Pace v Antlers Pty Ltd (In Liq)
[1998] FCA 973
•7 AUGUST 1998
CATEGORY: NO QUESTION OF PRINCIPLE
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 131 of 1994
BETWEEN:
CHARLIE PACE & ANOR
ApplicantAND:
ANTLERS PTY LIMITED (ACN 000 900 989)
Respondent
JUDGE:
LINDGREN J
DATE:
7 AUGUST 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
(supplementary reasons – ex tempore)
Background
I published reasons for judgment on 12 January 1998. I take them as read, and will use here the abbreviations I used there. On that date I stood over the proceeding to 16 February 1998 for the making of orders. In view of the earlier litigious saga between the parties it could not reasonably have been expected that the parties would be able to agree on the orders to be made.
There have been numerous directions and substantive hearings on and since 16 February. On 31 March 1998 I made the following orders:
“THE COURT ORDERS THAT
1. The following questions be determined separately from any other question in the proceeding:
“1. Whether Millar, as Liquidator, ought to have paid the income tax assessed on the company, Antlers Pty Limited (Receiver and Manager Appointed and in Liquidation), out of funds on hand, on some date earlier than May 1996 (and, if so, what date) by reason of:
1.1 the financial position of his liquidation on and after the date of his appointment; and
1.2 notwithstanding the circumstances of the liquidation and in particular, the receivership of the assets of the Company?
2. If the answer to 1 is ‘no’, should the Liquidator have applied to the Court for directions before February 1996 for directions to permit the payment of the said assessment, notwithstanding the financial position of the company and, if so, would the Court necessarily have directed payment of the sum assessed at a time earlier than it was in fact paid?
3. If the tax assessed ought to have been paid earlier than it was in fact paid, what loss or damage, if any, did the company incur, having regard to:
3.1 the additional tax incurred in fact;
3.2 the additional tax incurred before the appointment of Millar as liquidator;
3.3 interest earned by the company on monies not paid;
3.4 the prospect that the additional tax may be waived, in whole or in part, by the Commissioner;
3.5 the costs of the conduct of any application for directions or other costs attendant on making the payment?
4. If the said amount assessed has been paid to the Commissioner of Taxation, would there have been any earlier determination of the liquidation of the company than in fact occurred?
5. If the answer to 4 is ‘yes’, would there have been any change, by way of reduction in the aggregate of costs, charges and expenses of the liquidation than were in fact charged by or incurred by Millar in his capacity as Liquidator and as Receiver having regard to the work performed, and the directions of the court?
6. Has the company suffered any loss if the liquidation ought to have determined earlier than it did in fact, when some of the work and services charged for by the liquidator are work and services apparently for the benefit of the company, eg. in the prosecution of appeals against the assessment of tax; preparing reports to the Court in termination proceedings?
7. Is the Liquidator liable to the company in an amount by way of interest on payments on remuneration and out of pocket costs made in reliance on resolutions of creditors where no approval by the Court was obtained?
8. If 7 is answered yes as to both remuneration and out of pocket costs, for what period of time and on what amounts?
9. If 7 is answered yes as to remuneration, for what period of time and for what amounts?
10. If the answer to 3, 6 or 7 is yes, ought the liquidator be excused from liability to the company in all the circumstances in respect to all or any of the matters?”
2.Questions 1 to 10 in the immediately preceding order be answered as follows:
“1. Yes, by 1 October 1994.
2. Not necessary to answer, but it would have been reasonable for the Liquidator to make such an application and if he had done so the Court would necessarily have so directed.
3. The additional tax for late payment incurred from 1 October 1994 subject to deductions on account of the interest referred to in 3.3 and the costs referred to in 3.5.
4. No.
5. Unnecessary to answer.
6. Unnecessary to answer.
7. Yes as to remuneration; no as to out of pocket costs.
8. Unnecessary to answer.
9. From the dates when the respective amounts were paid to Mr Millar, on those amounts down to 10 May 1996.
10.No.”
