Porter v Miller Street Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Porter v Miller Street Pty Ltd [2008] FCAFC 77

CORPORATIONS – winding up – company acting solely as trustee – appointment of new trustee – duties of liquidator in relation to trust assets – assets encumbered by secured loans – liquidator’s refusal to transfer assets to new trustee without protection against claims from creditors and in respect of his costs and expenses – whether unreasonable conduct by liquidator.

TRUSTS – equitable compensation for breach of duty by liquidator in winding up trustee company – loss of rent due to liquidator’s failure to seek new tenant of premises – penalty interest payable to company consequent upon liquidator’s failure to transfer encumbered property to new trustee – whether liquidator personally liable.

TRUSTS – trustee company wound up – liquidator appointed – new trustee appointed – company remaining registered as proprietor of trust land – whether liquidator’s obligations in respect of trust property terminates on being advised of appointment of new trustee.

Corporations Act 2001 (Cth)

Re Crest Realty Pty Ltd (In Liq) and theCompanies Act (1977) 1 NSWLR 664 cited
Re GB Nathan & Co Pty Ltd (In Liq) (1991) 24 NSWLR 674 cited
Irvine v Australian Sharetrading and Underwriting Ltd (in liq) [1996] 22 ACSR 765 cited
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 cited

RICHARD JAMES PORTER AS OFFICIAL LIQUIDATOR OF TAYCORP THREE PTY LIMITED (IN LIQUIDATION) (ACN 071 753 734) v MILLER STREET PTY LIMITED (AS TRUSTEE FOR THE TAYLES DISCRETIONARY TRUST NO 3) (ACN 113 155 178)

VID 1193 OF 2007

SUNDBERG, JACOBSON AND GORDON JJ
14 MAY 2008
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 1193 OF 2007
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

RICHARD JAMES PORTER AS OFFICIAL LIQUIDATOR OF TAYCORP THREE PTY LIMITED (IN LIQUIDATION) (ACN 071 753 734)
Appellant

AND:

MILLER STREET PTY LIMITED (AS TRUSTEE FOR THE TAYLES DISCRETIONARY TRUST NO 3) (ACN 113 155 178)
Respondent

JUDGES:

SUNDBERG, JACOBSON AND GORDON JJ

DATE OF ORDER:

14 MAY 2008

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The appeal be dismissed.

2.The cross appeal be dismissed.

3.The appellant pay the respondent’s costs of the appeal.

4.The respondent pay the appellant’s costs of the cross appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 1193 OF 2007
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

RICHARD JAMES PORTER AS OFFICIAL LIQUIDATOR OF TAYCORP THREE PTY LIMITED (IN LIQUIDATION) (ACN 071 753 734)
Appellant

AND:

MILLER STREET PTY LIMITED (AS TRUSTEE FOR THE TAYLES DISCRETIONARY TRUST NO 3) (ACN 113 155 178)
Respondent

JUDGES:

SUNDBERG, JACOBSON AND GORDON JJ

DATE:

14 MAY 2008

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

Introduction

  1. In August 2005 a company known as Taycorp Three Pty Limited (“Taycorp”) was the trustee of the Tayles Discretionary Trust No 3…

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Details
Case
[2008] FCAFC 77
Decision Date

CaseChat Overview and Summary

In the matter of Porter v Miller Street Pty Ltd, the parties involved were the liquidator of Taycorp, acting on behalf of the creditors, and Miller Street, which had made a proposal to the liquidator for the termination of the winding up of Taycorp. The central dispute in this case centred on the liquidator's decision to reject Miller Street's proposal and the subsequent legal ramifications of this decision. The case was heard in the Supreme Court, where the liquidator contested Miller Street's claim for penalty interest and loss of rent.

The primary legal issues that the court had to resolve were whether the liquidator's rejection of Miller Street's proposal was reasonable and justified, and whether Miller Street was entitled to recover penalty interest and loss of rent due to the delay in the winding up process. The court had to consider the actions and responsibilities of the liquidator, the circumstances surrounding the winding up of Taycorp, and the impact of the delay on Miller Street's interests.

The court found that the liquidator acted reasonably in rejecting Miller Street's proposal, as it was not feasible to transfer the Trust property on the dates suggested by Miller Street. Additionally, the court ruled that the liquidator was not liable for the loss of rent or penalty interest, as the delay in finalising the liquidation was not inordinate or inexcusable. The court also dismissed Miller Street's cross-appeal regarding the liquidator's remuneration, stating that the liquidator was entitled to his costs and expenses for the work done, provided that the loss of rent was made good.

In conclusion, the court dismissed both the appeal and the cross-appeal, and ruled that the liquidator should pay Miller Street's costs of the appeal, while Miller Street should pay the liquidator's costs of the cross-appeal. The court's decision underscored the importance of considering the specific circumstances of each case when evaluating the actions of liquidators and the rights of creditors.

Orders

Orders of the court

1. The appeal be dismissed.

2. The cross appeal be dismissed.

3. The appellant pay the respondent’s costs of the appeal.

4. The respondent pay the appellant’s costs of the cross appeal.

Background

Background to the litigation

The gravamen of Miller Street’s argument is that the liquidator acted unreasonably in rejecting an offer from Miller Street in March 2005 proposing terms and conditions for the termination of the winding up of Taycorp.A chronology of the principal facts The Trust was established by a trust deed dated 12 December 1995. The trust deed conferred a power upon the appointor to remove the trustee and appoint a new trustee in its place. Ms Sandra Lacey Daly was the appointor. (See Finkelstein J at [4]). On or about 5 April 2004, the Commissioner for State Revenue issued a statutory demand to Taycorp under the Corporations Act 2001 (Cth) (“the Corporations Act”) for non-payment of land tax and other charges. The amount of the demand was $69,132.13. As we have said above, on 27 August 2004 Taycorp was wound up by an order of the Court for failure to pay the amount that was the subject of the demand. Less than one week later, on 1 September 2004, Mr Tayles paid the amount of the demand to the Commissioner. From about that time Mr Tayles informed the liquidator that he intended to make an application to the Court to terminate the winding up on the ground that Taycorp was solvent. However, no such application was ever made. (Finkelstein J at [13]). On 17 September 2004 the liquidator prepared a report to the petitioning creditor. The report stated that the liquidator had been informed by Mr Tayles that Taycorp was the trustee of the Trust. The report referred to Mr Tayles’ stated intention to have the winding up terminated, but the liquidator noted that a difficulty arose from the failure of Taycorp to produce its books and records. Indeed, as the primary judge observed at [13], most of the books and records of Taycorp were never handed over, apparently because they were said to have been lost. The liquidator’s report of 17 September 2004 set out the asset position of Taycorp. It recorded the value of the Trust property as $6m. It also recorded Taycorp’s liabilities, which were shown as $1.5m owing to the CBA and approximately $200,000 to other creditors who were unsecured. This left a surplus of over $4.3 million. At about that time, that is to say September 2004, the liquidator was notified by the Australian Taxation Office that income tax returns for Taycorp for the period 1996 to 2004 had not been lodged and that business activity statements for the period from 1 July 2000 to the date of liquidation were outstanding. As the liquidator observed in his affidavit, Taycorp had never lodged a tax return or a business activity statement. On 16 February 2005 the CBA sent to the liquidator a copy of a letter of 13 January 2005 from the CBA to Mr Tayles. The letter expressed disappointment in Mr Tayles’ continuing failure to provide information to the CBA. The letter stated that “as a last measure” the CBA was prepared to consider an application from Mr Tayles’ companies to restructure their loan facilities. The conditions included the retirement of the liquidator and the provision of certain financial information by Mr Tayles.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

SUNDBERG, JACOBSON AND GORDON JJ
The liquidator’s appeal having failed, he should pay Miller Street’s costs of the appeal. Miller Street’s cross-appeal having failed, it should pay the liquidator’s costs of the cross-appeal.Conclusion As we have said, the proceeding before the primary judge was confined to the two main issues the subject of the appeal and cross-appeal. There was extensive, lengthy and detailed correspondence passing between the liquidator and his solicitors on the one hand and Taycorp, its solicitors, barrister and Mr Tayles himself on the other. In our view the primary judge’s observation that the liquidator’s delay in finalising the liquidation was both inordinate and inexcusable not only ignored the badgering and harassing demands in the correspondence emanating from Mr Tayles, but was outside the ambit of the proceeding before him. That observation would have been better left unsaid. The appeal and cross appeal must be dismissed.

Ratio Decidendi

Legal Principle Established

Established by: SUNDBERG, JACOBSON AND GORDON JJ

Miller Street’s cross-appeal to recover the penalty interest must be dismissed.Liquidator’s remuneration The primary judge rejected at [27] Miller Street’s claim that the liquidator’s failure to protect the Trust property should deprive him of the costs and expenses to which he would otherwise be entitled. His Honour said that once the loss of rent was made good, there was no reason to deprive the liquidator of his costs for the work he had done. Miller Street cross-appeals against that conclusion. It contends that because of the primary judge’s opinion that the liquidator was responsible for inordinate and inexcusable delay, he should not be entitled to recover or retain any remuneration beyond 8 March 2005. The proceeding before the primary judge was not a general review of the conduct of the administration of the winding up. There were two distinct issues raised: the loss of rent and the penalty interest. As we have said, the liquidator was under no obligation to transfer the Trust property on 8 March 2005 (or on either of the later dates suggested by Miller Street). Although we have dismissed the rent appeal, we agree with the reasons the primary judge gave for rejecting Miller Street’s claim to deny the liquidator part of his remuneration.Costs The liquidator’s appeal having failed, he should pay Miller Street’s costs of the appeal. Miller Street’s cross-appeal having failed, it should pay the liquidator’s costs of the cross-appeal.Conclusion As we have said, the proceeding before the primary judge was confined to the two main issues the subject of the appeal and cross-appeal. There was extensive, lengthy and detailed correspondence passing between the liquidator and his solicitors on the one hand and Taycorp, its solicitors, barrister and Mr Tayles himself on the other. In our view the primary judge’s observation that the liquidator’s delay in finalising the liquidation was both inordinate and inexcusable not only ignored the badgering and harassing demands in the correspondence emanating from Mr Tayles, but was outside the ambit of the proceeding before him. That observation would have been better left unsaid. The appeal and cross appeal must be dismissed.