25 I need not take much time in dealing with Mr Korda's claims with regard to his costs and expenses of the provisional liquidation. The cases show that the costs of a provisional liquidator are to be treated in the same way as the costs of a receiver appointed by the court. This is for the reason that the court will appoint a provisional liquidator in much the same circumstances as it would appoint a receiver, namely to protect property for the benefit of all persons who are entitled to it. The better known cases are collected in Shirlaw v Taylor (1991) 31 FCR 222. There the Full Court affirmed the principle that the appointment of a provisional liquidator is analogous to the appointment of a receiver and that the provisional liquidator has a lien for his or her costs and expenses over the assets under his or her control analogous to that of a court appointed receiver.
26 There is a further issue concerning the costs and expenses of both the receivership and the provisional liquidation. Mr Power, who was given leave to intervene, has filed evidence to the effect that much of the work carried out by Mr Korda was an unnecessary reproduction of work already performed by Victorian Lawyers or by Mr Power. Mr Korda strongly denies this allegation. I was not asked to resolve this dispute and on the evidence tendered thus far I could not do so. However, it will be necessary for Mr Korda to prepare accounts for both the receivership and the provisional liquidation and have those accounts passed before he will be entitled to recover his costs and expenses. It is appropriate, in my opinion, that Mr Korda also be required to support those accounts with an affidavit which explains why and for what purposes the work was undertaken and the costs and expenses incurred. The affidavit should set out what information was provided to Mr Korda by Victorian Lawyers or Mr Power concerning the affairs of C L Custodians and Mr Korda should state, in light of that information, the reason he was required to perform the work that he did.
27 This then brings me to the claim in relation to the costs and expenses of the liquidation. It is only on this aspect of the case that I have found some difficulty in arriving at a conclusion.
28 I can begin a consideration of the cases by referring to In re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171, a decision of Dixon J sitting as a single justice in the original jurisdiction of the High Court. There the liquidator had realised assets that were subject to a debenture creating a floating charge. The proceeds were not sufficient to satisfy the claims of the debenture holder and the question arose whether the liquidator was entitled to be paid his costs out of the proceeds. Dixon J said (at 174):
"If a creditor whose debt is secured over the assets of the company come in and have his rights decided in the winding up, he is entitled to be paid principal and interest out of the fund produced by the assets encumbered by his debt after the deduction of the costs, charges and expenses incidental to the realisation of such assets. The security is paramount to the general costs and expenses of the liquidation, but the expenses attendant upon the realisation of the fund affected by the security must be borne by it.
. . .
The question is not whether moneys available for unsecured creditors should be relieved at the expense of the security. In such a case it may be said that the service of collecting enough to discharge the debenture must in any event be performed in order that a surplus may then arise in which the unsecured creditors may participate. The question in the present case is whether the liquidator can charge against the fund passing through his hands as between himself and the person to whom it is payable, so much of the remuneration fixed for work done in the winding up as is referable to the calling in and conversion of the assets producing the fund. I see no reason why remuneration for work done for the exclusive purpose of raising the fund should not be charged upon it. " (citations omitted)
29 The next case is Re Suco Gold Pty Ltd (in liq) (1983) 7 ACLR 873. I should mention that this case, a decision of the Full Court of the Supreme Court of South Australia, is in certain important respects in conflict with the decision of Full Court of the Supreme Court of Victoria in Re Enhill Pty Ltd (1982) 7 ACLR 8 but not on the aspect to which I will refer. Suco Gold was a trustee of two trusts. Prior to its winding up, Suco Gold had only acted in its capacity as trustee of those trusts; that is, it had not entered into any engagements on its own account. At the date of its liquidation there were still outstanding debts that the company had incurred in its capacity as trustee. Unless the assets of the trusts were realised those debts would not be paid. The question that arose for consideration was whether the liquidator's costs, expenses and remuneration incurred in realising the assets and in paying out the creditors could be charged against the trust assets. The Full Court held that they could. King CJ said (at 883) that this could be justified:
"…by reference to the obligations of the trustee company arising out of the carrying on of the business authorized by the trusts. It is part of the duty of the trustee company to incur debts for the purposes of the trust businesses and, of course, to pay those debts. Upon winding up, those debts can only be paid in accordance with the provisions of the Companies Act. This requires necessarily that there be a liquidator and that he incur costs and expenses and be paid remuneration. . . . As the company's obligation as trustee to pay the debts incurred in carrying out the trust cannot be performed unless the liquidation proceeds, it seems to me to be reasonable to regard the expenses mentioned above as debts of the company incurred in discharging the duties imposed by the trust and as covered by the trustee's right of indemnity. If that reasoning is wrong I would . . . be prepared to rely on the principle enunciated by Dixon J in Re Universal Distributing Co Ltd . . ."
30 There can be no difficulty with this ruling. All of the steps taken by the liquidator were to procure the performance by the trustee of its duties and it is no novel proposition that, in those circumstances, a trustee has a charge on trust property for the costs and expenses properly incurred in dealing with trust assets: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319.
31 In one respect Suco Gold, and other cases that have applied the principle there stated, may be said to have overlooked the distinction between the trustee (the company in liquidation) and its liquidator. The liquidator is not, of course, the trustee but the person who has replaced the directors who formerly controlled the trustee. The distinction was noted by Mr Nugee QC sitting as a deputy High Court Judge in In re Berkeley Applegate Ltd (No 2) [1989] 1 Ch 32 where, in somewhat similar circumstances to the present case, it was held that the liquidator could look to the trust assets for his remuneration not for reasons akin to those expressed by King CJ but on "a general principle that where a person seeks to enforce a claim to an equitable interest in property, the court has a discretion to require as a condition of giving effect to that equitable interest that allowance be made for costs incurred and for skill and labour expended in connection with the administration of the property.": see Berkeley Applegate at 50.
