of that bank account:

$26,400.00 (inclusive of GST) for liquidator’s remuneration;

$26,000 (inclusive of GST) for fees charged by the liquidator’s solicitors;

$3,729.59 (inclusive of GST) for other disbursements incurred and paid by the liquidator.

25 On 26 November 2009, $3,328.64 (inclusive of GST) was paid out of the proceeds of the controlled moneys account still remaining in Mr Porter’s bank account. This was paid to the Office of State Revenue, the plaintiff by which the winding up order was obtained, and represented its costs of the winding up proceedings.

26 After the four payments just mentioned had been made and after allowing for 30 cents bank interest credited and bank fees of $62.45 debited, there was, at 31 March 2010, a balance of $421.44 only remaining of the original $59,941.82.

27 In claiming an entitlement to the orders 1, 2 and 3 set out at paragraph [10] above, Mr Kardiasmenos relies on two propositions. The first is that a contract was made on 28 September 2005 between him and Pioneer that, if Mr Kardiasmenos paid the council rates and land tax amounts to which reference has been made, those amounts would be deducted from the $50,000 in the controlled moneys account and paid to Mr Kardiasmenos. The second proposition relied on by Mr Kardiasmenos is that the true effect of the orders of 16 October 2009 is that Mr Porter became entitled to $35,000 as a lump sum and that this was to cover the totality of his remuneration, legal costs and other disbursements.

28 I deal first with the alleged contract. Mt Kardiasmenos points to a letter he wrote on 28 November 2005 to Mr Porter. The letter reads in part as follows (the “Mr Barrett” referred to is an employee of Mr Porter’s firm):

^th

29 Mr Kardiasmenos relies on the fact that a letter to him from the liquidator’s solicitors dated 9 January 2006 referred to this letter of 28 November 2005 but did not deny or question the statement in it about what Mr Barrett had said.

30 Mr Barrett gave evidence that he spoke to Mr Kardiasmenos on 4 October 2005. Mr Barrett’s file note of the conversation reads:

“He confirmed that he has a buyer for the properties and that they have exchanged contracts on 1/9/05 for around $650,000. The buyer wants the outstanding debts which attach to the land paid before settlement. Also he said that his solicitor had sent us documents to transfer the land to the plaintiff.

He is handling the settlement himself. The buyer was looking to settle within 2 weeks.”

31 Mr Barrett also gave evidence of a conversation with Mr Kardiasmenos on 1 November 2005. The file note of that conversation does not refer to the matter of the outstanding rates and land tax.

32 Mr Barrett denies having made any agreement with Mr Kiardasmenos in the terms alleged. He says that he did not have any authority to do so and that, in any event, it was his practice and that of the firm to confirm in writing any agreements with creditors or other commitments. He has no record of any letter of confirmation to Mr Kardiasmenos.

33 Mr Kardiasmenos has not proved the making of the agreement he alleges. The most he has proved is that he made in his letter of 28 November 2005 the statement set out at paragraph [28] above and that the solicitors’ letter of 9 January 2006 said nothing in response to that. Silence in response to an assertion does not represent agreement with it – added to which, Mr Barrett has produced a contemporary document (in the form of his file note) quite at odds with Mr Kardiasmenos’s contemporary document.

34 There is, in any event, an objective reason why it is much more likely that Mr Porter did not make the alleged agreement than that he did. Mr Kardiasmenos had been recognised by the judgment and orders of 20 July 2005 as the beneficial owner of the land. By the same judgment and orders, a fund had been set aside for the purpose of defraying certain identified items in the winding up of Pioneer. After 20 July 2005, therefore, the only task of Pioneer and its liquidator – apart from providing a transfer of the land recognising Mr Kardiasmenos’s beneficial ownership of it – was to administer that fund. The company in liquidation had no beneficial interest in the land, save, in a limited sense, by reference to the lien recognised by order 2 of 20 July 2005 reflective of the trustee’s right of indemnity out of trust property. The estate under administration by the liquidator stood to derive no benefit from the land, except by reason of diversion of part of the sale proceeds (to the extent of $50,000) into the controlled moneys account to be established pursuant to item 3(c) of the orders of 20 July 2005 for the specific and limited purposes there identified.

35 In those circumstances, there was no reason at all for Pioneer’s liquidator to concern himself with the payment of council rates and land tax. The asset affected by the liability for those imposts did not, in any beneficial sense, form part of the estate to be administered by the liquidator for the benefit of persons entitled to participate in the winding up.

