Australian Securities & Investments Commission v Lawrenson Light Metal Die... [1999] VSC 500 | Case summary

Supreme Court of Victoria|1999-12-08|Before: Gillard J

INTERIM RECEIVER - manager - remuneration and expenses - nature of lien.

Effect of deed of company arrangement on right to remuneration and expenses.

For the former receiver-manager Mr Simon Wallace-Smith

For Secured Creditors Callawadda Equities Pty Ltd and Cosmick Pty Ltd

This is the return of a summons by Mr Simon Wallace-Smith who was the interim receiver-manager of a company seeking directions with respect to his remuneration as receiver-manager and an order that his remuneration costs and expenses be paid out of the assets of the company in priority to all other creditors of the companies.

Mr Wallace-Smith was appointed an interim receiver and manager of the company the first respondent Lawrenson Light Metal Die Casting Pty. Ltd. ("Lawrenson") by an order of this Court on 23 July 1999 pursuant to s.1323(h)(ii) of the Corporations Law ("the Law") on the application of the Australian Securities and Investments Commission ("ASIC").

He was also appointed interim receiver manager of another company, the second respondent but it soon thereafter went into liquidation.

On 30 July 1999 Lawrenson made application to discharge the order which was refused and thereafter the appointment of Mr Wallace-Smith was extended on a number of occasions until 10 September 1999 when an order was made by the Court that he be discharged as an interim receiver and manager of Lawrenson.

Section 1323 of the law empowers the Court, in a suitable case once it is established that an investigation is being carried out under the Law in relation to an act or omission which may constitute a contravention of the Law, to make orders to protect the interests of others including creditors. An application may be made to the Court either by ASIC or an aggrieved person, who is defined, and an order that can be made is an order appointing an interim receiver or an interim receiver and manager.

ASIC made application pursuant to the section and on 23 July 1999 I appointed Mr Wallace-Smith an interim receiver and manager of Lawrenson. Orders were made thereafter extending the appointment until ASIC and Lawrenson entered into a deed of settlement on 10 September 1999 pursuant to which it was agreed that an application would be made to the Court to discharge Mr Wallace-Smith as interim receiver and manager. It was anticipated that an administrator would be appointed to Lawrenson pursuant to Part 5.3A of the Law.

On that day Mandie J discharged Mr Wallace-Smith as interim receiver and manager of Lawrenson and the questions of his remuneration and passing of his accounts were reserved. On the same day Mr Anthony Cant was appointed the administrator pursuant to s.436A(1) of the Law on the resolution of the Board of Directors of Lawrenson.

The evidence established that on and after 10 September 1999 Mr Wallace-Smith provided further services in respect to the receivership.

Mr Wallace-Smith prepared an account for services rendered and expenses incurred for the period from the date of his appointment to the date of his discharge namely 10 September 1999. The amount of his account was $120,897.04. He was paid $60,000 as part payment of his fees on 22 September 1999 by the administrator.

The administrator prepared his report for submission to the creditors and he noted on page 11 that there was some uncertainty whether the balance of fees due to Mr Wallace-Smith had priority over other creditors. Solicitors acting for Mr Wallace-Smith put the administrator on notice that he claimed that his fees were to be paid in priority to any other creditor including secured creditors.

A meeting of creditors of Lawrenson was called and on 5 October 1999 a Deed of Company Arrangement was executed by the administrator Mr Cant and Lawrenson.

On 13 October 1999 Mr Wallace-Smith filed his summons in the proceeding seeking directions and orders with respect to his remuneration and expenses. Directions were given and the matter was adjourned for hearing on 29 October 1999.

On the hearing of the summons before me, counsel appeared on behalf of Mr Wallace-Smith and Lawrenson. Counsel also appeared on behalf of the deed administrator Mr Cant and for two secured creditors, Callawadda Equities Pty. Ltd. and Cosmick Pty. Ltd. Mandie, J. in giving directions on 15 October 1999 ordered that the summons and supporting documents be served on the two secured creditors.

Mr I.R. Jones of counsel appeared on behalf of the two secured creditors and made application to the Court for an adjournment to enable the two secured creditors to place material before the Court. He indicated that the creditors were not prepared to pay any costs in relation to the adjournment and if there was any risk that they would have to pay the costs then he abandoned his application. I stated that I was prepared to grant the adjournment but there was the risk that the two secured creditors would have to pay the costs and Mr Jones abandoned his application.

Mr M. Connock of counsel who appeared for the deed administrator stated that he appeared to assist the Court by raising a number of matters but did not seek to oppose the application by Mr Wallace-Smith. However the matters raised if successful, would preclude Mr Wallace-Smith from recovering his fees.

A solicitor employed by ASIC informed the court by letter that ASIC formed the view it had a conflict of interest in the proceeding and hence would not appear.

There is no provision in the Law dealing with the right of the court appointed receiver of a corporation to be paid his fees, costs and expenses. By way of contrast s.425 of the Law gives jurisdiction to the court to fix the remuneration of a receiver appointed pursuant to a power contained in an instrument.

"The court may provide for the remuneration of a receiver."

The question of jurisdiction was discussed by Needham in Re Central Commodities Services Pty Ltd (1984) 8 ACLR 801 and he came to the view that there was a general power to fix the remuneration of a receiver appointed by the court.

"It seems clear in my opinion that where a receiver is appointed by the court he can look to the assets of the company of which he is receiver to meet his proper remuneration and the liability properly incurred. He has an indemnity over the assets and as such is entitled to a lien, and that lien, as established by Bernard v Davies (1863) 32 L.J. Eq 41 at p.43, covers not only his remuneration but also his properly incurred expenses."

In National Companies and Securities Commission v Greater Pacific Investments Pty Ltd [1990] VicRp 49; (1990) VR 558 Brooking J when talking about the jurisdiction said -

"It seems to me that in dealing with the remuneration I am exercising the power conferred by Rule 39.06 of Chapter I of the Rules of Court ... Rule 39.06 itself recognises and confirms the inherent power to fix the allowances of a receiver appointed by the court."

No counsel who appeared before me raised any doubts about the jurisdiction and I am satisfied I have the necessary jurisdiction to make an appropriate order.

The proceeding and the rival contentions of the parties raise four matters for consideration and determination They are -

(i) what effect, if any, did the fact that a deed of company arrangement was executed and the provisions of s.444D of the Law have upon the entitlement of the receiver-manager to recover his fees in priority to any other creditor?

(ii) should the receiver-manager's remuneration costs and expenses be calculated in accordance with the scale prescribed by the Insolvency Practitioners Association of Australia ("IPAA") or in accordance with the Supreme Court scale in the Practice Note [1995] VicRp 72; (1995) 2 VR 549?

(iii) what, if any, remuneration costs and expenses is the receiver-manager entitled to for services rendered and expenses incurred on and after 10 September 1999 when his receivership was terminated?

(iv) did the receiver-manager perform services outside the scope of his receivership and if he did is he entitled to the remuneration costs and expenses in relation thereto?

Effect of Deed of Company Arrangement

Pursuant to the deed of settlement between ASIC and Lawrenson it was agreed that Mr Wallace-Smith should be paid $60,000 as part payment for his fees. This was done. The balance due is made up of $60,897.04 in respect of work done to 10 September 1999 and he claims the sum of $18,709.74 for work done between 11 September 1999 and 17 October 1999.

On 5 October 1999 the Deed of Company Arrangement was executed between Lawrenson and the administrator Mr Cant.

Mr Wallace-Smith was not a party to the deed. He attended the meeting of creditors but took no part in it.

"a creditor of the company in respect of a debt or claim the circumstances giving rise to which occurred on or before the day when the administration of the company began, namely 10 September 1999 but excludes the secured creditors."

The phrase "secured creditors" is defined as meaning Callawadda Equities Pty. Ltd. and Cosmick Pty Ltd. No other secured creditor is named.

The purpose of the Deed of Company Arrangement was for the administrator to collect funds due to the company and to discharge the company's priority debts and claims "in the order specified in s.556 of the Corporations Law."

No provision is made in s.556 for any priority payment to a receiver-manager.

Clause 5 concerns secured creditors and it provided that the rights of the secured creditors were in no way affected by the deed. But this is limited to the two defined secured creditors.

Clause 8 provided for the distribution of the fund in order of priority and it is clear that the entitlement of the receiver-manager is not given any priority.

Mr Connock on behalf of the administrator raised a doubt as to the right of Mr Wallace-Smith to a priority because of the provisions of s.444D of the law.

"444D(1) A deed of company arrangement binds all creditors of the company so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(1)."

The date specified is 10 September 1999 so that any claim after that date is not caught by the sub-section, that is, the claim for remuneration after 10 September.

The submission was that it was arguable that Mr Wallace-Smith was a creditor and hence bound by that sub-section and accordingly was not entitled to any priority in respect of the balance of his fees and expenses.

This raised the question whether or not Mr Wallace-Smith was a creditor of the company within the meaning of s.444D(1)?

Mr Tsalanidis on behalf of Mr Wallace-Smith submitted that he was not a creditor of the company within the meaning of s.444D(1)but if he was, he was a secured creditor and accordingly by reason of s.444D(2) his priority as a secured creditor was not affected by the execution of the deed of company arrangement.

"444D(2) Sub-section (1) does not prevent a secured creditor from realising or otherwise dealing with the security, except so far as: (a) the deed so provides in relation to a secured creditor who voted in favour of the resolution of creditors because of which the company executed the deed; or (b) the court orders under s.s.444F(2)."

Mr Wallace-Smith took no part at the meeting of the creditors. He did not vote in favour of the resolution that the company execute the deed.

The issue for determination is whether Mr Wallace-Smith is a creditor within the meaning of s.444D(1) of the Law?

It is well established law that a receiver appointed by a court is entitled to look to the assets of the company to meet his reasonable and proper remuneration costs and expenses. He has a right to an indemnity in respect of all liabilities incurred by him and the indemnity ranks as a first charge over the assets subject only to his costs and expenses including his remuneration. This right of indemnity is by way of a lien over the company's assets and it arises by operation of law and is not dependent upon statute.

In Moodemere Pty Ltd v Waters [1988] VicRp 31; (1988) VR 215 at 229 Tadgell J said -

"Both a receiver appointed by the court and (subject to the terms of his appointment) a receiver appointed out of court have a right to resort for their proper out of pocket expenses and remuneration to the proceeds of the realisation of the fund that they are required to realise. In either case, it seems, the right might be characterised as a lien on the relevant fund; and it is limited by reference to the interest in the fund as enjoyed by the beneficiary or beneficiaries for whom the realisation is made or attempted. So, where a receiver is appointed by the court as working for the benefit of all who have a legitimate interest in the fund, his lien may be correspondingly more extensive than it is in the case where the receiver is appointed out of court by an individual creditor whose interest in the fund is limited. It must be appreciated, however, that the limitation is expressed not in terms of the quantum of the individual's debt but in terms of his interest in the fund that affords the security for the debt."

It is also well established law that once a lien is established then a receiver who is appointed by the Court has in respect of that lien priority over the claims of secured creditors. See Moodemere Pty Ltd (In Liq) (supra) at p.221 per Murphy J.

The learned author of O'Donovan, Company Receivers and Managers (1981 ed.) at p.429 stated -

"A receiver's right to remuneration is not dependent upon the ability of the estate to answer all claims made upon it. As an officer of the court a receiver is considered to be appointed on behalf of all parties interested in the company's property. The court will, therefore, ensure that his remuneration takes precedence as far as possible over every other payment to be made out of the assets under its control."

See also Re Central Commodities Services Pty Ltd (1984) 8 ACLR 801 at 803 and the second edition of the work at p.8917.

Further it is also well established that the lien is not lost even if the receiver-manager parts with possession of the assets because the lien subsists independently of actual possession.

The object of appointing a receiver-manager pursuant to s.1323 of the Corporations Law is to place an impartial person in charge of the company to protect its assets for the benefit of those who may have some claim against the company. The main object of the exercise is to preserve the property of the company from some danger that threatens it.

The receiver becomes an officer of the court. He performs his services in that capacity.

The question is does the interim receiver-manager's right to remuneration ahead of all creditors including secured creditors make him a creditor of the company? Clearly he has a lien. In Re Central Commodities Services, supra at p.803 Needham J said -

"As submitted by counsel for the Corporate Affairs Commission, having an indemnity, a receiver appointed by the court has a lien over the assets of the company, and is therefore a secured creditor within the meaning of s.5(1) of the Bankruptcy Act, which is incorporated into the Company's Code by s.438(2). Under the definition of the Bankruptcy Act a 'secured creditor' includes a mortgagee, a chargee or a lienee."

In Shirlaw v Taylor [1991] FCA 415; (1991) 31 FCR 222, the Full Court of the Federal Court was concerned with the costs and charges of a provisional liquidator.

In the course of their judgment the Full Court stated at p.230 -

"It is well settled that a receiver or receiver and manager appointed by the court has an indemnity over the assets of the company in question and is a secured creditor with a lien for his expenses remuneration and costs; see Re Application of Central Commodities Services Pty Ltd."

It is noted that the court assumed that a receiver-manager was a secured creditor in respect of his remuneration and expenses costs was beyond argument.

In my respectful opinion the observation is incorrect in reaching his decision Needham J formed the view that the receiver-manager because he had a lien over the assets and by reason of the definition of secured creditor in the Bankruptcy Act, was a secured creditor.

The provisions of the Bankruptcy Act were incorporated in the winding up of an "insolvent company". In those circumstances a receiver-manager would be treated as a secured creditor by reason of his lien. But that does not make him a secured creditor for all purposes.

There is no doubt that he has a lien. The lien covers all assets of which he was appointed to take possession or has the right to take possession and in my opinion the lien continues to exist independently of actual possession. Indeed, that is a characteristic common of most forms of equitable lien.

The cases establish that a receiver-manager has an equitable lien in respect of his fees, costs and expenses over the property comprised in the estate which he is authorised to take into his possession and administer.

The lien extends to all assets of which he is appointed although it is unnecessary that they actually come into his actual control.

In Mellor v Mellor (1992) 4 All E.R. 10 at p.19, Deputy High Court Judge Michael Hart QC said at p.19 -

"In my judgment the receiver's right to be indemnified out of the assets of which he is appointed a receiver extends to all the assets of which he is so appointed and does not simply attach to those assets which, in the course of his receivership, he is able to bring within his grasp."

It is clear that an equitable lien is a right conferred in equity upon a person to charge property of another until certain obligations are satisfied. It is important to note that the receiver's lien is founded upon and arises by operation of the law. The receiver is not an agent of the parties to the proceeding, nor is he an agent of those who claim an interest in the property. He is an officer of the court but the court does not indemnify him if the costs and expenses charged by him exceed the value of the assets.

In Hewitt v Court [1983] HCA 7; (1983) 149 CLR 639 the High Court considered the nature of an equitable lien.

"Equitable lien does not depend upon contract or upon possession. It arises by operation of law, under a doctrine of equity 'as part of a scheme of equitable adjustment of mutual rights and obligations'; those words of Isaacs J were used in Davies v Littlejohn [1923] HCA 64; (1923) 34 CLR 174 at 185 in relation to the doctrine of vendor's lien, but they have a general application." (Emphasis added.)

The right to the equitable lien is based upon "solid and substantial justice" - see Rose v Watson [1864] EngR 300; (1864) 10 HLC 672 at p.684 and as Gibbs CJ makes clear on p.646 in the case of Hewitt, supra, the existence of a lien depends upon "the circumstances in which equity has considered that justice requires the recognition of the existence of a lien".

"An equitable lien is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness ... Though called a lien, it is in truth a form of equitable charge over the subject property ... in that it does not depend upon possession and may, in general, be enforced in the same way as an other equitable charge, namely by sale in pursuance of court order or, where the lien is over a fund, by an order for payment thereout."

In my opinion where a receiver-manager is appointed by the court in respect of the assets of the company, he is entitled to a lien over those assets in respect of his remuneration costs and expenses. His right is based upon an equity, namely, that it is just in all the circumstances that he should have a lien in respect of his remuneration and expenses incurred in the course of his receivership. It arises by operation of the law.

In my opinion his lien does not make him a creditor of the owner or person who may an have an interest in the property of which he has assumed control. Such persons do not owe him any money. The relationship of debtor-creditor is not established.

However, having said that, in certain circumstances a person holding a lien has been treated as a secured creditor.

In Combe v Lord Swaythling (1947) Ch 625 Wynn-Parry J was concerned with a lien claimed by a purchaser of real estate purchased pursuant to an agreement.

His Lordship accepted that there was a lien and went on to say -

"In my judgment all those cases are to be explained by reference to the underlying principle that the right of a purchaser to a lien in such circumstances is tested on the basis that he is regarded as a secured creditor. I cannot see how a purchaser has any right to a lien unless it can be postulated of him that he is a secured creditor."

His Lordship earlier said that the purchaser is to be regarded in respect to the deposit as a secured creditor and stated that in his view that emerged clearly from the speeches of their Lordships in Rose v Watson [1864] EngR 300; (1864) 10 HLC 672; 11 ER 1187.

Their Lordships in the House of Lords case did not state that the person entitled to the lien was a secured creditor and one should view what Wynn-Parry J said as an indication that the person entitled to the lien was to be treated as a secured creditor. This is how Gibbs CJ understood the decision in Combe.

Although not a creditor, a person entitled to a lien in certain circumstances has been treated as a creditor and in certain circumstances by reason of statute is a secured creditor.

73 Re Central Commodities Services Pty Ltd (1984), supra is an example.

It is clear that in certain circumstances the person entitled to enforce an equitable lien is treated as a creditor and a secured creditor. However, whether or not a receiver-manager is a creditor will depend upon all the circumstances. A statute may make him one.

This brings me to the real question, namely, was the receiver-manager of Lawrenson a creditor of the company in respect of his remuneration costs and expenses within the meaning of s.444D(1)?

This will depend upon what is meant by the word "creditors" in s.444D(1) of the Law.

The word "creditor" is not defined in the Law. It becomes a question of determining the intention of Parliament and in seeking the intention it is appropriate to consider the context, the Law as a whole and the purpose of a deed of company arrangement.

It is clear from a reading of Part 5.3A of the Law that the reference to a creditor is to a person who has had dealings with the company and who is owed money by it.

That is not to be taken as an exhaustive definition. The whole scheme of Part 5.3A puts the fate of the company in the hands of its creditors, those who have dealt with it in the past, are owed money by it and who can by reason of their dealings and information supplied make a decision as to its future.

The receiver-manager does not fall into that category. His right does not depend upon the company owing him any money but on his right in law to be reimbursed for his remuneration costs and expenses. He is not concerned to decide the fate of the company.

In my opinion he is not a creditor within the meaning of s.444D(1). The plain fact is he is not a creditor of the company.

There is no statutory provision which defines him as a creditor in relation to his receivership and in my opinion the circumstances do not require the court to treat him as a creditor.

If I am wrong in that conclusion then it seems to me that as he has a lien which gives him a priority over other creditors; he is in the same category as a secured creditor. It would follow therefore he is to be treated as such. Section 444D(2) applies and s.444D(1) does not apply to him.

It follows that the entry into the deed of company arrangement does not affect his lien.

This Court in a Practice Note published [1995] VicRp 72; (1995) 2 VR 549 published a scale of rates which was appropriate for a receiver-manager to charge. The rates operate as at and after 1 July 1995. They have not been increased.

The Practice Note provided that "the rates are not mandatory and the court is not bound to allow remuneration at the published rates. In every case the fixing of remuneration is a matter requiring the exercise of the discretion of the court and thus requiring consideration of (among other things) the complexity of the particular matter".

The IPAA rate was published on 1 December 1997 and provides a substantially higher rate than the Supreme Court rate.

The charges made by Mr Wallace-Smith are on the IPAA rate. The evidence showed that Mr Wallace-Smith and his staff undertook substantial work in order that Lawrenson should be able to continue in business and he and his staff increased trade debtors from $154,308 to the sum of $312,000 by the time the receivership terminated. In addition, the administrator received a substantial sum for trade debts to 25 October 1999. It is further noted that the administration has been time consuming with regular reports required to the Court.

The question of entitlement to a higher sum than that specified in the Court scale was considered by Brooking J in National Companies and Securities Commission v Greater Pacific Investments Pty Ltd. [1990] VicRp 49; [1990] VR 558. His Honour at p.561 stated the general rule -

"The Practice Note scale is to be applied unless the court considers it to be inappropriate to the particular matter. It may be inappropriate because an entirely different basis of assessment is more suitable and because the scale itself stands in need of modification to meet the circumstances of the case. The burden rests on the liquidator or receiver to show that the scale is inappropriate to the particular matter."

In that case the circumstances were unusual and his Honour, after considering the facts, held that it was unreasonable and inappropriate to simply apply the Court scale and in the final result, after giving all due weight to all relevant matters, came to the view that the scale of remuneration should be more than the Court scale but less than the IPAA scale.

