KIS Reality Pty Ltd v Andrew Reginald Yeo as liquidator of Westpoint Finance Pty Ltd
[2021] WASC 139
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: KIS REALITY PTY LTD -v- ANDREW REGINALD YEO as liquidator of WESTPOINT FINANCE PTY LTD [2021] WASC 139
CORAM: MASTER SANDERSON
HEARD: ON THE PAPERS
DELIVERED : 6 MAY 2021
PUBLISHED : 6 MAY 2021
FILE NO/S: COR 55 of 2017
BETWEEN: KIS REALITY PTY LTD
Plaintiff
AND
ANDREW REGINALD YEO as liquidator of WESTPOINT FINANCE PTY LTD
GUISEPPE MICHELE RIMBALDI as liquidator of WESTPOINT FINANCE PTY LTD
Defendants
Catchwords:
Corporation law - Party seeking to have liquidator explain disbursement of funds - Turns on own facts
Legislation:
Nil
Result:
Originating process dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendants | : | No appearance |
Solicitors:
| Plaintiff | : | Mony De Kerloy |
| Defendants | : | Frenkel Partners |
Case(s) referred to in decision(s):
KIS Realty Pty Ltd v Andrew Reginald Yeo and Giuseppe Michele Rambaldi as liquidators Westpoint Finance Pty Ltd [2016] WASC 149
MASTER SANDERSON:
By originating process filed 20 March 2017, the plaintiff sought to have the sum of $42,351.44 paid to it as a dividend from 'the remaining assets held by the defendant'. The application was supported by an affidavit of Norman Phillip Carey sworn 20 March 2017. Mr Carey is a director of the plaintiff. In his affidavit he refers to a decision I delivered on 8 November 2016 in KIS Realty Pty Ltd v Andrew Reginald Yeo and Giuseppe Michele Rambaldi as liquidators Westpoint Finance Pty Ltd [2016] WASC 149. As a consequence of that judgment I made an order KIS Realty Pty Ltd be admitted as a creditor of the defendants in an amount of $2,282,321.75.
Following the judgment the plaintiff's solicitors wrote to the defendants' solicitors seeking what is described as a 'catch up dividend' to bring its entitlement in line with other creditors who had received dividends. There was some minor dispute about the amount of the dividend. However, by the end of November 2016 the defendants' solicitors had stated they would pay a dividend of $42,351.44 but only after litigation in proceedings involving Westpoint Corporation Pty Ltd (in liq) (receivers and managers appointed) were concluded. The matter dragged on for some time without the dividend being paid and without the defendants' offering any explanation as to when it would be paid. Mr Carey attached to his affidavit a Form 524 which was lodged with the Australian Securities and Investments Commission (ASIC) by the defendants. That document described as 'Presentations of Accounts and Statement, for the period 27 March 2016 to 26 September 2016' showed the liquidators held the sum of $639,976.96. Mr Carey (at least by implication) asks the plaintiff be paid the dividend to which it is entitled. The matter moved in fits and starts but did not make any significant progress until October/November 2020. All the while the plaintiff had maintained its entitlement to a dividend and the defendants had maintained there was no funds from which any dividend payment could be made. The plaintiff answered that submission by saying that the ASIC records showed there were sufficient funds to make the payment and if it was not to be paid then there should be some explanation as to why it was not paid.
It appeared to me the parties were at crossed purposes. On the one hand, the plaintiff maintained it was entitled to a dividend and that it should be paid. If it was not to be paid then the defendants should explain where the money, which the ASIC records indicated they held, had gone. For the defendants part, they maintained they had been transparent from the first and that no funds remained because all available funds had been disbursed for a legitimate purpose.
In an attempt to crystallise the issues between the parties I ordered the plaintiff to file a points of claim. This was done on 24 November 2020. The points of claim read as follows:
1. On 8 November 2016, Master Sanderson delivered judgment in KIS Realty Pty Ltd v Andrew Reginald Yeo & Giuseppe Michele Rimbaldi as Liquidators of Wespoint Finance Pty Ltd [2016] WASC 149 (the Judgment).