36 The liquidator’s denial (or, more precisely, that of his relevant employee) that a contract as alleged by Mr Kardiasmenos was made in September or October 2005 is thus strongly supported by the commercial and legal realities of the situation as they existed after 20 July 2005.

37 I proceed to consider next the contention of Mr Kardiasmenos that the true effect of the orders of 16 October 2009 is that Mr Porter became entitled to $35,000 as a lump sum and that this was to cover the totality of his remuneration, legal costs and disbursements. I do so, for the moment, on the assumption that Mr Kardiasmenos was properly regarded as an unsecured creditor of Pioneer in respect of the rates and land tax (in other words, I put aside, at this point, the possibility that payment of those expenses by him was performance of his equitable obligation to indemnify his trustee).

38 The terms of order 3 of 16 October 2009 are clear. If Mr Porter as liquidator treated Mr Kardiasmenos as an unsecured creditor for the rates and land tax amounts (that being the assumption on which I am working at this point), Mr Porter was authorised by order 3, first, “to appropriate $35,000 on account of his remuneration to date to himself” and, second, “to pay all proper disbursements (including the costs of the petitioning creditor) out of the balance”. The reference to “the balance” is, clearly enough, a reference to the balance of the moneys paid out of the controlled moneys account under order 2 (in the event, $59,941.82) remaining after the liquidator’s remuneration (limited, however, to $35,000) had been satisfied.

39 Order 3 drew a distinction between the liquidator’s “remuneration to date” and “all proper disbursements (including the costs of the petitioning creditor)”. The distinction between a liquidator’s remuneration and expenses a liquidator incurs is a clear and well-recognised distinction: see, for example, Venetian Nominees Pty Ltd v Conlan (1998) WAR 96, Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290 and, in recent days, Re Timeshare Resort Club Ltd [2010] FCA 673. The liquidator’s remuneration is the reward he receives for performing his function. It is his or her fee or recompense. In a court-ordered winding up such as the present, the right to remuneration is conferred by s 473(2) of the Corporations Act. There is no expectation that the liquidator meet any expenses of the administration out of that remuneration. The liquidator’s right in respect of expenses properly incurred is a separately existing right to have those expenses paid out of the assets of the company. That right arises from s 556(1), to be discussed presently. It is a right quite distinct from the right to remuneration. It is obvious that Smart AJ had this well-known distinction in mind when he made the orders of 16 October 2009 and that order 3 was made by reference to the distinction.

40 I therefore reject the contention of Mr Kardiasmenos that the true effect of the orders of 16 October 2009 is that Mr Porter was to receive $35,000 as a lump sum and that this was to cover the totality of his remuneration, legal costs and other disbursements, including the petitioning creditor’s costs.

41 I move now to another point relevant to submissions made by Mr Kardiasmenos (and, in doing so, adhere to the assumption stated at paragraph [37] above). Necessarily implicit in order 3 of 16 October 2009 was recognition of the reality that, in giving effect to the order, Mr Porter would observe and adhere to the statutory order of priorities applying in the winding up. He continued to be a liquidator administering the estate of a company in liquidation and the fund of $59,941.82 became, in the circumstances of the case, the only asset available to be applied in the due course of that administration.

42 The relevant order of priorities is that laid down by s 556(1) of the Corporations Act. That section is as follows:

first application

43 Having regard to the s 556(2) definition of the term, Mr Porter is a “relevant authority”. The several items actually paid by him (see paragraphs [24] and [25] above) occupied the following rungs on the order of priorities specified in s 556(1):

petitioning creditor’s costs ($3,328.64 including GST) – s 556(1)(b)

fees charged by the liquidator’s solicitors ($26,000, including GST) – s 556(1)(a) or s 556(1)(dd) or partly one and partly the other, depending on precise circumstances

other disbursements incurred and paid by the liquidator ($3,729.59 including GST) – s 556(1)(a) or s 556(1)(dd) or partly one and partly the other, depending on precise circumstances

liquidator’s remuneration $26,400 including GST) – s 556(1)(de), read in the light of the definition of “deferred expenses” in s 556(2).

