Re Crown Meats Pty Ltd (in liq)
[2013] VSC 118
•5 April 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2012 6158
RE CROWN MEATS PTY LTD (IN LIQUIDATION) ACN 007 311 140, DAKIRI PTY LTD (IN LIQUIDATION) ACN 005 709 517, SOUTHERN CROSS FROZEN FOODS (VIC) PTY LTD (IN LIQUIDATION) ACN 006 373 753 AND ANEND PTY LTD (IN LIQUIDATION) ACN 006 455 429
BETWEEN:
| STEPHEN ROBERT DIXON AND LAURENCE ANDREW FITZGERALD in their capacities as joint and several liquidators of CROWN MEATS PTY LTD (IN LIQUIDATION) ACN 007 311 140 AND OTHERS AS SET OUT IN THE SCHEDULE OF PARTIES | Plaintiffs |
| v | |
| EILEEN WIESELMANN MARTMAN NOMINEES PTY LTD (IN LIQUIDATION) ACN 005 996 190 AND OTHERS AS SET OUT IN THE SCHEDULE OF PARTIES | First Defendant Second Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 February 2013 | |
DATE OF JUDGMENT: | 5 April 2013 | |
CASE MAY BE CITED AS: | Re Crown Meats Pty Ltd (in liq) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 118 | |
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CORPORATIONS – Application by liquidators for directions – Whether or not the Universal Distributing lien extends to the costs of the application for directions – Whether or not the applications were necessary and thus attracted the Universal Distributing lien –Corporations Act 2001, s 479(3).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Dr O. Bigos | Koroneos Lawyers |
| For the First Defendant | Mr J. Kohn | Marshalls & Dent |
| For the Second Defendant | Mr S.J. Maiden | Colin Biggers & Paisley |
| For the Third Defendant | No appearance | |
| For the Fourth, Fifth and Ninth Defendants | Mr S. Ostroburski (solicitor) | S Ostroburski – Legal Practitioner |
| For the Sixth Defendant | No appearance | |
| For the Seventh Defendant | No appearance | |
| For the Eighth Defendant | Mr D. Skapetis (solicitor) | Harrick Lawyers |
| For the Ninth Defendant | No appearance |
HIS HONOUR:
Introduction and summary
The Plaintiffs, Stephen Dixon and Laurence Fitzgerald, are the liquidators of:
(a)Dakiri Pty Ltd (in liquidation) (Dakiri);
(b)Southern Cross Frozen Foods (Vic) Pty Ltd (in liquidation) (Southern Cross);
(c)Crown Meats Pty Ltd (in liquidation) (Crown Meats); and
(d)Anend Pty Ltd (in liquidation) (Anend).
The defendants to the originating process before me are as follows:
(a) Eileen Wieselmann: first defendant;
(b) Martman Nominees Pty Ltd (in liquidation) (Martman Nominees): second defendant;
(c) Martin Wieselmann (as co-executor of the estate of Victor Wieselmann): third defendant;
(d) Helen Beck (as co-executor of the estate of Victor Wieselmann): fourth defendant;
(e) CCM Management Pty Ltd (CCM): fifth defendant;
(f) Oxhill Pastoral Company Pty Ltd (in liquidation): sixth defendant;
(g) Westmeats (Export) Pty Ltd (in liquidation): seventh defendant;
(h) Martin Wieselmann: eighth defendant; and
(i) Thomas Peter Watson: ninth defendant.
Only Mrs Wieselmann and Martman Nominees made submissions in the hearing.
The four companies which are the subject of this matter are related. They shared common directors. The companies were part of the West Meats group of companies, which conducted a common enterprise, primarily meat processing. Mr Wieselmann was the principal of that group.
On 29 February 2012, the liquidators were appointed joint and several administrators of the companies. On 28 March 2012, each of the companies was wound up by orders of this Court. The liquidators were appointed joint and several liquidators of each of the companies.
Each company owns real property:
(a)Dakiri is the registered proprietor of the property at 7-9 Cahill Street, Dandenong South (Cahill Street Property);
(b)Southern Cross is the registered proprietor of the property at 43 Colebrook Street, Brunswick (Colebrook Street Property);
(c)Crown Meats is the registered proprietor of the property at 322-324 Hammond Road, Dandenong South (322 Hammond Road Property); and
(d)Anend is the registered proprietor of the property 4/314 Hammond Road, Dandenong (314 Hammond Road Property).
The liquidators have sold each of the properties. Two have settled (Cahill Street Property and 314 Hammond Road Property), and the other two are scheduled to settle shortly. The Liquidators seek directions as to how to distribute the net proceeds of sale. In particular, they seek the following orders
1The First Plaintiffs (Liquidators) are justified in:
(a)treating the property described in Certificate of Title Volume 9525 Folio 347, situated at 7–9 Cahill Street, Dandenong South (Cahill Street Property), of which the Third Plaintiff (Dakiri) is the registered proprietor, as held subject to a charge in favour of the First Defendant (Eileen Wieselmann);
(b)paying the net proceeds of realisation of the Cahill Street Property, after deduction from them of the amounts set out in paragraphs 2 and 3, to Eileen Wieselmann.
2The Liquidators are justified in asserting an entitlement to:
(a)a first-ranking equitable lien upon the Cahill Street Property and its net proceeds of realisation, for the payment; and
(b)to the payment out of such net proceeds of realisation before any other payments are made,
of their costs, expenses and remuneration (including GST), on an indemnity basis, reasonably incurred in taking steps, in their capacity as joint and several administrators and joint and several liquidators of Dakiri, for the care, protection, preservation and/or realisation of the Cahill Street Property, including the costs of this proceeding and any personal liability of the Liquidators for tax arising as a result of the sale of the Cahill Street Property – such costs, expenses and remuneration (apart from any personal liability of the Liquidators for tax arising as a result of the sale of the Cahill Street Property and costs, expenses and remuneration associated with contesting such personal liability) fixed in the sum of $150,000.00; and in addition $267,600.00 plus $50,000.00 be held by the Liquidators in trust, respectively on account of:
(a)any personal liability of the Liquidators for tax arising as a result of the sale of the Cahill Street Property; and
(b)any costs, expenses and remuneration associated with contesting such personal liability for tax,
pending the resolution of the issue of the personal liability of the Liquidators for such tax.
THE COURT DECLARES THAT:
3The Liquidators have a first-ranking equitable lien upon the Cahill Street Property and its net proceeds of realisation, for the payment of their costs, expenses and remuneration (including GST), on an indemnity basis, reasonably incurred in taking steps, in their capacity as joint and several administrators and joint and several liquidators of Dakiri, for the care, protection, preservation and/or realisation of the Cahill Street Property, including the costs of this proceeding and any personal liability of the Liquidators for tax arising as a result of the sale of the Cahill Street Property – such costs, expenses and remuneration (apart from any personal liability of the Liquidators for tax arising as a result of the sale of the Cahill Street Property and costs, expenses and remuneration associated with contesting such personal liability) fixed in the sum of $150,000.00; and in addition $267,600.00 plus $50,000.00 be held by the Liquidators in trust, respectively on account of:
(a)any personal liability of the Liquidators for tax arising as a result of the sale of the Cahill Street Property; and
(b)any costs, expenses and remuneration associated with contesting such personal liability for tax,
pending the resolution of the issue of the personal liability of the Liquidators for such tax.
B COLEBROOK STREET PROPERTY
THE COURT NOTES THAT:
4Pursuant to paragraphs 2 and 3 of the orders made on 20 May 2011 in Federal Court of Australia proceeding number VID 850 of 2010, the Second Defendant (Martman) is subrogated to the rights of the mortgagee under the mortgage registered as dealing number T412816F over the property described in Certificate of Title Volume 9465 Folio 951, situated at 43–47 Colebrook Street, Brunswick (Colebrook Street Property), for the purpose of securing payment of the sum of $965,341.86 owed by the Fourth Plaintiff (Southern Cross) to Martman, plus interest calculated at a rate of 6% from 23 January 2009 until the date of payment.
5The Liquidators intend to pay the net proceeds of realisation of the Colebrook Street Property, after deduction from them of the amounts set out in paragraphs 6 and 7, to Martman.
THE COURT DIRECTS THAT:
6The Liquidators are justified in asserting an entitlement to:
(a)a first-ranking equitable lien upon the Colebrook Street Property and its net proceeds of realisation, for the payment; and
(b)to the payment out of such net proceeds of realisation before any other payments are made,
of their costs, expenses and remuneration (including GST), on an indemnity basis, reasonably incurred in taking steps, in their capacity as joint and several administrators and joint and several liquidators of Southern Cross, for the care, protection, preservation and/or realisation of the Colebrook Street Property, including the costs of this proceeding and any personal liability of the Liquidators for tax arising as a result of the sale of the Colebrook Street Property – such costs, expenses and remuneration to be agreed or determined by an Associate Judge in default of agreement.
THE COURT DECLARES THAT:
7The Liquidators have a first-ranking equitable lien upon the Colebrook Street Property and its net proceeds of realisation, for the payment of their costs, expenses and remuneration (including GST), on an indemnity basis, reasonably incurred in taking steps, in their capacity as joint and several administrators and joint and several liquidators of Southern Cross, for the care, protection, preservation and/or realisation of the Colebrook Street Property, including the costs of this proceeding and any personal liability of the Liquidators for tax arising as a result of the sale of the Colebrook Street Property – such costs, expenses and remuneration to be agreed or determined by an Associate Judge in default of agreement.
C 322 HAMMOND ROAD PROPERTY
THE COURT DIRECTS THAT:
8The Liquidators are justified in asserting an entitlement to:
(c)a first-ranking equitable lien upon the property described in Certificate of Title Volume 9400 Folio 140, situated at 322–324 Hammond Road, Dandenong South (322 Hammond Road Property), of which the Second Plaintiff (Crown Meats) is the registered proprietor and its net proceeds of realisation, for the payment; and
(d)to the payment out of such net proceeds of realisation before any other payments are made,
of their costs, expenses and remuneration (including GST), on an indemnity basis, reasonably incurred in taking steps, in their capacity as joint and several administrators and joint and several liquidators of Crown Meats, for the care, protection, preservation and/or realisation of the 322 Hammond Road Property, including the costs of this proceeding and any personal liability of the Liquidators for tax arising as a result of the sale of the 322 Hammond Rd Property – such costs, expenses and remuneration to be agreed or determined by an Associate Judge in default of agreement .
THE COURT DECLARES THAT:
9The Liquidators have a first-ranking equitable lien upon the 322 Hammond Road Property and its net proceeds of realisation, for the payment of their costs, expenses and remuneration (including GST), on an indemnity basis, reasonably incurred in taking steps, in their capacity as joint and several administrators and joint and several liquidators of Southern Cross, for the care, protection, preservation and/or realisation of the 322 Hammond Road Property, including the costs of this proceeding and any personal liability of the Liquidators for tax arising as a result of the sale of the 322 Hammond Rd Property – such costs, expenses and remuneration to be agreed or determined by an Associate Judge in default of agreement.
THE COURT ORDERS THAT:
10The Originating Process dated 1 November 2012, to the extent it deals with the 322 Hammond Road Property, otherwise be adjourned to a date to be fixed.
D 314 HAMMOND ROAD PROPERTY
THE COURT DIRECTS THAT:
11 The Liquidators are justified in asserting an entitlement to:
(e)a first-ranking equitable lien upon the property described in Certificates of Title Volume 9632 Folios 533–538 and Volume 9734 Folio 521, situated at 4/314 Hammond Road, Dandenong (314 Hammond Road Property), of which the Fifth Plaintiff (Anend) is registered proprietor, and its net proceeds of realisation, for the payment; and
(f)to the payment out of such net proceeds of realisation before any other payments are made,
of their costs, expenses and remuneration (including GST), on an indemnity basis, reasonably incurred in taking steps, in their capacity as joint and several administrators and joint and several liquidators of Anend, for the care, protection, preservation and/or realisation of the 314 Hammond Road Property, including the costs of this proceeding and any personal liability of the Liquidators for tax arising as a result of the sale of the 314 Hammond Rd Property – such costs, expenses and remuneration to be agreed or determined by an Associate Judge in default of agreement.
THE COURT DECLARES THAT:
12The Liquidators have a first-ranking equitable lien upon the 314 Hammond Road Property and its net proceeds of realisation, for the payment of their costs, expenses and remuneration (including GST), on an indemnity basis, reasonably incurred in taking steps, in their capacity as joint and several administrators and joint and several liquidators of Crown Meats, for the care, protection, preservation and/or realisation of the 314 Hammond Road Property, including the costs of this proceeding and any personal liability of the Liquidators for tax arising as a result of the sale of the Hammond Rd Property – such costs, expenses and remuneration to be agreed or determined by an Associate Judge in default of agreement.
THE COURT ORDERS THAT:
13Eileen Wieselmann bear her costs of the proceeding.
14The Originating Process dated 1 November 2012, to the extent it deals with the 314 Hammond Road Property, otherwise be adjourned to a date to be fixed.
15There is liberty to apply.
Mr Wieselmann was married to Eileen Wieselmann (Mrs Wieselmann). The marriage broke down, and Mrs Wieselmann commenced proceedings against Mr Wieselmann in the Family Court of Australia.
Mrs Wieselmann claims that under orders made by the Family Court in that proceeding she has an equitable charge over the proceeds of the sale of the Cahill Street Property. Prior to the hearing, Mrs Wieselmann also claimed a proprietary interest over the Colebrook Street Property. Mrs Wieselmann no longer makes such a claim. Mrs Wieselmann has been added as a defendant to this proceeding.
Martman Nominees claims an interest in the Colebrook Street Property and both the Hammond Road Properties under a Federal Court order. Martman Nominees has been added as a defendant.
