Milner v Conetip P/L
[2001] QSC 432
•20 November 2001
SUPREME COURT OF QUEENSLAND
CITATION: Milner & Anor v Conetip P/L & Anor [2001] QSC 432 PARTIES: BRUCE POUNTNEY MILNER
(first plaintiff)
ALAN RICHARD TAYLOR
(second plaintiff)
v
CONETIP PTY LTD (ACN 062 625 469)
(first defendant)
PALM SPRINGS VILLAGE PTY LTD (RECEIVER and MANAGER APPOINTED) (ACN 010 721 445)
(second defendant)FILE NO: S4527 of 2000 DIVISION: Trial Division DELIVERED ON: 20 November 2001 DELIVERED AT: Brisbane HEARING DATE: 29 October 2001 – 2 November 2001 JUDGE: Chesterman J ORDERS: 1. Judgment for the first plaintiff in the sum of $344,200.60 with simple interest at 10% per annum from 14 October 1999 to date.
2. Judgment for the second plaintiff in the sum of $80,667.39 with simple interest at 10% per annum from 25 March 1998 to date.
3. The moneys represented by the cheque, exhibit 7, are to be paid into Court and be paid out to the second defendant upon the filing of an affidavit verifying that the retirement village scheme is registered under s 27 Retirement Villages Act 1999 (Qld)
CATCHWORDS: CONTRACTS – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – whether possessive pronoun “their” should be read into clause – where such construction would substantially frustrate the intention of the parties to the deed – where such construction would deprive the receiver of a substantial part of remuneration and be a windfall gain to the first defendant – interpretation of the word “employees”
CONTRACTS – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where first defendant acquiesced to the irregularity in the receivership – whether parties to a contract may, by their conduct, prove that contract’s existence or its terms – whether acquiescence can amount to evidence that the terms of appointment of a receiver have been varied
CORPORATIONS – RECEIVERS, MANAGERS AND CONTROLLERS – DUTIES AND LIABILITIES – where the second plaintiff / receiver ceased practical connection with the receivership – where the receivership conducted by the first plaintiff / de facto receiver – where the receiver made repeated requests for the execution of a new deed of appointment – where delay caused by first defendant – whether the receiver acted responsibly and entitled to remuneration after delegating the whole of his function to another
Retirement Villages Act 1999 (Qld) s 27
Ah Toy v Registrar of Companies (1986) 10 FCR 356, referred to
Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216, cited
Cape v Redarb Pty Ltd (1992) 8 ACSR 67, not followed
Commissioner for Corporate Affairs v Harvey [1980] VR 669, referred to
Forrest v Ewes (1816) 2 Mer 68; 35 ER 867, cited
Fraser v Burgess (1860) 13 Moo PC; 15 ER 118, followed
John Connell Holdings Pty Ltd v Mercantile Mutual Holdings Ltd (1998) 10 ANZ Insurance Cases 61-407, followed
Rankine v Harris (unreported, QCA No 6944 of 1996, 9 July 1997, followed
Re National Flying Services Ltd [1936] Ch 271, referred to
COUNSEL: Dr D K Smith and with him Mr A K H Cooper for the plaintiffs
Mr D C Andrews for the first defendantSOLICITORS: Ford Knapp & Marshall for the plaintiffs
Barry Nilsson as town agents for Nash O’Neil Tomko for the first defendant
CHESTERMAN J: The plaintiffs, who are accountants, were appointed successively by the first defendant (“the defendant”) to be receivers and managers of the second defendant’s (“the village”) undertaking. They sue to recover from the defendant the balance of their fees earned in the performance of their receiverships.
At its beginning this action was unnecessarily complicated. Pleadings were voluminous and frequently amended, even during the trial itself. The parties thought the court would benefit from an agreed bundle of documents numbering almost 2,000 pages. Happily, as the trial progressed a number of issues were withdrawn from contention and, in the end, only five points, each of limited scope, were left for determination. Commendably the parties also reached agreement on the quantum of the claims and the amount in dispute with respect to each of the remaining points in contention.
I am thus able to recite the relevant facts with brevity.
The village was incorporated to develop and operate a retirement home for elderly people at a southern bayside suburb. It borrowed development funds from Custom Credit Corporation Ltd which secured the advance by a mortgage debenture and a real property mortgage. On 13 September 1989 the securities were transferred to Mr Noel Ling who was at all times the defendant’s controlling mind. For a time he could not formally represent it because he was a bankrupt. The defendant’s officers in that period were Dr Warren Ling and Mr Leung who acted in accordance with Mr Ling’s wishes. Mr Ling was the trustee of a number of family trusts and he took the assignment of the mortgage and the debenture as trustee. Consequent upon his bankruptcy, in March 1994, the securities were transferred to the defendant which replaced Mr Ling as trustee.
