McCourt and Ranteri and Anor
[2009] FamCA 455
•29 May 2009
FAMILY COURT OF AUSTRALIA
| MCCOURT & RANTERI AND ANOR | [2009] FamCA 455 |
| FAMILY LAW – COMPANIES – Receivership and/or liquidation and/or winding up – Obligations of receivers and managers |
| APPLICANT: | Mr McCourt |
| RESPONDENT: | Mr Ranteri |
| RESPONDENT: | Ms Lindell |
| FILE NUMBER: | MLC | 2638 | of | 2008 |
| DATE DELIVERED: | 29 May 2009 |
| PLACE DELIVERED: | Townsville |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Monteith J |
| HEARING DATE: | 23, 24, 25 & 26 March 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Gobbo |
| SOLICITOR FOR THE APPLICANT: | Maddocks Lawyers |
| COUNSEL FOR THE RESPONDENT: |
| SOLICITOR FOR THE RESPONDENT RANTERI: | Self-represented |
Orders
The Response to an Application in a Case filed by Mr Ranteri on 23 October 2008 be dismissed.
The Receiver and Manager, Mr McCourt, have liberty to apply for costs.
IT IS NOTED that publication of this judgment under the pseudonym McCourt & Ranteri and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT TOWNSVILLE |
FILE NUMBER: MLC 2638 of 2008
| MR MCCOURT |
Applicant
And
| MR RANTERI |
Respondent
| MS LINDELL |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
By an application dated 8 October 2008, the applicant Receiver and Manager sought an order that his appointment as Receiver of F Business Pty Ltd be discharged.
By an Order that I made on 20 May 2008, I appointed Mr McCourt Receiver and Manager of the said company, directed that he undertake an assessment as to the ongoing viability of the company and make recommendations for the future conduct or winding up of the company. I ordered that Mr McCourt prepare a report as to his findings, such report to be provided to each of the parties and to the Court, and that the parties each fully cooperate with Mr McCourt, including the provision of all relevant documents and access to the business premises at M in the State of Victoria.
These orders were made on the application of the wife, Ms Lindell, because she and the husband were both directors and shareholders of the company and were unable to agree upon the continued conduct of the business, having regard to ongoing matrimonial difficulties between them.
On 29 May 2008, I made supplementary orders confirming the appointment of Mr McCourt and varying the orders of 20 May 2008 by directing that Mr McCourt was authorised to do (in Receiver and Manager’s name or otherwise) anything that the company could do and was otherwise to have the powers referred to in section 420 of the Corporations Act 2001 (Cth).
At the time of making the orders, Ms Lindell and Mr Ranteri were legally represented.
Following upon the applicant’s appointment, a review of the company was conducted and a report was prepared, which was circulated to all parties by facsimile dated 30 May 2008, and filed with the Court under cover of a letter dated 2 June 2008.
Mr McCourt concluded that the company was insolvent, that it should not be permitted to trade and recommended that following a valuation of the company’s major assets, the business should be closed, its employees terminated and in the absence of an acceptable offer from either of the directors or their associates, arrangements should be made for the assets to be relocated to O Auctions premises and sold at public auction.
Only one formal offer to purchase the assets was submitted by a company called T Company Pty Ltd. This sale did not proceed, and I will deal with the facts surrounding that, later in my judgment.
Consequently, in view of the company’s insolvency and the lack of funds to allow the business to continue to trade, O Auctions was instructed by Mr McCourt to collect the company’s plant and equipment on 13 June 2008.
The company’s assets were sold by O Auctions by public auction.
RESPONSE OF MR RANTERI
In response to the application filed by the Receiver and Manager, Mr Ranteri filed a Response on 23 April 2008 and an affidavit in support, also filed 23 April 2008.
In addition, he filed a further affidavit on 23 March 2009 and an affidavit of Ms Lindell filed 24 March 2009, which I allowed into evidence even though the deponent was unavailable for cross examination.
Prior to filing his Application in a Case seeking his discharge as Receiver and Manager of F Business Pty Ltd, Mr McCourt filed an affidavit on 1 September 2008 in which, amongst other things, he deposed that since his appointment, he had conducted a review of the company and prepared a report which was filed with the Court and served on the parties on 30 May 2008. He deposed that from his investigations, he concluded that in view of the company’s financial position, it should not be permitted to trade. He recommended that following a valuation of the company’s major assets, the business should be closed, its employees terminated and the assets sold. He then deposed that O Auctions Group Pty Ltd was commissioned to undertake a valuation of the company’s assets on an ongoing and auction realisation basis. He deposed that only one formal offer to purchase the assets was submitted on 2 June 2008 and that purchase did not proceed, and that on 13 June, he instructed O Auctions Group to collect the company’s plant and equipment and that the sale of those assets was finalised in July 2008, with the total proceeds of all assets realised being $17,677. He deposited that as his fees and costs were in excess of $70,000, there would be insufficient funds to pay all of his costs and, as a consequence, there would not be any surplus moneys available to creditors of the company.
