Perpetual Trustee Company Ltd v Esafa Gallery Pty Ltd
[2010] VSC 653
•15 April 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL & EQUITY DIVISION
COMMERCIAL COURT
No. S CI 20069 5617
IN THE MATTER OF s 90(3) of the Transfer of Land Act 1958
B E T W E E N:
| PERPETUAL TRUSTEE COMPANY LIMITED | Plaintiff |
| and | |
| ESAFA GALLERY PTY LTD GLENN ANTHONY CRISP REGISTRAR OF TITLES | Firstnamed Defendant Secondnamed Defendant Thirdnamed Defendant |
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JUDGE: | Gardiner AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 21 July 2009 and 25 November 2009 | |
DATE OF JUDGMENT: | 15 April 2010 | |
CASE MAY BE CITED AS: | Perpetual Trustee Company Ltd v Esafa Gallery Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 653 | |
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CORPORATIONS ― winding up in insolvency ― liquidator claims lien over property for his remuneration and disbursements relating to care and preservation of property ― lien claimed to have priority to secured creditors’ rights under fixed mortgage over land ― claim for lien not made out.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Rubenstein | Deacons |
| For Mr Crisp | Mr J. Evans | Rothwell Lawyers |
HIS HONOUR:
On 2 April 2008, the first defendant (“Esafa”) was wound up in insolvency by an order of this Court and the second defendant (“Mr Crisp”) was appointed liquidator.
Esafa was the owner of a property at 9-11 Bloomberg Street, Abbotsford. Mr Crisp took possession of the property shortly after his appointment on 4 April 2008 and remained in possession of it until 14 August 2008.
The plaintiff (“Perpetual”) held a registered first mortgage dated 13 April 2007 over the property. In July 2007, Esafa defaulted under the mortgage. Perpetual exercised its rights under the mortgage and obtained judgment and an order for possession of the property from this Court on 1 October 2007. In March 2008, a warrant of possession was issued on the application of Perpetual. Shortly afterwards, Esafa went into liquidation.
In February 2009, Perpetual sold the property as mortgagee and received the proceeds of sale at settlement in about mid April 2009. Those proceeds were not sufficient to discharge Esafa’s indebtedness to Perpetual.
From 4 April 2008 to 14 August 2008, Mr Crisp was in possession of the property with the assent of Perpetual. In this application, he claims a lien over the property in respect of his remuneration and disbursements relating to the care and preservation of the property for the period of 4 April 2008 to 14 August 2008. He contends that the lien has priority to Perpetual’s rights under its mortgage.
On 4 April 2008, Mr Crisp lodged a caveat at the Office of Titles noting his interest under the claimed lien. In March 2009, Perpetual made application by originating motion to remove that caveat. The present application agitates the enforceability of the alleged lien and the quantum of Mr Crisp’s claim which it purportedly secures.
On 1 May 2009, Robson J made orders in respect of the filing of points of claim and defence and of affidavit material, and referred the hearing of the proceeding pursuant to r 77.05(1) of the Supreme Court (General Civil Procedure) Rules 2005 to an Associate Judge for determination.
Mr Crisp’s points of claim originally claimed fees in respect of the maintenance and security of the property in the sum of $33,015.50 and disbursements of $17,273.56. As the hearing of the application proceeded over two days on 21 July 2009 and 25 November 2009, Mr Evans of counsel, who appeared on behalf of Mr Crisp, made certain concessions and, by the conclusion of the hearing, Mr Crisp’s claim was for a considerably lesser sum.
Mr Crisp relies on two affidavits sworn by him on 24 April 2009 and 19 June 2009. He was cross-examined at length on those affidavits.
Perpetual relied on several affidavits, being those of Joe George Merciea sworn 25 March 2009 and 3 July 2009, Deborah Louise Maddern sworn 3 July 2009 and Heike Mirra sworn 2 July 2009. Those deponents were not cross-examined on their affidavits, nor was any objection taken to their contents.
Mr Rubenstein, counsel for Perpetual, submitted that Mr Crisp was not entitled to any lien by reason of the agreement reached between him and Perpetual in April 2008 in relation to his continued occupation of the premises. The application therefore involves a consideration of a threshold issue as to the very existence of the lien and then a consideration of what amount, if any, is secured by it.
I shall first deal with the issue of the existence of the lien. I will proceed then to determine the issue of the quantum of the lien, as much argument and cross-examination occurred in relation to that aspect of the matter and, notwithstanding that a determination which denies the existence of the lien means that the quantum argument falls away, it is nonetheless appropriate for me to determine the quantum issue as the matter may be the subject of an appeal.
The existence of the lien
Perpetual’s evidence
The principal affidavit of Perpetual was that of Mr Merciea of 25 March 2009. Mr Merciea states that in October 2007, default judgment was obtained by Perpetual and Challenger against Esafa for, inter alia, possession of the property at Abbotsford. He exhibits the correspondence passing between Mr Crisp’s office and Deacons, Perpetual’s solicitors. That correspondence includes a letter from Deacons to Mr Crisp’s firm, RSM Bird Cameron of 22 April 2008. That letter states, relevantly:
“We also refer to your recent discussions with Deb Maddern of our office. As discussed, we are instructed that:
(i) our clients will consent to the liquidator remaining in possession of the security property until 16 May 2008 to allow the sale of plant and equipment remaining on the property. Possession of the security property is to be handed to our client either on 16 May 2008 or once the plant and equipment has been sold, whichever is the sooner; and
(ii) our clients require access to the security property whilst the liquidator is in possession so that they can undertake valuations and marketing appraisals.
