• Lawyers in Sydney
• Lawyers in Melbourne
• Lawyers in Brisbane
• Lawyers in Perth
• Family lawyers
• Employment lawyers
• Criminal lawyers
• Wills and estates lawyers
• Find a lawyer

Judgment 1HER HONOUR : By summons filed 27 July 2011, the plaintiff company (Goldana Investments) has sought the revocation of the appointment of the third and fourth defendants as receivers and managers of the assets, undertaking and property of the company or that the receivership of the company be terminated. An order is also sought for the payment to Goldana of the surplus and other assets arising from their receivership of the company (having regard to the fact that the secured creditor's debt has now been paid out of the proceeds of sale of a shopping centre at Greystanes). 2The application is resisted by the Receivers on the basis of their concern that they may be personally liable for capital gains tax (if any) assessed on the sale of the Greystanes Shopping Centre. In that regard, Counsel for Goldana Investments, Mr Lonergan, was at pains to emphasise (on more than one occasion) that no capital gains tax has yet been assessed (and that none can be assessed until the filing of the company's year ended 30 June 2011 tax return, the preparation of which has apparently been hindered by the lack of books and records of the company, a matter to which I will return in due course). 3The source of power for the relief sought was identified (pursuant to directions made by Bergin CJ in Eq on 29 July 2011) by Goldana Investments' legal representatives, in a letter dated 1 August 2011, as being s 423(1)(b) of the Corporations Act 2001 (Cth), which, relevantly, provides as follows: 423(1) If: ... (b) a person complains to the Court or to ASIC about an act or omission of a controller of property of a corporation in connection with performing or exercising any of the controller's functions and powers: the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit. 4Reference was also made in the 1 August letter to s 420(1) of the Act, which provides that a receiver of property of a corporation has power to do 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 is appointed. Goldana Investments' position is that the receivers have now realised a surplus beyond the amount secured by the charge pursuant to which they were appointed and thus that the purpose for which they were appointed has been achieved. It is said that the charge and mortgage have been discharged and their provisions are no longer operative; and hence that the receivers are now acting ultra vires and should be removed. 5There is no dispute as to the validity of the Receivers' appointment or as to the indebtedness secured by the securities pursuant to which the Receivers were appointed. 6The solicitors acting for Goldana Investments on the present application have acted for its sole director, Mr Kwok, in other proceedings in this Court (2009/298763) in which Hammerschlag J gave judgment against, inter alios, Mr Kwok in March this year ( Brighten Pty Ltd v Bank of Western Australia [2011] NSWSC 816) and in the Federal Court (on an application, dismissed on 22 July 2011 by Lloyd-Jones FM, to set aside a Bankruptcy Notice that had been served upon Mr Kwok - Kwok v Bank of Western Australia Ltd [2011] FMCA 559). The relevance of this (adamantly disputed by Mr Lonergan) goes to the asserted inability of Goldana Investments' legal representatives to communicate with Mr Kwok for the purposes of compliance with an order made by White J in these proceedings on 29 August 2011 (to which I will refer later). Background facts 7Goldana Investments was incorporated in 1996. It acquired the Greystanes Shopping Centre in May 1997 for a stated consideration of $13,130,000 (see Exhibit 3). Currently, its sole director and member is Mr Michael Wilson Kwok, who is the subject of bankruptcy proceedings. 8In May 1997, Goldana Investments mortgaged the Greystanes Shopping Centre to the second defendant (National Mutual Life Association Australasia Ltd) (NMLA), in support of two advances made to a third party totalling $9,847,000. Under the registered Memorandum of Mortgage U6SS372, incorporated by reference into the Mortgage, the Mortgage secured the payment of not only the Principal Sum but also, inter alia, all costs, charges, expenses and payments which the receiver or any attorney of the mortgagor is liable to pay or sustains in connection with the exercise of any right, power, authority or remedy conferred by the security or by statute (clause 1). Clause 19 of the Memorandum of Mortgage specifies the order of priority of payments out of the proceeds of sale of the mortgaged land and provides, relevantly, that payment of the moneys secured by the Mortgage are to be paid in priority to payment to the mortgagor. 9Goldana Investments at the same time entered into a deed (headed Equitable Charge) pursuant to which it granted to NMLA a fixed and specific charge in relation to specific assets (including all freehold and leasehold land and fixed assets of the company) and a floating charge as to the remainder of the Mortgaged Premises (defined as meaning "all the undertaking and assets of [Goldana Investments] ... and any part thereof"). 10In November 2006, the term of the Mortgage was extended to November 2010 and the principal sum increased to $19,402,500. At that time, NMLA transferred to the first defendant, National Mutual Life Nominees Ltd (NMLNL), all of NMLA's interest in the Mortgage. 11It is not disputed that Goldana Investments defaulted on its obligations under the Mortgage. By Deed of Appointment of Receiver (undated but said by the Receivers to have been effective on 20 September 2010 and registered on 29 September 2010), NMLNL appointed the Receivers as the joint and several receivers and managers of all of the undertaking and assets of Goldana Investments as well as of the Greystanes Shopping Centre. Under the Deed of Appointment of Receiver, the Receivers were appointed to exercise all the powers, authorities and discretions of NMLNL as contained in the Charge and the Mortgage (clause 1). Pursuant to clause 2, NMLNL declared that, other than as directed in accordance with the provisions of the Charge and the Mortgage, or unless otherwise required by law, all surplus monies (excluding the Receivers' remuneration, costs expenses and charges) would be accounted for to NMLNL. 12Clause 4 contained a declaration by NMLNL that the Receivers would act as agents for Goldana Investments "to the full extent permitted by law" and that otherwise, the Receivers would act as agents for NMLNL. 13By a Deed of Indemnity for Receiver dated 20 September 2010, NMLNL indemnified the Receivers in relation to all claims made against them which may arise out of the conduct of the receivership (clause 2) and provided that NMLNL would be responsible for the due payment of all fees, costs, expenses and charges to which the Receivers are entitled under the terms of the Deed of Appointment (clause 3). 14On 13 May 2011, the Receivers exchanged contracts for the sale of the Greystanes Shopping Centre for a sale price of $25.5 million. Settlement of the sale took place on 6 June 2011. The net proceeds of sale were $24,550,731. Goldana Investments has complained that it was not notified in advance of the sale and that it "was left to the Solicitors for the Plaintiff on or about 20 July 2011 to ascertain an apparent sale of the property", which it seems they did by reference to an internet search of the real estate agents' website. Complaint is also made as to the response received to a request by Goldana Investments' solicitors for production of all documentation in relation to the sale. 15Effective as at 1 June 2011, NMLNL notified ASIC of its release of the Greystanes Shopping Centre from the Charge. Counsel for the defendants (Mr White) points out that this was not a discharge of the security (as contended in the submissions made on behalf of Goldana Investments on this application). 16On 10 June 2011, the Receivers paid to NMLNL the amount of $23,792,541.80, being the amount of the debt then owed by Goldana Investments. According to Mr Melluish (whose affidavit sworn 2 August 2011 was read on the present application) as at 1 August 2011, the Receivers held in the receivership bank account the amount of $771,684.26 ([14]) and there were disbursements yet to be paid in the amount of approximately $8,000 ([17]-[19]). Mr Melluish also deposed that the Receivers had performed further work up to 8 August 2011, for which he estimated that remuneration would be sought of about $6,000. (The Receivers have received an estimate for costs of this proceeding in the amount of $28,000 ([58]-[59]).) 17Mr Lonergan asserts that this affidavit is inconsistent with the letter written on 22 July 2011 from Gadens to Jackson Lalic in which it was confirmed that the Receivers anticipated a surplus of proceeds after payment of all their outstanding liabilities and the secured credit in the sum of approximately $800,000 (i.e. more than the $771,684.26 referred to in the affidavit as being held by the Receivers) and that the secured creditor had been paid and the remaining creditors were small in comparison to the surplus (whereas in the affidavit the sum of $390,106.00 is nominated as the remuneration approved to be paid to the Receivers, together with disbursements of $7,179.00). 