3. The motion brought by notice of motion filed 26 March 1996 by the Official Trustee in Bankruptcy and the Deputy Commissioner of Taxation (seeking dismissal of Frank Portelli’s motion brought by notice of motion filed 8 December 1995) be dismissed, with no order as to costs.
4. Leave be reserved to the Official Trustee in Bankruptcy and the Deputy Commissioner of Taxation or either of them to apply within 7 days for an order setting aside the immediately preceding order on 24 hours’ notice.
5. By consent, the motion brought by James Morrison Millar by notice of motion filed 15 April 1996 (relating to the remuneration of him as liquidator) be dismissed with no order as to costs.
6. On the motion brought by James Morrison Millar as liquidator by notice of motion filed 5 June 1996:
a) James Morrison Millar as official liquidator of Antlers Pty Limited (in liquidation) be released pursuant to s 239(c) of the Companies Act 1961 (NSW) upon and subject to payment by him, or set off in his favour, of the amounts payable by him referred to in other orders made on the present hearing today or on any date or dates to which the hearing may be adjourned part heard.
b) The costs of the parties in relation to paragraph 3 of the motion brought by Frank Portelli by notice of motion filed 15 October 1996 be treated as part of the costs of the present motion.
c) Antlers Pty Limited pay the costs of James Morrison Millar as liquidator of that company of the motion except for the costs of the hearing and determination of separate questions for determination 1, 3.1, 3.2, 3.4, 7, 8, 9, and 10 referred to in order 1 above.
d) James Morrison Millar pay the costs of Antlers Pty Limited of the hearing and determination of separate questions for determination 1, 3.1, 3.2, 3.4, 7, 8, 9, and 10 referred to in order 1 above.
7. On the motion bought by Frank Portelli by notice of motion filed 15 October 1996, the motion be dismissed in so far as it seeks the relief sought in paragraphs 1 and 2 and that Frank Portelli pay the liquidator’s costs of the motion in relation to those paragraphs.
8. On the motion bought by Frank Portelli by notice of motion filed 15 October 1996, the motion be dismissed in so far as it seeks the relief sought in paragraph 3 with no order as to costs of the motion in so far as it relates to that paragraph.
9. On the motion brought by James Morrison Millar by notice of motion filed 17 February 1997:
a) By consent, for the purposes of the Orders of Foster J made on 10 May 1996 and pursuant to those orders, the remuneration of James Morrison Millar as liquidator of Antlers Pty Limited for the period 1 June 1994 to 6 June 1996 be approved in the sum of $162,626.80.
b) Out of pocket expenses incurred and approved by James Morrison Millar as liquidator of Antlers Pty Limited for the period 1 September 1995 to 6 June 1996 be added to the remuneration approved in the preceding paragraph in the sum of $1275.28.
c) The Court notes that Mr Millar as liquidator has already been paid $99,334.30 on account of his remuneration referred to in par (a).
10. On the motion brought by James Morrison Millar by notice of motion filed 8 April 1997 seeking an order setting aside a notice to produce, the motion be dismissed and the costs of the motion be reserved.
11. On the motion brought by Antlers Pty Limited, Vera Kavich and Frank Portelli by notice of motion filed 7 May 1997, the motion be dismissed and the costs of the motion be reserved.
12. The further hearing of the various motions be stood over to Thursday 2 April 1998 at 2.15pm, part-heard.”
On 6 April the parties agreed in asking that I order that the following eight questions be set aside for separate determination under O 29 r 2 of the Federal Court Rules, on the basis that the answers would enable the various outstanding motions to be finally disposed of:
“1.Should a costs order be made in favour of the liquidator with respect to his two Notices of Motion for approval of remuneration filed 17th
February 1997 and 15th April 1997.
2.If the answer to 1 above is yes are those costs to be taxed in Court or are they to be approved by the liquidator as part of his remuneration.