2. On 10 November 2016, Master Sanderson made the following order, inter alia, further to the Judgment: 'The Plaintiff’s claim be admitted as a proof of debt in the winding up of the Defendant for the sum of $2,282,321.75'
3. The Plaintiff on 20 March 2017 commenced the present action seeking an order pursuant to Regulation 5.6.68 of the Corporations Regulations 2001 (Cth) on 20 March 2017.
4. The Plaintiff sought and continues to seek the payment of an equalising dividend of $42,351.44 to be paid to it as a dividend from the monies held on hand by the Defendants.
5. Regulation 5.6.67(2) of the Corporation Regulations requires a liquidator to distribute as dividends all money in hand except enough (relevantly) to:
(a) meet the costs of the administration; or
(b) give effect to the provisions of the Act.
6. At the time this application was commenced there was at least $610,000 of funds on hand in the liquidation. For some reason unexplained that had fallen to $582,677 when Mr Yeo swore an affidavit in July in this matter.
7. The basis for the Defendants’ refusal, then, to pay an equalising dividend to the Plaintiff was said by Mr Yeo in that affidavit to be because:
(a) there were two applications currently before the Supreme Court of Victoria which had not yet been determined. That included the Defendants’ application to the Court to have their fees from 3 October 2011 to 3 May 2015 in the amount of $305,784 (plus GST) approved by the Court. The other application was a challenge by the receivers of Westpoint Corporation Pty Ltd (the largest creditor of Westpoint Finance) to all the fees charged by the Defendants; and
(b) the Defendants had further fees outstanding from 4 May 2015 – 23 April 2017 for which they were (or would be seeking approval) in the amount of some $317,000 odd.
8. Apart from these outstanding approvals and disputes concerning the Defendants’ fees, the liquidation was effectively complete.
9. It could readily be seen, at that point, therefore, that if the Defendants had all their outstanding fees approved in due course, there likely could be no money for any further dividend, unless the major creditor was successful in having the fees reduced.
10. Within the meaning of Regulation 5.6.67(2), and viewing the matter prospectively, there might not be any funds available for distribution as a dividend after the costs of the administration were met.
11. Given these circumstances the application was adjourned in mid 2017 by consent pending resolution (or an outcome) of these prospective matters.
12. The matters have now all resolved as follows:
(a) the creditors have, earlier this year, approved the Defendants’ further remuneration in the amount of $305,784 only;
(b) the Defendants have not proceeded to seek (or obtain) any further or other approval for fees;
(c) the action brought by the largest creditor, the receivers of Westpoint Corporation Pty Ltd, has settled on the basis that those proceedings (and all related proceedings and inquiries) was dismissed with no order as to costs and the Defendants were paid $1.00. As part of that settlement those receivers agreed to vote to approve the Defendants’ remuneration (which they did in the said amount of $305,784);
(d) the Defendants have advised that their firm has met the costs of the litigation by the Westpoint Corporation receivers.
13. Accordingly all of the prospective matters raised by the Defendants in July 2017 have been resolved.
14. Against the sum of $610,000 (or $582,677) the only relevant deduction available to these Defendants is the $305,784 in approved fees resolved by creditors earlier this year, leaving at least some $275,000 (within the meaning of Regulation 5.6.68) in the hands of the Defendants and available for distribution.
15. All the costs of the liquidation have now been met including all approved fees due to the Defendants. The Defendants ought immediately pay the equalising dividend of $42,351.44 out of the funds they hold on hand and then, further, distribute the balance held amongst all creditors including the Plaintiff.
16. The Plaintiff also seeks its costs
The status of points of claim in civil litigation in this jurisdiction is somewhat uncertain. Matters commenced under the Corporations Act 2001 are not generally the subject of pleadings. It is in only the rarest of cases pleadings are ordered and then, of course, the normal rules as to pleading will apply. Otherwise, a party's case has to be distilled from a combination of the relief sought in the originating process and the affidavit or affidavits filed in support of that process. Really the action is evidence driven rather than pleading constrained. So while points of claim can serve to elucidate precisely what is being put against a defendant by a plaintiff, they do not stand in the same position as a statement of claim would in an action commenced by writ. This matter has, on the one hand, been assisted by the delivery of points of claim and on the other hand, hindered by the points of claim being given the status of pleadings – which they are not.