The village intended to recoup its development costs by selling long term leases to individual dwelling units constructed as part of the complex. A substantial sum was raised in this way but the village’s executive director succumbed to temptation and stole about $1.6m of the purchase moneys. Mr Ling, as mortgagee, was obliged to honour the leases which had been promised on behalf of the village which, as a result of the theft , was greatly under capitalised. In addition, news of the fraud and of the village’s reduced ability to function became public knowledge with the further result that purchasers could not be found for the remaining units. To overcome the problems Mr Ling appointed the second plaintiff, jointly with one of his partners, Mr Schmierer, as receivers and mortgagers of the village. The appointment was terminated when Mr Ling retired as trustee and transferred the securities to the defendant. It immediately reappointed the receivers. In April 1995 Mr Schmierer retired. Thereafter the second plaintiff continued on alone. He retired from active practice on 30 June 1995 but remained a consultant to his firm until 30 June 1996. The first plaintiff had been an employee of the firm when the second plaintiff was appointed receiver and manager. On 25 March 1998 the second plaintiff retired as receiver and manager and the first plaintiff was appointed in his stead. He resigned on 14 December 2000.
It is convenient, but inaccurate, to speak of the plaintiffs as members of a firm of accountants. Initially Mr Taylor was a member of the partnership of Horwath and Horwath but over time the structure of the practice changed. It became a proprietary company the first directors of whom were the partners of the firm. The company also seems to have changed name over time: it was at times Horwath (Brisbane) Pty Ltd and at other times Horwath (Qld) Pty Ltd. Despite the fact that the structural change from partnership to corporation took on a significance for the defendant’s case I was not given any detail of them, nor even the sequence in which the changes occurred, or their timing. It may be possible to overcome this deficiency by a careful study of some or all of the hundreds of pages of agreed documents but the effort would be disproportionate to the possible reward. It appears likely that when the second plaintiff and Mr Schmierer were appointed receivers they were members of a partnership of chartered accountants, Horwath and Horwath.
In each case there was an instrument of appointment and deed of indemnity. The documents are relevantly identical and seem to date from the existence of the partnership. Because two of the defendant’s points turn on the deeds it is appropriate to set out the terms in question. Having recited the appointment of the plaintiffs as receiver and manager, they provide:
“2.The (defendant) ... agrees to indemnify ... the (plaintiff) from and against all claims liabilities demands actions suits proceedings payments costs charges and expenses whatsoever ... that may be made or brought against or suffered sustained or incurred by the (plaintiff) in the due exercise or purported exercise of the powers authorities or discretions vested or purported to be vested in them by virtue of the respective appointments of the (plaintiff) as Receiver and Manager ...
...
5.The remuneration of the (plaintiff) shall be an amount equal to their charge for the time actually spent by them, their partners or employees in performing their duties as Receiver and Manager pursuant to the Instrument of Appointment provided that such charge shall be calculated at rates not exceeding the maximum rates recommended from time to time by the Insolvency Practitioners Association of Australia for work of that nature.
6.In addition to the remuneration referred to in Clause 5 ... the (plaintiff) shall be entitled to the reimbursement of such actual disbursements as they make in the course of acting as Receiver and Manager ...”
Although the matter was not explored in any detail it appears that after the incorporation of the practice of Horwath and Horwath, the directors (the former partners) were paid fees and/or a salary, and the firm’s employees became servants of the corporation (“the company”) which paid their salaries. Pursuant to an arrangement the detail of which was not proved, fees earned by the plaintiffs from the receivership would have been paid to the company and formed part of its general revenues.
The first point taken by the defendant is that none of the clauses of the deed relevant to remuneration applied to the plaintiffs’ actual situation in which much of the work of the receivership was done by employees of the company. It is submitted that clause 2 has no application because neither plaintiff incurred any liability to the company in respect of its employees’ work. That is, the company did not charge the plaintiffs for making its employees available to assist in the discharge of the duties of receivership. No doubt there was an expectation that the receiver’s fees would be paid to the company but there was no more formal arrangement.
Then it is submitted that clause 5 does not apply because it obliges the defendant only to remunerate the plaintiffs for the time spent by them, their partners or employees and, at relevant times, they had neither partners nor employees. There were instead co-directors of the company, and company employees.
Finally it is argued that clause 6, which applies only to the recovery of actual disbursements, has no application because the plaintiffs did not themselves pay anything towards salaries or wages.
It may be observed that the point does little credit to the defendant who does not complain that the work charged for was not done, or was not done properly, or that the amounts charged exceed the agreed rate. The receivership was expensive and produced little tangible benefit for the defendant but that is a consequence of the circumstances which led to the plaintiffs’ appointments and which made the receivership difficult. The defendant has had such benefit as there was from the receivership.
It may be accepted that clauses 2 and 6 of the deeds provide no basis for the plaintiffs’ claims. The defendant’s contention with respect to clause 5 is that the possessive pronoun “their” governs “employees” so that the remuneration to which the plaintiffs are entitled is an amount “equal to their charge for the time actually spent by them, their partners or their employees in performing their duties . .”. Where duties were performed by employees of someone else there is no right to remuneration unless, of course, the receiver incurs a liability to pay the employees or actually pays them, in which case other clauses of the deed would confer protection.
The defendant’s construction would substantially frustrate the intention of the parties to the deeds. They cannot have intended that work done in the receivership by an employee of an entity other than the receiver personally should go unrewarded. It would limit the applicability of clause 5 to occasions when the receiver was the member of a partnership or a sole practitioner whereas the particular structure of a receiver’s practice should not affect his right to remuneration. Indeed it may change over time as is the case here. It does not seem right that an over rigorous attention to syntax should deprive him of a substantial part of his remuneration, or confer a windfall on the defendant.