44 The first, second and third of these items thus had statutory priority over the fourth. Mr Porter therefore acted appropriately in paying them in full out of the $59,941.82 in priority to any payment on account of his own remuneration. Leaving aside the negligible balance left in the bank account, the remainder of the $59,941.82 – amounting to $26,400 – was properly paid in partial satisfaction of Mr Porter’s remuneration which, by the orders of 16 October 2009, was authorised for payment up to $35,000. To the extent that any of the petitioning creditor’s costs, the outgoings and expenses incurred by the liquidator and the liquidator’s remuneration had to abate because the $59,941.82 was inadequate to cover all in full, it was the last-mentioned that was appropriately selected to suffer. This is because of its inferior position on the s 556(1) ladder of priorities.

45 Mr Kardiasmenos expressed concern about the order in which the four payments listed at paragraphs [24] and [25] above appeared in the liquidator’s bank statement. The fourth was first, the second was second, the third was third and the fourth was fourth, but with all but the fourth made on the same day (4 November 2009) and the fourth made some three weeks later (26 November 2009). In reality, of course, the sequence, in a timing sense, is irrelevant to due and proper implementation of s 556(1). The concept of priority under s 556(1) is not concerned with timing. It is concerned to ensure that all items on one rung of the ladder are paid in full before those on any lower rung participate.

46 The approach taken by Mr Porter was in accordance with the legislation but meant, of necessity, that, although order 3 of 16 October 2009 contemplated that the re-quantified remuneration of $35,000 would be paid before the “balance” for proper disbursements (including the petitioning creditor’s costs) was struck, it was in fact a much smaller amount that was paid as remuneration after the higher ranking items for disbursements (including the petitioning creditor’s costs) had been paid in full in accordance with the legislation. Mr Porter acted properly (and, of course, to his own disadvantage) in proceeding in that way.

47 That brings me to a final point about s 556(1). As the opening words of that section make clear, the several items with which it deals are payable, in the order stated, “in priority to all other unsecured debts and claims”. It follows that, to the extent that Mr Kardiasmenos has an unsecured claim on the estate of Pioneer (whether for the council rates and land tax amounts or otherwise), that claim of his ranks, in point of priority, after all the s 556(1) claims and, therefore, after the four items mentioned at paragraphs [24] and [25] above. It also follows that, since those four items have exhausted the funds in Mr Porter’s hands (and again I disregard as negligible anything now remaining of the $421.44 balance), nothing remains for unsecured creditors not enjoying s 556(1) priority.

48 The foregoing discussion about the interpretation and effect of order 3 of 16 October 2009 is on the footing that Mr Kardiasmenos became an unsecured creditor of Pioneer by reason of his payment of the council rates and land tax. I now address the position according to the alternative basis (which I consider to be preferable) that, by paying those debts of Pioneer charged on the land to which he was beneficially entitled, Mr Kardiasmenos was, in reality, performing his equitable obligation to bear the burdens of that land and to indemnify Pioneer as trustee against those burdens, with the result that the payments he made did not give rise to any right of reimbursement on his part against Pioneer.

49 In the event, neither of the alternative possibilities addressed by order 3 of 16 October 2009 came to pass: Mr Kardiasmenos was neither a secured creditor nor an unsecured creditor in respect of his payment of council rates and land tax. Neither method of application of funds specified in order 3 therefore became binding on Mr Porter by virtue of that order. Rather, he had in his hands $59,941.82 in satisfaction of Pioneer’s entitlement under the lien recognised by order 2 of 20 July 2005 and his duty was to apply that asset in the due course of administration of the estate of the company in liquidation. And that is what he did by paying his disbursements and the costs of the petitioning creditor and causing his remuneration amount to abate in order to allow those higher ranking claims to be paid in full before anything was applied to liquidator’s remuneration.

50 On each of the available approaches – that is, the payments by Mr Kardiasmenos caused him to become an unsecured creditor of Pioneer or, alternatively, did not cause him to be a creditor at all – Mr Porter can be seen to have acted consistently with both the existing orders of the court and the Corporations Act by applying the $59,941.82 as he did.

51 Finally, in relation to the notice of motion before me, there is Mr Kardiasmenos’s claim for an order that “the costs of the Liquidator be his personal costs” (see 4 at paragraph [10] above).