3.Is the liquidator entitled to recover remuneration with respect to work carried out by him since 6th June 1996, being:-
(a)Work carried out by the liquidator with respect to preparation for the contested hearings of his Notices of Motion filed 17th February 1997 and 15th April 1997.
(b)Work carried out in preparing for his application for release and the questions pertaining thereto.
(c)If the answer to (b) is no then should his remuneration be apportioned in accordance with the findings of the Court.
(d)Any remuneration since 6th June 1996.
4.Should orders be made in accordance with Schedule 7 to the liquidator’s Short Minutes of Order being for payment of the liquidator’s remuneration to 31st March 1997 being the date to which Mr Green inspected the documentary basis of the claim for the liquidator’s remuneration and if so in what sum?
5.(a) Should the liquidator be entitled to claim legal costs he has incurred that he is satisfied are proper and reasonable without the need for him to obtain a taxation of those costs before paying them.
(b)Once he is so satisfied is there any basis for ordering a taxation of costs.
(c) If the answer to the above question is no then should those costs be subject to taxation by the Court. If taxation by the Court should it be on a solicitor and client or indemnity basis.
6.Should the amount ordered to be paid by Antlers pursuant to Schedule 5 of the liquidator’s Short Minutes of Order being $157,678.90 be set-off against the amount ordered to be paid by the liquidator to Antlers set out in Schedule 9 to Short Minutes of Order.
7. With respect to the notional income tax issue:-
(a)Should it be permitted to be raised it not having been the subject of submissions nor covered in the judgment.
(b)If the answer to (a) is yes should an adjustment be made.
(c)If an adjustment is to be made what is the monetary effect of this calculation.
8.Is the liquidator entitled to indemnity from the company’s assets for the costs ordered in Judges notes paragraph 6?”
I made the order as requested. I will refer to the eight questions set out above as “the Agreed Questions”.
Also on 6 April I noted that the parties’ positions on the Agreed Questions were as indicated on two further documents headed, “Liquidator’s answers to questions for determination” and “Agreed calculations”, and made directions for written submissions. The parties exchanged submissions in chief and submissions in reply.
Unfortunately, the procedure adopted has proved unsatisfactory. First, in some cases the submissions are inconsistent with the parties’ stated positions. Second, the answering of the Agreed Questions will leave some issues in dispute and will therefore not result in a termination of the proceeding.
Ms Nash, the solicitor for Mr Millar, helpfully provided draft short minutes of orders and annexed schedules 1 to 10. The 10 schedules were themselves draft short minutes of orders disposing of the 10 outstanding motions. Unfortunately, a comparison of the draft with the orders made on 31 March confirms that there would remain issues or groups of issues outstanding after the answering of the Agreed Questions.
Events of May/June 1996
I turn now to the events of May/June 1996. On 23 May 1996 I made certain orders by consent. They included an order directing Mr Millar, as liquidator of Antlers, to make certain payments, including a payment of $382,705.89 to the DCT in satisfaction of certain assessments of tax, together with penalty tax thereon. Upon Ms Kavich and Mr Portelli acknowledging certain matters by way of an undertaking to the Court, I ordered that all proceedings in relation to the winding up of Antlers be stayed absolutely on and after 6 June 1996. One of the matters noted as an undertaking to the Court seems to me to be important for some of the issues which remain to be determined. This was that:
“the company shall grant a mortgage of lot 53 Karuah Street Doonside to James Morrison Millar to secure payment of such costs and expenses of the winding up of the company as may be determined by the court or agreed by them to be due to him by way of proper remuneration (after taking into consideration all money received by him on that account to date) or as otherwise outstanding and for James Morrison Millar, his staff, Solicitor and Counsel’s costs and expenses in finalising the winding up including but not limited to preparation of and approval by the Court of his remuneration, lodgment of Notices at the Australian Securities Commission, notices to the Land Titles Office, notices to Share Registries and any necessary applications including but not limited to an application for release and finalisation of all accounts and the transfer of assets back to the company, such mortgage to provide for such payment to be made by the company within 14 days of notification to it of the Court’s determination or determinations.”