When the matter first came on for hearing before me, both Mrs Wieselmann and Martman Nominees made various objections to the orders sought by the liquidators, essentially dealing with costs and the extent of the Universal Distributing lien. It is convenient to set these out in a tabular form before summarising the issues to be decided.
Order Mrs Wieselmann Martman Nominees Cahill property 1 No objection Makes no submissions 2 Exclude “cost of proceedings” and “any personal liability of the liquidators for tax arising as a result of the sale of Cahill Street Property” Makes no submissions 3 Exclude “cost of proceedings” and “any personal liability of the liquidators for tax arising as a result of the sale of Cahill Street Property” Makes no submissions Colebrook 4 No objection Consent 5 No objection Consent 6 Exclude “cost of proceedings” and “any personal liability of the liquidators for tax arising as a result of the sale of Colebrook Property” Delete “including” and substitute “excluding” the “cost of proceedings” and exclude “any personal liability of the liquidators for tax arising as a result of the sale of Colebrook Property” 7 Exclude “cost of proceedings” and “any personal liability of the liquidators for tax arising as a result of the sale of Colebrook Property” Delete “including” and substitute “excluding” the “cost of proceedings” and exclude “any personal liability of the liquidators for tax arising as a result of the sale of Colebrook Property” 322 Hammond Road 8 Exclude “cost of proceedings” and “any personal liability of the liquidators for tax arising as a result of the sale of 322 Hammond Road Property” Order should not be made as premature 9 Exclude “cost of proceedings” and “any personal liability of the liquidators for tax arising as a result of the sale of 322 Hammond Road Property” Order should not be made as premature 10 No objection No objection 314 Hammond Road 11 Exclude “cost of proceedings” and “any personal liability of the liquidators for tax arising as a result of the sale of 314 Hammond Road Property” Order should not be made as premature 12 Exclude “cost of proceedings” and “any personal liability of the liquidators for tax arising as a result of the sale of 322 Hammond Road Property” Order should not be made as premature 13 No objection No objection 14 No objection No objection
Mrs Wieselmann seeks no order as to her costs of the originating process. Martman Nominees seeks an order that the liquidator pay its costs of the application.
As indicated in the table, Mrs Wieselmann initially objected to the direction sought by the liquidators that the Universal Distributing lien extended to the costs of this proceeding and to any personal liability of the liquidators for tax arising as a result of the sale of the Cahill Street Property. Mrs Wieselmann is owed some $1.778m under the Federal Court order, which far exceeds the sale proceeds of the Cahill Street Property (some $1.525m).
If, as I have found below, Mrs Wieselmann does have an equitable charge over the proceeds of sale of the Cahill Street Property, it is a matter for her and the liquidators to agree on the costs that the liquidators are entitled to retain out of the proceeds of sale.
Shortly before I was proposing to hand down my judgment, I was informed that Mrs Wieselmann and the liquidators had reached agreement on the amounts the liquidators could withhold out of the sale proceeds to meet their costs (including the costs of this proceeding) and the amount that could be held by the liquidators on account of the potential tax and their costs associated with contesting such personal liability for tax. These amounts are set out in the paragraphs 2 and 3 of the orders sought by the liquidators.
By reason of this agreement, it is unnecessary for me to make any directions concerning the costs of the proceedings and the amount that could be held by the liquidators on account of the potential tax and their costs associated with contesting such personal liability for tax. Accordingly, I do not propose to make the directions and declarations sought in paragraphs 2 and 3 of the proposed orders.
Issues for determination
The issues for determination are as follows:
1 Is Mrs Wieselmann entitled to an equitable charge over the Cahill Street Property entitling her to be paid the proceeds of the sale of the property, subject to the liquidators’ Universal Distributing lien?
2 Are the liquidators the liquidators entitled to a Universal Distributing lien over the Colebrook Property that includes the costs of the proceeding as proposed in orders 6 and 7?
3 Are the liquidators entitled to a Universal Distributing lien over the Colebrook Property that includes any personal liability for tax as proposed in orders 6 and 7?
4 Should orders 8, 9, 11 and 12 be made, or, the application for orders 8, 9, 11 and 12 be adjourned to a date to be fixed?
5 Are the liquidators entitled to a Universal Distributing lien over the Hammond Road Properties that includes the costs of the proceeding as proposed in orders 8 and 9, and 11 and 12?
6 Are the liquidators entitled to a Universal Distributing lien over the Hammond Road Properties that includes any personal liability for tax as proposed in orders 8 and 9, and 11 and 12?
7 Should the liquidators pay Martman Nominees’ costs of the application?
8 Should declarations be made as sought in orders 7, 9 and 12?
Principles relating to directions under s 479(3)
In Re S & D International Pty Ltd (in liq) (No 7),[1] I considered the circumstances where a Court could give directions to a liquidator. I referred to Re GB Nathan & Co Pty Ltd (in liq),[2] where the Court held that the power to give directions is limited in two fundamental ways:[3]
First, that the power may only be exercised to give directions as to how the liquidator should exercise his statutory functions as such. Secondly, that the power does not enable the Court to determine any rights or liabilities arising from the company’s transactions before the liquidation. In other words, the power may not be used to determine any rights or liabilities between creditors or contributories and the company or such rights as between themselves.
[1](2012) 92 ACSR 38.
[2](1991) 24 NSWLR 674 (Re GB Nathan).
[3]Re S & D International Pty Ltd (in liq) (No 7) (2012) 92 ACSR 38, [87].
It is unnecessary for me to consider in this case whether or not recent authorities authorise a wider application of the power to give directions under s 479(3).[4]
[4]See, for example, Re Willmott Forests (No 2) (2012) 88 ACSR 18.
Issue 1: Mrs Wieselmann’s claim of a charge over the Cahill Street Property
Mrs Wieselmann claims that under the Family Court order of 29 March 2011, in the proceedings between Mrs Wieselmann and Mr Wieselmann, she has an equitable charge over the Cahill Property. On 29 March 2011 the Family Court made orders by consent as follows:
2For the purpose of ensuring compliance with paragraph 3 hereof:
(a)Crown Meats Pty Ltd;
(b)Dakiri Pty Ltd;
(c)Southern Cross Foods (Vic) Pty Ltd;
herein referred to as the Companies be joined to these proceedings.
3Upon the making of these orders, the respondent husband personally and the husband and [Mr Watson] personally and in their capacity as directors of the Companies and [CCM] irrevocably authorise and direct the Companies to pay or cause to be paid to [Mrs Wieselmann] the following sums by way of interim property settlement:
(a)The amount of $134,745.70 from the monies held on behalf of the wife in the trust account of Marshalls & Dent relating to the current proceedings be paid by [Mrs Wieselmann] solicitors to the wife forthwith;
(b)On or before 30 June 2011, the amount of $600,000 by a payment by or non behalf of [Mr Wieselmann] in cash which shall be paid to [Mrs Wieselmann] solicitors or behalf of [Mrs Wieselmann].
(c)On or before 30 September 2011, the amount of $1,500,000 by a further payment by or on behalf of Mr Wieselmann in cash which shall be paid to [Mrs Wieselmann] solicitors on behalf of [Mrs Wieselmann].
…
5In the event that any of the amount referred to in paragraph 3 shall not be made in accordance with that paragraph the whole of the sums required to be paid shall fall due and payable and in that event [Mr Wieselmann] personally and [Mr Watson] and the Companies shall within 90 days sign all documents and all acts and things required of them to sell the real property at :
(a)43 Colebrook Street, Brunswick;
(b)79 Cahill Street, Dandenong; and/or
(c)322 Hammond Road Dandenong
and they shall irrevocably authorise and direct their agents to pay the sums referred to in paragraph 3 to [Mrs Wieselmann].
Some of the payments to be paid to Mrs Wieselmann were not made by the due dates, so the entire sum became due and payable. Mrs Wieselmann claims that there remains some $1.778m owing to her. As mentioned above, she claims a proprietary interest in the Cahill Street Property, in the nature of an equitable charge. She lodged a caveat, which has since been removed to enable the property to be sold.
The liquidators seek directions under s 479(3) of the Corporations Act 2001 (Cth) as to whether they are justified in paying the net proceeds of sale of the Cahill Street Property (after deduction of the liquidators’ Universal Distributing claims) to Mrs Wieselmann. The liquidators are of the view that they are required to do so, but seek the Court’s imprimatur before doing so. The liquidators contend that there is some legal uncertainty as to the legal effect of the Family Court orders and seek a direction that confirms their view that the effect of the Family Court orders is to give Mrs Wieselmann an equitable charge or lien over the Cahill Street Property.
The liquidators submit that the Court is not asked to determine any rights or liabilities arising from Dakiri’s transactions before the liquidation. They say that the Family Court has already done so. Although the orders did not specify the power under which they were made, the liquidators accept that the orders were valid and binding on the parties to the order. There was no issue before me that the orders were invalid.
The liquidators are also aware of a significant claim by the State Revenue Office against Dakiri. On 9 December 2011, Dakiri was served with a statutory demand dated 5 December 2011 from the State Revenue Office. The State Revenue Office asserts that the company owes the State Revenue Office the amount of $3.7m, arising from an assessment of unpaid payroll tax and interest due and payable to the State Revenue Office pursuant to the Payroll Tax Act. The State Revenue Office determined that during the period 1 July 2001 to 29 June 2009 the company was related to a group of companies that constituted the West Meats Group and accordingly is liable to payroll tax owed by the West Meats Group.
Mrs Wieselmann argues that the effect of the orders was to give her an equitable charge over the properties. Martman Nominees informed the Court that it did not oppose the directions sought by the liquidators in relation to the Cahill Street Property.
The history leading up to the Family Court orders is as follows. On 3 June 2008, Mrs Wieselmann filed an application in the Family Court of Australia seeking orders, inter alia, that there be an equitable division of the matrimonial asset pool between the parties on such terms as the Court deemed appropriate. Originally, Mr Wieselmann was the sole respondent to the application, but on 29 March 2011 five additional parties were added as respondents, including Dakiri as the fifth respondent, as well as CCM, Crown Meats, and Southern Cross.
Mrs Wieselmann is anxious to finalise the Family Court proceedings, which have been extremely protracted. Because of lack of disclosure by Mr Wieselmann, Mrs Wieselmann has been forced to file various applications in the Family Court. Applications were made on 3 June 2008, 18 July 2008, 8 October 2008, 24 November 2008, 20 May 2009, etc. Mrs Wieselmann was forced to issue a number of subpoenas directed to various individuals and organisations for the production of documents due to Mr Wieselmann’s failure to provide proper financial disclosure in accordance with the Family Court Rules.
On 24 August 2010, the Family Court made orders restraining Mr Wieselmann and Mr Watson (an associate of Mr Wieselmann) personally and each as a director of certain companies – including Dakiri, CCM, and Crown Meats – from receiving, alienating, pledging or dealing with in any way the assets of these companies and that certain funds be held by her solicitors, Marshalls & Dents, pending the final resolution of the Family Court proceeding.
On 22 February 2011, the Court ordered that the proceedings be listed for mention on 22 March 2011 for the purpose of setting the matter down for hearing or hearing an application for final orders by consent. The Court order referred to the ongoing negotiations between the parties to resolve the matter and that the wife envisaged that previous injunctions – which restrained various companies’ dealings with their properties – would in due course be discharged to permit funds to be borrowed against security of assets in the name of Mr Wieselmann, Mr Watson, and CCM, and for those funds to be drawn down by Mr Wieselmann and/or Mr Watson and/or CCM to satisfy the terms of any settlement. On 29 March 2011, orders were made by consent, as set out above.
Thus, in substance, in the event of non-payment, the whole of the sums to be paid fell due and payable and in that event Mr Wieselmann, Mr Watson, and Dakiri were required to sell, inter alia, the Cahill Street Property, and they irrevocably authorised and directed their agents to pay the outstanding sum referred to Mrs Wieselmann.
Mrs Wieselmann says that the use of the word “sell” in paragraph 5, the reference to the properties, and the use of the word “agents” in the order reflects the parties’ intention that if the moneys were not paid pursuant to order 3, then the properties would be sold and the money would come directly out of the proceeds of the sale and be paid to Mrs Wieselmann.
Mrs Wieselmann submits that that gives her an equitable charge over the properties and that that was the intention of the parties. Mrs Wieselmann deposes that she is still owed $1,778,501.32 under paragraph 3 of the order.
Equitable charge
Turning to the legal principles, Mrs Wieselmann relies on Porter v Bonarrigo,[5] a decision of Vickery J where His Honour thoroughly considers relevant authorities dealing with the establishment of an equitable charge.[6] Justice Vickery held that an equitable charge is created when property is expressly or constructively made liable to the discharge of a debt of some other obligation and that the charge thereby created confers on the chargee a right of realisation by judicial process, such as an order for sale. His Honour cited Swiss Bank Corp v Lloyds Bank Ltd,[7] Re Cosslett (Contractors) Ltd,[8] AVCO Financial Services v White,[9] and Re Bruynius.[10] In Palmer v Carey, a decision of the Privy Council on an appeal from the High Court of Australia, Lord Wrenbury described the law as to equitable assignment as follows: [11]
The law as to equitable assignment, as stated by Lord Truro in Rodick v. Gandell, is this: “The extent of the principle to be deduced ... is, that an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by a debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order, directing such person to pay such funds to the creditor, will constitute a valid equitable charge upon such fund, in other words, will operate as an equitable assignment of the debts or fund to which the order refers”.
An agreement for valuable consideration that a fund shall be applied in a particular way may found an injunction to restrain its application in another way. But if there be nothing more, such a stipulation will not amount to an equitable assignment. It is necessary to find, further, that an obligation has been imposed in favour of the creditor to pay the debt out of the fund.
[5][2009] VSC 500.
[6]See Porter v Bonarrigo [2009] VSC 500, [63]-[73].
[7][1982] AC 584, 594-5 (Buckley LJ).
