Lumsden, Leon Alfred v Long, George Walter - [1998] FCA 1304

FEDERAL COURT OF AUSTRALIA

CORPORATIONS - winding up - preferences - receiver failing to make payments to priority creditors - liquidator recovering funds from receiver - receiver's appointment terminated - whether receiver remains under obligation to priority creditors - whether liquidator assumed obligation upon recovery of company assets

Corporations Law ss 421, 433, 556

Sipad Holdings DDPO -v- Popovic (1996) 14 ACLC 307, applied
Re Pearl Maintenance Services Ltd [1995] 1 BCLC 449, applied
Perrins -v- State Bank of Victoria [1991] 1 VR 749, applied
Inland Revenue Commissioners -v- Goldblatt [1972] 2 ALL ER 202, discussed
Stein v Saywell (1969) 121 CLR 529, cited
James v Commonwealth Bank of Australia (1992) 37 FCR 445, cited
Sheahan v Carrier Air Conditioning Pty Ltd (1997) 147 ALR 1, discussed
Chief Commissioner of Stamp Duties v Buckle (1998) 151 ALR 1, cited

LEON ALFRED LUMSDEN -v- GEORGE WALTER LONG
VG 3163 of 1998

MURPHY JR
MELBOURNE
16 OCTOBER 1998

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 3163 of 1998

BETWEEN:

LEON LUMSDEN
APPLICANT

AND

GEORGE WALTER LONG
RESPONDENT

JUDICIAL
REGISTRAR:
MURPHY JR

DATE OF ORDER:

16 OCTOBER 1998

WHERE MADE:

MELBOURNE

ORDER

The Court orders and declares that the applicant is liable to pay the priority claims listed in paragraph 5 of the application dated 6 May 1998 out of the property of the company.

The application is otherwise dismissed.

The applicant pay the respondent's costs of the proceeding to be taxed in default of agreement.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 3163 of 1998

BETWEEN

LEON LUMSDEN
APPLICANT

AND

GEORGE WALTER LONG
RESPONDENT

JUDICIAL REGISTRAR:

MURPHY JR

DATE:

16 OCTOBER 1998

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

In these proceedings the liquidator of Fine Edge Kitchen Cabinets Pty Ltd (In Liquidation) (ACN 050 029 608) ("the company") seeks declaratory and other relief against the respondent, the former receiver and manager of the company. In particular the applicant seeks declarations that the respondent is liable to a number of priority creditors of the company. The applicant's case is that the respondent, although now no longer the receiver of the company, remains personally liable under the Corporations Law for certain priority debts. The evidence in the proceeding consisted of an extensive affidavit from the applicant and a shorter one from the respondent. Neither deponent was cross-examined.

Resolution of the proceedings requires consideration of the provisions of ss 433 and 556 of the Corporations Law and construction of a deed of settlement between the parties in earlier proceedings in the Court.

Background.
On 1st March 1996 the respondent was appointed receiver and manager of the company. His appointment was purportedly pursuant to a mortgage debenture between the company and its directors, Michael Terlato and Irma Terlato, dated 30th June 1994, which created a floating charge which was registered with the Australian Securities Commission. On 26th May 1996 the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1998] FCA 1304
Decision Date: 16 OCTOBER 1998

CaseChat Overview and Summary

The Federal Court of Australia was called upon to decide a dispute between Leon Alfred Lumsden, the liquidator of Fine Edge Kitchen Cabinets Pty Ltd, and George Walter Long, the former receiver and manager of the company. Lumsden sought to hold Long personally liable for certain priority debts of the company, specifically unpaid employee claims, under sections 433 and 556 of the Corporations Law. Long argued that his obligation as receiver had ceased with his resignation and the transfer of company assets to Lumsden. The court had to determine whether Long's personal liability for the priority debts continued despite his resignation and the transfer of assets.

The court examined sections 433 and 556 of the Corporations Law, which provide for the payment of certain debts in priority to other claims. Section 433 imposes a personal obligation on a receiver or person taking control of company property to pay priority debts from the property in their hands. Section 556 requires that priority debts be paid in the event of a company winding up. The court found that Long, as a receiver, had a personal and continuing obligation to pay priority creditors, which did not cease with his resignation or the transfer of assets to Lumsden. The court relied on authorities such as Sipad Holdings DDPO v Popovic and Re Pearl Maintenance Services Ltd, which established that a receiver's duty to pay priority creditors is a statutory obligation that persists even after the receivership ends.

The court also considered whether the Deed of Settlement executed between the parties in earlier proceedings affected Long's liability. The Deed provided for mutual releases but was silent on Long's obligation under section 433. The court held that the Deed did not release Long from his statutory obligation to priority creditors.

In conclusion, the court ordered that Lumsden, as liquidator, is liable to pay the priority claims listed in the application out of the company's property. The court dismissed the application otherwise and ordered that Lumsden pay Long's costs of the proceeding.

Orders