I do not think that clause 5 should be read as the defendant contends. The word “employees” where it appears in the phrase “time actually spent by them . . . or employees in performing their duties . . .” need not be limited by the possessive pronoun. Employees can be understood to be a class wider than the plaintiff’s own servants. So understood, the phrase would mean “. . . time actually spent by . . . persons employed in performing duties . . .”. A receiver will be entitled to remuneration at the agreed rate for time actually spent by any person who is an employee and who performs part of the receiver’s duties.
The next point concerns only the claim by the second plaintiff. The contention is that he is not entitled to any remuneration after 30 June 1996 when he “entirely ceased practical connection with the receivership”. On that date Mr Taylor ceased to be a consultant to the company and he no longer attended its offices. He himself did nothing in connection with the receivership which was conducted by the first plaintiff who had become a director of the company and who had been the de facto receiver since Mr Taylor resigned his directorship a year earlier. The submission is that clause 2 of the deed obliges the defendant to indemnify the second plaintiff only against liabilities “incurred by the receiver . . . in the due exercise or purported exercise of (his) powers . . .” and that after 30 June 1996 the second plaintiff did not exercise or purport to exercise any of the receiver’s powers. The submission does not mention clause 5 but perhaps it was intended also to submit that the receiver’s remuneration was to be equal to his charge for time he actually spent in performing his duties. This would assist the submission but it overlooks that part of the clause which confers a right to remuneration for time spent by employees in performing those duties. The defendant did not submit, more generally, that the second plaintiff was not entitled to remuneration in respect of duties the whole performance of which was delegated to others, though there is authority for that proposition. Before considering them, and the points actually taken by the defendant, it is convenient to refer to the passage of events in the interregnum between Mr Taylor’s retirement and his replacement by Mr Milner.
On 29 March 1996 the second plaintiff wrote to the defendant to inform it of the progress of the receivership. He concluded his report by saying:
“From 1 July 1995 I have been engaged as a Consultant at Horwath & Horwath with a view to my retirement on 30 June 1996.
It now appears that the affairs of the village will require the attention of a Receiver beyond 30 June 1996, and it is my suggestion that Mr Bruce Milner of this firm take over the appointment. Such change of appointment would require the preparation of a new Deed ... These documents will be drawn up at the Receiver’s cost.”
In his report of 12 July 1996 Mr Taylor told the defendant:
“As I foreshadowed in my report dated 29 March 1996 I have ceased practice as Consultant to Horwath & Horwath.
If the position is that this firm is to continue to act on your behalf as Receiver and Manager of the affairs of Palm Springs Village a new Deed of Appointment and Deed of Indemnity will need to be prepared.
The recitals to each of the Deeds will need to record my retirement and the appointment of Bruce Milner. . . . Perhaps Tony Mitchell (the defendant’s solicitor) could draft the Deeds.”
All the receiver’s reports written between 1 July 1996 and the first plaintiff’s appointment were in Mr Taylor’s name though they were compiled and signed by Mr Milner.
The report of 6 September 1996 recorded that A D Mitchell and Co had been instructed to draft the appropriate deeds to record the second plaintiff’s retirement and his replacement by the first plaintiff. By a letter dated 25 September 1996 the defendant was informed that deeds had been drafted but that:
“... no further action will be taken until Mr Mitchell advises of the outcome of the present discussions between Conetip . . . Griffiths and the company.”
Griffiths was the thief. The company is presumably a reference to the village. Although the matter was not canvassed in evidence it seems that there were discussions which might have led to an agreement that would have allowed the defendant to bring the receivership to an end.
On 18 March 1997 the receiver reported that the discussions had produced no result and, therefore:
“... it is now prudent for Mr Milner to replace me as Receiver and Manager. Accordingly, attached is a copy of my letter to Mr Mitchell instructing him to finalise the appropriate Deeds for execution.”
By letter dated 1 May 1997 the receiver informed the defendant that the deeds had been prepared in final form. They awaited execution by the defendant.
On 12 May 1997 Mr Milner spoke with Mr Mitchell who told him that the defendant intended to appoint him as receiver and manager “forthwith”.
By a letter dated 17 June 1997 the defendant wrote to Mr Milner to express concern about a number of aspects of the receivership. The letter included a sentence:
“ ... your remuneration in just over six months is far more than we have ever made.”
By this time Mr Taylor had been retired for almost a year. The letter was, as I have said, addressed personally to Mr Milner and refers to “your remuneration”.
There is no doubt that the first plaintiff was disturbed by the irregularity of the situation. He was performing the tasks and assuming the responsibilities of the receiver but had not been formally appointed. Mr Taylor, the appointed receiver, was taking no part in the receivership. Mr Milner in August 1997 took advice from senior counsel on what could, and should, be done about the problem.
It is worth mentioning that underlying the defendant’s reluctance to appoint Mr Milner was a disagreement between them about the sale of the retirement complex. The plaintiffs had unsuccessfully attempted to find purchasers for individual units. They proposed instead a sale of the entire property as a going concern. To that end they obtained a valuation so as to be able to fix a reserve price at auction. The valuation was at a figure unacceptable to the defendant. A sale at about that price would have resulted in the loss of the whole of its investment. The receivers could see no alternative. The defendant would not accept their recommendation. The impasse continued for months.