18These proceedings were commenced on 27 July 2011 (when ex parte orders for short service on the Receivers were obtained). Prior to the commencement of the proceedings, Jackson Lalic had written (in a letter signed by Mr Dominic Green, the employed solicitor who has sworn the four affidavits read in these proceedings for Goldana Investments) to Gadens asserting that it was incumbent on the Receivers and Managers to terminate the receivership and account to Goldana Investments forthwith. In that letter (in what does not seem readily explicable as simply a 'typographical' error), Mr Green states: We confirm that we act for Michael Kwok in relation to his request to inspect your clients' records and a letter of authorisation will be provided in due course. In the meantime, please advise the dates upon which your clients will permit inspection. 19On 27 August 2011, a Notice to Produce for Inspection was served by Jackson Lalic seeking the production of documents by 29 July 2011. That Notice, signed by Mr Green, identified the party for whom it had been prepared as "Michael Kwok, Client". (Mr Green, in the witness box on the present application, said that this was an error and suggested that the error had been an administrative one by the staff at his firm, though conceding that he had prepared and signed the document). 20On 29 July 2011, the proceedings came before Bergin CJ in Eq and her Honour made orders requiring Goldana Investments to identify in writing the provision(s) of any statute and/or the charge, or other principle upon which they rely to support the prayers for relief sought in the Summons. I have noted above the response that was provided in that regard. 21On 1 August 2011, the proceedings came before White J in the Corporations List and his Honour listed the matter for hearing on 8 August 2011. The matter then came before Hammerschlag J. At the request of Goldana Investments, the hearing was vacated and directions were made for the service by 26 August 2011 of any affidavit material in reply by the plaintiff. I am informed by Mr White that on that occasion, Counsel for Goldana Investments (again, Mr Lonergan) had acknowledged a need for the question of any capital gains tax liability to be determined before the retirement of the Receivers and had foreshadowed the service of expert evidence in that regard. Mr Lonergan did not demur from the proposition that this had been raised at that stage. 22During August 2011, correspondence took place between the respective solicitors in relation to the position taken by the Receivers in respect of the potential capital gains tax liability. Some of that correspondence may well have been covered by without prejudice privilege, as pointed out by Mr White, insofar as it appears to have been an attempt to resolve the dispute between the parties as to the retirement of the Receivers. Nevertheless, in the interests of time on the hearing of the current application, no objection was raised by Mr White to those communications being received into evidence (though he submitted that the context of the communications would affect the weight to be placed thereon). 23On 3 August 2011, in a document on which Mr Lonergan places weight, the Receivers' solicitors (Gadens) wrote to Jackson Lalic confirming that a surplus of approximately $800,000 was anticipated and noting that Mr Kwok had committed an act of bankruptcy (as a result of the unsuccessful attempt to set aside a bankruptcy notice issued by BankWest) and that Jackson Lalic was acting on instructions from Mr Kwok (against whom BankWest was seeking a sequestration order). The letter noted that Gadens' client was one of a number of creditors of Mr Kwok and sought an undertaking by Mr Kwok to both their client and to the Federal Magistrates Court that, to the extent that Goldana Investments was successful in the present proceedings (and pending the determination of the creditors' petition), Mr Kwok would direct the Receivers to deposit the surplus into Jackson Lalic's bank account and instruct that firm to refrain from disbursing those funds (other than by means of access by Mr Kwok to pay legal costs associated with the Federal Magistrates Court proceedings). There seems to have been no response to this by the time requested (5 August 2011). 24On 9 August 2011, Gadens sent a letter by email to Mr Green at Jackson Lalic, confirming that the books and records of Goldana Investments were required in order for the Receivers to calculate whether there was a capital gains tax liability on the sale of the shopping centre and confirming that the Receivers' position was that if there is no such liability, then the receivership would be finalised promptly and any surplus remitted to Goldana Investments. The email noted that Mr Green had been unable (after the hearing before Hammerschlag J the previous day) (or was 'not instructed') to indicate whether or not he (or presumably his firm) held the books and records of Goldana Investments or knew where they were located. It was pointed out to Mr Green that his firm was in a position to obtain instructions from Mr Kwok as it acted for Mr Kwok in his personal capacity in other matters. The letter noted that the Receivers could not advance the matter to a conclusion without Mr Kwok's cooperation in providing the books and records of Goldana Investments (and pointed out that Mr Kwok had failed to provide a report as to affairs of the company to the Receivers, requesting that he do so by 12 August 2011). 