Supreme Court of WA|2003-06-11|Before: Pullin J

Australian Securities and Investments Commission v Rowena Nominees Pty Ltd [2003] WASC 112 (11 June 2003)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION -v- ROWENA NOMINEES PTY LTD [2003] WASC 112

MATTER : Section 461 of the Corporations Law of Western Australia

BETWEEN : AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Corporations - Application for judicial direction - Whether liquidator's remuneration, costs, charges and expenses may be deducted from trust moneys

Finance Brokers Control Act 1975, s 48, s73, s 74(1)(b), s 75(1), s 78(1)

By Leave of the Court : Mr K L Christensen for P V & C S Beresford & Denmoore Holding Pty Ltd

By Leave of the Court : Mr D H Solomon & Mr B R Gannon for persons listed in amended notice to appear dated 15 January 2003

By Leave of the Court : Mr R C Kennealy for Hardie Developments Pty Ltd

Bainbridge v Lawton [2002] WASC 293

Bishopsgate Investment Management Ltd (in liq) v Homan [1995] Ch 211

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628; (2001) 188 ALR 566

Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 44 ACSR 390

Homestyle Pty Ltd v City of Belmont [1999] WASCA 59

James Hardie & Co Pty Ltd v Seltsam Pty Ltd [1998] HCA 78; (1998) 196 CLR 53

National Australia Bank Ltd v Finlay (1995) 13 ACLC 1175

News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410

Perpetual Trustee Co Ltd v Godsall [1979] 2 NSWLR 785

Pope v DRP Nominees Pty Ltd (No 2) [2000] SASC 65

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355

Re Global Finance Group Pty Ltd [2002] WASC 63; (2002) 26 WAR 385

Re Goldcorp Exchange Limited [1994] UKPC 3; [1995] 1 AC 74

Re Spurling's Will Trusts [1966] 1 WLR 920

Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544

WMC Resources Ltd v Southern Cross Pipelines Australia Pty Ltd [2002] WASCA 308

1 PULLIN J: Mr Mark Anthony Conlan ("Conlan"), who is the liquidator of Rowena Nominees Pty Ltd ("Rowena), applies for directions authorising him to pay his remuneration, costs, charges and expenses, out of the moneys held in two bank accounts holding moneys held on trust for certain creditors. The application is made under s 479(3) of the Corporations Act 2001.

Earlier application in action CIV 2076 of 1999

2 This application for directions began its life in action CIV 2076 of 1999. That action commenced with an originating summons in which Conlan, in his capacity as liquidator of Oakleigh Acquisitions Pty Ltd ("Oakleigh") and as supervisor of Rowena, along with Rowena and Oakleigh, sought declarations that certain property was held on trust by those companies for certain persons. Conlan, in his capacity as liquidator of Rowena, was later joined as an applicant and the Registrar of Titles was joined as a respondent. On other occasions, other parties were joined and then later removed as parties. Since then, persons interested in the companies filed documents in action CIV 2076 of 1999, ignoring the title and the designation of parties and instead inserting the title and the parties those persons preferred to see on the documents. As one counsel said in these proceedings, action CIV 2076 of 1999 has been "a sort of an omnibus file where there have been numerous different applications made." I have commented in other proceedings about how unsatisfactory this is. See Re Oakleigh Acquisitions Pty Ltd (in liq); Ex Parte Mark Anthony Conlan (as liquidator of Oakleigh Acquisitions Pty Ltd) & Ors [2003] WASC 75.

3 When the hearing of the application for directions came on for hearing in CIV 2076 of 1999, Mr G I Donaldson announced that he appeared for Conlan; Mr K L Christensen announced that he appeared for two persons and a company, namely P V & C S Beresford and Denmoore Holdings Pty Ltd; Mr D H Solomon and Mr B R Gannon announced that they appeared for numerous persons identified in a "notice to appear"; and Mr R C Kennealy announced that he appeared for Hardie Developments Pty Ltd. These persons (other than Mr Donaldson) all appeared as a result of notice that they had been given about the application. This notice had been given as a result of an order for directions made by Steytler J on 14 October 2002 in CIV 2076 of 1999. The order directed that Conlan should give notice of the application to all persons who are recorded in Rowena's records as investors, all those who are recorded in Rowena's records as borrowers, and all persons who have notified Conlan that they believed they had a claim against the Rowena or Oakleigh trust account. This notice was to be given by sending to each of the recipients at their last known address, a copy of the application and a copy of Steytler J's orders, together with a notice that if the recipients wished to appear at the directions hearing they should file and serve a notice of intention to appear. After the first appearance, Mr Kennealy did not appear again. He has since advised my Associate in writing that he does not wish to appear again. The other parties in CIV 2076 of 1999 did not appear; and it was not even certain who the parties should be on the hearing of the application.

4 Before submissions were made, and having noticed that the file for CIV 2076 of 1999 had over 450 documents on it, I asked the parties to identify the documents which were relevant to this application. Less than 30 documents were identified as being relevant. I also noticed before the hearing commenced, that the title to the proceedings referred to s 92 and s 98 (sic) (89) of the Trustees Act 1962 and to s 479(3) of the Corporations Law 2001. At the beginning of the hearing, I enquired of Mr Donaldson what jurisdiction was being invoked. The answer given by Mr Donaldson was as follows:

"The application is brought principally, your Honour, pursuant to the power exercisable under 479(3) ... The application is also brought pursuant principally to section 89 of the act ... the more obvious provision to bring this application under is in section 479(3) ... but it is the case, as the matter heading has indicated, ... that the application is also brought pursuant to section 89."

5 After hearing submissions from all the parties, I raised again the question as to whether reliance was being placed on s 89 of the Trustees Act as well as s 479(3) of the Corporations Act. I pointed out that, if so, it had to be borne in mind that an application under s 89 of the Trustees Act 1962 had to be an application by the trustee. An application under s 479(3) of the Corporations Act is by the liquidator. Furthermore, an application under s 479(3) of the Corporations Act is of limited effect (see below), whereas an application under s 89 of the Trustees Act 1962 would be a substantive application, and any orders made would have the usual effect of determining the rights of the parties to trust property.

6 As a result of these enquiries, the hearing was adjourned at Mr Donaldson's request and further submissions filed on behalf of Conlan. These submissions stated that the application was brought solely under s 479(3) of the Corporations Act 2001. There has subsequently been a formal abandonment of any reliance on s 89 of the Trustees Act 1962.

7 Through my Associate, I informed the parties that an application under s 479(3) of the Corporations Act 2001 should have been commenced pursuant to the provisions of O 81G of the Rules of the Supreme Court and not brought in action CIV 2076 of 1999. However, it would have given rise to wasted expense to have dismissed the application because of non-compliance with O 81G and not dealt with the issues argued before me. As a result, I invited the liquidator to file a notice of motion in these winding up proceedings and another one in Oakleigh (COR 189 of 1999), seeking the same directions under s 479(3) as had been asked for in the application in CIV 2076 of 1999. The persons and companies who appeared on the application in CIV 2076 of 1999 agreed with this course. It was agreed by all concerned that the submissions made in relation to the application in CIV 2076 of 1999 should be treated as having been made in this application and that I should read the affidavits filed in CIV 2076 of 1999 in support of the application for directions there, as affidavits in support of this application. As a result, the liquidator has filed the notice of motion in these proceedings seeking the directions under s 479(3) of the Corporations Act 2001.

8 Conlan was appointed provisional liquidator of Rowena on 24 May 1999 and of Oakleigh on 21 July 1999. On 10 June 1999, receivers and managers of Rowena's assets were appointed by a secured creditor. Conlan was appointed liquidator of Rowena on 21 July 1999 and of Oakleigh on 25 August 1999. On 23 July 1999, Conlan was appointed supervisor of Rowena's finance broking business pursuant to the Finance Brokers Control Act 1975 (WA) ("FBC Act").

9 Rowena was a finance broker and carried on business under the name "Graeme Grubb Finance Broker" ("GGFB"). Potential borrowers would approach GGFB with a view to obtaining finance for a venture. GGFB would, in turn, approach a number of potential investors and invite them to advance moneys for the venture. Often the amount required was beyond the resources of an individual investor, and several entities or people contributed varying amounts to make up the whole. Promises were made to investors that they would be given a first mortgage security over identified property. In the main, Oakleigh did little more than act as trustee for investors who had supplied the funds to Rowena for the advances to borrowers. Sometimes the mortgage was registered in the name of Oakleigh as mortgagee. Some remained in that state. Others were transferred from Oakleigh to named investors. In other instances, the mortgages were registered in the name of investors as mortgagees. Other investors did not receive any mortgage security. Others signed security documents, but they were never registered or never stamped.

10 Rowena offered investors a "cash flow guarantee" described in the documentation in this way: "GGFB will pay to you the monthly interest regardless of whether the borrower has paid us".

11 Rowena maintained a trust account. It also maintained a separate account styled "Cash flow guarantee account". Rowena would pay interest to the investors from the cash flow guarantee account. If there was insufficient money in that account (often because the borrower had not paid), then the shortfall would be made up by transferring money from the trust account. These transactions and others caused the trust account to be overdrawn on 84 occasions between June 1996 and May 1999.

12 Rowena was permitted under the FBC Act to operate only one trust account but, of course, the trust account was not supposed to be overdrawn and proper books and records were supposed to be kept to enable moneys in the trust account to be identified. The books and records of GGFB are in a mess. There are significant (probably insuperable) difficulties in tracing funds when they are paid into an overdrawn trust account or into an account which becomes overdrawn between the times when the moneys are paid in and paid out. The trust obligations were so badly mismanaged that there is little point in trying to reconstruct individual trust ledgers. The history which I have just related is drawn from the reasons for decision of Owen J in Conlan v Registrar of Titles [2001] WASC 201; (2001) 24 WAR 299 ("Conlan v Registrar") in action CIV 2076 of 1999. That decision of his Honour is a decision dealing with certain preliminary questions he was asked to determine.

13 One of those questions was a question about how much money was advanced by GGFB to a borrower called Hardie Developments Pty Ltd ("Hardie") and how much money Hardie would have to repay in order to secure a discharge of the mortgage which secured repayment. The mortgagee was Oakleigh. In relation to that question, his Honour found that the total amount advanced to Hardie was $1,025,647.54. His Honour also found that under the covenant in the mortgage, Hardie was obliged to pay a principal sum of $1,218,000.00 and interest.

14 I will now refer to the two trust bank accounts which contain the moneys from which Conlan wishes to deduct his remuneration, costs, charges and expenses.

Hardie moneys - in Rowena's ANZ Bank account 985933488

15 Hardie repaid part of the money due to Oakleigh before Oakleigh was ordered to be wound up. Conlan, as liquidator of Rowena, has received payment of the balance and holds that balance of $624,982.12 in Rowena's ANZ bank account number 985933488. That money, although secured by a mortgage in favour of Oakleigh, was paid into the Rowena ANZ bank account under the control of the liquidator of Rowena, because the money is beneficially owned by Rowena trust creditors.

16 Hardie has informed the Court that it proposes to seek rectification of the mortgage and repayment to it of the difference between the amount advanced to it and the amount it had to repay. If that suit succeeds, and if that repayment must be repaid out of the ANZ bank account (as to which issue I say nothing), then the liquidator will hold the sum of $450,000.00 in the account to which I have just referred.

17 In relation to the moneys paid by Hardie and now in the ANZ bank account, Owen J held in Conlan v Registrar at [366] that the investors' "right to trace" was lost in relation to those moneys and all that was left was a personal claim against the defaulting broker; and that "I am obliged to conclude that the unregistered investors must assert their claims in the general administration of Rowena or Oakleigh as the case may be rather than directly against the mortgage".

Cash flow guarantee recoupment moneys - in Rowena's St George Bank Ltd account (ROW 001)

18 Conlan, as liquidator of Rowena, has also recovered moneys from other borrowers. GGFB provided to its investor clients the "cash flow guarantee" to which I have already referred. The payments were made by GGFB out of the cash flow guarantee account which was funded from Rowena's trust account. Conlan says that based on his investigation of Rowena's records, in no case did any person whose funds were in the trust account immediately prior to such payment authorise their funds to be paid to an investor as interest payments owed by a borrower. Since his appointment as liquidator of Rowena, he has recovered from various borrowers payments which correspond in amount to the amounts paid on their behalf by way of the "cash flow guarantee". Owen J on 16 August 2001 ordered that these borrowers' payments be held in trust by Conlan pending further order of the Court. At this stage, Conlan does not know which trust claimants are entitled to receipt of the funds that have been recovered. Owing to the practical difficulties in reconciling the trust account, he is of the opinion that it is unlikely that he will ever know. These moneys recovered by Conlan from borrowers have been paid into a separate Rowena bank account, namely St George Bank Ltd account number 551466878, and recorded in a trust account ledger kept by the fifth applicant and called "Rowena Cash Flow Recoupments" ROW 001. The amount standing in that account as at 9 September 2002 (the date of one of Conlan's affidavits) was $362,550.67.

Subrogated claims moneys - in Rowena's St George Bank Ltd account (ROW 015)

19 In a number of instances where borrowers failed to repay a loan or where investors of GGFB demanded redemption of their investment prior to repayment by the borrower, or where one investor was substituted for another investor, GGFB paid to the relevant investor the amount of the principal or interest the investor claimed was owing from funds held in the trust account. Conlan has not been able to identify whose funds were used to repay these investors. Owing to the practical difficulties in reconciling the trust account, he considers that it is unlikely that he will ever be able to identify those people whose funds were used. However, in many cases where an investor was paid out of the trust account, the investor has agreed that Rowena (as trustee of the trust account) is subrogated to that investor's rights as against the borrower. Accordingly, Conlan has recovered such funds from various borrowers who had not previously repaid their loans. As at the date of Conlan's affidavit dated 9 September 2002, the funds recovered by Rowena as part of its subrogated claims total $1,013,538.56. These moneys have been paid into Rowena's St George Bank Ltd account referred to above and recorded in a trust account ledger kept by Conlan as liquidator of Rowena and designated ROW 015. He expects to receive further of these funds in the future from claims known to him at the present or that may arise from further investigations.

20 No finding has been made in relation to the moneys in the St George Bank Ltd account of the kind made by Owen J and referred to in par 17 above. It is likely, however, that unregistered investors must similarly assert their claims in relation to these moneys in the general administration of Rowena or Oakleigh. It is significant that as at 17 April 2003, no one had come forward to make a claim asserting they can trace their money or property into the Hardie moneys, the cash flow guarantee moneys, or the subrogated claims moneys.

ANZ and St George Bank Ltd account moneys are held on trust

21 Whatever the outcome, the moneys referred to above in these two bank accounts are not moneys in which Rowena has any beneficial interest. These moneys are therefore held on trust to be distributed to the beneficiaries, being investors or others, once the facts become clearer, possibly in accordance with directions of the Court. See, for example, the type of order made by Austin J in ASIC v Nelson [2003] NSWSC 129; (2003) 44 ACSR 719. The moneys are probably to be shared between the beneficiaries of many trusts. For example, when Rowena received money from an investor under an obligation to hold the money and then pay it over to a borrower in return for a registered mortgage Rowena held the money on trust. Rowena was obliged under s 48 of the FBC Act to pay the money into the trust account. Normally a trustee would have to hold the money in a separate account, but s 48 of the FBC Act permitted a finance broker to maintain one trust account and to pay all trust moneys received into that account. Another investor who paid a separate sum of money to be advanced to another borrower became the beneficiary of another trust. In some cases there may have been several beneficiaries of one trust. I am not making any findings at the moment. I only mention this aspect so that it can be shown that I recognise that the moneys in the bank accounts the subject of this application are moneys which the beneficiaries of many separate trust arrangements will be claiming. The mixing of the moneys and the likely inability of anyone to trace the moneys as a result of the very many overdrawings of the account, make it necessary for Conlan to complete his process of recovery and then to approach the Court for orders providing for the distribution of the mixed fund.

Categories of creditors and categories of property

22 In the liquidation of Rowena, there may be at least two possible categories of creditors and two possible categories of property (excluding secured creditors and property the subject of a registered mortgage or valid charge).

23 I deal first with creditors. There will be the general creditors. For example, persons who sold and supplied goods to Rowena and were not paid before the order for winding up, will be general creditors. They form one category.

24 There will be a second category of creditors, namely persons who paid money to Rowena to be held on trust pending, or during, a loan transaction. If Owen J is correct and there are insuperable difficulties in tracing funds and therefore no proprietary claim can be pursued to any moneys, then the trust creditors will still be able to pursue a personal claim against Rowena in relation to breaches of trust by Rowena and thereby seek a dividend out of Rowena's property. These personal claims will be provable debts. See Re Vassis [1986] FCA 21; (1986) 9 FCR 518; Re Crest Realty Pty Ltd (No 2) (in liq) [1977] 1 NSWLR 664 at 667. They will be creditors, but to distinguish them from the other general creditors I will call them trust creditors or investors. The trust creditors will also be able to claim a share of the pool of mixed trust moneys.

25 I now refer to the two categories of property. The first category is the property to which the company is beneficially entitled. The trust creditors will be able to lodge proofs of debt which will be administered under the provisions of the Corporations Act in relation to Rowena's property. Those claims (and the claims of the general creditors) will be met proportionately out of the "property of the company" if any. See s 555 of the Corporations Act. It may be that there is very little, or no, property owned beneficially by Rowena to be shared between the general creditors and the trust creditors because, although there was property in this category, the receivers and managers took control of, and sold, it. There remains an issue about who was the beneficial owner of this property. If the receivers and managers resist any claims against them, then it seems there will be no "property of the company" to meet the claims of the general creditors or the personal claims of the trust creditors.

26 The second category of property is trust property. In the main, as I have said, it seems that the trust property is so mixed, and the records so poor, that it is untraceable. It is likely that all that it will be possible to say is that Rowena does not have any beneficial interest in it, and that trust creditors have a claim in relation to this property. The Court will have to decide how the proceeds are to be divided up. Only the trust creditors will be able to claim against the property in this category. The general creditors will not be able to claim against the trust property because it is not "property of the company".

27 I make no findings of fact about what property of the company or what trust property there is at this stage. All that I have done is to identify problems which remain to be sorted out in this liquidation.

28 Before Conlan was appointed liquidator of Rowena, and before he was appointed supervisor of Rowena's finance broking activities, on 4 May 1999 Rowena and its directors entered into an "Enforceable Undertaking" with the Australian Securities Investment Commission in terms of which Conlan was appointed as an independent accountant of Rowena. Pursuant to that enforceable undertaking, Rowena and Mr and Mrs Grubb were obliged to pay a sum of money into a "Deficiency Account" to meet certain of Rowena's legal obligations to make good any deficiencies in the trust account and to pay the independent accountant's fees and expenses. No money was paid into the "Deficiency Account" by the Grubbs. Therefore Conlan was not paid any moneys under that arrangement.

29 Section 73(1) of the FBC Act 1975 authorises the District Court on the application of the Finance Brokers Supervisory Board ("Board") to suspend the finance broker from carrying on his business and to authorise the Board to appoint a supervisor of the business of the finance broker. An order was made by the District Court. Section 74(1)(b) provides that where an order is made under s 73 authorising the Board to appoint a supervisor, the Board may authorise the supervisor to obtain an advance from the Treasurer for the purpose of carrying on the business of the finance broker.

