McDermott and McDermott and Ors - [2014] FamCA 615

FAMILY COURT OF AUSTRALIA

MCDERMOTT & MCDERMOTT & ORS

[2014] FamCA 615

FAMILY LAW – PROPERTY SETTLEMENT – Ex parte application by Receiver and Manager previously appointed seeking directions and further orders – Application by Receiver and Manager to be appointed receiver of related corporate entity and partnership conducted by the husband and wife – Where financial circumstances of the two corporate entities and the partnership inextricably intermingled – Where appropriate to appoint receiver as Receiver and Manager of related corporate entity

FAMILY LAW – PROPERTY SETTLEMENT – Ex parte application by Receiver and Manager previously appointed seeking directions and further orders – Application by Receiver and Manager to be appointed receiver of trading partnership conducted by husband and wife – Where it is appropriate to exercise accrued jurisdiction to make appointment pursuant to section 67 of the Supreme Court Act 1970 (NSW) – Receiver appointed to partnership

FAMILY LAW – PROPERTY SETTLEMENT – Ex parte application by Receiver and Manger previously appointed seeking directions and further orders – Where it is appropriate in the circumstances of non-disclosure and non-cooperation with Receiver and for protection of assets for application to proceed ex parte – Where orders accordingly made ex parte

Supreme Court Act 1970 (NSW) s 67

Byrne v Byrne [2011] NSWSC 1437
Cumming v Hennessy [2005] NSWSC 1219
McDermott & McDermott [2014] FamCA 245
Tate v Barry (1928) 28 SR (NSW) 380

APPLICANT:

Ms McDermott

1st RESPONDENT:

Mr McDermott

2nd RESPONDENT:

3rd RESPONDENT:

B Pty Ltd

Mr M

FILE NUMBER:

SYC

2014

DATE DELIVERED:

Orders made on 21 July 2014;
Judgment delivered on 5 August 2014

PLACE DELIVERED:

Parramatta

PLACE HEARD:

Parramatta

JUDGMENT OF:

Foster J

HEARING DATE:

21 July 2014

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Campbell Paton & Taylor

SOLICITOR FOR THE 1ST RESPONDENT:

Hancock Alldis & Roskov Lawyers & Notaries Public

COUNSEL FOR THE 3RD RESPONDENT: Mr Reynolds

SOLICITOR FOR THE 3RD RESPONDENT:

Colin Biggers & Paisley

Orders

UPON APPLICATION MADE TO THE COURT BY THE COURT APPOINTED RECEIVER, AND UPON LEAVE BEING GRANTED FOR THAT APPLICATION TO BE DEALT WITH EX PARTE, AND UPON READING THE AFFIDAVIT OF MR M SWORN ON 18 JULY 2014 AND FILED ON 21 JULY 2014, IT IS ORDERED THAT:

Leave be granted to the Manager and Receiver (“Receiver”) appointed by the Court to the income and property of B Pty Ltd (“Company”) to file this application in a case returnable instanter.

UPON THE COURT BEING SATISFIED:

(A)That it would be appropriate for the Receiver to apply to the Court to wind up the Company and to appoint him or such other person as the Court considers fit as liquidator of the company;
(B)That it would be appropriate for the Receiver to apply to the Court for him or such other person to be appointed as the Court considers fit without security as receiver and manager of the property, assets and undertaking of Z Pty Ltd together (“Z Pty Ltd”) with such other order necessary to give effect to same
(C)That it would be appropriate for the receiver to apply to the Court for him or such other person as the Court considers fit to be appointed without security as Receiver and Manager of the property, assets and undertaking of the partnership of the Applicant and Respondent in the substantive proceedings trading as “B Pty Ltd” together with such other order necessary to give effect to same.

THEN THE COURT ORDERS THAT:

Leave is granted to the receiver to apply to the Court to wind up the Company and to appoint him liquidator of the company.

Z Pty Ltd

That Mr M of M Advisory, Sydney be appointed as Receiver and manager of the income and property of Z Pty Ltd.
Pursuant to section 420 of the Corporations Act 2001 the Receiver shall conduct and manage the business known as Z Pty Ltd.
In exercising any of his duties under these orders, the Receiver shall have all the powers ordinarily available to him pursuant to section 420 of the Corporations Act 2001.
That the Receiver’s right to be paid in respect of the matters the subject of the indemnity as defined in the orders made today be paid firstly by Z Pty Ltd and in default of sufficient funds being available from the said company by the Husband and Wife jointly and his remuneration be calculated in accordance with the standard rates effective from time to time of the Receiver Mr M.
There be no security given by the Receiver.
The Receiver is required to provide to the Court and to each of the parties an interim report at the expiration of two months from the date of these orders as to the financial circumstances of Z Pty Ltd with such report to include any recommendation that in the opinion of the receiver is appropriate as to the ongoing conduct of the business or its liquidation or winding up.
The Husband and Wife do all necessary things and sign all necessary documents so as to cooperate with the Receiver and shall provide such documents, financial records, bank statements/books, tax records and any other financial document as required by the Receiver within 24 hours of a request by the Receiver and provide any other information sought by the Receiver which relates to the income, property or liabilities of Z Pty Ltd.
That the Receiver shall submit accounts to the Husband and Wife on a monthly basis.