25The response from Jackson Lalic dated 11 August 2011, signed by Mr Green, was to acknowledge the Receivers' concern as to a perceived potential personal liability for capital gains tax on the sale of the property and its effect upon the surplus and to articulate their client's concern that, whilst the surplus remains under the control of the Receivers, it will "inevitably (with respect) be extinguished by way of professional and perhaps other fees". The letter went on to state that "That situation is only exacerbated by the fact that the information you request is not readily obtainable in the proper form, nor ascertainable for the purpose of bringing it to that stage." (I interpose to note that on its face this is an extraordinary admission by Goldana Investments - namely, to the effect that the company does not now retain or has not kept books and records of the company that are readily obtainable "in the proper form", having regard to the provisions of s 286 of the Corporations Act .) 26The letter went on to state that urgent and detailed instructions were presently being taken as to any potential capital gains tax liability arising from the disposal of the shopping centre but expressed (on an "initial and preliminary basis") the "emerging" view that any capital gains tax liability would be minor if not nil (or negative) because of the significant capital expenditures incurred, plus the costs associated with the purchase and sale. It proposed that the surplus be transferred to Jackson Lalic's trust account upon the execution of a deed of settlement and release indemnifying Gadens' clients and advised that Jackson Lalic (not, I note, Mr Kwok) would provide the undertakings previously requested, namely that the surplus would not be released or applied prior to the final determination of the capital gains tax issue. 27Mr Lonergan submits that, read with the 3 August letter, this was in effect a proposal that matched the proposal that had been put forward by the Receivers. 28Gadens responded to the 11 August letter on 15 August 2011, noting that no contention had been made that the Receivers had acted or may act improperly and that Mr Melluish's affidavit of 2 August had set out the remaining liabilities in the receivership as at that date. It also referred to the refusal by Hammerschlag J to make an order sought on 8 August for the payment of the surplus into Jackson Lalic's trust account on the basis that his Honour saw no utility in such an order. 29Gadens noted that the 11 August letter had referred to "clients" in the plural and went onto state that they assumed that the firm now acted both for Goldana Investments and for Mr Kwok in the present proceedings. Concern was raised that no information had been provided to assist the Receivers in the calculation of any capital gains tax liability (although the statement that detailed instructions on that topic were being taken by Jackson Lalic suggested that the firm had access to material that would assist the receivers in that regard). The letter stated that the difficulties with finalisation of the matter were entirely a result of Mr Kwok's failure to deliver up the books and records of Goldana Investments and to provide a report as to affairs. 30This produced a denial (by letter dated 17 August 2011 and signed by Mr Green) that Jackson Lalic was acting for Mr Kwok in this matter. The reference to "clients" (as, I might add, has since been said to be the earlier reference in the Notice to Produce to Mr Kwok as "client") was said to be "obviously a typographical error". The letter denied that there was any basis on which to assert that Jackson Lalic or its client (Goldana Investments) had the material requested by Gadens in its possession. The writer stated "We have made the enquiries and requested the instructions you refer to, and unfortunately these are not available, to this firm nor our client " (my emphasis). (Again, if this refers to the material requested by Gadens, this is an extraordinary admission when one considers that what was sought was the books and records of the company, which there was a statutory obligation to maintain). Mr Green, in the witness box, said that he had no played any part in making enquiries or requesting instructions from Mr Kwok or anyone else from "the client". 