On 19 September 1997 Mr Milner and his solicitor Mr O’Connor met Mr Leung in Sydney. Their discussions covered a number of topics amongst which was the present concern. According to Mr Milner’s note:
“(Mr Milner) explained (that Mr Taylor) was no longer a partner and while his name appeared on all correspondence he had no practical involvement in the matter. (Mr Leung) was not aware of this even though previous correspondence had made mention of it. (Mr Leung) advised that he was not entirely sure that Dr Warren Ling was aware of the matter either. (Mr Milner) advised that this would not be a problem depending on the future conduct of the Receivership, (Mr Milner) could replace (Mr Taylor) . . .”
It is difficult to believe in view of the correspondence I have reviewed that neither Mr Leung nor Dr Ling was aware of the exact situation.
On 12 November 1997 Mr Milner wrote to the defendant enclosing “in triplicate for ... execution and return ...” instruments of termination of Mr Taylor’s appointment, Mr Milner’s appointment in lieu and a deed of indemnity. On 18 December 1997 Mr Milner spoke to Mr Leung and asked him to have the documents executed. Still nothing happened. On 23 February 1998 Mr Milner met by chance with Mr Leung and Mr Ling. Among other things Mr Milner advised “that the resignation of Alan Taylor and (his) appointment ... as receiver and manager must be attended to. ... Alan Taylor had left the firm some 18 months ago and therefore he should no longer be the receiver ...”. The defendant continued to procrastinate. By a letter dated 4 March 1998 Mr Milner wrote to Mr Leung stating:
“It is now crucial that the documentation for the retirement of Alan Taylor and appointment of Bruce Milner as Receiver ... be executed. As advised at the meeting and in numerous letters sent to you, Alan Taylor retired from this firm in June 1996. To allow Alan Taylor’s retirement to be formalised this documentation must be executed. I request that you attend to this now.”
It appears that Mr Leung entertained fears that the defendant’s directors might be personally liable for debts incurred by the receiver which he could not pay from the income of the village.
Mr Milner addressed that concern in his letter. He said:
“In so far as you are concerned that there may be ongoing or contingent liabilities incurred by the directors of Conetip Pty Ltd, I advise that no such liabilities arise as a result of executing these retirement and appointment documents.”
Notwithstanding this assurance, in a telephone conversation between Mr Milner and Mr Leung on 16 March 1998, Mr Leung said that the directors (in reality Mr Ling) remained anxious that they would be liable for the receiver’s debts. Concern was also expressed about the defendant’s liability for the costs of an advertising campaign. This is relevant to the counterclaim and will need to be mentioned in that connection. For the moment it can be ignored.
Mr Leung said the defendant would not appoint Mr Milner until its concerns were addressed. By a letter written on the same day, 16 March 1998, Mr Milner assured the defendant that as the village had traded under the control of a receiver and manager
“the directors are not liable for breaches of the Corporations Law in relation to Insolvent Trading. The directors executed in favour of Mr Taylor many years ago a Deed of Indemnity. The directors have before them a new Deed ... in exactly the same terms. That document sets out the extent of the directors’ liability at law. You will note that the Deed of Indemnity has not been called on to date and I do not anticipate that it will be called on in the future. The cash flows of the village are such that it can, with careful monitoring, trade on a week to week basis on a cash flow positive situation ...”.
On 20 March 1998 Mr Leung sent Mr Milner a letter by facsimile transmission:
“As per our telephone conversation this morning please confirm that our understanding of the following (based on the letter from your office dated 16 March 1998) are correct:
1.Upon the signing of the Termination of Appointment of Mr A R Taylor as Receiver and Manager, no outstanding liability/liabilities that Conetip Pty Ltd is obligated to indemnify Mr Taylor for the period of his appointment as Receiver and Manager to date.
2.The new Deed of Indemnity will only cover Mr Bruce P Milner as new Receiver and Manager Appointed from the date the document is signed by Conetip Pty Limited.”
The letter was signed by Mr Leung. Following its receipt Mr Milner spoke to him by phone. At the conclusion of the conversation he added in handwriting to the paragraph numbered 1:
“With the exception of outstanding remuneration for which my firm is entitled to look to proceeds from unit sales as previously advised to you in our reports.”
Mr Milner signed and dated the amendment and signed the letter to confirm and accept its terms.
The addendum is also the subject of a point taken by the defendant and will need further consideration. For the moment it is enough to record that Mr Leung was satisfied with the letter as amended and on 25 March 1998 the second plaintiff’s appointment was terminated and the first plaintiff was appointed receiver and manager of the village. The defendant executed a deed of indemnity in the terms already mentioned.
The only other evidence relevant to this issue is Mr Taylor’s confirmation that the work done in connection with the receivership by Mr Milner after his retirement was done on Mr Taylor’s behalf. This assertion was not challenged in cross-examination.