(emphasis supplied)
I also authorised Antlers, by its liquidator, to grant the mortgage referred to in the form attached to the orders, and granted Mr Millar leave to apply for a release under section 239 (c) of the Companies Act 1961 (NSW) by motion returnable on 6 June 1996. The form of mortgage had annexed to it a standard form of National Australia Bank registered memorandum.
On the recent hearing, there was some debate about the definition of “the moneys hereby secured” in clause 34 of the memorandum. All that need be said at present is that clause 3 of a schedule to the mortgage stated that the definition of “the moneys hereby secured” in clause 34 of the memorandum was to include the costs and expenses described in the consent order which I have set out above. In other words, the form of mortgage reflected the consent order. The mortgage was granted.
It seems to me that the order and mortgage show that the parties were agreeing, as part of the arrangement made in May/June 1996 first, that Mr Millar should be remunerated for work done after the termination of the winding up, but that, second, he should be entitled only to “proper remuneration”. These two conclusions may also be supportable by reference to general principles. What is important and sufficient for present purposes is that they are required by the parties’ agreement in this case. I reject the submission that once 6 June was passed Mr Millar was not to be remunerated for any further work done by him. I also reject the submission that he was entitled simply to remunerate and reimburse himself without any possibility of review by the Court. Both submissions are inconsistent with the parties’ agreement which gave rise to, and is reflected in, the consent orders of 23 May 1996 and the subsequent giving of the mortgage.
Chronological account of relevant events
I will now set out a short chronology (see the appendix to my reasons for judgment dated 12 January 1998 for a more detailed chronology) of events of special relevance to the outstanding issues:
1 June 1994: Mr Millar was appointed as liquidator of Antlers.
1 October 1994: Mr Millar should have paid the tax in question by this date.
23 May 1996: The consent orders to which I have referred that Mr Millar pay certain amounts and that the winding up be stayed from 6 June 1996 upon certain undertakings being given to the Court by Mrs Kavich and Mr Portelli, were made.
24 May 1996: Mr Millar paid $240,945.45 to the DCT for income tax.
5 June 1996: Mr Millar paid $141,760.44 to the DCT for additional tax.
5 June 1996: Pursuant to the consent orders of 23 May 1996, Mr Millar filed a notice of motion seeking a release.
6 June 1996: The stay order took effect pursuant to the consent orders dated 23 May 1996.
17 February 1997: Mr Millar filed a notice of motion and a supporting affidavit of his sworn 4 February 1997, seeking orders for remuneration, out of pocket expenses and certain legal expenses. I set out the terms of the orders sought in this notice of motion at page 6 of my Reasons for Judgment dated 12 January last. The notice of motion sought remuneration for a period from 1 June 1994 to 31 December 1996 totalling $168,303. Thus, the period covered straddled the date 6 June 1996, when the company “came out of liquidation”. As well, the motion sought an order that out of pocket expenses in a sum of $1761.56 covering the period 1 September 1995 to 31 December 1996 be added to the remuneration. That period also straddled 6 June 1996. The “certain legal expenses” totalled $23,304.25 and were in respect of the period 18 August 1995 to 22 January 1997. Accordingly, they also straddled 6 June 1996.
By the consent orders made on 31 March last, an order was made approving Mr Millar’s remuneration from 1 June 1994 to 6 June 1996 in a sum of $162,626.80, which can be seen to be a little less than the total amount that he had been seeking for the period to 31 December 1996. By the same consent order, out of pocket expenses of $1275.28 were ordered in respect of the period 1 September 1995 to 6 June 1996. Again, this is less than the amount of $1,761.56 which was sought in respect of the period down to 31 December 1996. The failure of Antlers, Mrs Kavich and Mr Portelli to agree to any order for remuneration or disbursements after 6 June 1996 is, no doubt, due to the stance which they took and argued for, and which I reject, that Mr Millar was not entitled to any remuneration or disbursements after the date from which the winding up of Antlers was stayed.