“B Pty Ltd”

That Mr M of M Advisory, Sydney be appointed as Receiver and manager of the income and property of “B Pty Ltd”.
Pursuant to section 420 of the Corporations Act 2001 the Receiver shall conduct and manage the business known as “B Pty Ltd”.
In exercising any of his duties under these orders, the Receiver shall have all the powers ordinarily available to him pursuant to section 420 of the Corporations Act 2001.
That the Receiver’s right to be paid in respect of the matters the subject of the indemnity as defined in the orders made today be paid firstly by “B Pty Ltd” and in default of sufficient funds being available from the said company by the Husband and Wife jointly and his remuneration be calculated in accordance with the standard rates effective from time to time of the Receiver Mr M.
There be no security given by the Receiver.
The Receiver is required to provide to the Court and to each of the parties an interim report at the expiration of two months from the date of these orders as to the financial circumstances of “B Pty Ltd” with such report to include any recommendation that in the opinion of the receiver is appropriate as to the ongoing conduct of the business or its liquidation or winding up.
The Husband and Wife do all necessary things and sign all necessary documents so as to cooperate with the Receiver and shall provide such documents, financial records, bank statements/books, tax records and any other financial document as required by the Receiver within 24 hours of a request by the Receiver and provide any other information sought by the Receiver which relates to the income, property or liabilities of “B Pty Ltd”.
That the Receiver shall submit accounts to the Husband and Wife on a monthly basis.

IT IS FURTHER ORDERED THAT:

The Husband be ordered to deliver up to the Receiver the following forthwith:
(a)Prime Mover (VIN …, Registration …);
(b)Dolly (VIN …, Registration …);
(c)Low Loader (VIN …, Registration …).
An order nunc pro tunc that the Receiver is entitled to be indemnified out of the Company’s property (other than any security interest within the meaning of the Personal Property Securities Act 2009 and to which that Act applies, other than a transitional security interest within the meaning of that Act (PPSA Security Interest), that is perfected within the meaning of that Act for:
(a)Debt he incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as Receiver, for:
(i)Services rendered;
(ii)Goods bought;
(iii)Property hired, leased, used or occupied, including property consisting of goods that is subject to a lease that gives rise to a PPSA Security Interest in the goods;
(iv)The repayment of money borrowed;
(v)Interest in respect of money borrowed;
(vi)Borrowing costs;
(vii)Liability under section 220AAE, 220AAM, 220AAR, 221F (except 221F(12)), 221G (except 221G(4A)), 221YHDC(2), 221YHZD(1) or (1A), 221YN(1) of the former provisions of the Income Tax Assessment Act 1936 or any of the provisions of Subdivision 16-B in Schedule 1 to the Taxation Administration Act 1953;
(b)Any other debts or liabilities incurred, or damages or losses sustained, in good faith and without negligence, by the Receiver in the performance or exercise, or purported performance or exercise, of any of his or her functions or powers as Receiver; and
(c)His remuneration.
An order nunc pro tunc that the administrator has a lien on the Company’s income and property, with priority over another security interest only in so far as the Indemnity has priority over debts secured by the other security interest, to secure the Indemnity.
An order nunc pro tunc that order 7 of the orders made on 28 May 2014 be varied to substitute “420B” of the Corporations Act with “420”.
An order nunc pro tunc that order 9 of the orders made on 28 May 2014 be varied to replace the word “remuneration” in the first line with “right to be paid in respect of these matters the subject of the Indemnity as defined in the orders of 21 July 2014” and the word “such” in the third line be replaced with “his”.
The Application in a Case is adjourned to Friday 1 August 2014 at 10:00am.
The Application in a Case and affidavit in support be served on the Applicant and Respondent together with a sealed copy of the substantive orders made today by no later than the close of business on Monday 28 July 2014.
Leave is granted to the Receiver to re-list the present application before the Court on short notice by application to the Court in chambers in appropriate circumstances.
The reasons for decision made today are reserved to be published at a later date if required.
The costs of today’s application are reserved.

