NEIL RAYMOND CRIBB as liquidator of BULLION BOURSE PTY LTD (In Liq) - [2019] WASC 298

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   NEIL RAYMOND CRIBB as liquidator of BULLION BOURSE PTY LTD (In Liq) [2019] WASC 298
CORAM:   MASTER SANDERSON
HEARD:   30 JULY 2019
DELIVERED          :   30 JULY 2019
PUBLISHED           :   19 AUGUST 2019
FILE NO/S:   COR 152 of 2019
MATTER:   BULLION BOURSE PTY LTD (In Liq)

EX PARTE
NEIL RAYMOND CRIBB as liquidator of BULLION BOURSE PTY LTD (In Liq)
Plaintiff

Catchwords:

Insolvency - Direction sought by liquidator as to how to deal with third party property in possession of insolvent company - Who should bear liquidator's costs

Legislation:

Corporations Act 2001 (Cth)

Result:

Orders made

Category: A

Representation:

Counsel:

Plaintiff	:	Mr R M Johnson
Non-party	:	Mr A J Camp

Solicitors:

Plaintiff	:	HWL Ebsworth Lawyers
Non-party	:	Alan Camp Solicitor

Case(s) referred to in decision(s):

Primary Securities Pty Ltd v Willmott Forests Ltd (Receiver & Manager Appointed) (In liq) [2016] 50 VR 752; (2016) VSCA 309
Re Arcabi Pty Ltd (Receivers & Managers Appointed) (In Liq); Ex parte Theobald & Herbert in their capacities as Receivers & Managers of Arcabi Pty Ltd (Receivers & Managers Appointed) (In Liq) [2014] WASC 310
White (In their capacities as voluntary administrators of Mossgreen Pty Ltd) (Administrators Appointed) v Robertson [2018] FCAFC 63

MASTER SANDERSON:

The plaintiff, Neil Raymond Cribb, is the liquidator of Bullion Bourse Pty Ltd. He was appointed by order of the Federal Court on 2 July 2019. The company traded as 'Perth Bullion Company' and operated a safe custody business; it also traded as a bullion and numismatics dealer from premises located at 180 Wright Street, Cloverdale. For reasons not presently relevant Mr Cribb was not able to obtain control of the Wright Street premises until 9 July 2019.
At par 17 of his affidavit, Mr Cribb outlines the key activities of the business at the time of his appointment.[1] He says the company provided safekeeping and storage services including safety deposit boxes, allocated storage and unallocated storage. Further, it traded in bullion, coins and jewellery including online and over the counter sales of gold and silver bullion, coins and online and over the counter purchases of gold or silver bullion, coins and jewellery from customers. At par 20 of his affidavit Mr Cribb gives a description of the Wright Street premises. It reads as follows:
The Premises, being formerly occupied by a bank, is fitted with three large in‑situ vaults. Inside two of the vaults there are, amongst other things, numbered safety deposit box compartments of various sizes, presumably containing safety deposit boxes, and other standalone large safety deposit boxes. There are also nine other lockable vessels located on the Premises but not in the vaults including six unidentified safes. Inside each safe is a number of locked and unidentifiable compartments.
[1] Affidavit of Neil Raymond Cribb filed 29 July 2019.
Mr Cribb then sets out various ways in which the company conducted its business. He sets these out in categories. The first category is 'safety deposit boxes'. Essentially a customer can pay to access a safety deposit box. That customer is then referred to as a 'SDB Holder'. There are different sizes of safety deposit boxes – the standard box, a 'Medium Lock Box' (MLB) and 'Extra Large Boxes' (ELB). Mr Cribb says he believes SDB Holders retain ownership of the goods contained in the safety deposit boxes (SDB Goods) and that the company's rights are limited to any contractual or equitable lien the company might have to secure payment of outstanding fees. It would appear no register exists of SDB Holders.
The second category referred to by Mr Cribb is 'allocated storage'. The company provided 'allocated storage facilities to customers' (ASG Customer). Essentially the storage was in a steel cabinet located in one of the vaults on the premises. Goods stored included loose jewellery and loose gold and silver bullion and bars as well as a random assortment of goods. Once again it would appear the records of the company are in disarray and Mr Cribb is unable to be sure all costs and charges have been paid by each ASG Customer.
The third category is 'unallocated storage'. Just what is in this category appears to be uncertain. However, there is a lever arch file marked 'unallocated orders' which contains copies of receipts relating to amounts that appear to have been paid by unallocated storage customers. On the basis of information presently available Mr Cribb does not believe the 'unallocated storage' customers have any enforceable proprietary rights in any identifiable goods located in the vaults.
The fourth category is 'bullion and coin sales'. This involved both online and over the counter sale of bullion or coins. The system was the same for all customers. An order was placed and the goods were paid for. Once payment was made an employee of the company would 'pick the goods and place them into a plastic container or cardboard box within a safe or a vault'. It would seem that a number of the orders are incomplete.
The final category is 'bullion, coin and jewellery purchases'. The company engaged in purchasing bullion, coin and jewellery from members of the public. This was referred to as 'Buy Backs'. It would seem the company has possession of some items it has agreed to purchase but has not yet paid for in full or in part.
In pars 46 through to 50 of his affidavit Mr Cribb sets out the activities he has undertaken to date. Really what he is attempting to do is recreate the books of the company to allow him to ascertain who is entitled to what. This has involved producing an accurate stock list and register of safety deposit box holders. He also has been attempting to produce a register of unmarked safes and security boxes, a register of allocated storage customers, a register of unallocated storage customers and reconciliation of holders of unallocated products to stock on hand. By par 48 of his affidavit he sets out the purpose of this application. That paragraph reads as follows:
In light of the paucity of the information available, I make this application to seek the Court's guidance, by way of directions, regarding:
(a)the process that I ought to undertake to identify, preserve and facilitate the return of third party property in the Company's possession to the owners of that property where they can be identified;
(b)how I ought to deal with third party property in respect of which the owner cannot be identified;
(c)who ought to bear the cost of undertaking the process having regard to the benefit to the relevant stakeholders in undertaking the various activities that form the process; and
(d)if the whole or part of the cost ought to be borne by the property owners, how that cost should be apportioned, imposed and collected.
Attached to and forming parts of these reasons are the orders that I made on Mr Cribb's application. As counsel acknowledged the orders made drew heavily on the orders I made in Re Arcabi Pty Ltd (Receivers & Managers Appointed) (In Liq); Ex parte Theobald & Herbert in their capacities as Receivers & Managers of Arcabi Pty Ltd (Receivers & Managers Appointed) (In Liq) [2014] WASC 310. A reading of that decision really is a necessary precursor to understanding the reasons in this case. (Counsel in that case was Ms Banks‑Smith SC (as her Honour then was). Much of the reasoning found in the case and the form of the orders reflect her Honour's diligence in addressing the issues raised on the application).
Under s 90‑15 of the Insolvency Practice Schedule (Corporations) in sch 2 of the Corporations Act 2001 (Cth), the court is empowered to make any orders it thinks fit in relation to the liquidation of a company. Clearly in this case there was a need for orders. Counsel identified three matters which justified orders being made. First, the uncertainty regarding who ought to bear the costs of the liquidator's proposed course of action in relation to each class of third party goods. Second, the extent to which was appropriate that third party owners bear the costs (in full or in part) the liquidator sought directions he was acting reasonably in recouping that cost from the third party owners in the manner proposed. Finally, if the liquidator did not obtain directions at this early stage he runs the risk of incurring cost in returning the third party property to the owners without any recourse to the third party property or the property of the company to recover those costs. It is both proper and appropriate that the liquidator adopted a conservative position and sought the orders he did at an early stage.