The points of claim having been delivered, I ordered that the defendants file an affidavit which answered the claim. The result was an affidavit of Andrew Reginald Yeo sworn 22 January 2021. Relevantly the affidavit reads as follows:
8. The administration returns I have lodged with ASIC on a regular basis every year as the liquidator of the Company show that the cash available in the liquidation on 26 March 2017 was $610,107.58 and that the following expenditure of the Company's funds has occurred since September 2016:–
Period
Expenditure
(a)
27 September 2016 to 26 March 2017
$38,385.20
legal costs
(b)
27 March 2017 to 26 September 2017
$116,572.58
legal costs
$3,958.91
Liquidators' Expenses
(c)
27 September 2017 to 26 March 2018
$31,349.20
Legal costs
(d)
27 March 2018 to 26 March 2019
$59,827.85
Legal costs
(e)
27 March 2019 to 26 March 2020
$175,586.80
Legal costs
$258,500.00
Approved remuneration
$4,365.41
Liquidators' Expenses
$953.84
Liquidators' Expenses (GST Free)
Total
$689,499.79
9. The legal costs incurred over that period of time were paid to (as shown in the administration returns I have lodged with ASIC that are exhibited to this affidavit):–
(a) the law firms Gadens Lawyers and later Dentons Australia Pty Ltd for legal services in connection with legal proceedings in the Western Australia Supreme Court against KIS Realty; and
(b) the law firms Frenkel Partners and later SBA Law for legal services in connection with the WPC Proceedings.
Report to creditors – February 2020
10. In February 2020, I published and distributed to the creditors of the Company, including KIS Realty, the most recent report of the liquidators about the Company, which states, amongst other things, that:–
(a) I have determined (subject to approval of my proposed remuneration) that an equalising dividend will not be able to be paid to KIS Realty – at page 5;
(b) I would be seeking approval for the liquidators' remuneration for the period 3 October 2011 to 3 May 2015 in the amount of $305,784.00 plus GST – at page 7;
(c) the liquidators have further remuneration that requires approval in the sum of $86,157.50 plus GST for the period 4 May 2015 to 24 April 2016 and in the sum of $250,519.60 plus GST for the period 25 April 2016 to 14 May 2017 but it has now become apparent that there would be no commercial benefit in seeking approval for this remuneration – at page 7.
11. The liquidators' remuneration for the period 3 October 2011 to 3 May 2015 was approved in the amount of $305,784.00 plus GST at a meeting of the creditors of the Company that was held on 13 March 2020.
Current status
12. The liquidators have accounted for all receipts and payments in the liquidation of the Company during those periods in those administration returns that were lodged with ASIC. Those returns show all details of all receipts and spending – including the $1 payment received from Kordamentha Pty Ltd on 2 March 2020 in settlement of the WPC Proceedings. KIS Realty has, and always has had, the ability to access this information and documentation from ASIC at any time, as they are a matter of public record.
13. Following the approval of the remuneration of the liquidators on 13 March 2020, a part payment of $258,500 was made on 19 March 2020 towards that approved remuneration. This payment is listed in the administration returns I have lodged with ASIC being ASIC Form 5602 for the period 27 March 2019 to 26 March 2020, which is exhibit ARY21 of this affidavit.
14. Since the administration return that I lodged at ASIC for the period 27 March 2019 to 26 March 2020, the following transactions have occurred, which will appear in the next ASIC lodgement that will be made in or about March 2021:–
(a) on 7 April 2020 there was a receipt of $11,200.00 from SBA Law, being a refund in relation to Counsel fees that were inadvertently paid twice;
(b) on 6 May 2020 there was a receipt of $27,288.00 from the Commissioner of Taxation for GST Refund;
(c) on 11 August 2020 there was a receipt of $981.00 from the Commissioner of Taxation for GST Refund;
(d) on 23 June 2020 there was a payment of $22,000.00 to Pitcher Partners as a further part payment for the approved remuneration.