IT IS NOTED that publication of this judgment by this Court under the pseudonym McDermott & McDermott has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: SYC 70 of 2014

Ms McDermott

Applicant

And

Mr McDermott

First Respondent

And

B Pty Ltd
Second Respondent

And

Mr M
Third Respondent

REASONS FOR JUDGMENT

The primary proceedings before the Court are property proceedings between the Applicant husband and the Respondent wife.
The background to the matter was considered in the context of previous proceedings between the husband and wife in reasons for Judgment delivered on 14 April 2014 (McDermott & McDermott [2014] FamCA 245).
Orders were made on 18 March 2014 as follows:
(1)That within seven days from the date of these orders the Husband shall provide to the Wife’s solicitors the following information and do the following things in relation to any work from 1 July 2013 to date that the Husband has undertaken on his own behalf, on behalf of [B] Pty Ltd (“the company”) or on behalf of any other entity that is of a similar nature or type of work to the work undertaken by the company in the normal course of its business:
(a)A list of particularising all such work undertaken including the name of the person or entity for whom the work was undertaken, the dates between which the work was undertaken, the amount of money paid or to be paid for all such work and particulars of the financial institution and account into which the money was or was intended to be paid;
(b)A list of all amounts of money which remain to be paid and direct the person or entity responsible for payment to make those payments into the company’s account at the National Australia Bank are being account …20 (“the NAB account”);
(c)Pay into the NAB account all the money presently held by him or under his control with respect to the work particularised by him in the list provided pursuant to (a) above less money paid from funds held by him or under his control properly expended in the usual course of business of the company.
(2)That within seven days from this date the Husband and Wife authorise and direct the appropriate officer of the National Australia Bank to permit the Husband and the Wife to operate the NAB account independently of each other for the purposes of the usual course of business of the company and do all things necessary to facilitate each of them having internet banking access to the said account.
(3)That the Husband and Wife shall pending further order facilitate all income received by the company in the usual course of business being paid into the NAB account from which payments in the ordinary course of business or pursuant to these orders shall be made.
(4)That pending further order the Wife shall have the conduct of and manage on a day-to-day basis the farming enterprise conducted at the [D Street, E Town], New South Wales property and the Wife shall be restrained from conducting the said farming enterprise other than in the ordinary course of business and through the company.
(5)That pending further order the Husband shall have the conduct of and manage on a day-to-day basis the [construction] enterprise conducted during the course of the marriage by the company and the Husband shall be restrained from conducting the said [construction] enterprise other than in the ordinary course of business and through the company.
(6)That pending further order the Husband is restrained on his own behalf or on behalf of any other entity save for the company from undertaking any work of the type or nature of the work that has been at any time prior to the date of these orders undertaken or engaged in by the company in the ordinary course of its business.
(7)That pending further order the Husband is at liberty to draw from the company’s NAB account $2660 per week gross with such sum to cover his general living expenses and a contribution by him to one half of the cost of the governess employed by the parties for the children of the marriage with the characterisation of those drawings reserved to trial or as agreed by the parties.
(8)That pending further order the Wife is at liberty to draw from the company’s NAB account the sum of $2660 per week gross with such sum to cover her general household living expenses and a contribution by her to one half of the cost of the governess employed by the parties for the children of the marriage with such sum to be reduced by an amount equivalent to any child support assessment liability in respect of which the Husband is assessed from time to time and is paid by him when due and payable with the characterisation of those drawings reserved to trial or as agreed by the parties.
(9)That both the Husband and Wife shall be at liberty to draw from the company’s NAB account sums not exceeding $100,000 in total for each of them with such sums to be paid exclusively for their legal fees in these proceedings and that there shall be no drawings in excess of that sum without leave of the Court or the parties agreement in writing,
(10)That the Husband and Wife shall authorise and direct Mr [F] of [G & F], Accountants to provide to the Wife’s nominated accountant such documents as he or she may reasonably request and to answer any reasonable enquiries made about the accounts of the business or the party’s personal taxation affairs as made by the Wife’s nominated accountant with the costs of [G & F], Accountants in relation to such requests and the costs of the Wife’s nominated accountant to be paid by the company.
(11)That the Husband and Wife shall authorise and direct Mr [F] of [G & F], Accountants to provide to the Wife’s solicitors such documents as they may reasonably request in writing and to answer any reasonable enquiries made about the accounts of the business and the parties personal taxation affairs made by the wife’s solicitors with the costs of [G & F], Accountants in relation to such requests to be paid by the company and the Wife shall ensure that a copy of such request is provided to the Husband’s solicitors.
(12)That pending further order and save and except for any items of property agreed in writing by the parties to be sold each of the parties is restrained from selling, transferring or otherwise disposing of or mortgaging, charging or encumbering or further mortgaging, charging or encumbering any property of the company or the partnership, or any property held in their sole name is or jointly with each other or with any other person or entity otherwise than in the ordinary course of business without first giving the other party seven days’ notice in writing of their intention to do so.
(13)That on not less than a calendar monthly basis, and in the event of disagreement as to the date on or before the third Friday of each month, the parties shall disclose by exchange any relevant documents in respect of any transaction that has taken place in the ordinary course of operation of the separate business enterprises managed by each of them in the company in the preceding calendar month.
(14)That in the event that the Husband incurs any debt or authorises any expenditure on behalf of the company or the farming partnership to a value in excess of $25,000, the Husband must provide to the Wife not less than 48 hours’ notice of his intention to do so save and except in urgent circumstances involving the replacement or urgent repair of plant and machinery that is on site.
(15)That in the event that the Wife incurs any debt or authorises any expenditure on behalf of the company or the farming partnership to a value in excess of $5000 the Wife must provide to the Husband not less than 48 hours’ notice of her intention to do so save and except in urgent circumstances involving the replacement or urgent repair of plant, machinery or other equipment that is required for the ongoing operation of the farming partnership.
(16)That in the event that the Husband has since 1 July 2013 sold or otherwise disposed of any plant, equipment or machinery owned by him or in which the company had any interest whatsoever then he must promptly but no later than 28 days from the date of these orders provide to the Wife:
(a)A list of items sold and all documents instruments and writings in relation to wall such sales; and
(b)In the event that sale proceeds were not paid into the NAB account pay within 28 days from this date such sale proceeds received by him into the NAB account and do all necessary things to direct the purchaser of any items sold for which any amount remains unpaid to make remaining payments for the purchase into the NAB account.
(17)That the Husband is hereby restrained from attending at or upon the property at [D Street, E Town], New South Wales without giving to the Wife not less than 72 hours prior notice of his intention to do so and on any such attendance the Husband shall be accompanied by Mr [H] and no other person or persons except as provided for in these orders or with the written consent of the Wife.
(18)That the Husband is restrained from flying in or through the air space over the [D Street, E Town], New South Wales property except with the consent in writing of the Wife.
(19)That, save as hereinafter provided, the Husband is hereby restrained from removing any chattels, equipment and machinery from the property at [D Street, E Town], New South Wales without the written consent of the Wife.
(20)That upon the Husband giving not less than 72 hours’ notice to the Wife he shall be at liberty to arrange for a suitably qualified mechanic to attend at the [D Street] property to inspect and attend to rendering airworthy the aeroplane thereon and that thereafter upon giving to the Wife not less than 72 hours’ notice the Husband shall be at liberty to attend at the said property provided always that he is accompanied by Mr [H] to collect the aeroplane and remove it from the said property and for the purposes of this order the Husband’s notice to the Wife shall be in writing which shall include SMS or email communication.
(21)That the Husband and Wife shall keep in good order and repair and shall be restrained from causing any damage (or further damage) to any building or a construction on the [D Street] property (including but not limited to the homestead) or the [I Town] property and any plant or equipment of the company or partnership “including vehicles” and any other property in their respective possession.
(22)That the Wife is restrained from allowing any other person, save for herself to operate the [utility] or [4WD] motor vehicles in her possession unless those persons are properly licensed to do so in the State of New South Wales and/or any other state or territory of Australia and the Husband shall ensure that the said vehicles are at all times registered and insured.
(23)That within one calendar month from the date of these orders the solicitors for the Husband and Wife shall on the parties instructions confer for the purpose of endeavouring to reach agreement as to the value of assets, liabilities, financial resources and superannuation entitlements of the parties and if there is no agreement as to the valuation of any such items then a single expert witness shall be appointed to determine the value of any disputed item and the Husband shall nominate three single expert’s to prepare written valuation reports as to the market value of:
(a)The real estate held by the parties, whether solely, jointly, with any other person or entity or whether held by any entity in which the parties have a proprietary interest;
(b)The plant, equipment motor vehicles and machinery of the company including the partnership and otherwise the enterprises of the parties or as may be held in their names whether solely or jointly with any other person or entity;
(c)The livestock of the company, including the partnership and otherwise the enterprises of the parties or as may be held in their names whether solely or jointly or with any other person or entity;
(d)The furniture, furnishings and effects of the parties;
(e)The interests of the parties in the company including the partnership.
(24)That within 14 days from the Husband nominating three valuers as provided for hearing the Wife shall select one of the nominated valuers for such purposes.
(25)That within a further 14 days from the Wife selecting a valuer or valuers as provided for herein the parties shall instruct their solicitors to forward an agreed joint letter of instruction to the single expert to be appointed and the parties are granted liberty to relist the matter on seven days notice to the Court and to the other party in respect of any issue arising in relation to the joint letter of instruction to the single expert to be appointed.
(26)That the parties shall pay in the first instance in equal shares for the payment of the reasonable fees and disbursements of any single expert appointed pursuant to these orders with the ultimate liability for such reasonable fees and disbursements reserved to trial or agreement between the parties.
(27)That for the purposes of the appointment of the single experts and the tasks to be undertaken by the appointed single experts:
(a)The Wife shall provide to any single expert appointed, in a timely manner, copies of all documents in her possession, custody or control as may be requested by that single expert with copies of such documents to be provided to the Husband’s solicitors;
a.That the Husband shall provide to any single expert appointed, in a timely manner, copies of all documents in his possession, custody or control as may be requested by that single expert with copies of such documents to be provided to the Wife’s solicitors;
b.That each party shall make available for inspection by any appointed single expert all items that are to be valued pursuant to these orders and each party shall provide access to each item without restriction for the purposes of such inspection by the single expert;
c.That at all times all instructions to any single expert appointed shall be in writing and issued jointly on behalf of both parties.
(28)That for the purposes of any written notice to be provided by either of the parties to the other then such notice shall be in writing with such writing to include SMS or email communication or correspondence or email communication between the parties respective solicitors.
(29)That otherwise interim applications before the Court are dismissed.
(30)That these proceedings be adjourned to a listing before the Docket Registrar on Thursday 29 May 2014 at 9:30 am and on such a listing the Docket Registrar make such other further orders or directions as may be appropriate for the matter to proceed to a Conciliation Conference at a time when there remains no outstanding valuation issue between the parties.