31The 17 August letter advised that "...we now propose to involve a tax accountant...to calculate any net capital gain on disposal of the Greystanes property". In what might be said to be a Churchillian response, issue was taken to the inability of the Receivers "at least [to] commence some estimate calculation of any liability for CGT arising from the disposal of the Greystanes Shopping Centre" (emphasis as per original) and the letter called for all relevant accounting and other documentation so that Jackson Lalic could determine whether there was any information by which they could make an "indicative" assessment of potential capital gains tax liability. A proposal for the transfer of the surplus to Jackson Lalic's trust account was again put forward. 32On 25 August 2011, Mr Green confirmed that "neither instructions directly from Mr Kwok himself nor the books and records themselves are available" and indicated that Jackson Lalic were instructed (by whom, one might well ask) to seek an adjournment on the next occasion the matter was before the Court in order for negotiations to take place. 33On 26 August 2011, in response to correspondence from Gadens in which attention was drawn to the provisions of s 286 of the Corporations Act (and it was said that Mr Kwok's personal attendance at any meeting to discuss the matter was required), Mr Green informed Gadens that Mr Kwok resides overseas (though his place of residence on the ASIC search is local) and that he would "attempt to take further instructions" on the s 286 issue over the weekend. By that letter an affidavit in reply, sworn by Mr Green, was served. No expert evidence of the kind earlier foreshadowed was served but Mr Green in his affidavit deposed that "We are presently seeking instructions for the purpose of engaging Corben Consulting Services to reconstruct the necessary documentation and, more importantly, to calculate and determine whether any net capital gain was derived on the sale of the Greystanes Shopping Centre". 34The matter came before White J for hearing on 29 August 2011. As Mr Green had foreshadowed, an application for adjournment of the hearing was then made. (Over the Receivers' objections, the matter was then adjourned to 19 September 2011 for hearing.) White J on that occasion also ordered that Goldana Investments file and serve on or before 6 September 2011 an affidavit sworn or affirmed by Mr Kwok deposing to particular matters in relation to the company books and records listed in an annexure to his Honour's orders (namely, (i) whether they were in existence, prior to the appointment of the receivers; (ii) if so, the identification of: what books were then in existence; who had possession, custody or control thereof at that time; the location of the books at that time; if known, the current location of the books and person(s) exercising possession, custody or control over the books; and otherwise what has become of the books; and (iii) if not, what books and records relating to the financial affairs and performance of Goldana Investments were kept and what has become of them). 35His Honour ordered the production by Goldana Investments and Mr Kwok to the Receivers within seven days of any books and records described in the annexure to his Honours orders that are in its or his possession custody or power. His Honour also ordered the Receivers to file and serve an affidavit identifying what books and records relating to the financial affairs or performance of the company they had taken possession of, to be served within the same time period. 36In compliance with his Honour's orders, Mr Melluish swore an affidavit on 31 August 2011 in which he deposed to the fact that, at the time of the appointment of the Receivers, neither they nor their staff took possession of any books and records of Goldana Investments ([13]); that he had not been able to ascertain the identity of the company's accountant ([14]); that following his appointment he has obtained copies of various leases for the shops and kiosks within the Greystanes Shopping Centre ([15]) and deposing as to the attempts to obtain further books and records ([16]-[37]). The upshot of Mr Melluish's affidavit is that the Receivers do not have possession, custody or control of the books and records of Goldana Investments for the period prior to their appointment other than the lease documentation referred to in [14] of his affidavit. 