15. Further to the information set out in this affidavit and its exhibits:–
(a) the liquidators of the Company have so far been unable to pay all of their remuneration for the period 3 October 2011 to 3 May 2015 that was approved on 13 March 2020 – after the part payments of $258,500 on 19 March 2020 and $22,000.00 on 23 June 2020 (identified in this affidavit immediately above) there is currently a shortfall of $50,784 plus GST in the payment of this approved remuneration; and
(b) there is a further sum of about $847,000 of recorded work in progress for which remuneration approval has not yet been sought, simply because I formed the view that there was no utility in doing so as there are likely to be insufficient funds remaining in the liquidation of the Company with which to pay that remuneration.
16. There is currently $18,074.28 being held in the liquidators' bank account for the Company. The Company has no other assets. This legal proceeding is the last remaining issue the liquidators need to finalise before they can complete the winding up of the Company and deregister it. Depending upon what further expenses the liquidators incur and what funds remain in the account shortly prior to the completion of the winding up of the Company, these remaining funds may be applied towards the shortfall in the payment of the liquidators' approved remuneration. There are no funds remaining with which to pay any equalising or further dividend to KIS Realty or to any other creditor.
In passing I should note Mr Yeo's affidavit contains opinions as to the merits of the action which are both inadmissible and objectionable. Mr Yeo's personal views as to the worth of the action are matters for him and him alone. It is of no benefit for him to share those opinions with anyone. The affidavit ought have been more carefully drawn to exclude Mr Yeo's personal views. Liquidators are officers of the court. If ordered to file an affidavit by the court, they should do so ensuring the affidavit is in a proper form. This should be done irrespective of their personal view as to whether the step is necessary.
Faced with this affidavit, the plaintiff significantly changed its position. A flavour of this change can be illustrated by quoting two paragraphs of the plaintiff's submissions filed 26 February 2021:
21. If these Liquidators had adhered to their duties (and the procedures of the Corporation Regulations) with the requisite degree of care and skill they would have either not paid out any dividends to creditors until the claim was resolved (admitted or otherwise) or, alternatively, provisioned for it. They had plenty of time after June 2008 to do that.
22. In relation to the $730,000, that, at all relevant times, was a pool of money available to these Liquidators to pay out the dividend this Plaintiff was entitled to, in accordance with Corporation Regulation 5.6.68. That they have paid away this money in circumstances where they knew of the claim but failed to ascertain it or properly warn the Plaintiff that they were going to pay out and give the Plaintiff an opportunity to participate in the payment is a matter for them.
It is apparent the basis upon which the plaintiff now puts its claims have changed. In written submissions counsel for the defendants set out three grounds upon which he said the plaintiff's claim had been made. First, whether the plaintiff had a right to a catch up dividend if there were surplus funds to do so. Second, whether payments made by the liquidators of $275,000 and $177,000 were properly authorised. Finally, whether the liquidator's remuneration payments were properly authorised by resolutions of creditors. Those were the matters dealt with in Mr Yeo's affidavit. The reformulated claim, as advanced in the submissions, focused on whether appropriate notice of a dividend was given to the plaintiff under reg 5.6.65. Essentially, what had occurred was that the plaintiff had moved from seeking payment of a dividend to seeking damages from the defendants.
In my view, the defendants have made good their position. All along the plaintiff's aim in these proceedings had been to find out what became of moneys held by the liquidators. If funds were still held by the liquidators the plaintiff wanted to be paid the dividend to which all parties agreed it was entitled. The explanation as to why no funds were available having been provided, the plaintiff changed its position. That is unfair to the defendants. It is not consistent with the process that was filed and the basis upon which that process has been advanced. Accordingly, the plaintiff's originating process should be dismissed.
On publication of these reasons the parties ought agree a minute of orders or file competing minutes. If no agreement can be reached as to costs the parties should file short submissions on this issue within seven days.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
6 MAY 2021
0