Re Gramarkerr Pty Ltd (No 2)

[2014] NSWSC 1405

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Gramarkerr Pty Limited (No 2) [2014] NSWSC 1405
Hearing dates:	Monday, 13 October 2014
Date of orders:	13 October 2014
Decision date:	13 October 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Liquidator in the capacity of the receiver has leave to distribute assets
Catchwords:	CORPORATIONS – external administration – trustee company – receiver – approval for distribution of assets reduced – liquidators expenses – remuneration
Cases Cited:	Re AAA Financial Intelligence Ltd (in liq) [2014] NSWSC 1004 Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466 Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361; 48 ACSR 97 In the matter of Gramarker Pty Ltd; Clifford Sanderson (as liquidator of Gramarker Pty Limited) v Simon Kerr [2014] NSWSC 243 Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158 Re North Food Catering Pty Ltd [2014] NSWSC 77 Re Suco Gold Pty Ltd (1983) 33 SASR 99; 7 ACLR 873
Category:	Procedural and other rulings
Parties:	Clifford Sanderson in his capacity as Liquidator of Gramarkerr Pty Ltd (in liq) ACN 113 670 910 (plaintiff) Simon Kerr (first defendant) Thomas Marshall (second defendant)
Representation:	Counsel: C Harris SC (plaintiff) J Clifton (defendants) Solicitors: Colin Biggers & Paisley (plaintiff) JMA Legal (defendants)
File Number(s):	2013/360494

Judgment (ex tempore)

1. HIS HONOUR: By order of the Court made on 16 April 2013 the plaintiff Clifford Sanderson, an official liquidator, was appointed by the Court as liquidator of the defendant Gramarkerr Pty Ltd. As it transpired, the only asset of the company appeared to be a parcel of real estate at 49 Stanley Road Ingleburn, which was subject to a mortgage to Horizon Credit Union Limited, and which was held by the company upon trust for GMK Property No 1 Trust of which the company was the trustee.

2. As the trust deed provided that the trustee would be disqualified from holding office upon going into liquidation, the liquidator approached the Court for an order that he be appointed as receiver of the trust and given the requisite powers in relation to the assets of the trust. That application was dealt with and those orders made on 3 March 2014 [In the matter of Gramarker Pty Ltd; Clifford Sanderson (as liquidator of Gramarker Pty Limited) v Simon Kerr [2014] NSWSC 243]. In that judgment, I declined to give the liquidator all of the powers of the trustee under the trust deed, since that would conceivably extend to exercising discretions and making distributions to beneficiaries, and took the view that if there were assets to be distributed the liquidator should return to the Court for further directions in that respect, including in respect of any payment of trust property to himself by way of remuneration. By interlocutory process filed on 12 September 2014, the liquidator seeks in effect approval for the distribution of the remaining assets of the receivership, substantially to himself and his lawyers. The precise form of order sought has evolved in the meantime.

3. The defendants, being former directors of the company and apparently beneficiaries of the trust, appeared today by counsel and sought an adjournment of the hearing of the application, in the light of the late service on 10 October 2014 of a supplementary affidavit of the liquidator. As it is evident that the available funds are significantly less than the amount claimed by the receiver and that it is unlikely in the extreme that there will be any surplus available for distribution to beneficiaries, and it seems improbable that any objections to the amount claimed would reduce it below the amount that remains in the receivership, it seems to me that the prejudice to all parties from an adjournment was that there would likely be additional costs incurred that would not be recoverable, and unlikely to be any significant benefit to either party from that course. However, as I have indicated, while in those circumstances I think the least unjust approach is to proceed to deal with the application, I will reserve leave to the defendants, at their own risk as to costs, to apply to set aside or vary these orders within a limited time, if they are so minded.

4. As the company's only asset was a trust asset and its only activity apparently was its role as trustee, its liquidator is entitled to pay his costs and expenses – whether for administering the trust assets or for general liquidation work – out of the trust assets [Re Suco Gold Pty Ltd (1983) 33 SASR 99; 7 ACLR 873; Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd (1983) 1 NSWLR 158; Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361; 48 ACSR 97, [201]; Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466, 480 [70]; Re North Food Catering Pty Ltd [2014] NSWSC 77; Re AAA Financial Intelligence Ltd (in liq) [2014] NSWSC 1004, [13]].

5. The liquidation had the additional unusual aspect of requiring an application to the Court for the appointment of the liquidator as receiver. Aside from that, although it can be said that the defendants/directors were less than cooperative, that of itself is hardly an unusual aspect of liquidations.

6. The activities of the liquidator and receiver, other than attending to routine notifications, involved endeavouring – with ultimately limited success and only after obtaining an order of the Court – to obtain reports as to affairs from the directors, obtaining appointment as receiver of the trust assets, and then realising the trust asset by sale and paying out the creditors entitled to be paid from the proceeds.

7. The Ingleburn property was sold for $490,000 gross, of which about $55,763 remained following the discharge of the secured creditor, the payment of costs of sale and ordinary conveyancing adjustments. There remains a debt of $1,100 due to the Australian Taxation Office. That will leave a balance of $54,663 or thereabouts available for remuneration, liquidator's expenses and distribution.

8. The liquidator's expenses fall within two main categories, first, the liquidator's out-of-pocket expenses, and secondly, legal expenses, particularly those associated with the previous application and the present application. So far as out-of-pocket expenses are concerned they are referred to in para 9 and para 13 of Mr Sanderson's affidavit of 12 September 2014 and for the most part comprise costs concerned with the preservation or realisation of the subject property amounting to just over $10,000 in all. It seems to me that they are unobjectionable.

9. So far as legal expenses are concerned, at least a total of $55,823 has been incurred, which so far as I can tell includes counsel's fees. It strikes me as a surprisingly high amount for an application of this kind, given the quantum of the subject matter in issue. However, I am relieved of the need to examine this in any detail by the liquidator's indication that he will accept a total sum of approximately $20,000 in respect of his legal expenses, being $14,711 in respect of solicitor's costs and $5,700 for counsel. It seems to me that on no reasonable view could that amount be considered to be inappropriate or disproportionate.

10. So far as remuneration is concerned the liquidator, on what I take to be a time-cost basis, originally claimed approximately $64,000 for remuneration, which would represent about 12.5% of the total of the gross realisation of $495,000. Given the considerations – particularly that of proportionality – to which I referred inter alia in In the matter of AAA Financial Intelligence Ltd (in liq) No 2 [2014] NSWSC 1270, that seems to me to be a disproportionally high amount, notwithstanding the additional complexity involved in the application for appointment as a receiver. I would have been inclined to allow 10% on the first $100,000 and 5% on the balance, which would have generated remuneration of $27,750. That exceeds the $24,196.45 that the liquidator is now prepared to accept for remuneration. Accordingly, I am satisfied that the claim, reduced as it now is, is justified.

11. Accordingly, the Court orders that the liquidator in his capacity as receiver of the GMK Property No 1 Trust is at liberty to and would be justified in applying the assets of the receivership remaining in his control as follows:

1. First, in payment to the Australian Taxation Office in satisfaction of the debt to it of $1,100.

2. Secondly, in reimbursement of his out-of-pocket expenses in the sum of $10,055.76.

3. Thirdly, in payment of his legal expenses in the sum of $20,411.04.

4. And, fourthly, in payment of his remuneration in the sum of $24,196.45.

12. The defendants have liberty to apply by notice of motion filed within 14 days of this date to vary or set aside the above orders.

13. In those circumstances I will direct that these orders are not to be entered before 28 October 2014.

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Decision last updated: 11 February 2015