30 As a result of the District Court order, by letter dated 21 July 1999 the Board wrote to Conlan setting out the terms on which he was to be appointed supervisor. The letter identified certain services to be performed by Conlan as supervisor, some of which may have extended beyond the duties of the supervisor referred to in s 75(1) of the FBC Act. That subsection provides that the supervisor should carry on the business "for the purpose of concluding or disposing of matters commenced but not concluded on behalf of clients of the business and, where necessary, for the purpose of disposing of, or dealing with, documents relevant to those matters ..."

31 However, cl 2 of the letter of 21 July 1999 provided that:

"The Services shall not include any work that is solely referable to or reasonably incidental to any of the duties of the liquidator of Rowena or Oakleigh ..."

32 Clause 13 of the letter impliedly permitted a variation to the retainer. It provided that the prior written consent of the Board was required in relation to any variation. Clause 18 provided that the retainer could be terminated upon 30 days' notice in writing by either the Board or the supervisor for any reason, or earlier on sufficient cause. Clause 6 of the letter provided that the Board would authorise the supervisor to obtain an advance for the purpose of performing the services he was to perform.

33 In addition to the funding provided by the Board, Conlan made a number of separate applications to the Department of Consumer and Employment Protection ("DOCEP") for funding for specific activities designed to preserve or to recover assets of Rowena and Oakleigh. Some of these applications were granted and some refused.

34 After Owen J handed down his reasons for decision in CIV 2076 of 1999 in Conlan v Registrar, the Board noted that his Honour at pars [326] to [331] had adverted to the limited role which the supervisor was permitted to undertake. In particular, at par [331] his Honour said:

"... Parliament has chosen language that seems to me to restrict the ambit of the powers that a supervisor may employ. ... the powers and duties of a supervisor do not extend to the type of activity here in question. The sorting out of the trust account and the assessment of competing claims on it are, it seems to me, the province of an external administrator rather than a person appointed to carry on business so as to complete matters already in train."

35 As a result, the Board announced it was undertaking a review to consider Conlan's continued role as supervisor of Rowena.

36 By letter dated 1 February 2002, the Board wrote to Conlan. He was instructed to extricate himself as supervisor from those legal proceedings and to cease billing DOCEP in his capacity as supervisor for costs incurred in ongoing activities that could be undertaken by him as liquidator. DOCEP then advised that it was prepared to continue funding activities as supervisor to a very limited extent. In addition, it agreed to fund two actions instituted by Rowena against St George Bank Ltd and another, but otherwise refused to fund his activities as liquidator. This advice was contained in a letter from DOCEP dated 15 July 2002. DOCEP specifically said in the letter that it would not fund Conlan, in his capacity as liquidator, to pursue various activities which were listed and would not fund pursuit of action CIV 2076 of 1999, or another action (CIV 1543 of 2000).

37 DOCEP also said it would not meet the costs of maintaining the trust account or the distribution of pooled funds to trust creditors, or the cost of communicating with investors and borrowers, or the recovery of Rowena assets, or the costs of interpleader proceedings. All of these activities are activities which Conlan considers necessary in the liquidation of Rowena. Conlan, as liquidator, will have to deal with general creditors and the trust creditors; and he will have to deal with property in which Rowena has a beneficial interest and with trust property.

38 In relation to trust property or assets, Conlan says, and I find, that it will be necessary to:

(e) distribute trust assets to the person's beneficially entitled to them.

39 Some of this work has already been carried out. Much more remains to be done. I agree that the work listed above will have to be carried out by Conlan in his capacity as liquidator of Rowena.

Submissions concerning the effect of the Conlan supervisor's contract

40 Mr Solomon, appearing for his group of creditors, spent a long time making submissions about the effect of the supervisor's contract. He first submitted that the order sought by Conlan should not be made because all work Conlan performs will be covered under the Board's contract with him requiring him to act as supervisor. Mr Solomon persisted in this argument, even though counsel for Conlan said that the order was not being sought to cover remuneration for his work as supervisor, and even though the minute of proposed order makes it clear that the order is only sought in relation to work performed by Conlan as liquidator.

41 Mr Solomon submitted that resort to trust funds to pay the liquidator's remuneration and expenses must be a matter of last resort. It was then submitted that the liquidator should enforce the contract whereby the Board said it would pay for services, some of which, as I have said, appear to be the type of work which would be carried out by a liquidator rather than a supervisor. For example, one of the services listed in the letter of 21 July 1999 to be performed by the supervisor was to convene and conduct information meetings for borrowers and investors from time to time and to determine the trust account deficiency. As a result of Owen J's decision and the Board's review, this is now regarded by Conlan as work which the supervisor is not authorised to perform under the FBC Act. That is work the liquidator will have to perform.

42 There are several answers to these submissions. First, it is clear from cl 2 of the letter setting out the terms of the supervisor's retainer, that he was not to carry out work solely referable to, or reasonably incidental to, any of the duties of the liquidator of Rowena or Oakleigh. Secondly, the terms of the retainer were either varied, partly terminated or clarified after the reasons for decision of Justice Owen were published. In consequence, on 1 February 2002, the chairman of the Board instructed Conlan to "extricate" himself as soon as practicable in his capacity as supervisor from legal proceedings to which he was currently party.

43 Then by letter dated 15 July 2002, DOCEP informed Conlan that DOCEP did not intend to provide any further funds in relation to 18 specified areas of work, which included the conduct of this litigation, the maintenance of trust accounts, the distribution of pooled funds to trust creditors, action to pursue loan recoveries, and the recovery of Rowena assets, among other things. I find that on 25 July 2002, the Executive Director of DOCEP informed Conlan that funding in relation to his activities as liquidator would cease on 31 July 2002. On 31 July 2002, Conlan sent a circular to investors and borrowers, and in it he said:

"My activities as Supervisor and as Liquidator have been substantially funded by the State government to date. However I have recently been advised of a variation to these funding arrangements.

The Government will continue funding the legal actions against St George Bank Ltd and former auditor of Rowena's trust account.

However the government has advised it will no longer fund my general activities as liquidator. It has also declined to fund some specific actions that I intend to pursue in order to recover funds to the Rowena trust account or to determine entitlement to those funds. Considerable work still remains in relation to the identification, recovery, preservation and distribution of trust assets. Therefore I am now obliged to explore other avenues for funding, including an indemnity from funds held in trust in which investors do not have a direct interest by way of a registered mortgage.

My legal advisers are currently preparing an application to court in this regard."