37No affidavit was filed by Goldana Investments in compliance with his Honour's orders. Instead, on 6 September 2011, Jackson Lalic (in a letter signed again by Mr Green and annexed to his 19 September 2011 affidavit) wrote to Gadens referring to the order that had been made by White J and stating as follows: Despite our best efforts in communicating with our client to arrange for compliance, we have been unable to procure the affidavit. However, we can tell you that we are instructed that neither our client nor Mr Kwok are in possession of the relevant books and records, nor do either of them have any information as to their whereabouts. We are further instructed that at the time the receivers and managers were appointed, key staff were out of work, and our client has not been able to locate the relevant books and records ever since, and our client suspects the former disgruntled staff may have destroyed or misplaced them. 38Mr White sought leave (which I granted over the objection made by Mr Lonergan as to the lateness of the application for such leave) to cross-examine Mr Green, among other things, as to the basis on which the above statements were made. From that cross-examination it emerged that Mr Green has never spoken with Mr Kwok and has never taken instructions directly from him. Mr Green says, in effect, that all instructions from Mr Kwok were relayed to him by his supervising employer (Mr Lalic) and that the "best efforts" referred to in the letter were not efforts that he himself had made to contact Mr Kwok. He had no idea what efforts (if any) had actually been made to communicate with Mr Kwok in relation to the affidavit that was required to be filed and served (although presumably someone had spoken to him at some stage to obtain the instructions conveyed in the following paragraph in the above letter). Mr Green says that he wrote this letter (and others to which he was taken) on the instructions (and seemingly at the direction) of Mr Lalic (T 20.17). Mr Green says that he had no personal knowledge of the matters set out in that correspondence "beyond the extent of my instructions from my employer" (T 20.38). 39At most, Mr Green seems to have been Mr Lalic's amanuensis in that regard (although he says he did contact an accountant to try and arrange for an affidavit to be sworn in relation to capital gains tax - T 20.42 - but the accountant did not tell him anything as to the matters contained in the 6 September letter). I do not wish to be unduly critical of Mr Green. He is a young employed solicitor who says he works (as no doubt do many solicitors) long hours (T 20.39) and (perhaps less commonly in my experience) writes a 'million' letters on a daily basis (T 20.23). He presumably has not had considerable experience in practice. He says that he was acting on the instructions of the solicitor on the record and does not seem to have enquired beyond the content of those instructions or as to the basis on which they were given. Nevertheless, as an officer of the Court he should be aware of the professional obligations solicitors owe to the Court (and should in future keep them firmly in mind when affirming affidavits on the direction of others). 40Notwithstanding Mr Lonergan's persistent submissions to the contrary, what I consider to be relevant from the evidence given as to the manner in which Mr Green received the instructions which he communicated to the receivers' solicitors (and on which he put material before the Court) is that Mr Green was only ever in a position to relay second-hand instructions from Mr Kwok based on what he was told by Mr Lalic (who I can only assume chose not to put on any first-hand evidence of those instructions). That means that the content of those instructions (and what was sought by way of instructions) cannot now be tested in any meaningful way. Together with the inconsistency in the correspondence and documents prepared by Mr Green as to whether the firm was or was not acting for Mr Kwok in this matter (and the fact that it was clearly acting for him on the record in other matters), there is clearly an inference to be drawn that any difficulty in obtaining instructions from Mr Kwok as to the books and records (an issue that was much in contention over a period in which instructions from Mr Kwok seem able to have been obtained in other matters) was a difficulty of Mr Kwok's own making. Mr Green is adamant, and I accept, that he has never spoken with Mr Kwok (T 25.42) or "anyone who is the client" (T 25.43) and that the only instructions that he has received were from Mr Lalic. Mr Green was unaware as to how Mr Lalic himself had received instructions from "the client". This combination of factors makes it difficult for me to place any weight on the assertions made in the 6 September letter. 41It is a matter of no little concern that there has been no compliance by Goldana Investments with an order of this Court on a matter that itself cannot be taken lightly - namely, the existence and whereabouts of books and records that Goldana Investments is required by statute to maintain (and, if that be the case, the non-existence of which during the period leading up to the Receivers' appointment would lead to a statutory presumption of insolvency for the relevant period). Mr Green's knowledge of the persons from whom instructions on behalf of Goldana Investments would be sought, other than Mr Kwok, was Ms Helen James who he said was a business agent and former wife of Mr Kwok (and who is recorded in the ASIC search as a former director of Goldana Investments) (T 20.24). There is no suggestion that Ms James was approached in relation to the need to adduce evidence as to the whereabouts of the books and records. 