[8][1998] Ch 495, 508 (Millett LJ).
[9][1977] VR 561, 564.
[10][1995] 1 Qd R 492, 498 (Pincus JA and Derringon J).
[11](1926) 37 CLR 545, 548 (citations omitted, emphasis added).
The Family Court’s orders did not expressly refer to any constructive trust, or charge or lien, or any proprietary interest or security interest. Nevertheless, paragraph 5 of the orders relevantly provided that if the debts (relevantly owed by Dakiri to Mrs Wieselmann) were unpaid, the relevant respondents should sell the Cahill Street Property and the proceeds be paid to Mrs Wieselmann in satisfaction of the debts owed to her by Mr Wieselmann and Dakiri.
In my view, although the orders did not expressly refer to payment of the debts “out of the proceeds of sale”, this was implied, so that the orders contemplated an irrevocable direction to pay the proceeds of sale of the Cahill Street Property to Mrs Wieselmann. In my opinion, this should be construed as conferring on Mrs Wieselmann a proprietary interest in the Cahill Street Property, by way of charge, to secure Dakiri’s debt to her.
I am satisfied that an equitable charge over the properties was created by the order for the reasons given above and in the light of the authorities I have referred to.
Accordingly, I propose to order that the liquidators are justified in treating Mrs Wieselmann as holding an equitable charge over the Cahill Street Property, so that the net proceeds of sale (after deducting the Universal Distributing claims) are payable to her.
The Universal Distributing principles
Before turning to the objections raised by Mr Martin Wieselmann and Martman Nominees, it is convenient to consider the Universal Distributing principles. Relevantly, a liquidator who incurs expenses to care for, preserve or realise property to create a fund is entitled in equity to a first-ranking charge (lien) against the fund or the property: Re Universal Distributing Co Ltd (in liq).[12]
[12](1933) 48 CLR 171 (Universal Distributing), 174–5 (Dixon J).
In Re S & D International Pty Ltd (in liq) (rec and mgr apptd), I summarised the relevant Universal Distributing principles:[13]
(a)At equity, an equitable lien arises in favour of a liquidator over the funds realised from the sale of company property for the costs he incurs for the care, preservation and realisation of the property in priority to those otherwise interested in the fund.
(b)The costs include those that the liquidator fairly incurs in the discharge of his duty to care, preserve and realise the property.
(c)The lien may arise whether or not the ultimate sale is affected by the liquidator and entitles the liquidator to be paid in priority out of the fund whether or not he is in possession of the fund.
(d)The costs and expenses secured by the lien must be incurred exclusively for the care, preservation or realisation of the property and not otherwise expended in the general administration of the mortgagor.
(e)The costs and expenses include the liquidator’s reasonable remuneration.
[13]See [2009] VSC 225, [273] (where citations included).
The liquidators claim an indemnity secured by a first-ranking equitable lien over the properties for remuneration for work done and costs and expenses incurred in the care, preservation and/or realisation of that property.
For an equitable lien to arise, the liquidators need not demonstrate that the work and expenses added value or benefited the persons interested in the property; what is required is that the work was necessary, the costs incurred to do it were reasonably incurred, and that there was a sufficient nexus with the salvage objective: Thackray v Gunns Plantations Ltd.[14] There, the receivers and managers of the responsible entity of several forestry managed investment schemes sought their costs and expenses and remuneration in seeking to preserve protect and realise the assets of the schemes on the basis of the Universal Distributing principles. Justice Davies said:[15]
The cases that have applied the Re Universal Distributing principles also demonstrate that there is no limit on the type of expense or work done for which remuneration is claimed that may be the subject of an equitable lien, other than that the expenditure and remuneration must be referable to the care and protection of, or calling in and conversion of the assets producing the fund. In 13 Coromandel Place Pty Ltd), Finkelstein J, after reviewing relevant authorities, stated that these cases established “clearly enough in [his] opinion” that …
… provided a liquidator is acting reasonably he is entitled to be indemnified out of the trust assets for his costs and expenses in carrying out the following activities: identifying or attempting to identify trust assets; protecting or attempting to recover trust assets; realising or attempting to realise trust assets; protecting or attempting to protect trust assets; distributing trust assets to the persons beneficially entitled to them.
Another way of putting it is to ask the question whether the work done and expense incurred was necessary to the salvage objective. An actual benefit from the receivers’ work and expenditure does not have to be demonstrated. The nexus with the salvage objectives is sufficient.
[14](2011) 85 ACSR 144 (Thackray v Gunns Plantations), [48].
[15](2011) 85 ACSR 144, [48] (citations omitted) (my emphasis).
In Thackray v Gunns Plantations Ltd(No 2),[16] the receivers sought their costs of the proceedings on an indemnity basis. Justice Davies held that the receivers should get their costs on an indemnity basis and also as an incident of their receivership.
[16][2011] VSC 417, [4].
In Re Rolcross Pty Ltd(in liq),[17] Black J had before him an application by a liquidator for directions under s 479(3) of the Corporations Act 2001 that the liquidator would be justified in treating certain property as held on trust for the Prendergast Family Trust. Justice Black said that there was a question whether those assets were held by Rolcross in its own right or as trustee for the Trust; his Honour found that they were held on trust. Importantly for this present case, his Honour made a direction that pursuant to s 479(3) that the liquidator was justified in making the payment of his legal fees and expenses in relation to the proceedings from the trust assets of the Trust.
[17][2012] NSWSC 846.
The expression ‘care, preservation and realisation’ is to be understood widely, as it includes identifying or attempting to identify the assets; recovering or attempting to recover the assets; realising or attempting to realise the assets; protecting or attempting to protect the assets; and distributing the assets to the persons beneficially entitled to them: 13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq).[18]
[18](1999) 30 ACSR 377 (Coromandel), 385 ([34]).
At this stage, the liquidators seek only an order that they are justified in claiming the indemnity and lien, with the quantum to be worked out shortly after the hearing, by agreement with the relevant stakeholders, or (in default of agreement) to be determined by an Associate Justice. As indicated above, the liquidators and Mrs Wieselmann have reached agreement on the sums pertaining to the Cahill Street Property.
The liquidators claim that the Universal Distributing lien extends, amongst other things, to
(a) any personal liability of the Liquidators for tax arising as a result of the sale of the property (such liability is suggested to arise under s 254 of the Income Tax Assessment Act 1936 (Cth), according to the Commissioner’s Draft Taxation Determination TD 2012/D7); and
(b) the costs of this proceeding, as it was properly brought in relation to questions arising in the course of the liquidation, and hence constitutes a ‘trust dispute’: Sons of Gwalia Ltd v Margaretic.[19]
These claims of the liquidators are disputed by Mrs Wieselmann and by Martman Nominees in the case of the Colebrook Street Property and the Hammond Road Properties. In relation to the Cahill Street Property, these claims have been agreed between the liquidators and Mrs Wieselmann.
Issue 2: the Universal Distributing lien and costs of proceedings and Colebrook Street Property
[19](2006) 232 ALR 119, [5]–[7].
The liquidators seek an order that they are justified in claiming a Universal Distributing first ranking equitable lien upon the Colebrook Street Property and its net proceeds of realisation for the payment of their costs in realising the Colebrook Street Property “including the costs of this proceeding.”
The Colebrook Street Property owned by Southern Cross is subject to a mortgage in favour of Westpac which was registered on 15 November 1994. Martman Nominees has been subrogated to the rights of the mortgagee under that mortgage, under paragraphs 2 and 3 of an order of Dodds-Streeton J of the Federal Court of Australia made on 20 May 2011. Mrs Wieselmann, Martman Nominees and each of the companies was a party to that order.
Paragraphs 2 and 3 of the order of Dodds-Streeton J provided, by consent, as follows:
2[Southern Cross] pay the cross-claimant [Martman Nominees] $965,341.86 plus interest calculated at a rate of 6% from 23 January until the date of payment.
3The Court declares that for the purposes of securing payment of the sum described in paragraph 2 above, [Martman Nominees] is subrogated to:
(a)the rights of the mortgagee under the registered as dealing number T412816F Colebrook Street Brunswick; and
(b)the rights of the chargee under the charge created by [Southern Cross] in favour of [Westpac] on 22 September 1994 and formerly registered with [ASIC] as document number 8276257, as if the charge had not been released.
Martman Nominees’ claim against Southern Cross, secured by the mortgage, is for $965,341.86 plus interest calculated at a rate of 6% from 23 January 2009 until the date of payment (ie the total debt so far is about $1.2m). Martman Nominees lodged a caveat in respect of the Colebrook Street Property based on the subrogation to Westpac’s security.
The liquidators accept the claim of Martman Nominees. Accordingly, the liquidators propose to pay the net proceeds of sale of the Colebrook Street Property (after deduction of the liquidators’ Universal Distributing claims) to Martman Nominees. As no legal question now arises about this payment, the liquidators do not seek directions in relation to the payment but simply ask that the Court note the payment as provided in paragraphs 4 and 5 of the proposed orders.
Nevertheless, the liquidators say that at the time of commencement of this proceeding, it appeared that Mrs Wieselmann was also claiming an interest in the Colebrook Street Property, so that there was a priorities dispute between her and Martman Nominees. She had lodged a caveat over the Colebrook Street Property. As referred to above, Mrs Wieselmann now no longer objects to Martman Nominees being paid the sale proceeds from this property.
The liquidators, however, seek a direction that they are justified in claiming an indemnity secured by a first-ranking equitable lien over the Colebrook Street Property for remuneration for work done and costs and expenses incurred in the care, preservation and/or realisation of that property “including the costs of this proceeding” as proposed in paragraphs 6 and 7 of the proposed orders.
The claim for the lien to include the costs of this proceeding is objected to by both Mrs Wieselmann and Martman Nominees. Martman Nominees says that it has no objection to the liquidators treating the costs and expense of selling the Colebrook Street Property as being subject to the lien and has always made that clear to the liquidators. I accept that is the case, as shown by the correspondence tendered.
Mrs Wieselmann contends that the direction should not include “the costs of this proceeding”. Martman Nominees seeks that the words “excluding the costs of this proceeding” be included in the order 6 and 7 rather than merely deleting “including the costs of this proceeding”.
Martman Nominees says that the formulation put forward by Mrs Wieselmann of excluding the reference to “including the costs of this proceeding” would enable the liquidators to re-agitate their application for the costs of this proceeding before an Associate Justice.
Martman Nominees says that the liquidators should not be entitled to treat their costs of the proceedings in respect of the direction about the Colebrook Street Property as being subject to the Universal Distributing lien.
Martman Nominees says that the Federal Court order of Dodds-Streeton J completely disposes of the rights to all of the properties the subject of this application. Martman Nominees submits that the liquidators are seeking directions on issues that have already been determined by the Federal Court. Or, in other words, the liquidators are seeking a direction that it is appropriate for the liquidators to comply with an existing order that binds them.
Martman Nominees says that the liquidators should have assessed the claim of Mrs Wieselmann and rejected the claim without seeking directions.
Factual background
On 7 March 2012, Mrs Wieselmann’s solicitors wrote to the liquidators (when they were administrators) laying claim to the proceeds of the Colebrook Street Property and 322 Hammond Road Property under the Family Court order of 29 March 2011.
On 14 March 2012, Martman Nominees wrote to the liquidators setting out the background to the Federal Court orders and concluding that it expected to be paid the proceedings of the Colebrook Street Property on the basis of those orders.
On 28 March 2012, the liquidators’ solicitors wrote to Mrs Wieselmann’s solicitors saying that they intended to sell the properties but would be unable to distribute the proceeds in priority to unsecured creditors without being satisfied that Mrs Wieselmann has an entitlement to such a priority.
On 8 May 2012, the liquidators’ solicitors wrote to Mrs Wieselmann’s solicitors saying that given Mrs Wieselmann’s claim to priority, they were obtaining advice.
On 28 May 2012, Mrs Wieselmann agreed to withdraw caveats lodged on the titles of the properties on condition the proceeds of sale would be held by the liquidators and not disbursed.
After further correspondence, on 13 October 2012, Mrs Wieselmann’s solicitors wrote to the liquidators seeking a distribution of $100,000 to her from the sale of the Hammond Road Properties (which had sold) and the Colebrook Street Property and the Cahill Street Property (which had yet to be sold), as she was in extreme financial need.
On 1 November 2012, the liquidators issued the originating process seeking directions that the liquidators were justified in paying the proceeds of the sale of the Colebrook Street Property to Mrs Wieselmann, and/or Martman Nominees, and/or unsecured creditors. As at 1 November 2012, Mrs Wieselmann was laying claim to the proceeds of the sale of the Colebrook Street Property.
On 14 November 2012, Martman Nominees’ solicitors wrote to the liquidators’ solicitors, referring to the letter written by Martman Nominees’ previous solicitors on 14 March 2012 which set out the basis of Martman Nominees’ claim.
Martman Nominees’ solicitors say that they do not understand the grounds for seeking the order in relation to the Colebrook Street Property. Martman Nominees suggests an amendment to the orders being sought to make it plain that directions only be sought in relation to the surplus after payment to Martman Nominees. Martman Nominees says that it consents to the liquidators’ reasonable costs of the sale of the Colebrook Street Property being paid to the liquidators, but does not consent to any other costs being ranked ahead of Martman Nominees’ entitlement under the mortgage pursuant to the Federal Court orders as to the proceeds of sale of the Colebrook Street Property.
Martin Nominees says that it is in this context that they sought to be joined as a party. By asking to be joined, Martman Nominees says that it was not conceding the appropriateness of the litigation.
On 18 December 2012 Martman Nominees’ solicitors wrote to the solicitors for the liquidators, Mrs Wieselmann, and the late Mr Wieselmann. The letter commences by stating that the purpose of the letter is to propose a means of avoiding unnecessary expenses and inconvenience occasioned by the joinder of Martman Nominees to the proceeding. The letter points out that all the parties to the Supreme Court proceeding consented to the Federal Court proceedings (with the exception of the liquidators who, it is said, were relevantly bound by the consent of the corporate plaintiffs). The letter says that question of entitlements over the Hammond Road and Colebrook Street Properties was res judicata.[20]
[20] Martman Nominees relies on Re South American & Mexican Co; Ex parte Bank of England [1895] 1 Ch 37 to establish that a judgment by consent order precluded the liquidator in the winding up from denying the existence of the agreement.
The 18 December 2012 letter says that:
The only issue raised by the originating process that has not been determined by the parties’ consent and the Federal Court Orders is the entitlement of Messrs Dixon and Fitzgerald to a Universal Distributing lien over the Properties for the reasonable costs and expenses of caring for, protecting and realising these properties. Our client has already consented to a process of sale … that would give effect to that lien … and does not [otherwise dispute the lien].
Martman Nominees once again said that it did not consent to any other costs ranking ahead of its entitlement under the Federal Court order.
The letter went on to put forward a means of removing Martman Nominees from the proceedings. The letter concludes by asserting that if the parties could not agree, then Martman Nominees would seek its costs of the Supreme Court proceedings on the basis that the issues were res judicata and that Martman Nominees had agreed to an appropriate Universal Distributing lien.
Mrs Wieselmann, however, says that the receipt of this letter was the first time that she received any correspondence which details the claims that Martman Nominees would make in respect of the Colebrook Street Property.
The competing submissions
The liquidators submit that at the commencement of this proceeding, they were faced with a legal dilemma over the Colebrook Street Property. A claim had been made by Martman Nominees and Mrs Wieselmann. Mrs Wieselmann relied on the Family Court order. Martman Nominees relied on the Federal Court order. Mrs Wieselmann lodged a caveat on 31 March 2011 over the Colebrook Street Property on the grounds of an equitable interest pursuant to a constructive or implied trust, and Martman Nominees lodged one over the same property as mortgagee by way of subrogation. As mentioned above, Mrs Wieselmann no longer objects to Martman Nominees receiving the proceeds from the sale of this property. The liquidators also considered there was a risk that unsecured creditors of the plaintiffs may contest Mrs Wieselmann having an equitable interest.
The liquidators say that the Federal Court orders were extremely complex, running to some five pages. They say that it was not apparent on the face of the Federal Court orders how they sat with the Family Court orders. They also say it is not clear how paragraphs 5, 6, 7 and 8 of the Federal Court orders work.
The liquidators contend that it was not until the week before the hearing that they were informed there was no debate between Mrs Wieselmann and Martman Nominees that Martman Nominees should have priority.
On the other hand, Martman Nominees says that it has done all that it reasonably could to avoid incurring further costs which might be sought to be thrown against the proceeds of Colebrook Street Property and the Hammond Street Properties.
Martman Nominees says that any claim that Mrs Wieselmann made to the Colebrook Street Property is no longer pressed. Mrs Wieselmann was a party to the Federal Court proceeding and consented to the order.
Martman Nominees submits that the proceedings are unnecessary and referred to the decision of Young J in Sanderson v Classic Car Insurances Pty Ltd,[21] where his Honour cautioned liquidators from approaching the Court merely where they felt some unease about a situation or wished to obtain some sort of insurance. His Honour said:[22]
The Companies Code and the orders of the court these days usually commit the entire conduct of the liquidation to the liquidator, and empower him to do what in his commercial judgment thinks best in the interests of the creditors as a whole, leaving person aggrieved to their remedy by appeal to the court, and also leaving the liquidator free where he can foresee a challenge to his powers, or where there is some extremely difficult problem, to apply to court whose officer his is for directions.
[21](1985) 10 ACLR 115.
[22]Ibid, 116-117.
These observations relate to commercial decisions that fall to liquidators rather than legal issues. The matter at issue here is a legal one, and one of some significance in the winding up. The authorities establish that even when an issue is reasonably clear, a trustee seeking directions will usually get his costs out of the trust fund. In Sons of Gwalia v Margaretic, Finkelstein J said that:[23]
In a trust dispute the costs of all parties are treated as necessarily incurred for the benefit of the estate and are ordered to be paid out of the fund either on a solicitor client or indemnity basis … . One possible exception is the case of a “timid trustee” who unnecessarily approaches the court for advice when the answer to the problem raised by the dispute is sufficiently clear. Even then the trustee usually gets his (or her ) costs.
[23](2006) 232 ALR 119, [7] (citations omitted).
The liquidators rely on Commonwealth Bank of Australia v Butterell,[24] where Young J said that in the case before him that “as both the litigants really represent people who are administering funds that the proper order for costs should be that the costs of both parties come out of the fund.” His Honour contrasted that with adversary proceedings, where the litigants would be liable for the costs.
[24](1994) 35 NSWLR 64, 73.
I accept that the liquidators were faced with possibly inconsistent orders of the Family Court of Australia and the Federal Court of Australia. It is perhaps easy in hindsight to discern how the moneys should be distributed. In my opinion, however, it was necessary and appropriate for the liquidators to seek the directions that they sought in relation to the Colebrook Street Property.
I therefore find that the lien over the Colebrook proceeds should extend to the costs of this proceeding.
Issue 3: the Universal Distributing lien and tax liability for the Colebrook Street Property
The liquidators tendered evidence of a draft tax determination under the Income Tax Assessment Act1936 (Cth) and said that under the Draft Determination the liquidators may be personally liable for capital gains tax (CGT) if any tax liability is triggered by the sale of the properties.
Mr Dixon deposed that he is currently investigating the CGT liability of each of the companies resulting from the sale of the properties. His preliminary view is that CGT may be payable in relation to the sales, in the following amounts:
Crown Meats $162,675
Dakiri $267,700
Southern Cross $214,200
Anend $75,960
In order to protect the liquidators against personal liability from any CGT liability incurred by the sale of the, the liquidators and Mrs Wieselmann have agreed that the liquidators retain on trust the amount of $267,000 on account of any personal liability of the liquidators for CGT, and $50,000 on account of any costs, expense and remuneration associated with contesting personal liability for CGT payable as a result of the sale of the Cahill Street Property.
Initially, the liquidators sought a direction that they would be justified in asserting an entitlement to a Universal Distributing lien upon the Colebrook Street Property and the proceeds of sale for any personal liability of the liquidators for tax arising as result of the sale of the Colebrook Street Property, such expenses to be determined by an Associate Justice in default of agreement.
This direction was opposed by both Mrs Wieselmann and Martman Nominees. The liquidators responded to those objections by suggesting that rather than excise the reference to the tax liabilities in the proposed orders – as suggested by Mrs Wieselmann and Martman Nominees – that it may be appropriate to quarantine the amounts of any capital gains tax liability so that they are not now the subject of any lien claim. The liquidators suggested that the moneys could be put to one side in an interest bearing account. The liquidators say that the liability of the liquidators has not been resolved as yet. If and when it is found that the liquidators are liable for the tax, the application for a lien could be renewed.