44 From this history it can be seen that a result of Owen J's decision, the Board, the State government and Conlan determined what work was covered by the retainer and what work was excluded by reason of cl 2. In the alternative, the parties varied the retainer or terminated it in part or clarified its area of operation. It would seem unnecessary to determine which is the correct analysis, but in case that is wrong I find that cl 2 of the contract between the Board and Conlan is clear. Work solely referrable, or reasonably incidental, to any of Conlan's duties as liquidator of Rowena or Oakleigh is not to be paid for by the State government. This was re-affirmed by the correspondence.

45 As a result, it is pointless, in my opinion, for creditors to urge Conlan to seek to argue with the State government that under the retainer with the Board he is entitled to be paid for work which is solely, or reasonably, incidental to his work as liquidator of Rowena. Such an argument would fail.

46 Mr Solomon also submits that there should be an application to the District Court for an order that moneys be paid to the Treasurer so that the Treasurer can prepare a scheme. Section 78(1) of the FBC Act authorised the District Court, on application of either the Board, the Treasurer or the finance broker, to make orders directing that any moneys in any account affected by an order should be paid to the Treasurer on such terms and conditions as the District Court thinks fit. The section authorises the Treasurer, upon receipt of the moneys, to prepare a scheme for distributing the moneys as compensation for persons who claim compensation. There is no obligation on the liquidator to cause Rowena and Oakleigh to make such an application. In any event, viewing the matter from a practical point of view, even if such an order were made, the Treasurer would certainly require someone to do the work which will otherwise be performed by the liquidator. The Treasurer would doubtless require that such a person be remunerated out of the moneys paid to the Treasurer.

Fees charged and expenses incurred by the liquidator

47 An affidavit sworn by Michael John Edmondson (the insolvency manager employed to assist in the liquidation of Oakleigh and Rowena) on 10 March 2003 reveals that before 1 August 2002 (the date on which this application was made), Conlan had billed the State government the following amounts:

48 The affidavit reveals that Conlan is still negotiating with the State government for the payment of the amounts set out above. Mr Edmondson states that he believes that all of those amounts ought to be paid by the State government in accordance with the funding arrangements that applied until the cessation of government funding on 31 July 2002. Submissions have been made to the State government in those terms, but the State government has not responded. At the moment, I consider that these fees, disbursements and costs are not associated with the liquidation. This is not a final conclusion on the point. I do consider, however, that Conlan should continue to negotiate for payment from the government. Only if payment cannot be recovered should Conlan seek to demonstrate - if it be the case - that some or all of these fees, disbursements and costs relate to the work of Conlan as liquidator and are not covered by the agreement with the government.

49 In short, if the government refuses to make payment and that refusal is justified in contractual terms, then Conlan can seek to recover these fees, disbursements or legal costs in the liquidation.

50 Mr Edmondson also deposes to the fact that the following amounts (exclusive of GST) have been incurred in the liquidation of Oakleigh and Rowena prior to 1 August 2002 and not billed to the State government or to any other funding source. They are as follows:

51 According to Conlan, those amounts were incurred from the date of appointment of a provisional liquidator to Rowena and from the date of appointment of a provisional liquidator to Oakleigh up until 1 August 2002, and relate to fees and expenses of the provisional liquidation and the liquidation of Rowena and Oakleigh that fell outside any undertaking of the State government.

Is Conlan's application an abuse of process?

52 The next submission made by Mr Solomon was that this application be dismissed because Conlan is bound by the decision of Owen J in Re Conlan [2001] WASC 230 ("Re Conlan"), which decision (it was submitted) precludes the bringing of this application.

53 Re Conlan was another decision made in the course of related proceedings. It related to a particular problem which developed in relation to one borrower, namely Sandgate Corporation Pty Ltd ("Sandgate"). Sandgate was a borrower of funds arranged by Rowena. Liquidators were appointed to Sandgate. By court direction, the property over which Oakleigh held a mortgage was sold and a fund of money then stood in place of the property. I was informed that once the fund of money came into existence, that Conlan then orally applied to gain access to this fund to pay liquidator's remuneration. This was referred to by Owen J at [10], where he said:

"The answers to the preliminary questions in Conlan v Registrar should assist in determining competing claims to the funds created by the discharge of mortgages such as those taken out by Sandgate. Many other questions remain to be resolved. One of them is the status of claims by the liquidators and other external administrators of Sandgate, Oakleigh and Rowena (among others) to satisfy their fees from the same funds. That is the matter in issue in this application. These reasons should be read in conjunction with the reasons in Sandgate v Ionnou and in Conlan v Registrar."

54 I was informed that there was no summons or written motion by Conlan. One affidavit was filed in support.

55 Owen J dealt with this application between [41-46] of his reasons for decision in Re Conlan. He noted that the statements of general principle which he had made earlier in his reasons in relation to the liquidator of Sandgate applied equally to the entitlement of the liquidator of Oakleigh and Rowena to remuneration. His Honour noted some differences which applied to the application by Sandgate's liquidators and Conlan, and then in [42] he noted that the doubts he had about the extent of powers which the supervisor could exercise under the Act was going to complicate the final resolution of the remuneration issue in relation to Rowena. His Honour continued at [42]:

"... It will be necessary to isolate the work done on behalf of Rowena from that done on behalf of Oakleigh. It will also be necessary to identify the work done by Conlan in his capacity as supervisor from that done as a liquidator. Nice questions might arise about entitlement to remuneration purportedly done as supervisor but which were beyond the limits of the powers properly exercised in that capacity. The situation will be made even more difficult where the work purportedly done as supervisor could have been done by a liquidator."

56 I might interpolate that counsel for Conlan has informed me, as I have noted elsewhere, that work which has already been paid for by the Department, whether it was properly the work of the supervisor or properly the work of the liquidator, is past history. This application does not seek an order which would allow Conlan to try and recoup remuneration for work carried out by him under the retainer agreement and paid or payable under that agreement. On that basis, the "nice questions" that Owen J referred to will not arise. Owen J at [43] then said:

"These matters were not properly addressed or argued at the hearing, largely because my views on the powers of a supervisor had not then crystallised. I do not think it would be appropriate to say anything more or to give directions about the remuneration of the liquidator and supervisor of Rowena."

57 His Honour then added a sentence, which Mr Solomon seizes upon as a determination which precludes Conlan from pursuing this present application. His Honour said:

"This should await further argument after the issues relevant to the administration and which might affect the outcome become clearer."

58 Mr Solomon referred to Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 at 360, where it was stated:

"Once an issue is determined at the interlocutory stage, and the trial continues, the primary judge's hand is tied in respect of all matters of fact and law involved in that determination."