Please advise who our clients are to contact with respect to arranging access.”
Mr Merciea stated that Perpetual secured possession of the property on or about 14 August 2008.
On 17 October 2008, Deacons wrote to the solicitors for Mr Crisp requesting that Mr Crisp remove the caveat which had been lodged by him against the Abbotsford property. Mr Crisp’s solicitors declined to provide a withdrawal of caveat. Perpetual exercised its power of sale under its mortgage and entered into a contract to sell the property on 20 February 2009. Deacons again wrote to Mr Crisp’s solicitors requiring a withdrawal of caveat, but in response, on 6 March 2009, they wrote to Deacons asserting that Mr Crisp had a right to be reimbursed out of the proceeds of the sale of the property in priority to Perpetual’s mortgage for the cost of preservation of the property. The remainder of Mr Merciea’s affidavit deals with the exhibition of correspondence passing between Deacons and Mr Crisp’s solicitors, Rothwell Lawyers, culminating in the present application.
In her affidavit of 3 July 2009, Deborah Maddern, who is a paralegal at Deacons, deposes to her involvement in this matter. She states that on 4 April 2008, Mr Sandy, an associate of Mr Crisp, telephoned her informing her of Mr Crisp’s appointment as liquidator of Esafa. He inquired as to the intentions of Perpetual in relation to the property and whether it was going to sell the property as mortgagee in possession. She indicated to Mr Sandy that an application for a warrant of possession had been made. She states that on 9 April 2009, she spoke to a person by the name of Vincent at Mr Crisp’s office and informed him that Perpetual intended to sell the property as mortgagee in possession. On the following day, she spoke to Mr Sandy and informed him of Perpetual’s intention to sell the property as mortgagee in possession and, accordingly, Perpetual would require possession of the property. In that conversation, Mr Sandy requested that Mr Crisp be permitted to remain in possession of the property for the purpose of selling the plant and equipment. She states that Mr Sandy said words to the effect that the costs associated with the removal and storage of the plant and equipment would be extensive and it would be more cost effective if the plant and equipment were sold in situ.
On 17 April 2008, Ms Maddern was telephoned by Mr Sandy and, in that conversation, she informed Mr Sandy that Perpetual consented to Mr Crisp remaining in possession of the property for the purpose of selling the plant and equipment. Shortly after that, on 22 April 2009, she wrote the letter, the relevant parts of which are extracted above, to Mr Sandy.[1] On 24 April 2008, Mr Crisp replied to Deacons’ letter of 22 April 2008 indicating that the sale of plant and equipment should be completed by 16 May 2008. Mr Crisp indicated that the director of the Defendant, Mr Aing, had indicated to him that there was an investor willing to pay out all the creditors of the company, but that may delay the asset realisation process. On 29 April 2008, Deacons wrote back to Mr Sandy seeking clarification of the letter from Mr Crisp’s office of 24 April 2008. It inquired whether it was proposed that the director of the company would be sourcing purchasers for the security property and whether it was proposed that the liquidator would enter into the contract of sale. There was apparently no response to this letter.
[1]Exhibit JGM9 to Mr Merciea’s affidavit of 25 March 2009.
Ms Maddern says that, prior to this, on 8 April 2008, the director of Esafa telephoned her and indicated that “he wanted to keep the property”. Ms Maddern responded that any proposal in that regard was to be in writing for Perpetual to consider. She states that on 17 April 2009, Mr Sandy telephoned her and, in that conversation, said that Mr Crisp would like to meet with her client to ascertain whether or not they would entertain the idea of the sale of the property as proposed by Mr Aing. Ms Maddern denies that she had a conversation with Mr Sandy on 8 May 2008, as deposed to in paragraph 18 of Mr Crisp’s affidavit, to which reference will be made below, which stated that Perpetual would allow Mr Crisp to enter into a contract of sale. She also denies paragraph 19 of Mr Crisp’s affidavit, which contends that he proceeded to obtain a valuation and enter into negotiations with the director of the company through his solicitor, Mr Cheung, as a consequence of the discussion on 8 May 2008.
Ms Maddern says that during the period 6 June to 23 June 2008, she telephoned Mr Sandy on several occasions, but was not able to speak to him. She made contact on 24 June 2008 and remarked upon the delay in completing the sale of the plant and equipment by the liquidator. She stated that she had been instructed to secure possession of the property on behalf of Perpetual. Mr Sandy said that he would draft a letter and sent it to Deacons that afternoon. Shortly afterwards, on 26 June 2008, she received a letter from Mr Crisp’s office dated 24 June 2008 enclosing a valuation of the property.
