Wicks v Michael Giles Real Estate Pty Ltd (In Liquidation)

[2004] QSC 438

SUPREME COURT OF QUEENSLAND

CITATION:

Wicks v Michael Giles Real Estate Pty Ltd (In Liquidation) [2004] QSC 438

PARTIES:

ROBERT WICKS
(Applicant)
v
MICAHEL GILES REAL ESTATE PTY LTD
(ACN 090 549 287)

(Respondent)

FILE NO/S:

BS 6240 of 2004

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court, Brisbane

DELIVERED ON:

9 December 2004

DELIVERED AT:

Brisbane

HEARING DATE:

7 October 2004

JUDGE:

Moynihan J

ORDER:

1.   That the property owners who had appointed the company as agent to manage the letting of properties are entitled to receive rental deposits paid after 16 July 2004 to the company by the tenants of those properties;

2.   That the property being the trust accounts conducted under the Property Agents and Motor Dealers Act are Michael Giles Real Estate Pty Ltd as provided by the order of 30 July 2004;

a. The outlays and expenses of the receiver in getting in, preserving and administering the property be treated as an expense under s 556(1)(a) of the Corporations Act in the winding up of Michael Giles Real Estate Pty Ltd

b.   Otherwise, the receivers remuneration in respect of the appointment made on 30 July 2004 be treated as a deferred expense in terms of the winding up of the company as provided for by s 566 of the Corporations Act;

3.   That the liquidator to act in accordance with directions 1 and 2.

4.   No order as to the costs of the Chief Executive, Department of Tourism, Racing, Fair Trading and Wine Development.

5. That the remuneration of the receiver be approved in accordance with s 473(3) of the Corporations Act in that approval is sufficient justification for payment.

CATCHWORDS:

CORPORATIONS – WINDING UP – LIQUIDATORS – REMUNERATION – IN VOLUNTARY WINDING UP – directions as to how the payment of the executor’s remuneration in capacity of receiver is satisfied

CORPORATIONS – WINDING UP – LIQUIDATORS – OTHER MATTERS – whether the property owners are entitled to receive rental deposits paid by tenants

Corporations Act 2001 (Cth)
Income Tax Assessment Act 1997 (Cth)
Property Agents and Motor Dealers Act 2000 (Qld)

Re Asia Oil & Mining (1986) 5 NSWLR 42 at 44
Re Midland Coal Coke & Iron Co [1895] 1 ch 267 at 277

Re Oygevault International BV (In Liquidation) 14ACSR 245

COUNSEL:

Mr C D Coulsen for the applicant

Mr M K Conrick for Mr C Giles

SOLICITORS:

Lambert & Ho Lawyers for the applicant

Gayler Law firm for the respondent

Ms P Freeleagus, Crown Law for the Chief Executive, Department of Tourism, Racing, Fair Trading and Wine Development

1. The originating proceeding in which this interlocutory application is made were brought by Robert Wicks as executor and trustee of the estate of Michael Giles deceased.  Mr Wicks sought that Michael Giles Real Estate Pty Ltd (the company) be wound up on the just and equitable ground.

1. This interlocutory application is made by Peter Anthony Lucas.  On 19 July 2004 Mr Lucas was appointed provisional liquidator of the company.  On 30 July he was appointed receiver of specified trust accounts holding rental and sale receipts from the conduct of the company’s business.  On 16 August 2004 it was ordered that the company be wound up and Mr Lucas appointed liquidator.

1. Mr Lucas seeks directions as to how the payment of his remuneration “in his capacity as receiver” is to be satisfied.  In submission made after the hearing of the application he extended this to expenses and outlays involved in administering the funds.

1. He also seeks a direction that property owners who had appointed the company as their agents for the purpose of letting property are entitled to receive “rental deposits” paid by the tenants of those properties to the company after 16 July 2004.

1. In addition to the parties who I have mentioned Mrs Colleen Marie Giles, beneficiary of the estate of Michael Christopher Giles and Michael John Dempsey the purchaser of the company’s business, although not formally parties, appeared by the same counsel and made submissions as to the relief to be granted. 

1. The Chief Executive, Department of Tourism, Racing, Fair Trading and Wine Development (the Chief Executive) also appeared and made submissions.  That appearance reflected the apprehension that Mr Lucas as receiver would advance submissions to the effect that the Chief Executive meet payment of any shortfall in payments to beneficiaries consequent on the granting of the relief sought out of a fund constituted under the Property Agents and Motor Dealers Act 2000 (Qld) (the Act).  Submissions were, in fact, made to that effect.

1. The beneficiaries of the trust accounts were notified of the application by circular but none appeared.  That may be explicable by shortness of notice.  In the event I do not consider that a problem.

1. The company carried on a real estate and rental management business with offices in Harvey Bay and Maryborough.  Funds were received by way of payment of deposits and rent paid by the tenants of properties managed by the company on behalf of the property owner.  The company’s principal asset was the rent roll.

1. Rental receipts were held in designated rental trust accounts for Maryborough and for Harvey Bay.  A similar arrangement applied in respect of receipts relating to property sales.

1. Section 383 of the Act provides that an amount paid or required to be paid into a trust account under ch 12, Division 3 – “Dealing with Trust Money” cannot be used to pay a debt of a creditor of a licensee or be attached or taken in execution under a court order or process.  Section 384 provides money in a trust account can be paid out only in a way permitted under the Act.