The defendant’s point is that because Mr Taylor had no personal involvement in the receivership after 30 June 1996 there is no entitlement to remuneration for the work actually done. The defendant mistakenly relies upon clause 2 of the deed for this submission when the claim for remuneration is based upon clause 5. There is, as I mentioned, a wider basis for the objection. This is that an external administrator appointed to a company who abdicates his responsibilities and delegates the whole of his function to another behaves improperly and may not receive any recompense.
In Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 754 Marks J said:
“... the liquidator signed a letter . . . appointing Price Waterhouse as ‘my agents for the purposes of the liquidation and all ancillary matters’. ... The appointment of Price Waterhouse, of which he was at all times a member, was in the teeth of his duty as liquidator. ... (The Companies Act) permits the appointment of ‘an agent to do any business which the liquidator is unable to do himself’. No doubt, it is a power commonly exercised by liquidators in conjunction with his powers ... But it is not and cannot be contended that the appointment by a liquidator of his firm to do the work of the liquidation and ‘all ancillary matters’ comes within the purview of what he is ‘unable to do himself’. If the liquidator was so disabled in some way that he could not perform the duties to which he was appointed then his duty is, not to appoint an agent, but to apply to the Court for permission to resign.”
Mr Harvey’s liquidation of the companies to which he was appointed was an appalling tale of neglect and dishonesty. He made no attempt to protect assets or to enhance their value. He deliberately preferred the financial interest of his firm to that of the companies and their creditors. He ensured that the little money recovered was paid by way of professional fees to Price Waterhouse.
It was in that context that Marks J expressed the opinion I have quoted. The liquidator was denied his right to remuneration.
A similar opinion was expressed in Ah Toy v Registrar of Companies (1986) 10 FCR 356 at 361. A Full Federal Court (Toohey, Morling and Wilcox JJ) said:
“The Companies Act contains no provisions for the delegation of the functions of a provisional liquidator. In relation to liquidators there is a limited provision. ... a liquidator may ‘appoint an agent to do business which the liquidator is unable to do himself’. That provision falls well short of authorising the type of wholesale delegation undertaken in this case. The purpose of (the section) is to enable the delegation of specific tasks which the liquidator, for one reason or another, is not able to undertake. The scheme of the Act is that the liquidator remains generally responsible to the Court and to the creditors and contributories of the company for the conduct of the liquidation. We agree with the comments by Marks J ...”
The result did not deny the liquidator’s remuneration by reason of his complete delegation of functions. Professional fees paid to the delegate were disallowed but only because they had not been at first taxed as required by the Companies Rules.
It will be observed that both cases involved a liquidator appointed by the court. The limitation on a liquidator’s power to delegate would appear to extend to receivers similarly appointed. In Rankine v Harris (unreported, QCA No 6944 of 1996, 9 July 1997, BC 9702988) de Jersey J (as the Chief Justice then was) said (at 7):
“(The appellants) referred ... to cases concerning the limits of the permissible delegation by court appointed receivers and liquidators. Cases like Commissioner for Corporate Affairs v Harvey ... and Ah Toy v Registrar of Companies ... indicate that such officers must retain control, with any delegation being carefully regulated.”
McPherson JA said (at 3):
“As a general proposition, it may well be correct to say that a receiver appointed by the court may not delegate the performance of his duties and functions to others ... It appears to be the practice for receivers, who wish to employ agents, to obtain the authority to do so with the Court ... However, the absence of such authority does not necessarily deprive a receiver of the right to indemnity or reimbursement in respect of remuneration payable or paid to an agent so employed by the receiver.”
His Honour then referred to Re National Flying Services Ltd [1936] Ch 271 and Forrest v Ewes (1816) 2 Mer 68; 35 ER 867, in both of which a receiver claimed as remuneration amounts payable to agents engaged to perform part of the receivership when the receiver had not been authorised to delegate functions to the agent. The outcome of each case was that “disbursements on account of work done by others at the behest of the receiver or manager, but without the authority of the court, would, to the extent that they were required to be done and were reasonable, be allowed out of the assets”. McPherson JA concluded (at 5):
“... I do not consider that the fact that the respondent did not himself perform the auditing work is fatal to his claim to be paid or to retain a reasonable sum paid to others by way of remuneration for doing that work. The primary judge plainly regarded his conduct to be reasonable.”
In that case it was found that there was no excessive delegation of responsibility and that the receiver himself exercised an adequate degree of personal supervision and control over the receivership.
In Cape v Redarb Pty Ltd (1992) 8 ACSR 67 a receiver was appointed by two business associates who had fallen out. Each tried to buy the business. One offer was accepted in slightly controversial circumstances by the receiver’s employees after the receiver had gone overseas. Higgins J dismissed a complaint inter alia that the sale should be set aside because of an improper delegation of the receiver’s functions. In a brief passage (81) which referred sparingly to Harvey his Honour concluded that the receiver could delegate his functions “if it seemed reasonable to do so” and if the delegates were competent and properly supervised and if the receiver did not seek to avoid responsibility for the actions of the delegate. With respect I do not find the suggested test of responsibility entirely convincing. It might lead to an excessive degree of delegation because it does not require personal involvement in the task of receivership. It appears unsupported by authority.
This case concerns a receiver appointed privately, not by court order. The authorities are all concerned with the latter. Nevertheless I consider the same rule should ordinarily apply. Receivers, by whichever means of appointment, have statutory powers which they may exercise, and statutory obligations to perform.
There is a degree of trust and confidence reposed in the particular individual appointed to the task and it is to be expected that the appointee will personally undertake the role. Nevertheless there is in a case of a privately appointed receiver the possibility of flexibility in the manner in which the receivership is to be performed. Ordinarily a receiver must retain sufficient control and supervision over the receivership to make it his. However the terms of appointment might vary or be varied in a particular case to meet particular circumstances.
There is in this case no hint of misconduct, neglect or dishonesty by either plaintiff. There is no complaint that the work charged for between 1 July 1996 and 25 March 1998 was not done or was not necessary for the receivership. Moreover the defendant at all times knew that Mr Milner was acting as de facto receiver and that Mr Taylor had ceased all involvement with the affairs of the village. It also knew that Mr Milner was anxious to regularise the position by having the defendant terminate Mr Taylor’s appointment and appoint Mr Milner in his stead. It was the defendant’s reluctance, for reasons which were never rationally articulated, that prevented a timely replacement of the second plaintiff. In these circumstances it is impossible not to conclude that the defendant whole heartedly accepted the manner in which the receivership was conducted.
In Rankine McPherson JA suggested that acquiescence may provide a basis for finding that a delegation of the whole of a receivership was proper. His Honour referred to Fraser v Burgess (1860) 13 Moo PC; 15 ER 118, in which the owner of an estate consisting of a plantation in the West Indies appointed an agent to take possession of and work it. The owner’s brothers and sisters had an interest in the estate by way of an encumbrance given by their father’s will. The siblings fell out but the agent continued for many years to manage the estate, though with great difficulty. On his death his executor sought to recover his outstanding remuneration. The owner’s interest was insufficient to pay the debt. The executor sought to recover the balance from the encumbrancers’ interest. The Privy Council upheld the claim. Lord Kingsdown said (at 342-350; 129-131):
“Grant was originally merely the agent and attorney of ... the owner of the estate, subject to the charges. As such agent ... he stood in no relation whatever to the incumbrancers; he was subject to no control on their part, and liable to no responsibility to them for his management, on the one hand; and, on the other, he could have no claim upon them ...
But the cases ... establish, that where the possession has been held by the attorney and manager of the mortgagor, yet if the mortgagees have so recognized the possession of the manager that he can be considered as acting on their behalf and for their benefit, the same consequences will follow, as regards their interests, as if he had been appointed under the authority of the Court.
... the claim of Grant to be considered as having been in possession on behalf of the incumbrancers, and under the sanction of the Court, seems very strong. He had become manager, no doubt, originally ... under a power of attorney, executed by the owner, subject to the charge. But his continuance in that character has not only been acquiesced in by the incumbrancers, but has been insisted on by them as the condition on which the owner should be permitted to continue in possession.”
Acquiescence as a doctrine, or even a concept, appears to have no place in the modern law of contract if one may judge by the contents of the text books. It has no doubt been subsumed under the rubric of estoppel. However the notion underlying acquiescence may yet fulfil a useful function. Parties to a contract may, by their conduct, prove its existence or its terms. See Australian Energy Limited v Lennard Oil NL [1986] 2 Qd R 216 at 237. Similarly, conduct of the type which in Fraser was said to amount to acquiescence so as to make the owner’s agent also the mortgagees’, can amount to evidence that the terms of appointment of a receiver have been varied.
The appointment of the second plaintiff was silent as to the manner in which he was to undertake the receivership. I would accept that the parties intended that Mr Taylor should, at least, control and supervise the work done in the receivership. The critical question in this part of the case is whether the second plaintiff’s complete delegation of his functions after his retirement was a breach of the terms of his appointment so as to disentitle him to remuneration in respect of the delegated performance. With notice of what was intended the defendant made no objection. With knowledge of what was happening it dealt and corresponded with the first plaintiff and did not look to involve the second plaintiff in the receivership. It alone was responsible for the delay in appointing the first plaintiff. The circumstances satisfy me that the parties by their conduct varied the terms of the appointment to allow the complete delegation of functions from Mr Taylor to Mr Milner pending the latter’s appointment.
An alternative approach is to regard what happened as a waiver by the defendant of the requirement imposed on the second plaintiff by the deed that he personally oversee the receivership. As I explained in John Connell Holdings Pty Ltd v Mercantile Mutual Holdings Ltd (1998) 10 ANZ Insurance Cases 61-407, waiver in the sense that a party to a contract may continue to be bound to it where the other party has not performed it strictly in compliance with its terms remains part of the law of contract. The requirement that the second plaintiff personally oversee the receivership was waived by the defendant which permitted, for a time, the receivership to be performed by means of complete delegation to the first plaintiff.
Waiver and variation apply to a term found in a deed as well as to one found in a simple contract. See Halsbury’s Laws of England 5th ed vol 9 para 572, 570; McDermott v Black (1940) 63 CLR 161 at 187 per Dixon J.
The defendant’s next point is that its obligation to pay the second plaintiff is postponed until the proceeds from the sale of units are sufficient to pay him. The postponement of the obligation is the result of an agreement made between Mr Milner and Mr Leung between 16 and 20 March 1998 and, in particular, Mr Milner’s notation to the letter of 20 March 1998.
By its terms the letter supports the defence.
Mr Milner’s evidence was that his conversations with Mr Leung during those four days were directed towards allaying his anxiety that the defendant’s directors might be liable for the village’s debts if it traded while insolvent. He cannot recall the particular conversation which led to his handwritten amendment to Mr Leung’s letter. He denied agreeing that Mr Taylor’s fee should be paid only out of the proceeds of unit sales. Mr Milner said in cross-examination that at the time he had an expectation, based upon a marketing strategy that had been put in place, that the receiver’s remuneration would be funded from unit sales but he denied agreeing that the receivers would not be entitled to remuneration unless the proceeds were sufficient or that the right to payment should be delayed pending sales. He had no convincing explanation for the terminology of his notation which is inconsistent with his testimony. Mr Milner did make the point that such an arrangement would make no sense. The receivership was difficult and had been lengthy. Historically units had been difficult to sell and although hopes were entertained for the new marketing strategy there was no certainty of success. A considerable amount of money was owed to the receivers and had been for some time. To limit remuneration to the fortuity of sales does seem improvident and it is unlikely that Mr Milner would have made such an agreement. His note, however, suggests that he did.
Mr Leung’s recollection of the antecedent conversations was that the defendant would not appoint Mr Milner unless it had confirmation that its directors were “not liable for any liability under the indemnity”. This is ambiguous and might refer either to Mr Taylor’s fees or liability for insolvent trading. He remembered Mr Milner having “an anticipation” that the indemnity would not be called upon because, illogically, “Mr Taylor . . . has never called on the indemnity, so there is no liability there”. Mr Leung confirmed that the first paragraph of his letter of 20 March referred to the directors’ potential liability for insolvent trading, not receiver’s fees. In that context it is not easy to understand why the conversation should have turned to that question, and why Mr Milner made the note.
I find it difficult to make sense of the evidence. There is considerable force in Mr Milner’s argument, and the addendum does not answer Mr Leung’s expressed concern about directors’ liability, but rather the defendant’s liability to pay fees to the receiver. Nevertheless the document appears plain on its face; the second plaintiff’s remuneration was to be paid from sale proceeds and not from general assets of the defendant.
If such an agreement were made one would think it would contain implied terms as to the timeframe within which sales were to occur and implied promises to use reasonable diligence to obtain sales and at realistic prices. Such points were not pleaded or explored in evidence and so can be discarded.
There are two answers to the defence, both short. The first is that it has not been proved that Mr Milner had Mr Taylor’s authority to impose a moratorium on his entitlement to remuneration. The closest the evidence came was a statement from Mr Taylor that Mr Milner “would have had (his) authority to obtain the formal deed that terminated (his) receivership”.
The second plaintiff sues for his own fees. At the time of the alleged agreement the first plaintiff was not his partner nor even a co-director. There is no question of implied authority and no evidence that Mr Milner had actual authority to vary the terms of Mr Taylor’s contract with the defendant. The agreement, if it was made, does not bind the second plaintiff.
The second answer is that the alleged agreement is unsupported by consideration. The defendant had pleaded that in consideration of the defendant’s appointing the first plaintiff as receiver both he and the second plaintiff agreed that their fees should be paid only out of the proceeds of sale. On the evidence no such agreement was made. The defendant did not, in the end, argue that a term of Mr Milner’s appointment was that his and Mr Taylor’s fees should be paid in the manner alleged. Nor, as I understand the evidence and the submissions, was there any support for a finding that Mr Taylor’s fees should be postponed in consideration of Mr Milner’s appointment. In the result the only consideration pleaded has not been proved. No other consideration has been identified.
One item only remained in the defendant’s counterclaim, and that was not pressed with any vigour. It is a claim to recover $21,418.55 by which it is said the first plaintiff exceeded an agreed budget for advertising the sale of units in the village. The advertising campaign was conducted by a firm, Lafferty Webb, engaged by the first plaintiff early in 1998. It was their proposal for the sale of units which led to Mr Milner’s expectation that the cash-flow generated from sales would be sufficient to pay his and the second plaintiff’s outstanding fees. The hopes went unrealised but $31,418.55 was spent in the attempt. The money came from income generated from the operation of the village. The income was the defendant’s pursuant to the rights conferred by the mortgage and mortgage debenture. The defendant’s case is that it authorised the expenditure of $10,000 only on advertising. The additional sum actually spent by the first plaintiff is claimed as the defendant’s money wrongfully paid away; as money received by the first plaintiff for the use of the defendant but not so accounted for.
The resolution of the counterclaim depends entirely upon an assessment of credit. Mr Leung alleges, and Mr Milner denies, that a limit of $10,000 was placed upon the advertising budget. Mr Milner’s understanding of the arrangement was that the advertising budget proposed by Lafferty Webb was acceptable to the defendant as long as it was wholly funded from income derived by the receiver from the village and did not have to be paid from the defendant’s own resources. The relevant conversation occurred on 23 February 1998. I prefer Mr Milner’s version of it. I think Mr Leung is mistaken, but genuinely so. Mr Leung was demonstrably wrong in his recollection of where the meeting occurred. It may be noted that his account of the conversation given in chief was substantially more detailed than that put in cross-examination to Mr Milner by counsel for the defendant. Moreover there is contemporaneous documentary corroboration for Mr Milner’s account. Mr Malt, Mr Milner’s assistant, prepared a detailed diary note of the meeting. It contains no record of the monetary limitation but does record the defendant’s insistence that it not pay the costs of marketing. In his letter of 4 March 1998 Mr Milner wrote:
“Mr Leung raised in particular your concerns about you incurring liability for the marketing costs of Lafferty Webb. As discussed at the meeting on 23 February 1998, you have my undertaking that the marketing costs, and indeed all costs associated with the proper running of the village, are closely monitored by me. I will not allow these costs to exceed budget or to impose additional liabilities on you.”
The budget was for more than $10,000. The defendant did not respond to the letter.
I reject all of the defendant’s objections to paying the plaintiffs’ fees.
Two issues remain. The first is interest. The plaintiffs claim it at the simple rate of 10% per annum pursuant to s 47 of the Supreme Court Act 1995 on the amount of each invoice and from a date 30 days later. The defendant does not oppose the award of interest at the rate claimed but does argue that it should accrue only from a later date. It is pointed out that the parties did not agree that unpaid invoices should bear interest; that the plaintiffs did not demand interest until recently; and that the plaintiffs were for many years content to accept that payment would be made from the proceeds of the sale of units or otherwise spasmodically. It is also pointed out that the agreement to postpone the second plaintiff’s remuneration until units were sold did not stipulate that interest should be paid on the delayed receipt.
The points made are substantial. There is no doubt that the plaintiffs recognised that the receivership was a difficult one and that the defendant stood to receive little from it. Its investment had been crippled by Griffith’s fraud and it had a reduced ability to pay receivers’ remuneration. In the absence of an agreement to pay interest and in view of the plaintiffs’ complacency with respect to the late and incomplete payment of their invoices it would not be fair to impose retrospectively on the defendant a liability for interest from the delivery of each invoice.
There is no reason however why the second plaintiff should not have had his fees paid when his appointment was terminated. He did not agree to any further postponement and it was known that he had ceased practice and had no further involvement in the receivership. That was the time when his account should have been settled. The amount which the second plaintiff is entitled is $97,667.39 less an amount of $17,000 paid to date. The balance for which judgment will be given is $80,667.39. Simple interest at 10% per annum should be allowed on this amount from 25 March 1998.
The first plaintiff’s claim is for $344,200.60 of which $72,661.48 is an unpaid liability to John M O’Connor and Company, solicitors, for fees incurred in connection with the receivership. It appears that by mid October 1999 the relationship between the first plaintiff and the defendant had deteriorated. The parties had had a serious misunderstanding about the litigation which had generated Mr O’Connor’s fees. The misunderstanding is no longer a point of contention in the proceedings but it had led to a degree of distrust on the part of the first plaintiff towards the defendant. On 14 October 1999 Mr Milner wrote to the defendant to express concern about “the level of professional fees outstanding . . . in relation to work carried out since 1992”. The letter pointed out that the fees exceeded $214,000 towards which the defendant had “contributed nothing”. The defendant had never questioned its obligation to pay the fees or their amount. Mr Milner went on to say that he “envisaged a payment of $100,000 by 31 October 1999 with the balance ... to be paid” by equal monthly instalments over 6 months. There was no response, but on 29 December 1999 Mr Milner met with Messrs Ling and Leung in Brisbane. Mr Ling “advised that he did not dispute the amount of ... fees but said that Conetip could not pay them in whole or in part at this time. He asked (him) to consider some sort of timed repayment over ... 6 to 12 months. (Mr Milner) advised that that was not acceptable ...”.
The receivership had been conducted for the benefit of the defendant. The first plaintiff has not been paid more than a small fraction of his fees. The defendant delayed the receivership to enhance its prospects of recovering the maximum possible from its investment in the village. It should pay interest from the date that the first plaintiff reasonably insisted upon payment of its fees. That was 14 October 1999.
Accordingly, there should be judgment for the first plaintiff in the sum of $344,200.60 with simple interest at 10% per annum from 14 October 1999 to date. This order will award interest on the amount which the second plaintiff will pay to the solicitors. The defendant objects that the disbursement has not been made and that Mr Milner has no obligation to pay interest to Mr O’Connor. I see no reason to exclude the solicitor’s fees from the award of interest. I have no doubt Mr Milner will pass it on.
The last point concerns exhibit 7, a cheque drawn in favour of the Registrar of the Supreme Court on the receiver’s account in the sum of $22,807.10. It represents moneys garnered by the plaintiffs from the lessees of the village as contributions towards a sinking fund of moneys to be applied in the future towards maintenance and repair. Initially this cheque was the subject of contention between the parties, as were most things. It is now accepted that the moneys should be paid to the credit of the village’s sinking fund. This cannot be done until the managers appointed by the defendant to the village are registered under the Retirement Villages Act 1999. Accordingly, I order that the moneys represented by the cheque, exhibit 7, be paid into court and be paid out to the second defendant upon the filing of an affidavit verifying that the retirement village scheme is registered under s 27 Retirement Villages Act 1999.
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