59 In Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 at 642, Lord Diplock said that where an issue determined which is not decisive of the suit, the judgment on that issue is an interlocutory judgment and that the parties to the suit are bound by the determination. The only way to recontest the issue is via an appeal from the interlocutory judgment and, where appropriate, by an application to the appellate court to adduce further evidence

60 It was submitted that because of the sentence of Owen J to which I have just referred, there had been an interlocutory determination of the issue which precluded this application being dealt with at this stage.

61 In my opinion, that submission must be rejected. Owen J said nothing about when an application of this kind might be made. He merely said that it should be at some later time and after the issues become clearer. He said that because he was clearly concerned about the fact that the parties had not had the opportunity of considering the views he expressed about the role of the supervisor. In my view, the principle referred to in Bass v Permanent Trustee (supra) does not preclude this application being dealt with now, based, as it is, upon the substantial amount of additional affidavit material which has been placed before me.

62 I should now turn to note some observations made by Owen J in earlier proceedings about the subject of liquidator's remuneration.

Observations made by Owen J in earlier proceedings

63 In Conlan v Registrar, Owen J, between [371] and [375] under the heading "Liquidators Remuneration", made observations concerning that subject.

"Section 556 of the Corporations Law provides that the liquidator enjoys priority for the costs and expenses of the winding up over all other unsecured debts and claims. There are two reasons why this is of no assistance to the applicants here. First, the interests of the registered mortgagees in the Mortgagee is neither property of the company (Oakleigh or Rowena) nor is it property vested in Oakleigh as a trustee. The costs and expenses of the winding up could not take priority over the claim of a third party to property that is legally and beneficially owned by the third party. Secondly, the claims of the registered mortgagees are secured, not unsecured".

65 This paragraph appeared during Owen J's consideration of the liquidator's attempt to recover remuneration out of the funds recovered on behalf of registered mortgagees. He is not there, or in the following paragraphs, referring to the investors who did not hold registered mortgages.

66 At [375], his Honour then said in relation to a claim for remuneration for work performed in relation recovery of money due to registered mortgagees:

"This is not to say that the applicants cannot claim their remuneration. However, they do not have priority for their remuneration or other costs and expenses over the claims of the registered mortgagees. They will have to look to the general funds of the administrations to recoup those expenses. The liquidator of Oakleigh might be in a slightly different position (although not in relation to the registered mortgagees). I will deal with this situation in more detail in the Sandgate reasons."

67 The reference to the Sandgate reasons is a reference to Re Conlan.

68 In Re Conlan, Owen J referred to the question which had arisen, namely as to the status of claims by the liquidators of Sandgate, Oakleigh and Rowena to satisfy their fees from the fund containing moneys recovered for registered mortgages. His Honour began by referring to general principles, and he stated that the starting point was the judgment of Dixon J in Re Universal Distributing Co Ltd (in liq) [1933] HCA 2; (1933) 48 CLR 171, who held that a secured creditor whose debt was recovered in the winding up was entitled to be paid his principal and interest out of the fund produced by the assets covered by the security, but that expenses attendant on the realization of the fund affected by the security must be borne by it. However, he said the security was paramount to the general costs and expenses of the liquidation.

69 As I have noted already, between [41] and [46] his Honour dealt with the applications by Conlan in relation to his remuneration.

70 His Honour referred to the fact that other claimants were asserting an interest in the land in question, ie the Sandgate land. Despite deciding that he would not deal with Conlan's application, his Honour did, however, voice some views on the subject. He said at [15]:

"The principle arising from In re Universal Distributing would apply equally to persons claiming an interest as an equitable mortgagee. To the extent that the funds arising from the sale of the Eulup Road property are impressed with a trust (of whatever variety), similar considerations arise: Re G B Nathan and Co Pty Ltd (In Liquidation) (1991) 24 NSWLR 674 at 689. To the extent that it is trust property, it is available as a fund from which a liquidator can draw his or her costs, expenses and remuneration: In re Suco Gold Pty Ltd (In Liquidation) [1982] 33 SASR 99 at 110."

"So far as concerns Oakleigh, I think the object of the application was to obtain some guidance as to the general principles that might be applied rather than to establish a specific claim to a particular fund. Generally speaking, the principle in In re Universal Distributing will apply to the entitlement to remuneration of the provisional liquidator or liquidator of Oakleigh from trust or charged assets.

Where work done by a liquidator in relation to trust assets is done for the purpose of the winding up of the affairs of the company, remuneration and expenses attributable to that work may be paid out of non-trust property of the company in accordance with s 556 of the Corporations Law to the extent that such property is available. If there is not sufficient non-trust property available it is normally permissible to make an allowance to the liquidator out of trust property: Re G B Nathan at 689. In other words, a provisional liquidator or liquidator must first seek to satisfy his or her remuneration from assets held beneficially by the company but if they are insufficient then resort may be had to the proceeds from the realisation of trust property.

Where there is more than one trust from which the costs can be drawn the provisional liquidator or liquidator should estimate the costs attributable to each trust. If this cannot be done, then the costs should be apportioned pro-rata between the affected trusts. This is an application of the maxim that equality is equity: In re Suco Gold at 110. If the liquidator has performed work on behalf of investors for whom no property was held on trust he or she could look to trust assets to satisfy a claim in respect of that work if, and only if, the costs and expenses were not divisible at all: Coramandel v CL Custodians [1999] FCA 144; 30 ACSR 377 at 386."

72 This "guidance" as to general principles given by his Honour (and with which I agree) is obiter dictum. It does not provide sufficient comfort to Conlan, as liquidator of Rowena, who now seeks directions of the court authorising him to have access to the identified funds in the ANZ and the St George Bank Ltd accounts in order to satisfy his claims for remuneration, costs, charges and expenses.

73 As well as the submission by Mr Solomon that Conlan is precluded from bringing the application by reference to Bass v Permanent Trustee (supra), he also submits that this application should be dismissed because it is too early. It is suggested that only after all of the facts are known, can questions concerning remuneration be decided. I agree that any disputes about the reasonableness of remuneration may have to be decided at some later stage, but I do not agree that the liquidator is precluded from bringing his application now for an order authorising him to have access to the trust funds in order to make payments on account of his remuneration, costs, charges and expenses.

Whether the work proposed by the liquidator is necessary and whether the liquidator has been guilty of delay.

74 Mr Solomon claims on behalf of his clients that some of the work proposed by the liquidator is unnecessary. He also criticised the liquidator for delay in handling some aspects of the administration.