In my view, until the issue is resolved, the liquidators would be justified in putting the moneys to one side as they suggest, subject to any application by any party interested in the sum being made for their release.
Issue 4: should orders in relation to the Hammond Road Properties be adjourned?
The originating process seeks directions as to the distribution of the proceeds from the sale of the Hammond Road Properties. On the hearing of the originating process, the liquidators did not seek a direction as to the distribution of the proceeds. The liquidators say that there are complex issues that arise in relation to the distribution of proceeds of the 322 Hammond Road Property, which involve the interaction of paragraphs 5, 6, 7 and 8 of the Federal Court orders made on 20 May 2011, and paragraph 2 of the Family Court orders made on 24 August 2010, and appear to involve Martman Nominees, Mrs Wieselmann, and additional stakeholders – the executors of the estate of the late Victor Wieselmann.
The liquidators say that it appears that the distribution of those funds may need to await the sale of other properties situated in Western Australia, for which the liquidators have no responsibility. The liquidators say that the way in which those proceeds are distributed may impact on the claims made in relation to the 314 Hammond Road Property.
The liquidators say that after a without prejudice meeting they currently cannot resolve the distribution of the proceeds of sale of the Hammond Road Properties, and they seek to put off the remainder of the originating process but still seek the Universal Distributing lien as they continue to incur costs in relation to the care, preservation and realisation of the Hammond Road Properties.
The only orders sought in respect of the Hammond Road Properties are directions and declarations in relation to the extent of the liquidators’ lien for the costs and expenses involved in the sales.
Martman Nominees says that the appropriate order as concerns the Hammond Road Properties is to adjourn the proceeding sine die until such time as there may be a dispute.
Mrs Wieselmann says that similarly to the other properties, the liquidators lien should not extend to the costs of the proceeding and to the tax liability of the liquidators.
In my view, it is premature to make any orders as to the costs of the proceedings as a major point of the proceedings – being directions as to the distribution of the proceeds – is sought to be adjourned.
In my opinion, the appropriate course is to adjourn the further hearing of the originating process insofar as it concerns the Hammond Road Properties to a date to be fixed and otherwise reserve costs.
Issue 5: the Universal Distributing lien and costs of proceeding – the Hammond Road Properties
As is apparent from the above, it is unnecessary to address this issue at this stage. It should be addressed on the hearing of originating process insofar as it concerns the Hammond Road Properties.
Issue 6: the Universal Distributing lien and tax liability – the Hammond Road Properties
It is also unnecessary to address this issue at this stage. It should be addressed on the hearing of originating process insofar as it concerns the Hammond Road Properties.
Issue 7: should the liquidators pay the costs of Martman Nominees?
Martman Nominees claims that its costs should be paid by the liquidators or by Mrs Wieselmann.
It is appropriate that Martman Nominees’ costs be met by the fund the subject of the originating motion relating to the Colebrook Street Property: see In re Buckton.[25] In this case, the involvement of Martman Nominees has assisted in the resolution of the proper distribution of the proceeds of sale of the Colebrook Street Property.
[25][1907] 2 Ch 406.
In my opinion, the proper course is to order that the costs of Martman Nominees on the originating motion in respect of the Colebrook Street Property issues be costs in the winding up of Southern Cross for the purposes of s 556(1)(a) of the Corporations Act 2001. The costs of Martman Nominees in respect of the applications concerning the Hammond Road Properties will be reserved.
Issue 8: should declarations be made?
In addition to seeking directions the liquidators also seek a declaration as to the existence of the lien. They refer to Thackray v Gunns Plantations, where Davies J made both a direction and a declaration that the receivers were entitled to a Universal Distributing lien. The liquidators did not direct me to any examination by her Honour, or any other authority, on the issue. A declaration is something that would normally be made inter partes in a trial and does not lend itself to an ex parte application for directions, even though in this case nine defendants were added at the first directions hearing. In the absence of any detailed submissions on the issue, I do not propose to make the declarations sought in paragraphs 3, 7, 9 and 12 of the proposed orders.
Accordingly, I propose to order as follows:
Under other matters:
THE COURT NOTES THAT:
APursuant to paragraphs 2 and 3 of the orders made on 20 May 2011 in Federal Court of Australia proceeding number VID 850 of 2010, the Second Defendant (Martman) is subrogated to the rights of the mortgagee under the mortgage registered as dealing number T412816F over the property described in Certificate of Title Volume 9465 Folio 951, situated at 43–47 Colebrook Street, Brunswick (Colebrook Street Property), for the purpose of securing payment of the sum of $965,341.86 owed by the Fourth Plaintiff (Southern Cross) to Martman, plus interest calculated at a rate of 6% from 23 January 2009 until the date of payment.
BThe Liquidators intend to pay the net proceeds of realisation of the Colebrook Street Property, after deduction from them of the amounts set out in paragraphs 6 and 7, to Martman.
Orders and directions:
1That the First Plaintiffs (liquidators) are justified in:
(a)treating the property described in Certificate of Title Volume 9525 Folio 347, situated at 7–9 Cahill Street, Dandenong South (Cahill Street Property), of which the Third Plaintiff (Dakiri) is the registered proprietor, as held subject to a charge in favour of the First Defendant (Eileen Wieselmann);
(b)paying the net proceeds of realisation of the Cahill Street Property, after deduction from them the amounts agreed by the liquidators and Mrs Wieselmann.
2That the liquidators are justified in asserting an entitlement to:
(a)a first-ranking equitable lien upon the Colebrook Street Property and its net proceeds of realisation, for the payment; and
(b)to the payment out of such net proceeds of realisation before any other payments are made,
of their costs, expenses and remuneration (including GST), on an indemnity basis, reasonably incurred in taking steps, in their capacity as joint and several administrators and joint and several liquidators of Southern Cross, for the care, protection, preservation and/or realisation of the Colebrook Street Property, including the costs of this proceeding – such costs, expenses and remuneration to be agreed or determined by an Associate Judge in default of agreement.
3That the further hearing of the originating process dated 1 November 2012 be adjourned to the extent that it deals with the 322 Hammond Road Property and 314 Hammond Road Property to a date to be fixed.
4That the liquidators are justified in setting aside from the proceeds of sale of each of the Colebrook Street Property and the Hammond Road Properties in a separate trust account so much of the proceeds of the sale of each of the Colebrook Street Property and the Hammond Road Properties as the liquidators reasonably consider may constitute the tax payable under the Income Tax Assessment Act arising from the sale until the hearing and determination of the originating process dated 1 November 2012 or further order.
5That the costs of the second defendant relating to the originating process in relation to the Colebrook property be costs of the liquidators for the purposes of s 556(1) of the Corporations Act 2001 in the winding up of and Southern Cross and be paid by the liquidators out of the assets of Southern Cross accordingly.
6.That Eileen Wieselman bear her costs of the proceeding.
7That there be liberty to apply.
9
5
0