Gandangara Local Aboriginal Land Council v Gandangara Services Limited

Federal Court of Australia|2021-04-15|Before: Yates J

The first plaintiff be discharged as receiver and manager of the assets of the Absolute Triumph Trust, this order to take effect following the completion of the steps referred to in paragraph 19 of the affidavit made by the first plaintiff on 14 April 2021.
The requirement in r 14.25 of the Federal Court Rules 2011 (Cth) to file accounts be dispensed with, as well as the need to pass accounts.
The first plaintiff be permitted to draw from the assets of the Absolute Triumph Trust the amount approved as his remuneration as receiver and manager of the trust, and his costs of, and incidental to, the interlocutory process filed on 18 September 2020, fixed in the sum of $29,380.37.
The first plaintiff be granted liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 On 18 September 2020, the first plaintiff, Mr Sprowles, filed an interlocutory process in which he sought, amongst other relief, an order fixing his remuneration for acting as receiver and manager of the assets of the Absolute Triumph Trust (the Trust) and fixing his remuneration for acting as liquidator of the second plaintiff, Triumph N Triumph Pty Ltd (in liquidation) (the company). 2 On 21 October 2020, I made orders referring his claims for that relief, and his claim for an order for costs, to a Registrar of the Court for determination. The Registrar has now made her determination, and orders have been made accordingly in relation to Mr Sprowles' remuneration as receiver and manager. 3 When making the orders on 21 October 2020, I also ordered that the balance of Mr Sprowles' claims for relief in the interlocutory process be adjourned for determination at a later date. Those claims are now before me for determination. 4 In substance, Mr Sprowles now seeks an order that he be permitted to draw from the Trust's assets the amount approved as his remuneration for acting as receiver and manager, as well as his costs of and incidental to the interlocutory process. He also seeks an order that he be discharged from his obligations as receiver and manager.

Discharge as receiver and manager 5 A court-appointed receiver may be discharged where the object of the appointment has been achieved: Lunn v Savage [2006] NSWSC 240 at [8]. I am satisfied that the objects of the present receivership have been achieved, as I explain below. 6 On 4 September 2019, I made an order appointing Mr Sprowles as the receiver and manager of the Trust in circumstances where he had already been appointed as liquidator of the company: Sprowles, in the matter of Triumph N Triumph Pty Ltd (in liq) [2019] FCA 1461. The reason for the appointment was that it appeared, at that time, that a service and petrol station business operated by the company was being conducted from property that the company had acquired in its capacity as the trustee of the Trust. However, upon being placed into liquidation, the company was "automatically removed" as the trustee of the Trust, under the terms of the Trust Deed. 7 The property in question is located at 7 Withers Street, West Wallsend (the West Wallsend property). The West Wallsend property was acquired from DIB Group Pty Limited with the benefit of proceeds from a loan provided by the Commonwealth Bank of Australia (CBA). The repayment of the loan was secured by a registered mortgage on the West Wallsend property and by a charge which the company had given over all its assets. The West Wallsend property was the major asset of the Trust. 8 After Mr Sprowles' appointment as liquidator of the company on 24 July 2019, he continued to trade its business from the West Wallsend property in order to run down the company's stock and inventory. On 23 August 2019, he ceased to trade the business. Given the company's then substantial liability to pay the loan from the CBA, Mr Sprowles determined that the West Wallsend property should be sold to discharge that liability. 9 Contracts for the sale of the West Wallsend property were exchanged on 23 March 2020, and the sale was completed on 20 April 2020. The sale price was $739,000 plus GST. In an affidavit made on 8 July 2020, Mr Sprowles deposes to the distribution of the proceeds of sale. The sum of $523,210.47 was paid to the CBA to discharge the company's mortgage. After the payment of other costs and disbursements, the sum of $147,587.70 was deposited into a controlled monies account established in Mr Sprowles' name in his capacity as receiver and manager. With interest that has accrued, the balance now standing in that account is $147,669.62. In his affidavit, Mr Sprowles also gives an account of the receipts and payments made in respect of the Trust, as at that time. 10 The account given in Mr Sprowles' affidavit of 8 July 2020 has now been supplemented by a further affidavit made by him on 14 April 2021. This affidavit reveals that on 10 September 2019, a separate receivership account was opened by him. The bank statements in respect of that account, for the period 1 July 2020 to 31 March 2021, are in evidence. They show that the account maintained a consistent balance of $9,755.04 during that period. However, the funds in that account have now been used to pay a utilities expense owed to Alinta Energy in the sum of $9,919.57. Therefore, as at 14 April 2021, Mr Sprowles holds $147,669.62 for distribution. 11 In his affidavit of 14 April 2021, Mr Sprowles also annexes an updated receipts and payments schedule in relation to the receivership. This schedule has been corrected in minor respects. An updated schedule has been tendered as Exhibit A. Exhibit A identifies the funds available to Mr Sprowles as receiver and manager and the intended distribution of those funds. 12 Following the payment of his approved remuneration and the legal costs that have been incurred in respect of the interlocutory process, there will be no surplus funds remaining in the Trust for distribution to the company. I note in this regard that the legal costs and disbursements actually incurred substantially exceed the sum of $29,380.37 that is now claimed - a substantial discount having been applied in order to facilitate the payment of the approved remuneration.

Dispensation in relation to the filing and passing of accounts 13 Rule 14.25(1) of the Federal Court Rules 2011 (Cth) provides that a receiver must file accounts at the times ordered by the Court. This is to achieve the object of passing accounts. The object of passing accounts is to verify that all amounts received in the course of the receivership are accounted for and that all payments made in the course of the receivership have been properly made and are evidenced. However, courts have readily made orders dispensing with this requirement. 14 In Ide v Ide [2004] NSWSC 751; 184 FLR 44; 50 ACSR 324 at [22] - [29], Young CJ in Eq discussed the circumstances in which a rule, such as r 14.25(1), can be dispensed with. At [26], his Honour referred to the importance of adhering to the process of passing accounts in cases involving substantial assets, and those which his Honour described as "ranging from the middle to the higher end of the financial scale". His Honour contrasted these cases with cases where the gross assets of the receivership are minimal and the parties are not wealthy. 15 However, his Honour did not limit the occasion for dispensation only to such cases. His Honour stated a more general principle, namely that dispensation will be appropriate where the benefit obtained by adhering to the standard procedure is outweighed by the significant costs and time involved in filing and passing accounts: see also in that regard Kerr, In the matter of Angel's Castle Pre-School Pty Ltd (in liquidation) (No 2) [2012] FCA 57 at [5] - [8]; Gandangara Local Aboriginal Land Council v Gandangara Services Limited [2015] NSWSC 2011 at [12]. 16 I am satisfied that, in the present case, it is appropriate that an order should be made dispensing with the requirement to file and pass accounts in relation to the receivership, given the modest amount of the Trust's assets and the account that has already been given by Mr Sprowles of his receivership activities and of the amounts he has received and expended, and will expend, in that capacity, as shown in Exhibit A and in the affidavits read on this application. No object would be achieved in ordering accounts to be filed and passed, especially in circumstances where, as the evidence shows, the Trust has no surplus assets. 17 I should add that the evidence before me shows that only one person, DIB Group Pty Limited, has expressed opposition to the relief claimed in the interlocutory process. This opposition was in relation to some items in Mr Sprowles' claim for remuneration, not in relation to the receivership as such or Mr Sprowles' account of the sums received and expended by him. This opposition does not appear to have been maintained, although the objections were addressed by an affidavit made by Mr Sprowles on 18 September 2020, which was in evidence before, and considered by, the Registrar. 18 On 6 April 2021, I made an order that Mr Sprowles give notice of the listing of the present hearing to each person who had notified him of that person's opposition to the relief sought in the interlocutory process. On the same day, Mr Sprowles' solicitors sent a letter to the solicitors acting for DIB Group Pty Limited, advising on the listing. No response was received to that letter and no appearance by DIB Group Pty Limited, or any other person opposing the relief now sought, has been made.

Disposition 19 I am satisfied that it is appropriate to make the orders that are now sought. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.

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