On 18 March 2014 it was noted by the Court that:
(a)The Husband has on 17 March 2014 advised the Court that he has exchanged contracts to purchase an apartment at [J Town], Queensland at a purchase price of $910,000 with the intention that no monies accumulated during the course of the marriage or to date will be used in the purchase and that the Husband will be borrowing the whole of the purchase price and that it is intended that of the sum of $2660 to be drawn by the Husband from the companies NAB account it is inclusive of mortgage expenses in relation to that property in the lieu of rent.
(b)The Wife has today advised the Court that it is her proposal to cause the sale of a portion of the goat herd presently on the [D Street, E Town], New South Wales property at an appropriate time following recent rains.
(c)These proceedings are suitable for private mediation having regard to the nature of the pool of assets and the financial issues for determination and reserves the question of referral for mediation for further consideration in due course.
(d)The Court has been informed by the parties that final draft financial statements and tax returns for the company and draft personal tax returns for each of the parties will be available for consideration by the parties within seven days from this date.
(e)To the extent of the operation of any of the orders herein would be inconsistent with the terms of the provisional AVO made on 9 January 2014 in the [E Town] Local Court as between the parties, then the terms of these orders shall prevail.
Subsequently, a further interim application was brought by the wife so as to facilitate enforcement of and compliance by the husband with Orders made on 18 March 2014.
On 9 May 2014 on the wife’s application ex parte Orders were made, in summary, as follows:
(a)that the husband and the manager of the ANZ Bank, I Town, Queensland be restrained from transferring monies or making payments from ANZ accounts held in the name of the husband and the husband jointly with another to any person other than the NAB account being held in the name of B Pty Ltd;
(b)that a sealed copy of orders be served on the manager ANZ Bank I Town, Queensland by fax or e-mail and that the solicitor for the wife have leave to forthwith with notify the manager of the ANZ Bank of the terms of orders by telephone before the close of business today; and
(c)that the proceedings be adjourned to 12 May 2014 at 9:30 am.
Subsequently, on 28 May 2014 further Orders were made that relevantly, in summary, provided:
(a)that the wife facilitate the repair of the aeroplane located on the parties’ rural property at E Town and, thereafter, effect a sale of that plane with the net proceeds of sale to be paid in reduction of the indebtedness of the parties and B Pty Ltd to the NAB;
(b)that B Pty Ltd be added as a party to the proceedings;
(c)that a receiver and manager be appointed to the income and property of B Pty Ltd;
(d)that the husband and wife do all things necessary to cooperate with the receiver including the provision of financial and other documents; and
(e)that the Receiver and either of the parties have liberty to apply to the Court to relist proceedings on short notice in appropriate circumstances.

The Receiver’s Application

Subsequent to the appointment of the Receiver, and pursuant to leave granted, the Receiver made an urgent application to the Court by Application in a Case filed on 21 July 2014, made returnable that day for orders, in summary, as follows:
(a)for the Court to give directions to the Receiver of the income and property of [B Pty Ltd] as to whether:
i)it would be appropriate to appoint a liquidator to that company;
ii)whether it would be appropriate for the Receiver to be appointed receiver and manager of the property, assets and undertaking of [Z Pty Ltd] (“[Z Pty Ltd]”) and if so for the Receiver to be appointed forthwith; and
iii)whether it would be appropriate for the Receiver to be appointed as receiver and manager of the property, assets and undertaking of the partnership of the applicant husband and the respondent wife trading as “[B Pty Ltd]” and if so for the Receiver to be appointed forthwith.
(b)that the husband the ordered to deliver up certain items of heavy equipment to the Receiver forthwith; and
(c)other procedural orders.
In support of his urgent application, the Receiver, Mr M, swore an affidavit on 18 July 2014.
The Receiver’s application was brought on short notice and listed when the Court was otherwise engaged in other matters. Following short oral submissions and consideration of the evidence relied on by the Receiver, Orders were made as sought. Reason for Orders were reserved. These are those reasons.

The Receiver’s evidence

The Receiver is a chartered accountant and registered liquidator and has over 20 years’ experience in the areas of asset recovery and insolvency.
The company B Pty Ltd was incorporated on 8 November 2010. Both the husband and wife are directors of the company. The business of the company had previously been operated through the partnership of the husband and wife trading as B.
The B Pty Ltd business appears to be conducted via three entities, B Pty Ltd, the partnership and Z Pty Ltd. The principal business is the hire of construction equipment to third parties, principally businesses in New South Wales, Queensland and Western Australia. Machinery operators are at times also contracted to operate the machines.
The business is cash flow negative with no realistic prospect of being cash flow positive in the foreseeable future. Given the current poor state of the services industry, the Receiver says that since his appointment there have been seven machines de-hired by customers.
Currently, three of the 23 identified company machines and vehicles are being hired. One of the machines is hired by the partnership to a third party and the Receiver is unaware of any contractual arrangement for the partnership to reimburse the company for the use of the machine.
Nine vehicles have been disclaimed as assets as they are not generating income and the asset value is less than the finance agreements payout.
The Receiver estimates that the financial position of the company B Pty Ltd, based on an orderly wind-down of operations and the sale of assets, would result in an estimated best case scenario shortfall of $662,000 to unsecured creditors, and on a worst case scenario an estimated shortfall of $2,300,000. The best-case scenario assumes repayment by the partnership of a loan of $1,013,000, as evidenced in the company accounts as at 31 December 2013, to the company.
The Receiver gives evidence that, in addition to the 23 machines or vehicles referred to above, there are also seven items of machinery included on the company’s depreciation schedule for the year ended 30 June 2013, however, the Receiver has been unable to establish the location and status of those machines.
Some of the company plant and equipment has been financed by way of hire purchase agreement and there are seven financiers holding security over 17 items of plant and equipment. Otherwise, the National Australia Bank has a general security agreement over the assets of the company.
There is uncertainty as to the identity of the owner of some items of plant and equipment as to whether the assets are owned by the company or the partnership. The Receiver is engaged in resolving this issue on an asset-by-asset basis.
The directors of the company did not maintain a manual or computerised accounting system. The company’s external accountant prepared accounts for the company from bank statements marked by the directors with narratives to explain the transactions. The loan account owed by the partnership to the company as identified in draft financial statements and financial statements reveals the following balances:
(a)30 June 2012 – partnership owes company–$10,000;
(b)30 June 2013 – partnership owes company–$869,000;
(c)31 December 2013 (draft) – partnership owes company–$1.013m.
The Receiver has been provided by the company’s external accountant journals for the period 2011 to 2013. The Receiver has been unable to reconcile these journals and has not been provided with any rationale supporting the commercial benefit to the company of entering into the loan transactions with the partnership. The Receiver has been informed that there is no documented loan agreement between the company and the partnership nor has the Receiver been provided with an explanation of the loan account.
There has been an intermingling of the trading of the partnership and the company. There are $945,000 worth of assets not listed in either the partnership or company depreciation schedules. The Receiver asked the husband to advise as to which entities owned each of the assets and provide supporting documentation. The husband’s response was that the assets were owned by the partnership but was unable to provide documentation supporting his advice. The husband otherwise asserts that there are two assets with a market value of $192,500 on the company depreciation schedule that he asserts to be assets of the partnership.
On 1 June 2014 the Receiver met with the husband in relation to company work in progress. The husband informed the Receiver that the company currently had a job at N Town, New South Wales. However, subsequently the husband informed the Receiver that this job was partnership work in progress. The Receiver ascertained that the quote for this work was on company letterhead and that both company and partnership assets were used in the job. The Receiver has invoiced the job but has received no payment.
On 10 June 2014 the Receiver travelled to I Town, Queensland to inspect company assets. A valuer and a locksmith accompanied him. With the consent of the wife, the Receiver entered a shed at I Town to identify and value company assets. Prior to his attendance at I Town the Receiver had attempted to contact the husband and was informed that he was in Asia.
Shortly after the Receiver’s attendance at the premises at I Town, police arrived alleging that there had been a break-in. The Receiver explained his appointment and the police departed. The Receiver changed the locks on the shed and locks on the gates to the property.
The husband asserts that the shed at I Town is an asset of the partnership. However, the balance sheet of the company includes a shed as an asset valued at $951,528. The Receiver is not aware of any other shed owned by the company to which this could refer and is satisfied that the reference in the balance sheet is to the shed at I Town, Queensland.
The Receiver deposes as to the following matters relating to the company:
(a)Debtors: The estimated realisable balance of debtors appears to be between $445,000 and $624,000. The Receiver has forwarded letters requesting payment and responses received indicate the company’s tardy debtor control. Records after 30 June 2013 are poorly kept and there is no aged debtors ledger.
(b)WIP: Subsequent to the Receiver’s appointment the husband and wife provided information to him as to unbilled hire charges totalling $262,000. These have been subsequently billed by the receiver.
(c)Insurance: Insurance obtained by the company lapsed from November 2013 due to non-payment of insurance premiums. The Receiver has since obtained insurance of all of the company fixed assets.
(d)Books and Records: The Receiver has requested the company’s external accountant and directors to provide updated management accounts to the date of the Receiver’s appointment. The Receiver has not received the requested information and the significant discrepancy between 31 December 2013 book values and current estimates of value remains subject to the Receiver’s investigation.
(e)Management Information Systems: The company did not utilise a double entry general ledger accounting package to account for its transactions. Rather, the husband periodically marked the company’s bank statements and forwarded them to the external accountant who prepared financial statements. The external accountant Mr F has informed the Receiver that he has had experienced difficulty in obtaining timely, accurate and complete information from both the husband and wife.
(f)Unsecured creditors: There are 19 unsecured creditors owed $665,000 known to the Receiver. The company is unable to pay those creditors. Some creditors have submitted informal proofs of debt.
(g)Financiers: There are 11 finance agreements for seven different financiers whose asset security value is less than the likely payout. The deficiency is unsecured and is approximately $1,100,000.
(h)National Australia Bank: The NAB holds a general security agreement in respect of all the assets of the company. The company has a $1,000,000 overdraft limit, which is currently drawn to $979,000 as at 30 May 2014.
(i)Superannuation contributions: The company has not paid employee superannuation contributions from as early as July 2013, with a debt of $12,000 owing for one employee.