Mr Wallace-Smith does carry the burden of establishing that the Court scale is inappropriate in the circumstances and that a higher remuneration should be allowed.

Mr Wallace-Smith, in his affidavit, supported by Mr Beck in his affidavit, set out the work that was performed.

It has been said that no two receiverships are exactly the same. The tasks confronting a receiver vary according to the particular circumstances. Matters which are clearly relevant to the question of remuneration are difficulty, complexity and responsibility. That is not an exhaustive list but indicates the more important factors to take into account.

Mr Wallace-Smith in his affidavit traced through the history of his receivership and exhibited a number of accounts which he rendered from time to time.

He also referred to and relied upon an affidavit of Gavin Joel Baigel sworn 10 September 1999 which was filed in proceeding No. 6359 of 1999 but which deals with the receivership. Mr Baigel referred to a report dated 10 September 1999 to the court in relation to the receivership.

The affidavit evidence of Mr Wallace-Smith provides very little evidence suggesting difficulty or complexity. There is no doubt that he and his staff performed considerable work and did manage Lawrenson in a way which made it possible for it to continue to trade. He emphasises that during his receivership he made contact with the majority of debtors and managed to collect a considerable sum of money from them.

A colleague of Mr Wallace-Smith swore an affidavit pursuant to a power of attorney from Mr Wallace-Smith. The colleague is Andrew William Beck. In an affidavit sworn 27 October 1999 he exhibited a very full breakdown of the work that was performed by the members of staff and the nature of it. Mr Beck on behalf of Mr Wallace-Smith emphasised the efforts made by Mr Wallace-Smith in continuing to operate the business and the fact that Lawrenson's debtors were increased significantly. At the conclusion of the interim receivership the debtors had increased from $154,308 to $312,000. By collecting the money from debtors Lawrenson was able to trade. It is also noted that after the receivership was terminated Mr Wallace-Smith continued to receive moneys from debtors which he remitted to the administrator.

The thrust of the evidence in support of the application that the fees should be in accordance with the IPAA scale, is that the interim receiver-manager did a good job in conducting the business of the company to enable it to continue to trade.

The affidavit material does not set out in any detail the complexity or difficulty with the receivership. That there was considerable work performed there is no doubt but the work is to be remunerated for the time involved.

The burden does rest upon the receiver and I am not satisfied that he is entitled to a higher remuneration than that set out in the Practice Note of the court. Accordingly, I am prepared to allow his remuneration in accordance with the scale recommended by the court.

It was submitted on his behalf that the scale has not been updated since 1 July 1995. That is correct. However, it is not appropriate to increase the amount of the charge merely because the scale has not been updated since 1 July 1995. If it is inadequate then application should be made to the court to increase it. Further, it is said that the receiver and his staff undertook substantial work and I have no doubt that that is correct, but that is what he is being remunerated for. It is also said that the administration has been time consuming with regular reports required by the court and that is also correct but the fact is that he will be remunerated for it.

Mr Wallace-Smith has claimed a sum for services rendered after 10 September 1999. Mr Irlicht, counsel for the company, submitted that he is not entitled to be remunerated for such work and that his entitlement is restricted to those services necessary to finalise his receivership. In my opinion, that is correct.

Evidence was placed before the Court with respect to the details of the work done post the receivership and I was invited by counsel for Mr Wallace-Smith to consider the details and rule whether the services rendered were necessary and reasonable to finalise the receivership. Bearing in mind the amount involved I indicated that if there were sufficient detail I would be prepared to perform that exercise but after looking at the details I am not satisfied that the works done were all necessary for the purpose of finalising the receivership. The problem is that there is insufficient material or detail before the court to enable the exercise to be performed with any degree of confidence. I indicated that was my provisional view in the course of argument and upon further consideration, I think it necessary to refer the matter to the Master so that an assessment can be made on proper evidence as to what works were reasonably performed to finalise the receivership and what charge should be allowed.

The order appointing the receiver-manager set out the powers, duties and rights of the receiver-manager.

The order gave the powers to the receiver-manager which are found in s.420(2) of the Law. These are additional powers and are conferred "for the purpose of attaining the objectives for which the receiver was appointed." The sub-section went on to provide what he was permitted to do and importantly s.420(2)(h) empowered him to carry on the business of Lawrenson.

However, the powers given to him are not exhaustively provided by s.420(2). That sub-section is concerned with conferring additional powers.

The general powers are found in s.420(1) which provides -

"Subject to this section, a receiver of property of a corporation has power to do, in Australia and elsewhere, all things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objectives for which the receiver was appointed."

Mr Irlicht on behalf of the company has referred to a number of items in the receiver's bill which he submitted showed that he performed tasks which were outside his receivership and not necessary for him to perform. It was submitted that he carried out work that fell outside s.420(2a) and s.420(2h). One of the matters identified was whether a related company was owed any money by Lawrenson which the receiver-manager investigated. It was submitted it was an unnecessary investigation.

It was submitted that the evidence disclosed some of the items claimed were not in respect of work which he was required to do as receiver-manager.

I have closely considered the evidence and in my view the question of investigating the matter was within the power and authority conferred upon him.

Mr Irlicht referred me to a number of items which he submitted showed that the receiver-manager performed work which was either unnecessary or unauthorised. He invited the court to refer the bill to a Master so that each item could be considered. I am not prepared to do that.

The receiver-manager has sworn an affidavit as have others, setting out in some detail what he has done and the charges made. They were not cross-examined on the affidavits. Those who appeared to oppose the receiver's application did not call evidence. If they wished to attack the bill on the ground that the work fell outside the receivership it should have been the subject of evidence before me.

To refer the matter for a hearing before a Master is inappropriate and the expense not justified bearing in mind the amount of money involved.

The evidence before the court shows that what Mr Wallace-Smith did up to and including 10 September 1999 was authorised and necessary in order to properly perform his office.

It is contended that the assets of the company at this point may be insufficient to meet the balance of the receiver-manager's claim. That is not a matter for the court's consideration.

The receiver-manager is entitled to his remuneration and expenses out of the assets over which he assumed control. The fact that payment may affect the financial viability of the company is not a reason to refuse to enforce the receiver-manager's lien. The law is clear he is entitled to enforce his lien against the assets of which he was appointed.

In my opinion the execution of the deed of company arrangement by Lawrenson does not effect the right of Mr Wallace-Smith to recover his fees, costs and expenses in priority to any other creditor of Lawrenson.

In my opinion his costs and expenses should be calculated in accordance with the scale prescribed by the Supreme Court in Practice Note [1995] VicRp 72; (1995) 2 VR 549. I am not persuaded by him that the scale should be increased in the circumstances of this case.

In my opinion Mr Wallace-Smith is entitled to be paid for the services he performed up to and including 10 September 1999 which services are set out in the various accounts which he has prepared. I am not persuaded that he has performed services up to and including 10 September 1999 which were outside the scope or authority of his receivership. I am of the opinion they were.

I am further of the opinion that he is entitled to his remuneration costs and expenses on the Supreme Court scale in respect to work done on and after 10 September but only in relation to those works which were essential for the finalisation of his receivership. The amount involved is not great and I encourage the parties to work out between themselves and by this I mean Mr Wallace-Smith and the legal practitioners for Lawrenson to avoid the expense of referring the matter to the Master.

Subject to any submissions from counsel I propose to make the following orders, namely -

1. That the remuneration costs and expenses of Simon Alexander Wallace-Smith from and including the date of his appointment as interim receiver and manager of Lawrenson Light Metal Die Casting Pty Ltd on 23 July 1999 up to and including 10 September 1999 be assessed by a Master on the scale recommended by the court and published in [1995] VicRp 72; (1995) 2 VR 549 and be paid to Simon Alexander Wallace-Smith out of the assets of Lawrenson Light Metal Die Casting Pty Ltd in priority to other creditors including the administrator.

2. That the remuneration costs and expenses of Simon Alexander Wallace-Smith on and after 11 September 1999 in respect of work performed and expenses incurred necessary to finalise his receiver-managership be assessed by a Master on the said scale of the court published in [1995] VicRp 72; (1995) 2 VR 549 and be paid to Simon Alexander Wallace-Smith out of the assets of Lawrenson Light Metal Die Casting Pty Ltd in priority to the other creditors including the administrator.

In order to avoid further costs I recommend to the parties that they meet and resolve the amounts owing without the necessity of an assessment by the Master.

I will hear the parties on the question of costs of this application.

Australian Securities & Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd [1999] VSC 500

At a glance

Court

Decision date

Before

Source

Judgment (141 paragraphs)

Parties

Cases Cited (4)