75 I do not have to decide whether there is any merit in those claims. This is a complicated administration, and the categories of work proposed by the liquidator will be necessary to try and sort out the rights and entitlements of creditors. The trust creditors will not lose their right to scrutinise and, if necessary, bring before the Court disputes about costs, charges and expenses (see Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 and GIS Electrical Pty Ltd v Melsom [2002] WASCA 302), and the creditors will have the opportunity to consider claims for remuneration by reason of s 473(3) of the Corporations Act.

Possible sources of other funds to pay the liquidators

76 The opposing creditors suggested that other funding sources might provide remuneration for the liquidators. It was submitted that government funding might be provided. It was submitted that creditors' funding might be secured, and it was submitted that some kind of commercial litigation funding might be secured. I am satisfied that State government funding is not available for many of the areas of work which have to be performed by the liquidator. The State government has said so in unambiguous terms. Where the State government will pay the liquidator's fees, those areas have been identified. As to creditors' funding, I suppose that some creditors might be persuaded to fund the activities of the liquidators, but no-one has informed me that this is anything more than a theoretical possibility. The mere possibility of creditors' funding, or some other source of funding, does not provide any reason for dismissing the present application.

77 This application by Conlan is for directions pursuant to s 479(3) of the Corporations Act, which reads:

"The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up."

78 The only proper subject of a liquidator's application for directions is the manner in which the liquidator should act in carrying out his functions and that the only binding effect of a direction given in pursuance of such application is that the liquidator, if he has made full and fair disclosure to the court of the material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him in accordance with the directions: Re G B Nathan & Co Pty Ltd (1991) 24 NSWLR 674 at 679.

79 An application under the section is an administrative non-adversary proceeding; Re Murphy & Allen (1996) 19 ACSR 569, although in this case I granted leave to any interested beneficiary to make submissions. The section does not enable the court to make binding orders in the nature of a judgment. The function of a liquidator's application for directions is to give him advice as to his proper course of action in the liquidation. It is not to determine the rights and liabilities arising from the company's transactions before the liquidation. The court must confine itself, in giving directions, to matters concerning the administration of the company, and it has no authority to resolve substantive matters in dispute between a trustee and a third party: Re G B Nathan & Co (supra) 679-680; Re Magic Aust Pty Ltd (In liq) (1992) 7 ACSR 742 at 745; the cases cited by Goldberg J in Re Ansett Australia Ltd [2001] FCA 1439; (2001) 39 ACSR 355 at [59]; Conlan v Registrar at [343]-[348]; and see also Bastion v Gideon Investments Pty Ltd (in liq) [2000] NSWSC 939; (2000) 18 ACLC 854.

80 The question about payment of a liquidator's remuneration, costs, charges and expenses from assets held by a company on trust was the subject of consideration in Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99. McLelland J in Re G B Nathan & Co (supra) noted, however, that Re Suco Gold (supra) differed from the present case in that it involved a company which was a trustee of a trading trust. That is, the companies carried on business as trustees, in the course of which, or for the purposes of which, they incurred debts. That was not the case in Re G B Nathan & Co (supra), nor is it the case here. The primary rationale of Re Suco Gold (supra) has no application here, and it had no application in Re G B Nathan & Co (supra); see 685 and 686.

81 The decision in Re Universal Distributing Co Ltd (in liq) (supra) provides some guidance by analogy. In that case, the company concerned was in liquidation and the whole of the assets were charged in favour of the debenture holder for an amount which exceeded their value. It was held that although the security interest of the debenture holder prevailed over any entitlement of the liquidator to recover his expenses and remuneration, such of the expenses in remuneration of the liquidator as were attributable to the realisation of the assets, the benefit of which passed to the debenture holder, were properly payable out of the proceeds of realisation.

82 Re Berkeley Applegate (Investment Consultants) Ltd (In liq) [1989] 1 Ch 32 is a case which, in factual terms, was similar to this case. The company there carried on business by receiving money from depositors and investing funds in mortgages in the name of the company. When the company went into liquidation, it held mortgages and substantial sums of money which were held on trust for depositors. The liquidator carried out a substantial amount of work sorting out the company's affairs, identifying claimants and their classes, responding to enquiries from investors and borrowers, ascertaining assets and handling general liquidator matters. In that case, as appears also to be likely in this case, the free assets of the company were insufficient to meet the liquidator's expenses and remuneration. In that case, as here, there was no statutory authority for the payment of any part of the liquidator's expenses or remuneration out of trust assets. The question which had to be decided was whether the liquidator's expenses or remuneration could be paid out of trust assets if the assets of the company were insufficient. It was held in Re Berkeley Applegate (supra) at 50- 51, that such expenses or remuneration could be paid out of trust assets on the basis of general principle, which is 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 an allowance be made for costs incurred and for skill and labour expended in connection with the administration of the property. It is a discretion which will be sparingly exercised; but factors which will operate in favour of its being exercised include the fact that, if the work had not been done by the person to whom the allowance is sought to be made, it would have had to be done either by the person entitled to the equitable interest ... or by a receiver appointed by the court whose fees would have been borne by the trust property (as in Scott v Nesbitt [1808] EngR 39; 14 Ves Jun 438); and the fact that the work has been of substantial benefit to the trust property and to the persons interested in it in equity (as in Phipps v Boardman [1964] 1 WLR 993)."

83 In Re G B Nathan & Co (supra) at 689, McLelland J noted that a liquidator is not liable to incur any expense in relation to winding-up of a company unless there is sufficient available property, and that if there were not sufficient available property, it was appropriate to apply the principle referred to in Re Berkeley Applegate (supra) and make an allowance to the liquidator out of trust assets. In Re G B Nathan & Co, (supra) McLelland J finally decided that there was no insufficiency of available property of the company to meet the liquidator's remuneration and expenses, and accordingly there was no occasion for any allowance to be made from the trust assets.

84 In this case, it appears that there will not be sufficient free assets of the company to meet the expenses of administration. Accordingly, in my view, it is appropriate to give a direction allowing the liquidator to charge remuneration, costs, charges and expenses to trust assets insofar as the property of Rowena and Oakleigh is not sufficient for that purpose.

85 In Re Suco Gold (supra), King CJ at 110 indicated in the circumstances of that case, that unless an order was made, the liquidation of the company, being without assets of its own, could not proceed. That is the case here. The government funding has come to an end, and there are not sufficient free assets to allow the liquidator to proceed with the task of sorting out the trust assets and recovering what he can on behalf of the beneficiaries. If the Court appointed a new trustee or a receiver, then the costs and expenses of the new trustee or of a receiver would certainly be paid out of the trust assets. Those factors make it an appropriate case for a similar order to be made in favour of the liquidator.

86 Mr Solomon argued that the order sought cannot be made because, if made under s 479(3) of the Corporations Act, it would not be determinative of rights. He referred to Bass v Permanent Trustee (supra) at [45], where the Court said that the purpose of a judicial determination is to provide a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy, and not to answer hypothetical questions or give an advisory opinion. The submission was that an order of the kind sought will be advisory only and will not quell controversy.

87 Those submissions cannot be upheld. This application is administrative in nature and which is authorised under the Corporations Act 2001. In any event, the order authorising the liquidator access to trust moneys, quells controversy about whether or not the liquidator will be in breach of his duties if he deducts moneys to meet remuneration and costs from the nominated trust bank accounts. Such an order is not advisory in nature. The order will have the effect mentioned in Re G B Nathan & Co (supra).

Expenses of administration of trust and expenses of winding up

88 There is also a question about whether a liquidator in these circumstances should be able to seek to deduct his remuneration costs and expenses from trust moneys if these relate to the general administration work concerning the winding up of the company as well as those related to the administration of the trusts. Gibson J in Re Berkeley Applegate (Investment Consultants) Ltd (No 3) (1989) 5 BCC 803 considered that there was a distinction between the two classes of work and that the expenses of general administration relating to winding up were payable out of the assets of the company and expenses relating to the administration of the trust assets were payable out of the trust assets. On the other hand, Needham J in Re Crest Realty (supra) at 672 said:

"... In the absence of any statutory provision regulating the administration of trusts of which a company in liquidation is the trustee, it seems to me that s 261(1) of the Companies Act (of which s 495(1) of the Corporations Act is the present equivalent) places upon the liquidator the duty to act in a responsible way in the administration of the trust in the name of the company."

89 In other words, as Finkelstein J said in 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq) [1999] FCA 144; (1999) 30 ACSR 377, Needham J tended to the view that a good deal of the liquidator's work could be categorised both as work in the administration of the trust and work in the general administration of winding up.

90 McLelland J in Re G B Nathan & Co (supra) preferred the views of Needham J. See Re G B Nathan & Co (supra) at 689.

91 In 13 Coromandel (supra) at page 385, Finkelstein J, after discussing the judgment of Gibson J in Re Berkeley Applegate (supra), Needham J's judgment in Re Crest Realty (supra), and the views of McLelland J in Re G B Nathan & Co (supra), said:

"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.

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."

92 In Re Greater West Insurance Brokers Pty Ltd [2001] NSWSC 825; (2001) 39 ACSR 301, Young CJ said at [20]:

"Some of the English cases have distinguished between the costs of the winding up in administering the trust assets and the cost of the winding up generally: see Re Eastern Capital Futures Ltd (1989) 5 BCC 803. However, in New South Wales, it has been recognised that it is often impossible to make that segregation: see G B Nathan & Co Pty Ltd at NSWLR 688, and indeed see also the earlier aspect of the English case of Re Eastern Capital Futures Ltd ... at 375. The Federal Court seems to have taken a middle position: see 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd ... The bulk of authority, however, favours the position taken in the Nathan case."

93 Young CJ also said, at [21], that it may be that in a particular case beneficiaries under a trust will be able to show that it is inappropriate for the whole of the costs of the liquidation to be loaded onto the trust assets. He considered that it was not so in that case and considered that the general rule was that whole of the costs of the liquidator are to be charged on the trust assets.

94 In my view, the whole of the costs of the liquidator of Rowena should be charged on the trust assets because, as I have said, the trust creditors will have personal claims against Rowena - I cite again Re Vassis (supra) and Re Crest Realty (supra) at page 667 - as well as claims as beneficiaries to the trust property. That being so, the general administration associated with winding up Rowena will concern creditors, and this includes trust creditors.

95 Section 473(3) provides that a liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined by agreement between the liquidator and committee of inspection, or if there is no committee of inspection then by resolution of the creditors or, if no such resolution is passed, by the court.

96 Creditors opposing the application submitted that the directions sought under s 479(3) would avoid the provisions of s 473. That will not happen, in view of my reasons below. The present application under s 479(3) is to obtain an order to allow the liquidator access to the funds for the purpose of remuneration. Section 473 is concerned with control of the terms of, or amount of, remuneration, and as I indicate below s 473 must be complied with.

97 Section 473 does not, however, apply to costs, charges and expenses. See Venetian Nominees Pty Ltd v Conlan (supra) for the distinction between "remuneration" and "costs charges and expenses".

Meeting of creditors - requirements of s 473(3)

98 Section 473(3) provides that a liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined by agreement between the liquidator and a committee of inspection, if there is one, or if there is no committee of inspection, then by resolution of the creditors, and if no such resolution is passed, then as determined by the court. Before the court has any power to act under s 473(3)(b)(ii), the liquidator must first act in accordance with s 473(4) to convene a meeting of creditors for the purpose of fixing his remuneration. Only if such a meeting is called and a resolution not passed, is the court empowered to make an order under s 473(3)(b)(ii). See Re Interchase Corporation Ltd (in liq) [1993] FCA 448; (1993) 44 FCR 501; Re WA Pines Pty Ltd (in liq) (1994) 12 ACLC 328. The resolution or order will relate to remuneration earned by the liquidator up to the date of the meeting or order. The creditors are entitled to proper particularisation of the liquidator's remuneration. If no resolution is passed, then the liquidator may apply to the court for an order. A proper particularisation of remuneration would be necessary on such an application. See Re Solfire Pty Ltd (in liq) (No 2) [1999] 2 Qd R 182.

Directions given under s 479(3)

99 I direct that Conlan, in his capacity as liquidator of Rowena, may if the assets of Rowena are insufficient for the purpose, deduct moneys from the trust moneys in the nominated bank accounts to pay his just and reasonable remuneration (as is first determined pursuant to s 473 of the Corporations Act 2001).

100 I also direct that the liquidator's "costs charges and expenses" (as distinct from "remuneration") may be deducted from the same accounts if they were incurred in relation to his duties as liquidator, and if the assets of Rowena are insufficient for that purpose.

Brokers Control Act 1975

Australian Securities and Investments Commission v Rowena Nominees Pty Ltd [2003] WASC 112

At a glance

Court

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Judgment (162 paragraphs)

Australian Securities and Investments Commission v Rowena Nominees Pty Ltd [2003] WASC 112 (11 June 2003)

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Legislation Cited (1)

Cases Cited (15)