On 1 July 2008, Ms Maddern spoke to Mr Sandy, who indicated that he had been speaking with an agent in relation to the property and that he intended to appoint an agent for the sale of the property that afternoon. A week later, on 8 July 2008, she again spoke with Mr Sandy, who told her that he had sent a proposal to the agent, but it had not been approved because the person with the requisite authority to approve the proposal was absent overseas. A week later, on 17 July 2008, she again spoke with Mr Sandy by telephone and indicated that Deacons had not received the exclusive agent authority as requested on 1 July 2008. Mr Sandy advised the proposal had not been approved. However, he indicated that Deacons would receive the approved proposal the next day. On 25 July 2008, she telephoned Mr Sandy but was not able to speak with him.
On or about 30 July 2008, Ms Maddern spoke to a female at Mr Crisp’s office who stated that she was Mr Crisp’s assistant. Ms Maddern indicated that she advised that person that she had instructions to take possession of the property. The following day, she instructed an agency to secure possession of the property on behalf of her clients.
Ms Maddern states that during her discussions with Mr Sandy, she had been told that Mr Crisp had conducted two separate auctions of the plant and equipment at the property. She says that in her discussion with Mr Birch of the agents who were appointed to secure possession of the property, she had been told that not all the plant and equipment had been sold. She states that when Perpetual took possession of the property, it had to engage, at its expense, the services of rubbish removalists to remove remaining plant and equipment and rubbish from the property.
In her affidavit of 2 July 2009, Heike Mirra states that she assisted Deborah Maddern in this matter. She states that on 8 May 2009, she spoke to Mr Sandy in relation to the letter from Deacons to Mr Crisp’s office of 29 April 2008, which sought clarification of Mr Crisp’s letter of 24 April 2008. She said that Mr Sandy said in substance that the directors of the company would be sourcing purchasers for the property, but that they, i.e. Mr Crisp’s office, had not seen the evidence of this yet and that it was proposed that the liquidator would enter into a contract of sale, but this would be dependent on a number of issues, including Perpetual’s attitude.
Like Ms Maddern, Ms Mirra denies the matters referred to in paragraph 19 of Mr Crisp’s affidavit and that, as a consequence, she had no knowledge whatsoever that Mr Crisp would obtain a valuation of the property.
Ms Mirra states that during the period 20 May to 22 May 2008, she telephoned Mr Sandy on several occasions, but was not able to reach him, despite leaving messages for him to return her call. She says that as at 22 May 2008, Deacons had not received a written response from Mr Crisp in respect of the letter of Deacons dated 29 April 2009. She says that on 22 May 2008, she spoke to Mr Sandy, who informed her that Mr Crisp wanted to proceed with the private sale of the property. Mr Sandy had informed her that the liquidators were having difficulty obtaining a valuation and there would be a six week wait. Mr Sandy also informed her that there was a large amount of rubbish still at the property and that he would provide a written response to Deacons the next day.
Mr Merciea swore a further affidavit on 3 July 2009. He states that Perpetual and its agent, Challenger, never addressed the issue of consenting to any contract of sale for the property or ever consented to Mr Crisp entering into such a contract as liquidator. He states that there was never any response to Deacons’ letter of 29 April 2008 referred to above.[2]
[2]Exhibit JGM11 to Mr Merciea’s first affidavit.
Mr Merciea states that on 28 May 2008, Perpetual and Challenger engaged their own valuer to conduct a valuation of the property. He notes that while Mr Crisp may have contemplated the sale of property in his letter of 24 April 2008, no response was ever received to Deacons’ letter of 29 April 2008.
Mr Merciea states that Perpetual was required to expend the sum of $13,200 for the removal of rubbish and abandoned goods, plant and equipment.
Mr Crisp’s evidence in relation to the existence of lien issue
Mr Crisp’s evidence in relation to this issue is contained in his affidavit sworn 19 June 2009. The affidavit does not deal with Deacons’ letter of 22 April 2008, which set out the terms of Perpetual’s consent to Mr Crisp remaining in possession of the property. The segment devoted to this issue (paragraphs 7 to 20 of the affidavit) does not, in my view, squarely meet the evidence of Mr Merciea, Ms Maddern and Ms Mirra referred to above.
Mr Crisp was cross-examined on this issue. He stated that he was looking at options to maximise the value of the property. The property was regarded as the most significant asset of the company and if the price achieved was in excess of the valuations, could pay all the creditors and provide surplus funds. He states that Mr Sandy made inquiries with Perpetual’s lawyers, Deacons, to allow Mr Crisp to sell the property.
In cross-examination, it was put to Mr Crisp that Ms Maddern of Deacons told Mr Sandy that Perpetual wished to sell as mortgagee in possession. Mr Crisp stated that he instructed Mr Sandy to tell Ms Maddern that it would be in the interests of the liquidator to stay in possession of the property to effect the sale of the plant, equipment and stock. The terms of Deacons’ letter of 22 April 2008 to Mr Crisp were put to him. In response, Mr Crisp said that it was a “fluid situation that was changing all the time”, but did not elaborate further. It was put to him that the position was clear in regard to Perpetual’s intentions and his response was somewhat vague, speaking of understandings that the situation subsequently changed, but he was not able to give any detailed evidence as to when and how it subsequently changed.
It appears that the direct communications in regard to the arrangement to continue occupation of the property took place between Ms Maddern and others on behalf of Perpetual and Mr Sandy on behalf of Mr Crisp. Mr Sandy has been quite ill and has not sworn an affidavit in this application. On the other hand, Ms Maddern and the other deponents, who have sworn affidavits on behalf of Perpetual, are quite clear and unequivocal in regard to the terms of the continued occupation of the property. Their position is supported by contemporaneous correspondence and was not displaced by cross-examination.
Mr Rubenstein cross-examined Mr Crisp on Mr Crisp’s letter of 23 April 2008 to Mr Cheung, the solicitor for the director of the company, Mr Aing. In that letter, Mr Crisp stated:
“I note your advice to Terry Sandy that your client has an investor who is willing to put in $1,500,000 for the building. As previously advised, Perpetual Trustee Company Limited and Challenger Managed Investments Limited have advised me that they will conduct the sale of the property as mortgagees. Offers for the acquisition of the property should be directed to the mortgagee or its agent.”
Mr Crisp said that the director’s solicitors had indicated that Perpetual would not deal directly with him and his client, and that he had been told by them that they were trying to get in touch with Perpetual and Challenger and they would not deal directly with them. Mr Crisp said that he had conversations with the director and his solicitors in that regard in meetings with them, but he had no records of those meetings available. He stated that he told Mr Aing to contact Perpetual. The cross-examination then persisted on the subject of the director’s quest to have a private sale of the property, but ultimately, Mr Crisp did not press a claim for the time he is said to have applied to that exercise.
Mr Crisp has not put forward any evidence which would displace the evidence put forward by Perpetual in regard to the terms of the continued occupation by him of the property. There is no correspondence subsequent to April by which Perpetual assent expressly to him expending time and disbursements on the sale process. The thrust of the evidence is that Mr Aing, the director of the company, was trying to engineer a private sale, but there is no evidence to suggest that Perpetual acquiesced in this, other than not moving to force a sale when the 16 May 2008 date specified in the 22 April 2008 letter to Mr Crisp expired.
Submissions
In submissions, Mr Evans for Mr Crisp submits that Mr Crisp and his staff incurred time and expense in relation to the maintenance and preservation of the property from the time of his appointment as liquidator until he vacated the property on 14 August 2008. He says that the tasks and expenditure the subject of his claim of the character which conferred an incontrovertible benefit to Perpetual. He stated that the case law on the subject did not impose any requirement that the costs and expenses the subject of the lien be exclusively for the benefit for the holder of the legal interest and referred to the decision of Coad v Wellness Pursuit Pty Ltd (in liquidation).[3]
[3]226 FLR 91.
Mr Evans submitted that there are three elements of the test as to whether a particular payment is the subject of the lien. The first is that the expense must relate exclusively to the property in question; second, that the costs and disbursements must have conferred an incontrovertible i.e. undeniable benefit, to Perpetual,; and third, that it would be unconscionable for Perpetual to receive the proceeds of sale without accounting for the benefit that it has received.
In Coad, a decision of the Court of Appeal of Western Australia, Buss JA collected and analysed the authorities dealing with equitable liens in the context of insolvency practitioners. Such collection and analysis includes the seminal decision of the High Court in Re Universal Distributing Co Ltd (in liq),[4] a decision of Dixon J sitting as a single judge. At [48] and [49] of Coad, Buss JA cited of Universal Distributors, culminating in the following passage:
“The question in the present case is whether the liquidator can charge against the fund passing through his hands as between himself and the person to whom it is payable, so much of the remuneration fixed for work done in the winding up as is referable to the calling in and conversion of the assets producing the fund. I see no reason why remuneration for work done for the exclusive purpose of raising the fund should not be charged upon it.” (Emphasis added in reason of Buss JA)[5].
[4](1933) 48 CLR 171.
[5](1933) 48 CLR 171 at 174-5.
Buss JA then continued with his analysis of the various authorities, which included the decision of Commonwealth Bank of Australia v Butterell,[6] a decision of Young J sitting as a single judge of the Commercial and Equity Division of the Supreme Court of New South Wales. At [60] of Coad, the following passage of Butterell is cited:
“[The] Cases… make it clear that in the current situation one has to make a distinction between the costs and expenses of realisation, the general costs of the administration and the costs of preservation of the property. If something falls within the general costs of the administration because its sole purpose was not to preserve the property or to realise the property, then the secured creditor takes in priority to the person whose efforts brought about the production of the fund. Thus Dixon J said in the Universal Distributing case (at 175): ‘I see no reason why remuneration for work done for the exclusive purpose of raising the fund should not be charged upon it’.”
* And at [61], continuing with the quotation from Butterell, his Honour stated:
“Young J concluded, relevantly, that the administrator was entitled to an equitable lien ‘in respect of his proper remuneration for time spent exclusively on the matter of realisation of assets’ (at 73).”
[6](1994) 35 NSWLR 64.