32 What of the case where the trustee does not carry on the business of trustee but nevertheless holds property on trust? That was the position in Re G B Nathan & Co Pty Ltd (in liq) (1991) 5 ACSR 673. There, the company had received funds from investors on terms that they would be invested in the money market; by loans to institutions and by the purchase of bills of exchange. At the time of its winding up the company held certain money and securities on trust for its clients. The liquidator applied for directions as to whether he was entitled to deal with the money and the securities by passing them on to the claimants without further investigation and whether he could deduct therefrom the cost, charges and expenses of the winding up. McLelland J gave certain directions concerning the manner in which the money and securities were to be dealt with and then turned to consider the question of the liquidator's costs. As to this his Honour said (at 687):
"Where, as appears to be the position in the present case, the company holds assets on what are virtually bare trusts for other persons, there seems to be no sufficient reason why the liquidator should not simply cause the company to comply with any demand by the beneficial owners to transfer the assets to them, thus giving effect to, and terminating, the trusts. In such a case, the work of the liquidator in causing those assets to be transferred to those entitled to them wears the double aspect of work properly carried out for the purposes of the winding up, as well as work carried out in the 'administration' of the trusts. It seems to me that to the extent that there is a conflict between the views of Gibson J in Berkeley Applegate (No 3) and the views of Needham J in Crest Realty . . . as to the duties of a liquidator in relation to trust property held by the company, the views of Needham J are to be preferred, at least where 'administration' is confined to the process of identifying the trust assets and those entitled to them and taking such steps as may be appropriate in the circumstances for the purpose of divesting from the company the trust assets and any continuing obligations in relation to them, all of which processes may fairly be comprehended in 'winding up the affairs of the company'."
However, as there were sufficient assets of the company to meet the liquidator's claim for costs, there was no need for any order against the trust assets.
33 The difference of opinion between Gibson J in Re Berkeley Applegate (Investment Consultants) Ltd (No 3) (1989) 5 BCC 803 and Needham J in Re Crest Realty Pty Ltd (No 2) (in liq) [1977] 1 NSWLR 664 to which McLelland J referred concerned which of the activities undertaken by a liquidator of a trust company could be characterised as work related to the winding up of the company and which could be described as work that related to the administration of trust assets. Gibson J suggested that there is a reasonably clear distinction between the two classes of activity, whereas Needham J tended to the view that a good deal of the liquidator's work would ordinarily fit within both categories. The importance of the distinction is that work that is solely concerned with the winding up and not with the administration of trust assets can not ordinarily be charged against those assets.
34 These cases establish, clearly enough in my opinion, that provided a liquidator is acting reasonably he is entitled to be indemnified out of trust assets for his costs and expenses in carrying out the following activities: identifying or attempting to identify trust assets; recovering 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.
35 The position is a little more involved as regards work done and expenses incurred in what may be described as general liquidation matters. If that work is unrelated to the beneficiaries and their claims it is difficult to see how the cost could be charged against their assets. In the case of a company that has carried on the business of trustee it might be that much of the work involved in the liquidation is chargeable against trust assets if it can be shown that the liquidation is necessary for the proper administration of the trust. But it is unlikely that this will be so where the company did not act solely as trustee or at least did not act in that capacity to a significant extent. In that event, the liquidator will be required to estimate those of his costs that are attributable to the administration of trust property and only those costs will be charged against the trust assets.
36 There is insufficient evidence before me to determine whether the whole or only some part of the work performed by the liquidator is chargeable against trust assets. It does appear that a good deal of the work was concerned with the affairs of the trusts. But whether that work was reasonably required to be undertaken in the administration of the trusts I cannot say. In these circumstances, I am not prepared to make any order insofar as the costs and expenses of the liquidation are concerned. It will be necessary for the liquidator to prepare proper accounts to justify his claim for indemnity against the trust assets and make a further application in that regard.
37 There are two further difficulties with regard to the liquidator's claim. The first is that the beneficiaries who are entitled to the debt due from the ATO (assuming that it is recoverable) are not the same as the beneficiaries who are entitled to the deposit with the NAB. The liquidator is not entitled to charge the beneficiaries of one trust with the costs and expenses incurred in relation to the other trust. Accordingly, it will be necessary for the liquidator to estimate the costs and expenses incurred insofar as they relate to each trust and only charge those costs to the trust on whose behalf the work was performed. If that estimate is not possible then a pari passu distribution of the costs and expenses will be in order as was envisaged by King CJ in Suco Gold, supra. The second difficulty is the possibility that the liquidator has performed work on behalf of investors for whom no property is held on trust. If that is the case the liquidator could not look to the existing trust assets for the costs and expenses of that work unless, in accordance with the foregoing principles, the liquidator is entitled to charge those assets with a proportionate share of the costs. That would be so if the costs and expenses are not divisible. The accounts that the liquidator prepares should deal with these issues.
38 I will make orders concerning the work and expenses of the receivership and of the provisional liquidation as follows:
(1) That the receivers are entitled to have deducted from any money that C L Custodians holds upon trust their just and reasonable costs, charges and expenses of the receivership.
(2) That the provisional liquidator is entitled to have deducted from any money that C L Custodians holds on trust his just and reasonable costs, charges and expenses of the provisional liquidation.
39 I will hear the parties on what are the appropriate directions that should be given for the passing of the receivers' and provisional liquidator's accounts. When it is sought to pass those accounts the question whether the costs and expenses were reasonably incurred will be determined. I will not now decide whether, at that time, Mr Power has standing to appear to challenge the reasonableness of those costs and expenses. It may be that he does although, as presently advised, it seems to me that only the beneficiaries will be entitled to appear.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein