611 Pty Ltd (in liq), in the matter of 611 Pty Ltd (in liq) (No 2) [2019] FCA 341

Judgment (10 paragraphs)

[1]

The second and third plaintiffs are justified in distributing the proceeds of sale of certain real property owned by 611 Pty Ltd (611) in its capacity as trustee of the Zumbo Trust (being the real property contained in New South Wales Folio Identifiers 1/SP80721 and 2/SP80721 and also known as 1 & 1A Apollo Place, Lane Cove West NSW 2066) (the Property), and surplus trading or other proceeds held by the second and third plaintiffs, in the following manner: (a) $6,896,120.25 to Australia and New Zealand Banking Group Limited (ANZ) (or such other final amount as may be required to procure a discharge of all relevant encumbrances held by ANZ as described in the supporting affidavit of the second plaintiff); (b) $90,942.19 to the Office of State Revenue; and (c) $99,281.50 plus GST in the amount of $9,928.15 in respect of the second and third plaintiffs' remuneration for the period 24 August 2018 to 23 October 2018.
The second and third plaintiffs be allowed remuneration from the property of the first plaintiff as trustee of the Zumbo Trust in respect of their remuneration: (d) for the period 22 July 2018 to 15 August 2018 in the amount of $73,532.15 (including GST); and (e) for the period 16 August 2018 to 23 August 2018 in the amount of $21,337.99 (including GST).
The plaintiffs' costs of and incidental to this application be costs in the winding up of 611 and such costs be paid from funds held by 611 as trustee.
The second and third plaintiffs not distribute any surplus proceeds of sale of trust assets other than as identified in Order 1 above until further order.
The plaintiffs have liberty on reasonable notice to restore the proceeding for case management by application to the Associate to Justice Yates. THE COURT NOTES THAT:
The amounts referred to in Order 2 above have been drawn by the second and third plaintiffs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

YATES J: 1 This is an application by the second and third plaintiffs for directions and orders in respect of the distribution of the certain trust funds, including the proceeds of sale of certain real property owned by the first plaintiff, 611 Pty Ltd (in liq) (the company), in its capacity as a trustee. Orders and directions were made on 8 March 2019. One order was subsequently varied on 13 March 2019. These are my reasons for making the directions and orders. 2 As I recounted in earlier reasons (611 Pty Ltd (in liq), in the matter of 611 Pty Ltd (in liq) [2018] FCA 2018) (my earlier reasons), the second and third plaintiffs are the joint and several liquidators of the company. They were appointed on 24 October 2018, when the Court made an order on the application of the Deputy Commissioner of Taxation that the company be wound up in insolvency. Prior to that, the second and third plaintiffs were administrators of the company and of two related entities. 3 The company has traded exclusively as trustee of the Zumbo Trust, which is a discretionary trust established by deed dated 15 February 2008. The company became the trustee on 11 October 2010. However, its appointment was terminated automatically under cl 47 of the deed when the second and third plaintiffs were appointed as joint and several administrators. No other trustee has been appointed. The company continues to act as a bare trustee. 4 On 14 December 2018, I made orders pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) that the second and third plaintiffs be appointed as receivers of the trust property owned by the company as trustee for the Zumbo Trust, without security, effective on and from 22 July 2018, the date when they were appointed as administrators. Apart from any other reason, the second and third plaintiffs, as court-appointed receivers, require the Court's approval to making payments from the trust funds to which they have been appointed. 5 The company is the registered proprietor of the land in Folio Identifiers 1/SP 80721 and 2/SP 80721, known as 1 and 1A Apollo Place, Lane Cove West, New South Wales. On 30 January 2019, the second and third plaintiffs entered into a contract to sell the property for $7.5 million. The sale is due to complete on 12 March 2019. 6 The property is subject to a registered mortgage in favour of Australia and New Zealand Banking Group Limited (ANZ) and a statutory charge for New South Wales land tax. These encumbrances will need to be discharged at the time of settlement of the sale in order for the purchaser to be provided with an unencumbered title. As at 7 March 2019, the amount required to discharge the mortgage was $6,896,120.25. A slightly greater amount will be payable at settlement. The amount of land tax due to the Chief Commissioner of State Revenue as at settlement will be $90,942.19. 7 In an affidavit read in support of the present application, the second plaintiff, Mr Holzman, identified all the payments which he and the third plaintiff wished to make from the proceeds of sale and from other funds held by them as a result of carrying on the company's business: Proceeds from sale of property 7,500,000 Funds currently held in the 611 liquidation account in respect of trading proceeds 350,000 Total funds to be held 7,850,000

8 With respect to the second and third plaintiffs' remuneration as administrators, and then as liquidators, on 14 December 2018 the following resolutions were passed by the creditors under the facility provided by r 75-130 of the Insolvency Practice Rules (Corporations): (a) that the remuneration of the Administrators for the period from 24 August 2018 to 23 October 2018 calculated at the hourly rates as detailed in the Initial Remuneration Notice dated 24 July 2018 is determined in the sum of $99,281.50 plus GST of $9,928.15 and the Liquidators are authorised to draw such remuneration as required; and (b) that the remuneration of the Liquidators from 24 October 2018 to the Finalisation of the Liquidation is determined as a sum equal to the cost of the time spent by the Liquidators and their staff and contractors, calculated at the hourly rates detailed in the Initial Remuneration Notice dated 20 November 2016, to a limit of $60,000 plus GST of $6,000, payable as and when incurred, without limiting the right to approach creditors or the Court to approve further remuneration. 9 Mr Holzman deposed that the remuneration referred to in paragraphs (a) and (b) has not been paid. Further, he anticipated that the liquidators' remuneration referred to in paragraph (b) will exceed $60,000 plus GST. 10 The application heard on 8 March 2019 was advanced on a limited basis. The second and third plaintiffs sought orders that would enable them to make payments necessary to procure the removal of the encumbrances referred to above, to pay their legal costs of the sale, and to pay their remuneration which had been approved by the creditors but not yet drawn. 11 Other than in respect of one creditor (who has not lodged a proof of debt and whose known debt is, in any event, small), the interlocutory application and Mr Holzman's affidavit was served on those creditors whose email addresses are available to the second and third plaintiffs, and on the Australian Securities and Investments Commission (ASIC). No person, including ASIC, came forward to oppose the making of the orders sought in the interlocutory application. 12 I was satisfied that it was appropriate to make orders that the second and third plaintiffs are justified in making the following payments from the proceeds of sale of the property and the other surplus funds they hold: (a) $6,896,120.25 to ANZ, or such other final amount as may be required to procure a discharge of all relevant encumbrances held by ANZ as described in Mr Holzman's affidavit; (b) $90,942.19 to the Office of State Revenue; and (c) $99,281.50 plus GST in the amount of $9,928.15 in respect of the second and third plaintiffs' remuneration in the period 24 August 2018 to 23 October 2018 as administrators of the company. 13 It is plainly appropriate that the payments in (a) and (b) should be made. It is inconceivable that the sale will settle without them being made. It is also appropriate that the payment in (c) be made having regard to the agreement of the company's creditors to remuneration in that sum. The application that was made was not so much approval of the second and third plaintiffs' remuneration as administrators. This had already been agreed to by the creditors. Rather, what was sought was a direction that the second and third plaintiffs could act on that approval: In the matter of EMA Consulting Pty Ltd (in liquidation) [2018] NSWSC 1993 at [3] and [6]; In the matter of PrimeSpace Property Investment Limited (in liquidation) [2018] NSWSC 2001 at [6]. I could see no reason why that approval should not be given. 14 I was not persuaded that I should give a direction in relation to the other payments that were being sought at the present time, even though no interested party had come forward to oppose the payments being made. 15 As to the payment of legal fees and disbursements incurred by the second and third plaintiffs to date, the evidence did not descend to the detail of either the nature of the payments or their actual amount. I was not prepared to make a direction in respect of an unparticularised and unsubstantiated global amount, which is as far as the evidence went. 16 As to the payment of the amount sought for the second and third plaintiffs' remuneration as liquidators, I had the views of the company's creditors reflected in the resolution passed on 14 December 2018. However, the payment sought by the second and third plaintiffs was for their remuneration as liquidators from 24 October 2018 to date (which I take to be the date of Mr Holzman's affidavit - 22 February 2019). The amount sought was the total amount agreed to by the creditors for work up to the finalisation of the liquidation. 17 Although Mr Holzman expressed his anticipation that his and the third plaintiff's remuneration for the period from 24 October 2018 to finalisation of the liquidation will exceed $60,000 plus GST, I was unable to tell from the evidence before me, consistently with the method of calculation expressed in the creditors' resolution, what the appropriate amount of the remuneration "to date" should be. Put shortly, I did not know, on the present evidence, whether the second and third plaintiffs were entitled, now, to remuneration of $60,000 plus GST. The fact that the second and third plaintiffs may, in future, seek additional remuneration did not justify the payment now of the total amount for remuneration to which the creditors have agreed. 18 The second and third plaintiffs also sought an order that they be allowed remuneration for the periods 22 July 2018 to 15 August 2018 and 16 August 2018 to 23 August 2018 as administrators. These amounts had also been approved by the creditors and, in fact, had already been drawn by the second and third plaintiffs in reliance on the resolutions that were passed. I made an order in the form sought but, on further reflection, was concerned as to its form. The order was intended to regularise an anomalous situation that had arisen as a consequence of the retrospective effect of the order appointing the second and third plaintiffs as receivers of the trust property. I communicated my concern to the second and third plaintiffs' legal advisers, suggesting that the order be varied to reflect more accurately the fact that retrospective approval was being given for the drawings that had been made in reliance on the creditors' approvals. As I stated at the hearing on 8 March 2019, I had no reason to go behind or interfere with the creditors' approvals as such. The second and third plaintiffs agreed to the variation proposed. 19 In these circumstances, the appropriate course was that I should give directions in respect of the intended payments referred to at [12] and make an order regularising the payment of the remuneration referred to at [18] above. 20 The balance of interlocutory application will stand over to be dealt with at a later time on appropriate evidence justifying the additional payments sought. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.

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Judgment (10 paragraphs)

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