He deposed that in accordance with the orders that I had made, he was satisfied that his duties as Receiver and Manager had been fulfilled and that he intended to lodge a Form 505 with the Australian Securities and Investment Commission in order to resign from his appointment as Receiver and Manager of the company, and that as his appointment was by Order of the Court, he required an Order of the Court formally discharging him from his obligations.
In the Response filed by Mr Ranteri, he sought the following orders:
“1. The Applicant pay outstanding debts to all creditors.
2.The Applicant to issue Group Certificates and Separation Certificates to all former employees of [F Business] P/L.
3.The Applicant to remunerate former [F Business] employees […] and […] for the 8 days whilst in their employee.
4.The Applicant to reimburse Directors of [F Business] for losses incurred by their negligence and mismanagement.
5.The Applicant to pay all shortfalls with regard to the sale of Third Party assets.
6.The Applicant to be liable for all costs in these proceedings.
7.The Applicant and his associate company PPB to be further investigated under Chapter 20 of the Corporations Act 2001 for the failure to act honestly and exercise their powers with care and diligence.
8.That the Applicant Wife pay damages to the Respondent Husband, in accordance with the Court Order dated 20 May 2008.
9.That the accounts of the Applicant and PPB be disregarded, in this case on the grounds that the services were not provided in accordance with the Court Orders made on 20 and 29 May 2008.”
SUBMISSIONS IN RELATION TO THE DISCHARGE OF THE APPOINTMENT OF MR MCCOURT AS RECEIVER AND MANAGER OF F BUSINESS PTY LTD
It was submitted by Ms Gobbo on behalf of the Receiver and Manager as follows:
“Section 420 of the Act charges a receiver with the power to do all the things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objectives for which the receiver was appointed. This includes but is not limited to:
(a) entering into possession of and control of property of the corporation; and
(b) the conversion of property of the corporation into money.
In accordance with section 420 of the Act together with the orders that I had made, following the orderly sale of the Company’s assets and the filing of the required accounts, the Applicant’s duty as Receiver and Manager of the Company have been duly fulfilled.
….
A receiver’s appointment by the court can be discharged only by its order as the Receiver in these circumstances is not an agent or trustee of a secured creditor but is responsible to the Court.
The Respondent raises several matters in his Response filed 23 October 2008 which have not been previously ventilated. The matters raised by the Respondent should have no bearing on the discharge of Mr [McCourt’s] appointment.
An order discharging Mr [McCourt] does not discharge or release him from any fiduciary duties owed, and it remains open to a court of competent jurisdiction to investigate such matters even after Mr [McCourt’s] discharge.
Having fulfilled his duties as ordered by the Court Mr [McCourt] is rightly entitled to seek an order formally discharging him from his appointment. Mr [McCourt] denies that he has failed to discharge his duties as receiver and manager of the Company. However, notwithstanding his discharge, any genuine grievance that Mr [Ranteri] may have can be brought by him in an appropriate forum.
Mr [McCourt] should not be precluded from obtaining an order of discharge because of any foreshadowed claim of [Mr Ranteri].”
ORDER DISCHARGING MR MCCOURT
On 24 March 2009, I ordered the appointment of Mr McCourt as Receiver of F Business Pty Ltd by order dated 20 May 2008 be discharged.
I made that order for the reasons that I published on that date. It is unnecessary to reiterate them.
Having discharged Mr McCourt as Receiver and Manager, the issue then arose as to what relief Mr Ranteri was seeking and whether there was a basis for the grant of same.
STATE OF RANTERI’S APPLICATION – THE CONDUCT OF AN ENQUIRY
Mr Ranteri made a number of complaints regarding Mr McCourt’s actions as Receiver and Manager. Those actions can be broadly categorised as being:
(a)actions not in accordance with the terms of the order; and
(b)actions not in accordance with the terms of the Act.