Z PTY LTD

This company was incorporated on 17 December 2013. The husband is the sole director and shareholder of the company.
On 1 June 2014 the husband informed the Receiver that the company was opened on the advice of the company’s external accountant to ensure that the husband could operate the business and maintain trading given his dispute with his wife. The Receiver has confirmed this advice with the external accountant.
This company has two passenger vehicles financed by Motor Vehicle Finance. This company operates a bank account with CBA.
This company invoiced $255,632 during the period December 2013 to May 2014 with these invoices in relation to the hire of heavy machinery assets held by B Pty Ltd and directing payment to the husband’s personal ANZ account. This company’s invoices have resulted in payments to the husband’s personal ANZ account of $216,191.
The Receiver is satisfied that this arrangement was implemented for the purpose of diverting payment directly to the husband.

B Pty Ltd Invoices

A sum of $1,900,000 has been billed/invoice by the company from 30 November 2013 to 28 May 2014. Of these invoices, $333,000 was directed to and paid into the company’s NAB account, $702,000 and was directed to and paid into either the partnership CBA account or the husband’s personal ANZ account, and $865,000 was directed to accounts other than those of the company and remain outstanding. The Receiver has subsequently directed these customers to pay into the receivership account.

B Pty Ltd Insolvent

The Receiver concludes that a review of the company’s position as at 28 May 2014 shows that the company is insolvent and this circumstance was reported by the Receiver to the NAB on 30 June 2014. The Receiver is of the opinion that the company remains insolvent as at 18 July 2014.
The Receiver concludes that the ongoing trading of the business of the company is not sustainable given that only two of the 23 vehicles/machines are being hired.
On 10 June 2014 the Australian Taxation Office (“ATO”) issued a statutory demand with respect to debts of $374,478. The Receiver has been informed that if the Receiver does not wind up the company, the ATO will do so. The Receiver concludes that the company cannot pay this debt to the ATO.
On 27 June 2014 a statutory demand was issued by one of the company’s financiers with respect to debts totalling $58,231. The Receiver concludes that the company cannot pay this debt.