52 Although the precise import of this claim is not altogether clear, Mr Kardiasmenos obviously takes the view that, in respect of some part of the outgoings Mr Porter has incurred, he should be denied the right of recoupment out of the estate under administration. There can be no doubt that the court can, in appropriate circumstances, make an order having that effect. But it will do so only if the liquidator has acted in some way that is, in objective terms, negligent or unreasonable: see, for example, Mead v Watson [2005] NSWCA 133; (2005) 23 ACLC 718. None of the complaints and criticisms levelled at Mr Porter by Mr Kardiasmenos has been shown to have any substance. There is accordingly no basis for the making of an order compelling Mr Porter to bear anything out of his own pocket (the exhaustion of assets in the winding up will no doubt mean that he is, in any event, left out of pocket to some extent, but that is purely by force of circumstances and not because of any finding of unsatisfactory conduct).

53 I order that the notice of motion filed by Nick Kardiasmenos on 26 March 2010 be dismissed.

54 In relation to costs, there is no apparent reason why Mr Kardiasmenos should not be ordered to pay the costs of Mr Porter of and incidental to the notice of motion. However, at this stage and in view of the fact that Mr Kardiasmenos is a litigant in person, I will merely make the following directions:

1. Direct that Richard James Porter, within seven days, give to both Nick Kardiasmenos and my Associate notice in writing whether or not he presses for a costs order against Nick Kardiasmenos in respect of the notice of motion filed by Nick Kardiasmenos on 26 March 2010.

2. Direct that, if such notice in writing states that Richard James Porter presses for a costs order, Nick Kardiasmenos deliver to Richard James Porter and to my Associate, within fourteen days after his receipt of the notice, a written statement of the grounds, if any, on which he opposes the making of the costs order.

55 In the meantime, the question of costs will be reserved.

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Kardiasmenos v Pioneer Management Pty Ltd [2010] NSWSC 683

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CITATION:	Kardiasmenos v Pioneer Management Pty Ltd [2010] NSWSC 683
HEARING DATE(S):	08/06/10
JUDGMENT DATE :	30 June 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	1. I order that the notice of motion filed by Nick Kardiasmenos on 26 March 2010 be dismissed. 2, I direct that 1. Richard James Porter, within seven days, give to both Nick Kardiasmenos and my Associate notice in writing whether or not he presses for a costs order against Nick Kardiasmenos in respect of the notice of motion filed by Nick Kardiasmenos on 26 March 2010. 2. If such notice in writing states that Richard James Porter presses for a costs order, Nick Kardiasmenos deliver to Richard James Porter and to my Associate, within fourteen days after his receipt of the notice, a written statement of the grounds, if any, on which he opposes the making of the costs order. 3. If any such written statement of grounds is so delivered, any submissions of Richard James Porter in reply be reduced to writing and be delivered to Nick Kardiasmenos and my Associate within fourteen days after receipt of the written statement of grounds.
CATCHWORDS:	CORPORATIONS - winding up - winding up by the court - application of assets by liquidator - order of application - TRUSTS - court previously recognised company in liquidation as holding land on trust for third party - funds remaining with company and liquidator in accordance with order - whether third party a creditor of company for rates and taxes on land paid by him - if so, whether secured or unsecured - whether third party beneficiary bound to indemnify company as trustee for rates and taxes
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 473(2), 556(1), 556(2) Land Tax Management Act 1956, s 47(1) Local Government Act 1993, s 550(1) Supreme Court (Corporations) Rules 1999, rule 9.4
CATEGORY:	Principal judgment
CASES CITED:	Ghana Commercial Bank v Chandiram [1960] AC 732 Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd [2004] NSWSC 1224; (2004) 213 ALR 373 Hardoon v Belilios [1901] AC 118 Kardiasmenos v Pioneer Management Pty Ltd [2009] NSWSC 1106 Mead v Watson [2005] NSWCA 133; (2005) 23 ACLC 718 Nick Kardiasmenos v Pioneer Management Pty Ltd [2005] NSWSC 770 Nick Kardiasmenos v Pioneer Management Pty Ltd [2005] NSWSC 778 Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290 Re Suco Gold Pty Ltd (1983) 33 SASR 99, Re French Caledonia Travel Service Pty Ltd [2003] NSWSC 1008; (2003) 59 NSWLR 361 Re Timeshare Resort Club Ltd [2010] FCA 673 Venetian Nominees Pty Ltd v Conlan (1998) WAR 96
PARTIES:	Nick Kardiasmenos - Plaintiff Pioneer Management Pty Ltd - Defendant
FILE NUMBER(S):	SC 2002/064856
COUNSEL:	Plaintiff in person Mr G Lancaster - Liquidator
SOLICITORS:	Plaintiff in person Access Law Group - Liquidator