31 March 1997: A Mr Green, on behalf of Antlers and the contributories, inspected documents made available by Mr Millar which related to his claim for remuneration.
8 April 1997: Mr Millar filed a notice of motion seeking to set aside a notice to produce served by Mr Portelli. Both parties had some success on that motion. Documents were produced but a confidentiality undertaking was given. There will be no order for costs on that motion.
15 April 1997: Mr Millar filed a fresh notice of motion and an affidavit of his dated 11 April in support of a further claim for remuneration and out of pocket expenses. This claim covered the period 1 January 1997 to 31 March 1997: a period entirely after 6 June 1996. The amount of remuneration sought by Mr Millar in respect of those three months was $24,480.60. As well, he sought out of pocket expenses of $881.35 in respect of the same period. Consistently with their stance mentioned above, Antlers and the contributories did not consent to any order in respect of that period and therefore that motion is entirely outstanding.
Perhaps surprisingly, in view of their opposition to the awarding of remuneration and out of pocket expenses after 6 June 1996, Antlers, Mrs Kavrich and Mr Portelli do not resist an order for costs on both motions for remuneration in favour of Mr Millar. Be that as it may, they are right not to resist such an order. I would make it in any event. I think that Mr Millar is entitled to his costs on both motions, that is, the motions brought by notice of motion filed 17 February 1997 and notice of motion filed 15 April 1997. The reason is that at least some work done by him after 6 June 1996 is clearly work for which he is entitled to be remunerated pursuant to the terms of the consent orders dated 23 May 1996, if not by reference to general law principles.
7 May 1997: Antlers, Mrs Kavich and Mr Portelli filed a notice of motion seeking miscellaneous orders. Those miscellaneous orders have fallen away by reason of the way in which other issues have overtaken them. There will be no order for costs on that motion.
23 May 1997: A further notice of motion was filed by Antlers, Mrs Kavich and Mr Portelli seeking miscellaneous orders. The fate of the costs of that motion will await the outcome of the determination to be effected by a Registrar to which I will shortly refer. The costs order ultimately to be made on that motion must, however, be consistent with the measures of success which the respective parties had on the separate questions for determination, the subject of my reasons dated 12 January 1998.
Rulings, orders and direction
The reasons which I have just given enable me now to proceed to give several formal rulings and to make certain orders and a direction.
The rulings are as follows:
(1)The fact of the stay of all proceedings in relation to the winding up of Antlers Pty Limited on or after 6 June 1996 is not a bar to Mr Millar’s claim for remuneration for any work done and any out of pocket expenses incurred subsequently.
(2)Antlers Pty Limited, and Mrs Kavich and Mr Portelli are not precluded by the inspection of Mr Millar’s records and the report on that inspection by Mr Green from raising objections to Mr Millar’s claim for remuneration for any work done and for any out of pocket expenses incurred on or after 6 June 1996.
I interrupt myself to elaborate on Ruling (2) to say that in my opinion the evidence does not clearly show that Antlers, Mrs Kavich and Mr Portelli were giving up any right of objection. The evidence is that records extending beyond, that is later than, 6 June 1996, were produced and Mr Green may or may not have inspected them, but the fact is that his retainer only went down to 6 June and the evidence does not clearly show that he did in fact inspect and approve. Moreover, the passages in my judgment which have been referred to on behalf of Mr Millar did not address this particular issue. If in fact Mr Green did check and satisfy himself as to the records of work done by Mr Millar after 6 June 1996, no doubt he will, as a responsible person, be able to signify his approval immediately and without further cost.
(3)Subject and without prejudice to all orders made on 31 March 1998, Mr Millar is entitled to proper remuneration and out of pocket expenses to be determined and legal costs to be taxed on his motions brought by notices of motion filed on 17 February 1997 and 15 April 1997 including proper remuneration, out of pocket expenses and legal costs on the sequelae of those motions, that is, on the quantification of the remuneration before a registrar.