1. Up to 28 June 2004 the directors of the company were Michael Francis Giles and Colleen Marie Giles.  Michael Giles was a licensed real estate agent but Colleen Giles does not hold a real estate licence.  Under s 54 of the Act a corporation that holds a licence may perform an activity under its licence only if the “activity may be performed by a licensed director under the director’s licence.”

1. Michael Giles died on 28 June 2004.  There was an obstacle to anyone who held a licence accepting appointment as a director.  That was because the company owed substantial group tax and has other liabilities which might be imposed on a newly appointed director if that person did not take one of the steps prescribed under s 222AA(e) of the Income Tax Assessment Act 1997 (Cth).  For that reason no licensed director was appointed.

1. The Act provides for the Chief Executive to appoint a receiver in specified circumstances of default or defalcation.  Such an appointment triggered the operation of other sections of the Act, including access to the fund referred to earlier; see part 4 of the Act.  It was, however, common ground that the provisions of the Act founding the appointment of a receiver by the Chief Executive were not satisfied in this case.  In any event it is clear that Mr Lucas was a court appointed receiver rather than appointed under a statute or security.

1. As I said earlier, Mr Lucas was appointed provisional liquidator of the company on 19 July 2004.  On 27 July 2004, in that capacity, he entered into a contract for the sale of the company’s business to Michael John Dempsey.  The sale was settled on 9 August 2004.  The purchase price for the rent roll component of the business was the greater of $250,000 or $1,000 for every property owner remaining on the rent roll.

1. Mr Lucas, as provisional liquidator, having taken advice formed the view that he could not properly authorise payment of trust account money.  Owners understandably began to take their property management business elsewhere because they did not receive funds from payments made to the company held in the trust accounts..  This diminished the sale price.

1. On 30 July 2004 Mr Lucas was appointed receiver of the trust accounts.  The purpose of the appointment, in my view, was to protect the company’s assets.  From this perspective, apart from the considerations I have already mentioned the company was entitled to commission and other remuneration for operating the rental business and the administration of the funds.

1. Put shortly, Mr Lucas’s appointment was for the benefit of the company and protected its assets particularly the rent rolls in the context of its provisional and final liquidation and the sale of its business.

1. Against that background I turn to the declaration sought and deal first to a declaration as to the payment of rental deposits to property owners on the rent roll.

1. The combined effect of ss 383 and 384 of the Act is that those moneys can only be paid to the property owners on whose behalf they are held in trust in the trust accounts.

1. I do not accept that the receiver is not a “creditor seeking access to the trust funds” because there was no debtor/creditor relationship.  The term is not defined in the Act or, for that matter, in the Corporations Act 2001 (Cth). The term has been defined at common law to include all persons having any pecuniary, including contingent, claim against the company; see for example Re Midland Coal Coke & Iron Co [1895] 1 ch 267 at 277, Re Asia Oil & Mining (1986) 5 NSWLR 42 at 44.

1. The Act contains no provisions authorising the payments for remuneration, expenses and outlay that the receiver seeks from the trust funds beyond those already obtained for payment by way of commission et cetera.

1. I turn to the question of the applicant’s remuneration in his capacity as receiver and payment of expenses and outlays in administering the trust funds are to be satisfied.

1. The applicant, citing Re Oygevault International BV (In Liquidation) 14ACSR 245 considered making a submission that the receiver’s remuneration be treated as an expense in the winding up rather than a deferred expense. There was, however, no evidence as to the effect of such an order on what was otherwise available for unsecured creditors.

1. It is, however, unnecessary to consider that aspect of the matter because after taking instructions counsel for the applicant informed me that he did not pursue the point since there were sufficient funds available in any event.

1. Those being the consideration, I direct:-

1.          Property owners who had appointed the company as agent to manage the letting of properties are entitled to receive rental deposits paid after 16 July 2004 to the company by the tenants of those properties;

2.          The property being the trust accounts conducted under the Property Agents and Motor Dealers Act 2000 (Qld) are Michael Giles Real Estate Pty Ltd as provided by the order of 30 July 2004;

(a) The outlays and expenses of the receiver in getting in, preserving and administering the property be treated as an expense under s 556(1)(a) of the Corporations Act in the winding up of Michael Giles Real Estate Pty Ltd

(b)        Otherwise, the receivers remuneration in respect of the appointment made on 30 July 2004 be treated as a deferred expense in terms of the winding up of the company as provided for by s 566 of the Corporations Act;

3.          I direct the liquidator to act in accordance with directions 1 and 2.

1. I turn to the questions of costs.  Given the difficulties consequent on the death of Mr Giles facing any persons licensed under the Act accepting appointment as a director and the terms of ss 383 and 384 of the Act and that the appointment of a receiver was to protect the insolvent company’s asset this application was properly brought.

1. The interest of Ms Giles and Mr Dempsey in the relief sought is obvious and their costs should be costs of the winding up.  The Chief Executive seeks a costs order against the applicant.  The difficulty which arose in this case flow from the provisions of the Act, no doubt they are in the public interest, to the effect that a company must act through a licensed director.

1. As I’ve already said Mr Lucas in his capacity as provisional liquidator acting on advice formed the view that he could not properly authorise payment out of trust account money, I have concluded that the effect of ss 383 and 384 of the Act was that the money should be paid out to the beneficiaries of the trust. 

1. The applicant was a receiver appointed by the Court to protect the company’s principle asset.  The argument on his behalf designed to give access to the fund constituted by the Act failed for the reasons I canvassed earlier.

1. Given that the situation arose as a consequence of legislation in the public interest and the particular circumstances of this case, in my view, it is appropriate to make no order as to the costs of the Chief Executive.