The Husband’s conduct

On 12 June 2014 the Receiver wrote to both the husband and wife requiring further information as to company plant and equipment, particularly as to the whereabouts of certain missing assets.
The Receiver was able to find a purchaser for a machine owned by the company for $325,000 including GST. The NAB, as holder of general security, approved the sale of the company asset. It was anticipated that on sale of the machine and discharge of the finance facility secured thereon there would be a small equity of about $12,000 remaining.
The Receiver asserts that the husband has wilfully obstructed the sale of this machine and, as a consequence, the purchaser did not proceed.
Assets of the company, including a prime mover, a dolly and a trailer with a combined value of $740,000, were engaged on work at N Town, New South Wales as referred to above. In early July 2014 the Receiver gave instructions for those company goods to be collected. The Receiver was subsequently informed by his agent that the husband had removed the subject goods without the Receiver’s authority and has transported those goods to I Town in Queensland.
The Receiver subsequently received information that the goods were, as at 17 July 2014, at E Town, New South Wales. The Receiver has thereafter received further information that these goods had been moved again to an unknown address.
On 1 June 2014 the Receiver met with the husband and made enquiries of him as to whether company monies were going through his personal account. The husband assured the Receiver that company funds were going through the company bank accounts.
Subsequently, on 20 June 2014 the husband disclosed to the Receiver that he had, indeed, paid company funds into his ANZ account from December 2013. The Receiver requested the husband to provide details of amounts owed by the debtors and what had been paid to date. The husband has provided no such information to the Receiver.

The Receiver’s Conclusions

The Receiver expresses an opinion that a liquidator should be appointed to the company as the company is insolvent and such appointment would facilitate the liquidator investigating the following and providing reports to creditors and the Australian Securities and Investments Commission:
(a)actions of the director using company funds for personal or non-company related purposes;
(b)the company’s financial interest in other assets;
(c)the company’s interest in assets claimed as owned by the partnership;
(d)the company’s interest in jobs claimed to be partnership;
(e)compliance with the directors statutory duties;
(f)payments that may be recoverable by a liquidator of the company;
(g)any insolvent trading claims; and
(h)the conduct of examinations and the issue of summonses for the production of documents or orders for production addressed to the directors and any other relevant third-party.
As to the question of appointing a Receiver to the partnership and Z Pty Ltd, the Receiver was appointed to conduct and manage “the business known as B Pty Ltd” and as part of the process the Receiver has endeavoured to identify and secure property of the company.
However:
(a)there is uncertainty as to the identity of the owner of some items of plant and equipment;
(b)there has been an intermingling of the business and the assets of the company, the partnership and Z Pty Ltd;
(c)there has been inconsistency in the books and records and information provided by the husband and wife; and
(d)as a consequence of this uncertainty, inconsistency and intermingling, the Receiver has been impeded in his ability to identify and secure the property of the company and that of the construction business (which is conducted not only by the company but also by the partnership and Z Pty Ltd).
In the circumstances outlined above, the Receiver is prepared to be appointed as the liquidator of the company and receiver of the partnership and Z Pty Ltd.
Having regard to the matters set out above, the Court is satisfied that it is appropriate for the Receiver to apply to the Court to wind up the company and to appoint him as liquidator of the company. The Receiver proposes to make that application.

The power to appoint a receiver to a partnership rests with the Supreme Court of NSW exercising jurisdiction under s 67 of the Supreme Court Act 1970 (NSW). A receiver may be appointed “in any case in which it appears to the Court to be just or convenient so to do”.
It is inherent in the Receiver’s present application that the Receiver seeks for this Court to exercise the power of the Supreme Court to make the order as sought in the exercise of accrued jurisdiction relating to the present justiciable controversy before this Court.
The power to appoint a receiver to a partnership should be exercised with some caution (Byrne v Byrne [2011] NSWSC 1437, Cumming v Hennessy [2005] NSWSC 1219, Tate v Barry (1928) 28 SR (NSW) 380).
Otherwise, in circumstances where the husband and wife are the only members of the partnership, where the husband is the sole director and shareholder of Z Pty Ltd and where there has been a significant intermingling of the affairs of the partnership, Z Pty Ltd and the company, where the Receiver has not been provided in a timely manner or at all information that would facilitate him properly discharging his duties as a receiver of the company, it is appropriate that the Receiver be appointed receiver and manager of the partnership and Z Pty Ltd forthwith.
For the reasons set out above, it is appropriate that this Court do so.
The Receiver seeks to make the present applications on an ex parte basis in order that his appointment may take effect immediately and that he can provide prompt notice to all interested stakeholders and avoid, as best it can be facilitated, interference by the husband and the wife in the proper undertaking of his obligations to the company in circumstances where the affairs of the three entities have been inextricably intermingled.
For these reasons, it is appropriate that the Receiver’s application proceed ex parte.
Orders will be made as sought by the Receiver and consequent orders for prompt service on the husband and wife are appropriate.

I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 5 August 2014.

Associate:

Date: 5 August 2014