(4)The notional income tax issues are permitted to be raised by Antlers Pty Limited, Mrs Kavich and Mr Portelli.
I elaborate to say that according to my understanding, the parties are agreed on the result, that is, on the mathematical consequences, if the issues are permitted to be raised at all. In my opinion they should be permitted to be raised. Although the parties, legally represented, put certain questions to the Court for determination earlier, it is clear that unfortunately there were numerous issues still left outstanding and I do not see any reason why I should treat the notional income tax issues as belonging to a special category, although I think it unfortunate they were not noticed and raised earlier.
(5)Mr Millar’s remuneration associated with the hearing on 30 and 31 July and 1 August 1997 of the separate questions which gave rise to the delivery of Reasons for Judgment on 12 January 1998 should be determined in accordance with the measure of success which Mr Millar had. That is, he should be remunerated for his preparation for the hearing only insofar as that preparation related to separate questions for determination other than questions 1, 3.1, 3.2, 3.4, 7, 8, 9 and 10. I reject the submission by Antlers Pty Limited, Mrs Kavich and Mr Portelli that he should get costs but not his own remuneration.
6)All questions of quantification of legal costs not having been agreed should be the subject of taxation.
7)All questions of quantification of remuneration not having been agreed should be referred to and determined by a Registrar.
This brings me to the formal orders and the direction to which I referred earlier. The orders are as follows:
1)The order made on 6 April 1998 under order 29 rule 2 that the eight questions identified in that order be heard and determined separately be set aside.
2)There be no order as to costs on Mr Millar’s motion to set aside a notice to produce given to Mr Millar by Mr Portelli brought by notice of motion filed on 8 April 1997.
3)There be no order as to costs on the motion of Antlers Pty Limited, Vera Mary Kavich and Frank Portelli seeking miscellaneous orders brought by notice of motion filed on 7 May 1997.
4)Subject to order 6 made on 31 March 1998, Antlers Pty Limited pay Mr Millars legal costs on the motions brought by him by notices of motion filed on 17 February 1997 and 15 April 1997 to be taxed if not agreed.
I interrupt myself to add, by way of explanation, that there could be debate over the identity of the motions under which the separate questions were argued and determined. Against the background that there were numerous motions outstanding, it was sensibly agreed that those questions should be separately answered. They were answered. No order as to costs being made this afternoon is intended to affect the orders for costs that were made on 31 March last relating specifically to those questions. Accordingly, and it should be clearly understood, that it cannot be said that because an order for costs is made this afternoon on a motion, under which the separate questions or one or some of them arguably arose, that order somehow affects the orders for costs made on 31 March last in relation to the hearing and determination of the separate questions.
(5)The costs referred to in (4) be taxed on the basis of party and party costs plus 20 per cent.
I make that order because it seems to me that there is difficulty associated with the matter and in my view an order for party and party costs does not adequately recognise the level of difficulty involved.
(6)Antlers Pty Limited pay to Mr Millar remuneration in respect of the two motions referred to in order (4) above in an amount to be determined by a Registrar but not including any remuneration in connection with separate questions for determination 1, 3.1, 3.2, 3.4, 7, 8, 9 and 10, the subject of Reasons for Judgment delivered on 12 January 1998.
The direction is as follows:
(7)The parties contact the Registry with a view to listing the proceeding for determination of all issues of taxation of costs and quantification of liquidator’s remuneration.
I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren
Associate:
Dated: 17 August 1998
Counsel for the Applicant: Mr JT Johnson Solicitor for the Applicant: Sally Nash & Co Counsel for the Respondent: Mr RW Cameron Solicitor for the Respondent: Tony Vella Date of Hearing: 16 February 1998, 3, 24, 31 March 1998, 2, 6, 9, 16 April 1998 Last Submission Received: 23 April 1998 Date of Judgment: 7 August 1998
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