Insofar as Mr Ranteri complains that Mr McCourt’s actions were not in accordance with the Orders of the Court, the “actions” complained of by Mr Ranteri can be broadly summarised as follows:
(a)Mr McCourt was appointed to assess the ongoing viability of the business and prepare a report as to his findings which was to be provided to all parties. However, Mr McCourt began winding up the company without submitting a report to either of the parties as required by the Court Order.
(b)Mr McCourt had breached the Orders by taking security of the assets and authorising O Auctions to sell such assets, whereas the order of the Court appointed Mr McCourt “without security of the assets and undertakings of (the company)”.
(c)Mr McCourt’s affidavit sworn 27 August 2008 attempts to deceive the Court and other concerned parties as:
(i)contrary to paragraph 4 of the affidavit, Mr McCourt was appointed without security of the assets and undertakings of (the company);
(ii)the affidavit refers to a report having been served on 30 May 2008 which, it is alleged is impossible, as Mr McCourt was appointed on 29 May 2008;
(iii)Mr McCourt was not present in the initial proceedings.
ACTIONS NOT IN ACCORDANCE WITH THE ACT
Insofar as Mr Ranteri complains that Mr McCourt’s actions were not in accordance with the Act, the “actions” complained of by Mr Ranteri can be broadly summarised as follows:
(a)Mr McCourt made no attempt to familiarise himself with the operation of the company.
(b)Mr McCourt made no attempt to trade the business and recover moneys outstanding on nearly completed work in progress or to acknowledge the work in progress.
(c)Mr McCourt did not conduct a Creditors’ meeting prior to winding up the company as required by the Act.
(d)Contrary to his obligations under the Act, Mr McCourt negotiated with a third party, the National Australia Bank.
(e)The assets of the company were sold for a fraction of their value and without taking reasonable steps to ensure the highest possible price in accordance with s 420 of the Act.
(f)Mr McCourt has not completed his obligations to former employees of the Company with Separation Certificates and Group Certificates yet to be issued.
LEGAL PRINCIPLES
Pursuant to the terms of my Order and the provisions of the Act, Mr McCourt was authorised to do, in the Receiver and Manager’s name or otherwise, anything the Company could do and was otherwise to have the powers referred to in section 420 of the Act.
Section 420 of the Act provides that a Receiver’s powers include, but are not limited to:
(a)To carry on the business of the corporation;
(b)To convert property of the corporation into money;
(c)To borrow on security;
(d)To execute documents;
(e)To engage or discharge employees on behalf of the corporation; and
(f)To appoint an agent.
Mr Ranteri’s allegations with respect to the appointment of Mr McCourt being without security are completely incorrect. The Order I made was “[Mr McCourt] (Receiver and Manager) be appointed Receiver and Manager without security of the assets and undertakings (assets) of [F Business] Pty Ltd (company).
Generally, the Rules of Court require that unless a Court otherwise orders, an applicant Receiver must furnish security. The security, if ordered, is to ensure compliance by the Receiver with the Receiver’s duty to account. No security was ordered by the Court nor sought by the parties who were legally represented. Accordingly, the order states that Mr McCourt was appointed without security, that is, he was not required to lodge with the Court security.
Consequently, Mr Ranteri’s allegations with respect to this matter are completely erroneous.
Further, with respect to the date of the appointment of Mr McCourt and his first report, again Mr Ranteri is completely confused. The appointment was made on 20 May 2008 which was subsequently varied on 29 May 2008. The appointment of a Receiver and Manager by the Court takes effect from the moment the appointment is announced. Mr McCourt had been in office as Receiver and Manager for a period of 10 days, not one, when Mr McCourt furnished his report to the parties and the Court.
Further, Mr Ranteri is confused in relation to a winding-up. No winding-up of the Company has occurred and there was no statutory obligation on the Receiver and Manager to call a meeting of creditors. Mr McCourt was never the liquidator of the company.
No sale of the assets of the company was undertaken prior to –
(a)Mr McCourt filing his report dated 30 May 2008 with the Court;
(b)Mr McCourt serving his report dated 30 May 2008 on both Mr Ranteri and Ms Lindell by their respective solicitors;
(c)Mr McCourt extended an opportunity to the Company’s Directors and their associates to purchase all of the company’s assets;
(d)Mr McCourt negotiated with both Ms Lindell and Mr Ranteri’s associates in relation to the potential sale of the company’s assets; and
(e)Mr McCourt advising both Mr Ranteri and Mr Lindell of his intention to have O Auctions sell the assets of the company prior to actually doing so.
Further, Mr Ranteri made allegations that Mr McCourt made no attempt to familiarise himself with the operations of the company and Mr McCourt made no attempt to trade the business and recover moneys outstanding on nearly completed work-in-progress or to acknowledge the work-in-progress.