Perhaps the most important question in this case was who ought to bear the liquidator's costs. There were two alternatives. Either costs could be recouped from the owners of the third party goods or the costs could be borne by the company as part of the costs of the liquidation. I determined in conformity with submissions made on behalf of the liquidator, the costs ought be borne, if not whole, in part, by the owners of the third party goods.
There are valid arguments both ways on this issue. Before detailing those arguments I should mention that at the hearing Mr Camp of counsel appeared on behalf of 'some box holders' (to use Mr Camp's phrase). Mr Camp also appears to have been advising one of the former directors of the company. Sensibly, the liquidator had engaged in discussions with Mr Camp and the former director. Mr Camp said, as a consequence of the discussions he had with the liquidator, he was satisfied the orders sought were appropriate. His main concern had been the imposition of costs on persons who were not in a position to meet those costs. Mr Camp gave two examples. First of a lad who had invested his pocket money in coins which were held by the company. He was not in a position to pay any levy. The other case was of a person in distressed circumstances who also could not afford to pay. The liquidator indicated he would not levy charges against these two individuals or any person in a similar situation. The orders I eventually made did not reflect exemptions from the levy nor did they set out a procedure by which the liquidator could work out who was and who was not entitled to an exemption. But there are limits to how detailed orders can be made before they become unworkable. The liquidator is an officer of the court. Having given an assurance he would treat third party owners in a way that respected their individual circumstances I did not see any need for introducing a regime to deal with individual cases. The orders did provide liberty to apply generally.
Turning then to the factors supporting the recoupment of costs from the owners of the third party goods, the liquidator pointed out that in the present case he does not propose to realise the third party goods or otherwise create a 'fund'. That does not deny the existence of a lien over the third party goods in favour of the liquidator to secure costs and expenses reasonably incurred in and exclusively referable to the care and preservation of third party goods as assets under his care or control: see Primary Securities Pty Ltd v Willmott Forests Ltd (Receiver & Manager Appointed) (In liq) [2016] 50 VR 752; (2016) VSCA 309.
There seems little doubt that such a lien would arise in equity. Creditors of a company in liquidation who stand to benefit from the actions taken by the liquidator with respect to relevant assets should meet the liquidator's costs. By extension, owners of third party goods who stand to benefit from the actions from the liquidator should also meet the costs. This is consistent with the decision of the Full Court of the Federal Court of Australia in White (In their capacities as voluntary administrators of Mossgreen Pty Ltd) (Administrators Appointed) v Robertson [2018] FCAFC 63 their Honours said:
In our view, there can be (an equitable lien) in favour of administrators in respect of costs incurred in dealing with claims for the return of items even where there is no claim to ownership by the company under administration, including costs in holding them and keeping them secure in the meantime [23].
The owners of the third party goods receive the incontrovertible benefit of the work undertaken by the liquidator to identify, preserve and facilitate the return of the third party goods. Goods that become 'unclaimed goods' will be dealt with by the liquidator in the ordinary course of the liquidation. The costs which form the Base Levy are exclusively referable to facilitating the identification and return of the third party goods to their owners.
A question does arise as to proportionality. Some of the third party goods may be very valuable; others may have little value. But it is intended to raise the same base levy on all goods. Effectively there is no alternative. The value of the majority of the third party goods is unknown. To attempt to value these goods and have a levy on a sliding scale is unworkable. Using the Base Levy is the only option.
Then to the alternative argument. Much of the work required to identify the owners of the third party goods is necessitated by the company's failure to keep adequate record particularly in relation to the goods stored in the unidentified boxes and the unidentified goods. It is arguable that the costs the liquidator stands to incur in order to identify the ownership of the third party property, at least in relation to the bailed goods, results from the company's breach of its obligations as bailee. That being so, it is arguable the general creditors of the company should bear these costs ahead of the owners.
Both arguments are respectable. On balance, I am satisfied the liquidator's preferred option is the better alternative. Apart from anything else, it has the advantage of being relatively straightforward. It also spreads the costs of the collapse of the company more widely than if the unsecured creditors were left responsible for the liquidator's costs. It recognises the liquidator's equitable lien which might otherwise have been exercised to the detriment of the owners of the third party goods.
The weight of the authority is to the effect that an insolvency practitioner is entitled to assert an equitable lien for their remuneration, costs and expenses in relation to identification of other's goods by stocktake or other enquiry in the performance of their statutory functions. That arises from the observations of the court in Mossgreen. The liquidator submits, and I accept, that this is a case where a lien will arise with respect to the third party goods. What the liquidator sought at this stage was a direction confirming the entitlement, relying upon the principle that the entitlement to a lien and the actual amount so secured can be determined separately.
For these reasons I made orders in terms attached to these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
Associate to Master Sanderson
19 AUGUST 2019