At [96], Buss JA observed:
“In my opinion, an administrator’s equitable lien for his or her proper remuneration, and properly incurred costs and expenses, attributable to work done exclusively in caring for, preserving and realising the company’s assets will have priority over, relevantly, a prior charge that was fixed from its creation if, in the particular circumstances of the case, the holder of the fixed charge would be acting unconscientiously if it were to assert priority over the assets realised by the administrator, without the relevant remuneration, costs and expenses having been discharged.” (Emphasis added.)
In my view, the element of exclusivity is still requisite insofar as it must be attributable to work done exclusively in caring for preserving and realising the assets under administration.
Mr Evans contends that the aspect of uncontrovertibility arises by the consent by Perpetual to Mr Crisp’s occupation of the property between April 2008 and August 2008. Mr Evans submits that there is no evidence that Perpetual ever informed Mr Crisp that there would be no recognition of the claim for an equitable lien when it informed him that it could remain in possession. It is also said that Perpetual derived a benefit by reason of that occupation and, in the course of that occupation, Mr Crisp incurred expenses. As a corollary, it is said that Perpetual would have been required to incur such time and expenses if Mr Crisp had not carried out the subject task and incurred the claimed expenditure. It was submitted that it is unconscionable for Perpetual to have the benefit of this and not compensate Mr Crisp for such expenses and, in order to overwhelm that unconscionability, Perpetual would have needed to have expressly stated to Mr Crisp before he incurred any such expenses that no such lien would be recognised. Mr Evans conceded that Mr Crisp bears the onus of proof in respect of each of the elements which must be satisfied on the balance of probabilities.
Mr Rubenstein, in his submissions on behalf of Perpetual, says that Mr Crisp has no equitable lien by reason that there was an agreement between Mr Crisp and Perpetual that Mr Crisp could remain in possession of the property for a limited period of time for the purpose of effecting the sale of stock, plant and equipment on the premises, after which Perpetual would sell the property as mortgagee in possession. Perpetual contends that Mr Crisp was effectively granted an indulgence to remain in possession of the property for a limited purpose and that, as such, he was not authorised to incur fees and expenses that would be claimed in priority to Perpetual’s interest as mortgagee. Perpetual says that its denial of the Universal Distributors lien is not unconscientious, as it never gave its consent or acted in any way to authorise the liquidator to incur costs and expenses in respect to the care and preservation of the property. Perpetual points to the absence of any evidence that it was aware of or acquiesced in the incurring of costs of a kind that might be regarded as being in respect of the care and preservation of the property.
Mr Rubenstein said that if, contrary to his primary submission, an equitable lien did arise, then the ordinary priority principles apply and Perpetual, as a registered mortgagee, takes priority over Mr Crisp’s equitable lien[7]. He says further that there are no costs and disbursements incurred by Mr Crisp that could be characterised as being properly and exclusively incurred in respect of the care and preservation of the property and, even if there were, which he says there were not, they were not such as to produce an incontrovertible benefit that inures to Perpetual’s advantage.
[7]See generally Coad
Mr Rubenstein submitted that an equitable lien, which ordinarily arises by implication where there is some assumption or conduct that makes it unconscionable for a party to rely on its strict legal rights, can be precluded or qualified by express or implied agreement. He cited as authority for this proposition the decision of Hewett & Ors v Court & Anor,[8] where Deane J observed at 663:
“An equitable lien is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness … . Though called a lien, it is, in truth, a form of equitable charge over the subject property … . While it arises by implication of some equitable doctrine applicable to the circumstances, its implication can be precluded or qualified by express or implied agreement of the parties (Davies v Littlejohn; In re Bond Worth).” (Emphasis added).
[8] (1981-1982) 149 CLR 639.
Mr Rubenstein observed that Perpetual had the benefit of an order for possession of the property on 1 October 2007. In March 2008, it obtained a warrant of possession for the property and could have proceeded forthwith to exercise its rights to sell the property. Shortly afterwards, Esafa went into liquidation and the events described above whereby Mr Crisp was permitted to remain in occupation of the property took place. The terms by which Mr Crisp was permitted to remain in occupation of the property are set out in plain terms in Deacons’ letter of 22 April 2008. The sale of the plant and equipment was not completed until late June 2008. On 14 August 2008, Perpetual entered into possession of the property and served a notice on Mr Crisp to remove goods and other items remaining on the property.
Conclusion on the issue of the existence of a lien
As I have said, Ms Maddern’s account of events was documented in contemporaneous file notes and confirmed in formal correspondence. In my view, the evidence points to an agreement whereby Perpetual, who were in a position to take immediate possession of the property, permitted Mr Crisp to remain in occupation in order that he could conduct an orderly sale of the plant and equipment in situ, rather than incur the cost and have the convenience of removing it from the premises and conducting the sale elsewhere. Perpetual could have required Mr Crisp to remove the plant and equipment forthwith, but instead allowed him an interval to conduct the sale. As such, it amounted to an indulgence by Perpetual which was for the benefit of the company’s creditors. It is certainly clear that Perpetual intended to conduct a mortgagee’s sale, but that it was prepared to postpone doing so until after the sale of the plant and equipment. I do not consider that Perpetual, by allowing such continued occupation, impliedly agreed to Mr Crisp incurring costs which would be claimed in priority to Perpetual’s interest as mortgagee. This is not, in my view, a circumstance where Perpetual have engaged in what would be described as unconscientious conduct so as to justify deferring its priority under the mortgage. The sole reason why Mr Crisp remained in occupation was, in my view, for his convenience and that of the creditors, and it is difficult to discern any benefit that Perpetual gained by the continued occupation. To the contrary, by agreeing to allow Mr Crisp to remain at the property, the sale by Perpetual was delayed. In that period, it could have prepared the property for an earlier auction.
Mr Rubenstein submitted, in the context of an estoppel arising against Mr Crisp, that the principal loan, continuing in default for a longer period of time than it otherwise might have, caused the debt to Perpetual to increase, and that increased debt was not able to be discharged because insufficient funds were raised by the sale of the property to discharge the secured debt. As such, I regard the agreement struck between Mr Sandy on behalf of Mr Crisp and Deacons on behalf of Perpetual and set out in the 22 April 2008 letter of Deacons prevents Mr Crisp now contending that he has a lien. In my view, it was implicit that Mr Crisp maintain appropriate protection and security for the premises while he continued to occupy it pursuant to Perpetual’s indulgence. Mr Crisp indicated that he had cancelled the insurance which had been put in place by the company prior to its liquidation, obtained a refund and effected insurance through Willis Australia Limited. The documentation in respect of that cover tendered at the trial of this application and, which is Exhibit GAC24, does not, as is observed by Mr Rubenstein, note Perpetual as a secured creditor on that policy. In any event, in order for Mr Crisp to successfully contend the existence of a lien in priority, he must demonstrate that his efforts and those of his staff and the disbursements incurred were incurred exclusively for the care or preservation of the property concerned. That is to say, he cannot recover them as costs and expenses if they were also in and about the expenditure required in the general administration of the liquidation.[9]
[9]See Commonwealth Bank of Australia v Butterell 35 NSWLR 64 at 71.
In my view, none of the various endeavours and the expenditure incurred ancillary to such endeavours which are detailed in exhibit GAC16 could be said to be solely or exclusively for the purpose of preserving the property. If one views the narration to the redacted version of Exhibit GAC16 (which originally contained some 88 entries but, by the conclusion of the hearing, had been reduced to 25 items), I do not consider that the items claimed meet that test. It was clear, in my view, from early in the piece, that Perpetual would assume conduct of its own mortgagee sale and that while approaches were made by the director of the company to conduct such a private sale, this never eventuated and was never entertained by Perpetual. Certainly, Perpetual did not acquiesce in Mr Crisp involving himself in such negotiations in Perpetual’s behalf. The communications which appear in the narrative between Mr Crisp and Mr Sandy of the one part and Deacons on behalf of Perpetual are, in my view, typical of the type of communication that would ensue where a liquidator is appointed to a company and there is a secured creditor over all or part of the company’s assets.
The first nine items on the redacted table, which is set out as a schedule in these reasons, in my view, fall into that characterisation. The first four items are in my view typical of the type of communications which a liquidator is required to engage in as part of his general duties in administrating a liquidation. The fifth item, it appears, related to liaison with Mr Michael Bent, an auctioneer of chattels, in relation to the sale of the plant and equipment, which is very obviously not allowable. The sixth and seventh items involved writing letters to State Revenue and South-East Water in relation to land tax and rate issues, which are in my opinion part of a liquidator’s ordinary administrative functions to perform and are not allowable. The eighth and ninth items relate to events on or about the last day that Mr Crisp was in possession of the premises. Mr Crisp agreed in cross-examination that the scenario of a mortgagee taking possession when a liquidator was in office occurs on many occasions and would be dealt with as part of his ordinary responsibilities as liquidator. Similarly, Mr Crisp would have been obliged to hand over the keys to the premises when he had concluded the permissive occupancy of the premises resulting as a result of Perpetual’s indulgence to him to enable him to conduct the sale of stock and equipment.
Items 10 to 17 on the table relate, according to the narration, to the caveat lodged on the property by Ms Aing, the wife of the director of Esafa, who contended that she had a constructive trust of some type over the assets of the company. Mr Crisp was cross-examined in relation to these items[10] and it would seem that the activities referred to amounted to efforts being put in to obtaining a withdrawal of the caveat, but the particulars in respect of this lacked specificity. It would not appear that the caveat was withdrawn as a result of the efforts of Mr Crisp and Mr Sandy. Rather, Deacons were ultimately instrumental in its removal. In any event, Perpetual, as the secured creditor who was to conduct the mortgagees sale, was the party charged with the removal of the caveat and it was not a concern of Mr Crisp.
[10]Transcript pp 105-111.
Mr Crisp was cross-examined in relation to a letter written by him on 26 August 2008 to Deacons. That letter informs Ms Maddern of Deacons of the lodgement of the caveat by Ms Aing and encloses a copy of it. There is no mention of any negotiations being conducted by Mr Crisp or his office in regard to the removal of the caveat in the letter. Those items are not allowable. If any of those items are, contrary to the narration in the exhibit, in respect of the caveat lodged by Mr Crisp shortly after his appointment, I would consider such costs, which are in any event minimal, to be part of his ordinary responsibilities as liquidator. It was never clarified by evidence or at the hearing, but one assumes that Perpetual, as a registered first ranking mortgagee, would have held custody of the duplicate Certificate of Title, which would have prevented dealings in respect of the property. As to the item number 17, which the narration describes as dealing with Department of Sustainability and Environment, it transpired that the caveat the subject of that claim had nothing to do with the company’s property.
The remaining categories of claim relate to insurance and security issues. As I have stated above, my view is that implicitly, Mr Crisp would have assumed responsibility for the building during the period that Perpetual permitted him to continue to occupy it. The insurance cover covered the plant and equipment at the property, as well as the building itself and, in my view, it is not possible to unravel, in the relevant way, those costs and expenses that are incurred exclusively or solely for the preservation of the property, i.e. the building – they were inextricably mixed. Further, as I have observed, the policy does not, on its face, mention Perpetual as a mortgagee.
Mr Rubenstein referred to the decision of Hamilton v Donovan Oates.[11] At paragraph [63], Barrett J stated:
“The legal position in relation to insurance is as stated by Parker J in Sinnott v Bowden (1912) 2 Chancery 414 at 419:
‘It is, I think, clear that, apart from special contract or the provisions of some statute, a mortgagee has no interest in the moneys payable under a policy of insurance effected by a mortgagor on the mortgaged premises: see Lease v Whiteley LR 2 Eq 143; Poole v Adams (1864) 12 WR 683; Rayner v Preston 18 Ch D 1.’”
[11]61 ACSR 82.
At paragraph [64], his Honour stated:
“… Insurance in the form taken out in this case by the plaintiffs for the company in its own name only therefore did not protect or preserve the property so as to benefit [the mortgagee]. By taking out the insurance, the plaintiffs no doubt protected the company against the adverse financial consequences of any destruction of the building, but that in no way protected or preserved the property itself.”
I agree with Mr Rubenstein’s submission that Mr Crisp has not established that the insurance policies which he put in place would have inured for the benefit of Perpetual as mortgagee. This applies both to the remuneration claim in respect of the insurance matters and the premiums disbursed.
Remuneration and disbursements are claimed by Mr Crisp in respect of securing the premises. In my view, such claims are not sustainable on an application of the relevant test. There was stock and equipment at the premises which Mr Crisp was required to protect as part of his general responsibilities as liquidator. He cannot, in my view, seek to claim that effort and expense from Perpetual. The maintenance of security services was, in any event, required under the terms of the insurance policies which Mr Crisp put in place.
The same applies, in my view, to the maintenance of power and communications utilities, which, while Mr Crisp remained in occupation of the premises for the purpose of the sale of the stock and equipment, were required by him enable the sale of stock and equipment to take place.
Mr Crisp makes a claim for $6,000 for rubbish removal. In cross-examination, he disagreed with the proposition that not one dollar was spent on cleaning up, stating that a credit was provided to the purchaser of the stock for cleaning up the premises. Mr Crisp was taken to the Report to Creditors of 12 November 2008. That report stated, at paragraph 2.3:
“I received various offers for the stock. After consultation with the valuer I accepted an offer of $20,000 that provided the best outcome for creditors.”
He states that the clean-up of the premises involved removal of a lot of off-cuts lying around the premises. The purchaser of the stock cleaned up the area from which the goods which had been purchased were removed. Mr Sandy had apparently identified the stock as being a fire risk on 3 April 2008, although the clean-up did not occur until May. The sale for $24,000 took place after advice that costs of auctioning it would be in excess of $6,000, allowing for advertising, labour and other expenses. It was put to Mr Crisp that it was simply a matter that an offer was made for $20,000, no more, no less, and that Mr Crisp determined to accept the offer because it would mean saving $6,000 for advertising and labour and other expenses. The letter to Mr Crisp’s office stated:
“We wish to further advice the successful purchaser spent in excess of $5,000 in cleaning up the premises.”
Mr Rubenstein put it that there was no discount to the purchaser as such and that the successful purchaser nearly spent “in excess of $5,000”. Mr Crisp stated that in reality, the purchaser did because Mr Crisp had allowed a credit in that sum. Mr Crisp was firm about the purchaser of the stock not having done so unless he was obliged to. The cross-examination went back and forwards on this topic without any satisfactory resolution of the issue.[12] Mr Crisp, who bears the burden of establishing a claim, has not, in my view, made it out to the requisite degree.
[12]See transcript 138-141.
By reason of the foregoing, I do not consider that Mr Crisp has made out a claim that he has a lien in respect of any remuneration and disbursements.
I will hear the parties on the question of costs.
SCHEDULE
(Redacted version of exhibits GAC16 to the affidavit of Glen Anthony Crisp, sworn 19 June 2009)
| Esafa Gallery Pty Ltd (In Liquidation) | ||||||||||
| Report Date: 2/04/2008 - 21/08/2008 | ||||||||||
| Date | Operator | Task Code | Comment | Total Hours | Charge Rate | Charge | ||||
| WORK UNDERTAKEN TO FACILITATE A SALE | ||||||||||
| 1. | 14/04/2008 | Glenn Crisp | Sale of Land and Buildings | Discussions with TS re Secured creditor taking possession & insurance matters | 1.40 | 475.00 | 665.00 | |||
| 2. | 17/04/2008 | Glenn Crisp | Sale of Land and Buildings | Emails T Sandy re: org meeting with Secured creditor or Deacons & third parties removal of their property. | 1.00 | 475.00 | 475.00 | |||
| 3. | 28/05/2008 | Travis Marchione | Sale of Land and Buildings | Call from Valuer for Challenger | 0.20 | 215.00 | 43.00 | |||
| 4. | 28/05/2008 | Dean Schwab | Sale of Land and Buildings | Liaising with valuers - for Challenger on site | 1.50 | 155.00 | 232.50 | |||
| 5. | 28/05/2008 | Dean Schwab | Sale of Land and Buildings | Liaising with valuers for sale of property on site | 2.50 | 155.00 | 387.50 | |||
| 6. | 21/07/2008 | Travis Marchione | Creditor Inquiries | Letter to State Revenue | 0.50 | 215.00 | 107.50 | |||
| 7. | 22/07/2008 | Travis Marchione | Creditor Inquiries | Letter to South East Water | 0.30 | 215.00 | 64.50 | |||
| 8. | 13/08/2008 | Glenn Crisp | Secured Creditor Reports | Re Mortgagee taking possession issues | 1.60 | 485.00 | 776.00 | |||
| 9. | 14/08/2008 | Dean Schwab | Sale of Land and Buildings | Handed over keys at premises | 1.50 | 155.00 | 232.50 | |||
| WORK UNDERTAKEN TO ATTEMPT TO REMOVE THE CAVEAT | ||||||||||
| 10. | 5/06/2008 | Glenn Crisp | Sale of Land and Buildings | Emails and discussions with T Sandy re caveat by director's wife | 2.20 | 485.00 | 1067.00 | |||
| 11. | 6/06/2008 | Terry Sandy | Sale of Land and Buildings | Discussions with Director re caveat | 0.30 | 380.00 | 114.00 | |||
| 12. | 11/06/2008 | Glenn Crisp | Sale of Land and Buildings | Discussions with T Sandy re: caveat Mrs Aing | 1.70 | 485.00 | 824.50 | |||
| 13. | 23/06/2008 | Glenn Crisp | Sale of Land and Buildings | draft letter to David Cheung re: sale of property & caveat by Mrs Aing | 1.50 | 485.00 | 727.50 | |||
| 14. | 8/07/2008 | Terry Sandy | Sale of Land and Buildings | Telephone conversation with David Cheung re receipt of letter and caveat lodged by Directors wife | 0.80 | 380.00 | 304.00 | |||
| 15. | 10/07/2008 | Terry Sandy | Sale of Land and Buildings | Telephone discussion with Tracey Rothwell re caveat lodged by Directors wife. | 0.10 | 380.00 | 38.00 | |||
| 16. | 18/07/2008 | Travis Marchione | Sale of Land and Buildings | Letter to Department of E & E re: Caveat removal | 0.60 | 215.00 | 129.00 | |||
| 17. | 21/07/2008 | Glenn Crisp | Sale of Land and Buildings | Dealing with Dept of Sustainability & Environment Re: incorrect notice of Caveat | 1.80 | 485.00 | 873.00 | |||
| WORK UNDERTAKEN TO SECURE THE PROPERTY | ||||||||||
| 18. | 11/04/2008 | Terry Sandy | Insurance | Willis - email to Sallie Payne re: insurance of building and provide details of previous building insurance policy. | 0.30 | 360.00 | 108.00 | |||
| 19. | 15/04/2008 | Terry Sandy | Trade On Tasks | Letter to Origin Energy to continue supply | 0.20 | 360.00 | 72.00 | |||
| 20. | 30/06/2008 | Terry Sandy | Insurance | Insurance - cover for 3 months - emailed Sallie Payne | 0.30 | 380.00 | 114.00 | |||
| 21. | 2/07/2008 | Terry Sandy | Insurance | Email to Willis Australia | 0.10 | 380.00 | 38.00 | |||
| 22. | 16/07/2008 | Glenn Crisp | Sale of Land and Buildings | Insurance issue & attend Premises | 1.00 | 485.00 | 485.00 | |||
| 23. | 16/07/2008 | Terry Sandy | Sale of Land and Buildings | Call from security company to attend premises on alarm call. | 2.50 | 380.00 | 950.00 | |||
| 24. | 17/07/2008 | Travis Marchione | Sale of Land and Buildings | Attend premises re: Security break in | 2.30 | 215.00 | 494.50 | |||
| 25. | 18/07/2008 | Terry Sandy | Insurance | Insurance re: account | 0.10 | 380.00 | 38.00 | |||
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