These allegations have been addressed by Mr McCourt in his affidavit sworn 23 December 2008. No affidavit replying to these matters has been filed by Mr Ranteri. I saw Mr Ranteri, Mr McCourt and Mr McCourt’s employee, Mr Y, in the witness box and saw them all cross-examined. I have no hesitation in accepting the evidence of Mr McCourt in relation to this matter.
Further, Mr Ranteri made allegations that contrary to his obligations under the Act, Mr McCourt negotiated with a third party, namely the National Australia Bank.
Again, this is a total misconception on the part of Mr Ranteri. The appointment of a Receiver by the Court does not have any effect on persons holding security, in this case, National Australia Bank. No negotiations were undertaken with the National Australia Bank, rather, any sale of the company’s assets over which the National Australia Bank had security, needed to be subject to the National Australia Bank’s consent. The circumstances relating to Mr McCourt’s involvement with the National Australia Bank are set out in Mr McCourt’s affidavit sworn 23 December 2008, which I accept.
Further, Mr Ranteri made allegations that the assets of the company were sold for a fraction of their value and without taking reasonable steps to ensure the highest possible price in accordance with section 420A of the Act.
Section 420A of the Act provides –
(i)In exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for:
(a)If, when it is sold, it has a market value – not less than that market value; or
(b) Otherwise – the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.
There is no evidence to show that Mr McCourt failed to take all reasonable care to sell the property for its market value, whatever that market value might be. On the contrary, there is evidence of Mr McCourt’s repeated attempts to sell the assets of the company, which attempts failed as a result of the conduct of others, resulting in the assets being publicly auctioned on notice to the parties.
Mr Ranteri made an allegation that Mr McCourt has not completed his obligations to former employees of the company, with Separation Certificates and Group Certificates yet to be issued.
The starting point is to deal with the effect of the appointment of a Receiver on a Contract of Employment. It is generally accepted that the appointment of a Receiver by the Court terminates the Contract of Employment. The rationale for this view is that a Court appointed Receiver does not operate the concern on behalf of the company, but adverse to it. Speaking generally, the opposite is true in the case of a privately appointed Receiver who is the Company’s agent. In that event, the rule is that the Contract of Employment is not terminated.
To determine whether the appointment of a Receiver and Manager by the Court terminates a Contract of Employment, it is necessary to look at the facts in each case.
None of the employees of the company were employed by McCourt. Mr McCourt was not acting as agent of the company. Consequently, Mr McCourt is not in a position to issue Group Certificates or Severance Notices on behalf of individuals who are not his employees.
With respect to the Receiver’s remuneration, a Receiver is entitled to a right of indemnity out of the assets of the company and in addition, is entitled to a lien for his remuneration and properly incurred expenses.
In the Order that I made on 29 May 2008 by Order 1B(iii), I ordered that the Receiver and Manager be entitled to be remunerated in accordance with time spent by the Receiver and Manager and his staff and calculated in accordance with the Schedule of Fees annexed to the letter from the Receiver and Manager filed with the Court on 20 May 2008.
I further ordered that he be entitled to reimbursement from the assets, his remuneration calculated in accordance with Order 1B(iii) above, together with any and all costs and disbursements incurred by the Receiver and Manager in relation to the company, his appointment or in compliance with this Order.
PRELIMINARY SUBMISSION
Prior to the commencement of the hearing of Mr Ranteri’s application, a preliminary submission was made on behalf of the Receiver and Manager to the effect that in order to obtain relief against the actions of a Receiver and Manager, a person in Mr Ranteri’s position would need to either –
(a)make application to the Court pursuant to section 1321 of the Act, appealing against an act, omission or decision of the Receiver and Manager; or
(b)make application to the Court pursuant to section 423 of the Act, for an enquiry into the conduct of the Receiver and Manager.
Neither section of the Act was identified by Mr Ranteri in the material filed by him and it was submitted to the Court that no act, omission or decision of the Receiver and Manager was appropriately identified pursuant to section 1321 of the Act, such that the Court would be able to grant the orders sought by Mr Ranteri in his grounds of relief.
It was further submitted that Mr Ranteri had failed to identify any grounds for an enquiry into the Receiver and Manager’s conduct. It was submitted that the onus was on Mr Ranteri to establish the grounds or case for enquiry (See Moore v Macks [2007] FCA 10 and Trollope v Rambaldias Trustee for the Bankrupt Estate of Barry Barton Trollope [2009] FCA 74.
This being the case, it was submitted that an enquiry should not be ordered.
In response to the preliminary submission, I identified that there were two potential issues which were not specifically raised by Mr Ranteri under Section 423 which might, subject to the provision of satisfactory evidence by Mr Ranteri, give rise to the Court ordering an enquiry. The issues identified were –
(a)Was there a Contract of Sale for the assets of the company to T Company for the sum of $80,000 in place which the Receiver and Manager disregarded?
(b)Was there a Consent Order made between Ms Lindell and Mr Ranteri on or around 13 June 2008 by which Mr McCourt was discharged from his role of Receiver and Manager following which he proceeded to continue to act including selling the assets of the company?
Without ordering that there be an enquiry pursuant to section 423 of the Act, I determined to hear evidence on those two issues.
Mr Ranteri gave evidence on his own behalf, no other witnesses were called by him. He sought to rely on an affidavit by Ms Lindell, notwithstanding that she was not available for cross examination and, as I have already indicated, I admitted that affidavit on the basis that it be given the appropriate weight having regard to the fact that she was not available for cross examination.
Mr Y, an employee of the Receiver and Manager, and Mr McCourt, the Receiver and Manager, gave evidence. Both were cross examined by Mr Ranteri.
In summary, the key matters given in evidence were –
Contract of Sale
(a)Settlement was scheduled to occur at 2.30 pm on 11 June 2008 at the offices of the Receiver;
(b)Until the National Australia Bank’s consent to the sale was provided, which occurred on 10 June 2008, Mr McCourt was not able to complete the sale;
(c)Neither Mr McCourt nor anyone on behalf of T Company attended settlement;
(d)Mr Ranteri was not aware of whether T Company had $80,000 in cleared funds on 11 June 2008;
(e)No evidence was given to prove that T Company could settle the Contract of Sale on 11 June 2008 or otherwise;
(f)No attempt was made by Mr Ranteri or T Company after 11 June 2008 to settle the Contract of Sale or to explain why they did not attend settlement.
Consent Orders
(g)No agreement was reached by Mr McCourt to the terms of the Consent Orders referred to in evidence by Mr Ranteri.
(h)No signed orders were filed by Ms Lindell or Mr Ranteri.
(i)No orders were pronounced by the Court discharging Mr McCourt as Receiver and Manager of the company until I made such an order on 25 March 2009.
APPLICABLE PRINCIPLES
If a Receiver appointed by the Court is guilty of bad faith or adopts an approach which is erroneous in law or principle, the Court will exercise control over the Receiver. There is no evidence of bad faith or erroneous application of the law or principle by Mr McCourt. Where the allegation against the Receiver is that the Receiver’s actions show an absence of prudence and wisdom in managing the company’s affairs, the Court will not exercise any control unless it is satisfied that there is a decision of real significance and there are substantial grounds for questioning the course adopted – see Duffy v Super Centre Development Corp Ltd (1967) NSWR 382; Lancet Pty Ltd v Olholn Developments Pty Ltd [2001] Qd R 22.
I find that there is no evidence of an absence of prudence or wisdom shown on the part of Mr McCourt.
There have long been provisions which bear some similarity to section 423 of the Act. The statutory provisions which include the notion of a person in control of another’s property, complaint being made to the Court about the actions of that person, the Court enquiring, and taking such action as it thinks fit, can be found in Bankruptcy statutes (s 179 of the Bankruptcy Act1966 (Cth) and statutory provisions governing liquidators (s 536 of the Corporations Act).
Similarly, section 536 of the Corporations Act is concerned with aspects of the conduct of liquidators and others which are liable to attract sanctions or control for what might be broadly described as disciplinary reasons.
Section 536 gives the Court a discretionary power. That is, the Court may enquire into the matter.
Like its counterpart provision in the Bankruptcy Act, section 536 does not provide an automatic right to an enquiry upon application. Grounds of enquiry must be established by the applicants/complainants.
I find that Mr Ranteri has not identified any duties which Mr McCourt has not faithfully performed. I further find that he has not identified any requirements of the Act which Mr McCourt has not observed. In the circumstances, I find that he has failed to establish any case for an enquiry, pursuant to section 423 of the Act.
Consequently, for the reasons set out above, I order that the Response to an Application in a Case filed by Mr Ranteri on 23 October 2008 be dismissed and I give liberty to the Receiver and Manager, Mr McCourt, to apply for costs.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Monteith.
Associate:
Date: 29 May 2009
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