Segal v Sharma; In the matter of South West Radiology Pty Ltd (No 2)

Case •

[2024] NSWSC 1062

•

21 August 2024

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Segal v Sharma; In the matter of South West Radiology Pty Ltd (No 2) [2024] NSWSC 1062
Hearing dates: 21 August 2024
Date of orders: 21 August 2024
Decision date: 21 August 2024
Jurisdiction:Equity - Corporations List
Before: Nixon J
Decision:

See [77]

Catchwords:

CORPORATIONS — Receivers and managers — Appointment by court as receiver of property, assets and undertaking of trust — Application for retirement and replacement – Application for approval of remuneration — Where monies were previously paid into Court and there were declarations that trustee of trust is entitled to portion of those funds — Where one party opposed application for payment of remuneration out of funds held in court on basis that trust did not exist – the opposing party was estopped from raising this issue – the receiver’s remuneration was properly incurred and payable out of the funds held in Court

Legislation Cited:

Corporations Act 2001 (Cth), s 471B

Insolvency Practice Schedule (Corporations), ss 60-5, 60-10, 6-12

Uniform Civil Procedure Rules 2005 (NSW), r 26.5

Cases Cited:

Black Lab Design Pty Ltd (in liq) as trustee for the Black Lab Unit Trust [2023] NSWSC 661

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45

Re Sakr Nominees Pty Ltd [2017] NSWSC 668 Segal v Sharma & Anor [2022] NSWSC 496

Segal v Sharma; In the matter of South West Radiology Pty Ltd [2022] NSWSC 1196

Timbercorp Finance Pty Ltd (in liq) v Collins; Timbercorp Finance Pty Ltd (in liq) v Tomes (2016) 259 CLR 212; [2016] HCA 44

Category:Principal judgment
Parties:

Proceedings 2018/00190679

Phillip Segal (Plaintiff)
Praneal Dutt Sharma (First Defendant)
Gregory Chen (Second Defendant)
Adam Bernard Preiner in his capacity as the receiver and manager of the property, assets and undertaking of the SWR Holding Unit Trust (Third Defendant)
Glenn Ian Livingstone in his capacity as liquidator of South West Radiology Pty Ltd (Fourth Respondent)
Representation:

Proceedings 2018/00190679

Counsel:
ET Finnane (First Defendant)
T Bagley (Third Defendant)
B Shaw (Fourth Respondent)

Solicitors:
Uther Webster & Evans Pty Ltd (First Defendant)
Booth Boorman Kiely Pty Ltd (Second Defendant)
File Number(s): 2018/00190679; 2018/00381397
Publication restriction: Nil

EX TEMPORE JUDGMENT – REVISED 23 AUGUST 2024

  1. By Notice of Motion filed on 2 May 2024 in proceeding 2018/00190679 (the Partnership Proceeding), the Third Defendant, Adam Preiner in his capacity as receiver and manager (Receiver) of the property, assets and undertaking of the SWR Holding Unit Trust (Trust), seeks orders that he retire as Receiver and be replaced by Glenn Ian Livingstone. Mr Livingstone is the liquidator (Liquidator) of South West Radiology Pty Ltd (in liq) (Company), which is the trustee of the Trust. In addition, the Receiver seeks orders that:

  1. the Receiver be removed as a party to the Partnership Proceeding, and the Liquidator be joined as fourth defendant;

  2. the requirement for filing and passing of final accounts be dispensed with as against the Receiver;

  3. the remuneration of the Receiver be fixed in a specified amount, from 17 August 2022 up to the date of his retirement; and

  4. this remuneration and the Receiver’s costs of the application be paid out of certain funds held in Court, which the Court has previously determined to be owing to the Trust.

  1. The Receiver sought an order, which was not opposed, that his application which was filed the Partnership Proceeding be taken as having been filed in a related proceeding in this Court, 2018/00381397 (Winding-up Proceeding) (together, the Proceedings).

  2. The Liquidator appeared on the Receiver’s application and confirmed that he consented to the proposed appointment as receiver and manager of the property, assets and undertaking of the Trust and consented to his joinder to the Partnership Proceeding. Each of the parties to the two Proceedings consented to the orders sought by the Receiver, with the exception of Dr Segal, who was self-represented and who opposed certain orders being made. I address the particular issues raised by Dr Segal below.

Relevant background

  1. The background to this application can be briefly stated.

  2. The two Proceedings concern disputes arising out of a business that was conducted by three specialist radiologists. Initially, the business was conducted in partnership by Dr Segal and Dr Sharma (the Segal Sharma Partnership). Subsequently, they formed a partnership with Dr Chen (the Segal Sharma Chen Partnership).

  3. In June 2018, Dr Segal commenced the Partnership Proceeding against Dr Sharma and Dr Chen, seeking the appointment of receivers to the two Partnerships and a partnership accounting.

  4. In the Partnership Proceeding, orders were made appointing receivers, and requiring the receivers to dispose of the assets of the two Partnerships, to discharge their liabilities, and then to pay the net proceeds into Court. Those steps were implemented and moneys were paid into Court in the Partnership Proceeding (being net proceeds of $2,845,025.93 in respect of the Segal Sharma Partnership and $596,655.80 in respect of the Segal Sharma Chen Partnership). Substantial moneys remain held in Court in the Partnership Proceeding.

  5. The accounting aspects of the Partnership Proceeding were referred out to a referee for determination. As noted below, there was a substantial dispute about the adoption of the referee’s report.

  6. In December 2018, Dr Sharma commenced the Winding-Up Proceeding, in which he sought the winding up of the Company. The Company’s activities were limited to acting as trustee of the Trust. In that proceeding, winding-up orders were made. Mr Preiner was, by orders made on 20 May 2019, appointed both as liquidator of the Company and as Receiver of the Trust. However, on 17 September 2019, he was replaced as liquidator of the Company by Mr Livingstone, following a vote by creditors. Since that time, different persons have held the roles of liquidator of the Company and of receiver of the Trust.

  7. There are two prior judgments of the Court in the Proceedings which are of particular importance for this application.

  8. First, on 27 April 2022, Slattery J delivered a judgment in the Partnership Proceeding: Segal v Sharma & Anor [2022] NSWSC 496. This judgment addressed the dispute between the parties concerning the adoption of the referee’s report.

  9. The referee’s report addressed, among other things, the issue of what moneys were owing as between the two Partnerships and the Trust. Dr Segal was represented by counsel at this hearing and made submissions on these issues.

  10. On 27 June 2022, Slattery J made orders that the referee’s report be adopted in a manner consistent with the declarations in paragraph 4 of those orders, which included the following:

“4.   The Court declares that:

Segal Sharma Chen Partnership

….

(b)    The Segal Sharma Chen Partnership owes South West Radiology Pty Ltd (ACN 106 041 007) as trustee for the SWR Holding Unit Trust the sum of $149,716, subject to any set-off that might be determined.

(c)   South West Radiology Pty Ltd (ACN 106 041 007) as trustee for the SWR Holding Unit Trust owes the Segal Sharma Chen Partnership the sum of $40,000, subject to any set-off that might be determined.

…

Segal Sharma Partnership

(f)    The Segal Sharma Partnership owes South West Radiology Pty Ltd (ACN 106 041 007) as trustee for the SWR Holding Unit Trust the sum of $484,000, subject to any set-off that might be determined.

(g)    South West Radiology Pty Ltd (ACN 106 041 007) as trustee for the SWR Holding Unit Trust owes the Segal Sharma Partnership the sum of $382,745, subject to any set-off that might be determined.”

  1. The effect of those declarations was that, irrespective of how the issue of set-off was resolved, it was determined that:

  1. the Segal Sharma Chen Partnership owed at least $109,716 to the Trust (being the difference between the amounts specified in declarations 4(b) and 4(c)); and

  2. the Segal Sharma Partnership owed at least $101,255 to the Trust (being the difference between the amounts specified in declarations 4(f) and 4(g)).

I will refer to those amounts as the “Undisputed Sums”.

  1. Justice Slattery also made orders that:

  1. the Receiver was to file and serve in the two Proceedings an application for determination of his remuneration both as Receiver and (up to 17 September 2019) as liquidator of the Company; and

  2. as part of the remuneration application, the Receiver could apply for the remuneration to be paid out of the funds held in Court (being the net proceeds from the sale of the assets of the two Partnerships).

  1. The orders also included the following note:

“12.    The Court notes that it is the intention of the Court that if:

(a)    the Remuneration Application is approved; and

(b)    the liquidator consents to being granted all of the powers held by the third defendant as receiver;

then:

(c)    the third defendant is to retire from its office as receiver and manager of the property, assets and undertaking of the SWR Holding Unit Trust; and

(d)    the liquidator is to be given all of the powers previously held by the third defendant as receiver and will have liberty to apply for access to the funds held in Court for the purpose of covering his reasonable expenses in determining the question in order 13 below.”

  1. Secondly, on 17 August 2022, Black J delivered judgment in respect of the Receivers’ remuneration application that was made, in accordance with Slattery J’s orders, in both of the Proceedings: Segal v Sharma; In the matter of South West Radiology Pty Ltd [2022] NSWSC 1196. Dr Segal was also represented by counsel at that hearing and made submissions on the Receiver’s application.

  2. Black J fixed the amount of the Receiver’s remuneration, and determined that those moneys should be paid out of the moneys held in Court in the Partnership Proceedings. His Honour noted (at [4]) that;

“There is also no dispute between the parties [including Dr Segal] as to the extent to which the relevant monies may be paid out of Court, in a manner which properly recognises that no more should be paid out of Court than reflects the entitlements of the Company and the Trust to monies paid into Court …”.

  1. His Honour noted (at [9]) that the evidence before the Court established that “a portion of those monies [held in Court in the Partnership Proceedings], but not all of them, reflected funds to which the Trust, or the Company in its capacity as trustee of the Trust, was entitled in payment of debts owed by other associated entities or trusts”.

  2. Accordingly, on 17 August 2022, his Honour made the following orders in the Winding-up Proceeding regarding the payment of Receiver’s approved remuneration from the moneys held in Court:

“4.    Note that, pursuant to Orders 4(b), (c), (f) and (g), and Order 5 and 6, made on 27 June 2022, the funds in court in proceedings 2018/00190679 [the Partnership Proceeding] include the following sums:

(a)    The sum of $109,716 which is payable by the Segal Sharma Chen Partnership to South West Radiology Pty Ltd (ACN 106 041 007) as trustee for the SWR Holding Unit Trust.

(b)    The further sum of $40,000, the entitlement to which, as between Segal Sharma Chen Partnership and South West Radiology Pty Ltd (ACN 106 041 007) as trustee for the SWR Holding Unit Trust, is yet to be determined.

(c)    The sum of $101,255 which is payable by the Segal Sharma Partnership to South West Radiology Pty Ltd (ACN 106 041 007) as trustee for the SWR Holding Unit Trust.

(d)    The further sum of $382,745, the entitlement to which, as between Segal Sharma Partnership and South West Radiology Pty Ltd (ACN 106 041 007) as trustee for the SWR Holding Unit Trust, is yet to be determined.

5.    Note that in consequence of these orders, the Court will make orders in proceedings 2018/190679 [the Partnership Proceeding] that:

(a)    The sum of $154,796.68 be paid out of court to the third defendant as follows:

(i)    as to 50%, being the sum of $77,398.34, from the funds held in court in relation to the Segal Sharma Chen Partnership, in part payment of the sum referred to in paragraph 4(a); and

(ii)    as to 50%, being the sum of $77,398.34, from the funds held in court in relation to the Segal Sharma Partnership, in part payment of the sum referred to in paragraph 4(c).

(b)    The third defendant be permitted to apply the sums in subparagraph (a) in payment of the sums approved in orders 1 to 3 made on 17 August 2022 in proceedings 2018/381397 and towards his proper expenses and disbursements.”

  1. On the same date, Black J made an order in the Partnership Proceeding in the terms set out in order 5 above. His Honour also made an order that the Receiver’s costs of the remuneration application “be paid out of the assets of the Trust”.

  2. Pursuant to the orders made by Black J on 17 August 2022, each of the Undisputed Sums – being the amounts which had been determined by Slattery J to be owing by each of the Partnerships to the Trust (irrespective of how any issue of set-off was resolved) – has been reduced by $77,398.34. The remaining balance of the Undisputed Sums, following those payments, is:

  1. an amount of $32,317.66 owing by the Segal Sharma Chen Partnership to the Trust; and

  2. an amount of $23,847.66 owing by the Segal Sharma Partnership to the Trust.

(Remaining Undisputed Sums)

Retirement and replacement of Receiver

  1. The Receiver sought orders providing for his retirement, for his replacement by the Liquidator, and for the Liquidator to be joined to the Partnership Proceeding as fourth defendant.

  2. Dr Segal did not oppose those orders, and the other parties (as well as the Liquidator) consented to those orders being made.

  3. Those orders should be made. As I have set out above, it was the Court’s intention, expressed in the note set out in the Court’s orders made by Slattery J which is quoted above, that if the remuneration application of the Receiver was approved and if the Liquidator consented to being granted all of the powers held by the Receiver (both of which have occurred), then the Receiver was to retire from his office as receiver and manager of the property of the Trust and the liquidator was to be given all powers previously held by the Receiver.

  4. The proposed orders give effect to that intention.

Final accounts

  1. The Receiver sought an order, under rule 26.5(1) of the Uniform Civil Procedure Rules 2005 (NSW), that the requirements under rules 26.5(2) and (3) for the filing and passing of final accounts be dispensed with against the Receiver.

  2. The basis for this application may be shortly stated.

  3. First, the Receiver deposed that the only assets of the Trust are the amounts owed to it by the two Partnerships. The only assets of the Partnerships are the funds held in Court.

  4. Secondly, the Receiver has prepared a receipts and payments report in respect of the receivership of the Trust. It shows that:

  1. the only payments which have been made into the receivership account, other than interest, have been funds paid out of Court pursuant to the orders made by Black J and business activity statement (BAS) refunds from the Australian Taxation Office; and

  2. the only payments which have been made from those funds are the payment of the remuneration that was approved by Black J and legal fees.

  1. Against that background, the Receiver submitted that any requirement for final accounts to be prepared would lead to costs being incurred, with no material benefit.

  2. All parties, other than Dr Segal, consented to the proposed order. The only basis which was identified by Dr Segal in his written submissions for opposing this order was that: “Accounts are required to justify the claim by the receiver of the trust against the Partnership funds in Court”.

  3. I do not accept this submission. The only claim made by the Receiver is for his remuneration and his costs of this application. Those are matters which can be determined by the Court without any need for any final accounts to be prepared.

  4. Further, the only claim made by the Receiver “against the Partnership funds in Court” is a claim that, insofar as his remuneration is approved and costs are awarded, those moneys should be paid out of the Remaining Undisputed Sums which, having regard to the terms of the declarations made by Slattery J, represent moneys which have been determined by this Court to be owing to the Trust. It is not necessary for accounts to be prepared in order for this issue to be addressed (which is dealt with below).

  5. Given the matters I have outlined above, I consider that the requirement to prepare final accounts would lead to costs being incurred without any material benefit, and therefore I will make an order dispensing with the need for such accounts to be filed and passed.

Fixing of Remuneration

  1. Black J previously made orders on 17 August 2022 fixing the amount of the Receiver’s remuneration from 27 June 2022 to his retirement, in the amount of $8,800.00 inclusive of GST.

  2. The Receiver now seeks orders approving remuneration in addition to that amount:

  1. for the period from 17 August 2022 to 21 April 2024, in the amount of $20,675.60 inclusive of GST; and

  2. for the period from 22 April 2024 to his retirement from office, in the amount of $12,012.00 inclusive of GST.

  1. The significance of the date 21 April 2024 is that, at the time the Receiver prepared his affidavit in support of this application, he had historical figures for time expended on the matter (and the cost of such time) up to 21 April 2024, and provided estimates for the time (and the costs of such time) likely to be required for the period through to his retirement as Receiver.

  2. The parties other than Dr Segal consented to the proposed orders in relation to the Receiver’s remuneration. Dr Segal did not advance any submissions regarding the quantum of the remuneration or regarding whether such remuneration should be approved. Instead, his opposition was to the proposed order that this amount be paid from the funds held in Court. I deal with that issue below.

  3. The principles relating to the approval of a receiver’s remuneration were not in dispute.

  4. Section 60-5 of the Insolvency Practice Schedule (Corporations) (the IPSC) set out in Schedule 2 to the Corporations Act 2001 (Cth) (the Act) provides that an external administrator of a company is entitled to receive remuneration for necessary work properly performed by the external administrator in relation to the external administration, in accordance with the remuneration determinations (if any) for the external administrator.

  5. Section 60-10 of the IPSC provides that remuneration determinations may be made by, inter alia, the Court. Section 60-10(4) provides that, if a determination under this section specifies that the external administrator is entitled to receive remuneration worked out wholly or partly on a time-cost basis, the determination must include a cap on the amount of remuneration worked out on a time-cost basis that the external administrator is entitled to receive.

  6. In determining the amount of such remuneration, the Court must have regard to the matters specified in section 60-12, namely:

Matters to which the Court must have regard

In making a remuneration determination under paragraph 60-10(1)(c) or (2)(b), or reviewing a remuneration determination under section 60-11, the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:

(a)    the extent to which the work by the external administrator was necessary and properly performed;

(b)    the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed;

(c)    the period during which the work was, or is likely to be, performed by the external administrator;

(d)    the quality of the work performed, or likely to be performed, by the external administrator;

(e)    the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator;

(f)    the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues;

(g)    the extent (if any) to which the external administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;

(h)    the value and nature of any property dealt with, or likely to be dealt with, by the external administrator;

(i)    the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors;

(j)    if the remuneration is worked out wholly or partly on a time - cost basis--the time properly taken, or likely to be properly taken, by the external administrator in performing the work;

(k)    whether the external administrator was, or is likely to be, required to deal with one or more controllers, or one or more managing controllers;

(l) if:

(i)    a review has been carried out under Subdivision C of Division 90 (review by another registered liquidator) into a matter that relates to the external administration; and

(ii)    the matter is, or includes, remuneration of the external administrator;

the contents of the report on the review that relate to that matter;

(m)    any other relevant matters.

  1. Those matters overlap with the matters which have traditionally been taken into account in assessing an insolvency practitioner’s remuneration, as summarised by Black J in Re Sakr Nominees Pty Ltd [2017] NSWSC 668 at [23]-[25]:

“A liquidator is entitled to reasonable remuneration for his or her services and the liquidator bears the onus of establishing that the amount of remuneration they seek is fair and reasonable and, in determining a liquidator’s reasonable remuneration, the Court will have regard to the factors specified in s 473(10) of the Corporations Act, to which I refer further below. The Court must bring an independent mind to bear on the question whether the remuneration sought by a liquidator is fair and reasonable; the liquidator must lead evidence in sufficient detail that the Court can determine that question; and the Court will generally need to be provided with an account in itemised form, setting out at least the details of the work done; the persons who did the work; the time taken to perform the work; the remuneration claimed; and, to the extent relevant, the expenses incurred by the liquidator: Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 102–103. Proportionality is an important matter in considering the question of whether remuneration is reasonable, and the ‘value’ of a liquidator’s work can include the benefit of resolving the position of creditors and beneficiaries; the benefit to the community of not permitting assets to remain unproductively in the hands of a defunct company for a long period; and can include work that was required to be done, although it did not result in a return to creditors: Thackray v Gunns Plantations Ltd [2011] VSC 380; (2011) 85 ACSR 144 at [64]; Macks v Maka [2015] SASC 200; (2015) 110 ACSR 279 at [52]–[66]; Warner, Re GTL Tradeup Pty Ltd (in liq) [2015] FCA 323; (2015) 104 ACSR 633 at [70]–[71]; Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; (2015) 108 ACSR 545.

Most decisions in both State Supreme Courts and in the Federal Court of Australia have applied time costing as at least the starting point for a calculation of remuneration, although those decisions also emphasise the need for proportionality between the cost of the work done and the value of the services provided: Venetian Nominees Pty Ltd v Conlan above; Templeton v Australian Securities and Investments Commission above; Warner, Re GTL Tradeup Pty Ltd (in liq) above. There has been a degree of concern as to time-based remuneration, over a considerable period, although it must be accepted that remuneration on that basis is now more common. ...

In Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr above, Bathurst CJ (with whom the other members of the Court of Appeal agreed) observed (at [54]) that the onus is on a liquidator to establish that the remuneration claimed is reasonable, and it is the Court’s function to determine that remuneration by considering the material provided to it and bringing an independent mind to bear on the relevant issues; that many of the factors specified in s 473(10) of the Corporations Act have the concept of proportionality as an underlying theme, and that concept is an important consideration in determining whether remuneration is reasonable, so that the work done must be proportionate to the difficulty and importance of the task in the context in which it needs to be performed (at [55]); and that the fact that work does not increase the funds available for distribution to creditors or contributories does not mean that the liquidator is not entitled to be remunerated for it, where it was reasonable to carry out that work and the amount charged is reasonable (at [57]–[58]). ...”

  1. The Receiver also referred to the following observations of Black J in Black Lab Design Pty Ltd (in liq) as trustee for the Black Lab Unit Trust [2023] NSWSC 661 at [6]-[7]:

“The Court will apply an independent mind to whether the remuneration sought by an external administrator relates to necessary work which is properly performed, having regard to considerations of proportionality, but it is not the Court's function to undertake a line by line review of the costs claimed, including by reference to narratives in time schedules, and the Court will review the evidence in a broad way to satisfy itself that the amount claimed is reasonable: Re Banksia Securities Ltd (in liq) (recs and mgrs apptd) [2017] NSWSC 540 at [48]; Knox v Nile [2022] NSWSC 638 at [35].

These principles have also been applied in assessing the remuneration of a Court appointed receiver, such as Mr Cook, in decisions including Ide v Ide (2004) 184 FLR 44; [2004] NSWSC 751 at [39]ff and Re Metal Storm Ltd [2015] NSWSC 1699 at [11], Re Wine National Pty Ltd [2016] NSWSC 4 at [13]; Re Banksia Securities Ltd (in liq) (recs and mgrs. apptd) [2018] NSWSC 229 at [5]ff. …”

  1. I have reviewed the evidence advanced in support of the Receiver’s application for remuneration in the sums proposed.

  2. I am satisfied as to the following matters.

  3. First, when the previous orders were made by Black J on 17 August 2022, it was not foreseen that, two years later, the Receiver would remain in office and would have performed significant work in the intervening period. The increased delay and cost, beyond what was anticipated at the time of the application before Black J, are primarily explained by two matters:

  1. Dr Segal did not agree to fix a sum for the Receiver’s costs of the remuneration application before Black J (despite all other parties being willing to fix a sum for those costs), resulting in a protracted costs assessment process; and

  2. Dr Segal did not consent to the orders sought by the Receiver in this application (in circumstances where all other parties consented to those orders), resulting in correspondence extending over a period, following which steps were taken to bring and pursue the current application.

  1. Secondly, the Receiver has kept time records of all work done. I have reviewed the evidence and am satisfied that the work which has been done relates to the receivership. For example, the tasks undertaken include:

  1. work in respect of the costs assessment application, including liaising with the Receiver’s solicitors, reviewing documents from the costs assessor and reviewing correspondence from the parties in respect of the costs assessment;

  2. conferring with the Receiver’s solicitors regarding correspondence and draft orders to the parties regarding the Receiver’s retirement and reviewing correspondence form the parties in respect of the draft orders; and

  3. preparing remuneration reports for this application, reviewing the draft affidavit and notice of motion for this application, and liaising with the Receiver’s solicitors in relation to the application.

  1. As the Receiver is a sole practitioner, and does not currently employ any staff, he charges differential rates for his time based upon the nature of the work being performed.

  2. As I have noted, there is no suggestion by Dr Segal that excessive work has been done, or excessive amounts have been charged. Nor did I discern, from my review of material included in the exhibit to the Receiver’s affidavit, any basis for any such criticism.

  3. Having regard to those matters, I am satisfied that the remuneration of the Receiver should be fixed in the amounts specified in the Receiver’s application.

Costs of the application

  1. The Receiver sought an order that the costs of his application be paid on an indemnity basis out of the assets of the Trust.

  2. Dr Segal did not advance any reason why the Receiver should not have his costs of the application. Instead, Dr Segal opposed the order on the basis that there are no assets of the Trust. I address this issue below.

  3. Each of the other parties consented to the proposed order for costs.

  4. The application has properly been brought by the Receiver, and is in accordance with the Court’s intention stated in the note to the orders made by Slattery J which has been set out above.

  5. In circumstances where Dr Segal would not consent to the proposed orders, it was necessary for the application to be brought. The Receiver is entitled to an order for his costs.

  6. In addition, the Plaintiffs in the Winding-up Proceedings (Dr Sharma and a corporation controlled by him) sought an order that their costs be paid out of the assets of the Trust. It was appropriate for Dr Sharma to take an active role on the Receiver’s application. Although Dr Sharma consented to the substance of the relief sought by the Receiver, he proposed a number of significant amendments to the proposed orders, and advanced submissions as to why those amendments should be made, which were largely accepted by the Receiver and which have been reflected in the form of orders that were ultimately sought on the application.

  7. No party opposed the order sought by Dr Sharma for costs, and I am satisfied that it should also be made.

Payment of remuneration and costs from moneys held in Court

  1. The Receiver sought an order that the balance of the Remaining Undisputed Sums (totalling $56,165.32) be paid out of the moneys held in Court in the Partnership Proceeding to the Receiver, and be applied by the Receiver to pay his approved remuneration and costs, with the balance then being paid to the Liquidator (who will assume the powers of the Receiver in respect of the assets of the Trust).

  2. As noted above, the Remaining Undisputed Sums represent amounts which this Court has determined and has declared are owing by the two Partnerships to the Trust (irrespective of how any issue of set-off is resolved).

  3. All parties other than Dr Segal consented to the proposed orders. Dr Segal opposed the orders on two main bases, which he advanced in his written and oral submissions.

  4. First, Dr Segal submitted that the Trust Deed referred to the trust being established on the payment of an amount of $101.00 by the settlor. He asserted that this money was not paid, and therefore the Trust was not established. On this basis, he argued that there could be no assets of the Trust, and any property which was claimed to be property of the Trust was in fact property of the Company.

  5. Secondly, and building on the first submission, Dr Segal contended that by operation of s 471B of the Act, the Court was prevented from making any orders in respect of “property of the Company”.

  6. These submissions may be deal with briefly.

  7. Dr Segal is estopped, in these Proceedings, from raising any issue that the Trust was not created or that the Trust is not owed any amounts by the two Partnerships.

  8. These Proceedings have been on foot for some 6 years, and Dr Segal has taken an active part in them.

  9. In particular, he was represented by counsel at the hearing before Slattery J, advancing submissions regarding the question whether the referee’s report should be adopted and identifying particular matters in that report which were disputed. The referee’s report found that certain sums were owing by each of the two Partnerships to the Trust. Dr Segal did not, at that time, raise any issue that no sums could be owing to the Trust because it had not been created.

  10. Following that hearing, declarations were made by this Court in the Partnership Proceeding that specified amounts were owed by the two Partnerships to the Trust. Dr Segal did not appeal, or seek leave to appeal, against those orders.

  11. Subsequently, Justice Black made orders in the two Proceedings that the Receiver’s remuneration be paid out of the Undisputed Sums which had been declared by the Court to be owing by each of the two Partnerships to the Trust. Dr Segal was again represented by counsel on this application. No submission was advanced on behalf of Dr Segal to the effect that no such order should be made because the Trust did not exist. In his reasons, Black J stated that a portion of the moneys held in Court in the Partnership Proceedings “reflected funds to which the Trust, or the Company in its capacity as trustee of the Trust, was entitled in payment of debts owed by other associated entities or trusts”. His Honour also made orders that the costs of the Receiver be paid out of the assets of the Trust. Dr Segal did not appeal, or seek leave to appeal, any of those orders.

  12. The Receiver now seeks orders in the Proceedings that his remuneration be paid out of the remaining undisputed balance of the moneys which this Court has declared to be owing by the Partnerships to the Trust.

  13. Given the matters outlined above, Dr Segal is estopped from raising, at this stage of the proceedings, any submission that no such amount is owing or that the Trust does not exist. The issue of the Trust’s entitlement to moneys owed by the two Partnerships is res judicata, by reason of the Court’s previous declarations in these Proceedings, and any issue regarding whether the Trust was created and exists would be at least the subject of an Anshun estoppel, given that it was an issue so relevant to the subject matter of the dispute before Slattery J in these Proceedings that it would have been unreasonable not to rely on it: Timbercorp Finance Pty Ltd (in liq) v Collins; Timbercorp Finance Pty Ltd (in liq) v Tomes (2016) 259 CLR 212; [2016] HCA 44 at [56] per French CJ, Kiefel, Keane and Nettle JJ (with emphasis added by their Honours to a quotation from Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 602; [1981] HCA 45).

  14. In any event, it is notable that Dr Segal’s own affidavit evidence indicated that an amount of $101.00 (being the sum stipulated in the Trust Deed as the amount to be settled on the Trust) was transferred on 24 April 2013 into the Trust’s bank account, with a notation of “settlement cheque”. Accordingly, even if Dr Segal were able to advance a submission that the Trust does not exist because the settlement sum was never paid, his own evidence fails to substantiate the factual basis for any such submission.

  15. It follows that Dr Segal is unable to contend (let alone establish) that the moneys which have been declared by this Court to be due to the Trust represent moneys to which the Company is beneficially entitled. Finally, and in any event, s 471B does not limit the Court’s power to make orders in relation to property of a company in liquidation, but instead stays a proceeding against the company or in relation to the property of a company, or an enforcement process in relation to such property, except with the leave of the Court. If leave were necessary (and it is not), it would have been granted in the circumstances of this case, particularly given that the Receiver’s application has been brought in accordance with the orders made by Slattery J, which provided for the Receiver to bring an application for his retirement and replacement by the Liquidator and, specifically, to seek orders that his remuneration be paid out of the moneys held in Court in the Partnership Proceedings.

Conclusion and Orders

  1. For those reasons, I am satisfied that the orders sought by the Receiver in the two Proceedings should be made, including an order for the Receiver’s costs of this application.

  2. In addition, there should be an order for the costs of the Plaintiffs in the Winding-up proceeding to be paid out of the assets of the Trust.

  3. For those reasons, I make the following orders.

In proceeding 2018/00381397 (the Winding-up Proceeding)

  1. Order that the Receiver’s notice of motion filed in proceedings 2018/00190679 on 2 May 2024 (Receiver’s Notice of Motion) be taken to have been filed in these proceedings.

  2. Following completion of the steps in Order 9, Adam Preiner (Receiver), appointed as receiver and manager over the property, assets and undertaking of the SWR Holding Unit Trust (Trust) pursuant to paragraph 3 of the orders made on 20 May 2019, shall immediately retire from office as receiver and manager.

  3. Immediately following the retirement of the Receiver pursuant to Order 2, Glenn Ian Livingstone in his capacity as liquidator of South West Radiology Pty Ltd (ACN 106 041 007) be appointed as receiver and manager over the property, assets and undertaking of the Trust and be granted all of the powers previously held by the Receiver as receiver and manager, being the powers recited in s 420 of the Corporations Act 2001 (Cth) (Act) as if the reference in s 420 to “property of the corporation” were a reference to “property of the Trust”, together with the powers that a liquidator has in respect of property of a company (in its role as legal owner and trustee) pursuant to s 477(2) of the Act including, without limitation, the power to do all things necessary or convenient to:

  1. distribute the proceeds of the sale of the assets of the Trust to any creditors of the Trust pursuant to s 556 of the Act; and

  2. distribute any surplus thereafter to the beneficiaries of the Trust

and has liberty to apply for access to the funds held in Court for the purpose of his reasonable expenses in determining the question in orders 5 and 6 of the orders made by Justice Slattery on 27 June 2022 in proceedings 2018/00190679.

  1. Pursuant to rule 26.5(1) of the Uniform Civil Procedure Rules 2005 (UCPR), the requirements under rule 26.5(2) and rule 26.5(3) of the UCPR for the filing and passing of final accounts are dispensed with as against Receiver.

  2. The remuneration of the Receiver in his capacity as receiver and manager of the property, assets and undertaking of the Trust for the period 17 August 2022 to 21 April 2024 is fixed in the amount of $20,675.60 inclusive of GST.

  3. The remuneration of the Receiver in his capacity as receiver and manager of the property, assets and undertaking of the Trust for the period 22 April 2024 to his retirement from office is fixed in the amount of $12,012.00 inclusive of GST.

  4. Order that the Receiver’s costs of the Receiver’s Notice of Motion be paid on the indemnity basis out of the assets of the Trust.

  5. Note that the Court will make orders in proceedings 2018/190679 to the effect:

  1. That the sum of $56,165.32 be paid out of court to the Receiver as follows:

  1. the sum of $32,317.66 from the funds held in court in relation to the Segal Sharma Chen Partnership in discharge of the remaining balance of the sum referred to in paragraph 4(a) of the orders made on 17 August 2022 in proceedings 2018/381397 (17 August 2022 Orders); and

  2. the sum of $23,847.66 from the funds held in court in relation to the Segal Sharma Partnership, in discharge of the remaining balance of the sum referred to in paragraph 4(c) of the 17 August 2022 Orders; and

  1. That the Receiver is permitted to apply the said sums in accordance with paragraph 9 of these orders.

  1. Order that the Receiver is to apply the sums referred to in Order 8 first, in payment of the sums referred to 5, 6 and 7 of this order, including reimbursement of any costs or other sums paid by the Receiver, and second, if any sums remain, to Glenn Ian Livingstone who shall hold and deal with such funds as property of the Trust.

  2. Order that the First and Second Plaintiffs’ costs of the Receiver’s Notice of Motion be paid on the indemnity basis out of the assets of the Trust.

In proceeding 2018/00190679 (the Partnership Proceeding)

  1. Glenn Ian Livingstone in his capacity as liquidator of South West Radiology Pty Ltd (ACN 106 041 007) is joined to the proceeding as Fourth Defendant.

  2. The Third Defendant is removed as a party to the proceeding pursuant to rule 6.29 of the Uniform Civil Procedure Rules 2005.

  3. The sum of $56,165.32 be paid out of court to the Third Defendant as follows:

  1. the sum of $32,317.66 from the funds held in court in relation to the Segal Sharma Chen Partnership in discharge of the remaining balance of the sum referred to in paragraph 4(a) of the orders made on 17 August 2022 in proceedings 2018/381397 (17 August 2022 Orders); and

  2. the sum of $23,847.66 from the funds held in court in relation to the Segal Sharma Partnership, in discharge of the remaining balance of the sum referred to in paragraph 4(c) of the 17 August 2022 Orders.

  1. The Third Defendant is permitted to apply the sums in paragraph 3 in accordance with paragraph 9 of the orders made on 21 August 2024 in proceedings 2018/00381397.

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Decision last updated: 26 August 2024

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Statutory Material Cited

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In the matter of Black Lab Design Pty Ltd (in liq) as trustee for the Black Lab Unit Trust [2023] NSWSC 661
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45
Keet v Ward [2011] WASCA 139