42Mr White's cross-examination of Mr Green established (by reference to documents to which Mr Green was taken - in Exhibit 1 - and which he accepted had been prepared and/or signed either by himself or by his firm) that Jackson Lalic has acted for Mr Kwok in a personal capacity over a period that includes the period of the receivership and has therefore, to the extent that instructions must have come from Mr Kwok in order to permit the law firm properly to take the steps it appears to have taken on his behalf in those proceedings, there is no ready explanation for the apparent difficulty in obtaining instructions from Mr Kwok as to the books and records of the company. 43Mr White's submission in this regard was that the reliance sought to be placed on the contents of this letter by Goldana Investments, as explaining the position in relation to the books and records of the company, was an attempt to outflank the orders of the Court. He submitted that a Jones v Dunkel ((1959) 101 CLR 298) inference could be drawn that the books and records are either available and in the possession of either Goldana Investments or Mr Kwok or else Mr Kwok knows where they are and has not been prepared to produce them. (For the reasons set out below, I do not find it necessary to draw such an inference in order to determine the application presently before me. I do, however, draw the inference that nothing Mr Lalic could have told the Court as to the instructions received from Mr Kwok would have assisted Goldana Investments case.) I remain concerned at the manner in which Goldana Investments, while seeking the exercise of a judicial discretion in its favour, has apparently chosen not to comply with an order of the Court made against it or to put forward any officer of the corporation to give evidence as to the reason for that non-compliance. 44Finally, I note that, by letter dated 16 September 2011, in which Jackson Lalic advise that they require further instructions on various queries as to the matters raised in the 6 September correspondence (including the names of the 'key staff' and 'disgruntled staff', requested by the receivers in order to make further enquiries as to the books and records), there is the somewhat qualified (and seemingly disingenuous) statement that: ... we confirm that our letter of 6 September 2011 does not state that our clients [here, again, seemingly including Mr Kwok as a client] had any knowledge of the whereabouts of the relevant books and records at any time , and the words "ever since" were not intended to imply prior knowledge to the contrary. (my emphasis) 45If what this letter says on its face is correct, then this seems to be an admission that Mr Kwok (the sole director of Goldana Investments) had no idea at any time as to where any books and records of the company were kept, a matter which clearly calls for explanation having regard to his duties as a director of the company. 46The letter goes on to "reaffirm that Mr Kwok does not reside in Australia and at times it is difficult for us to obtain instructions from our client". Presumably, that difficulty was not operative at the time that instructions were obtained to file the application to set aside the bankruptcy notice on Mr Kwok's behalf in early June 2011; or at the time Ms James deposed (in an affidavit filed by Jackson Lalic on behalf of Mr Kwok) that Mr Kwok had instructed Jackson Lalic to ascertain whether to bring proceedings against other receivers and managers; or when a notice stating grounds of opposition to the creditor's petition in the bankruptcy proceedings was filed on behalf of Mr Kwok (by Mr Green) on 9 September 2011. (Although I note that the instructions, to which Mr Green deposed in the affidavit affirmed in support of that notice of opposition were "by [Mr Kwok]", were instructions he said in the witness box had been obtained from Mr Lalic - his explanation for that incorrect statement in his affidavit being that he was rushed when preparing the affidavit that morning. Curiously, that affidavit said further time was required to confer with Mr Kwok, though Mr Green's evidence is that he has never conferred with him.) 47With the above background in mind, I turn then to the application before me. Application for termination of receivership or removal of receivers 48The primary submission of Mr Lonergan is that, because the secured creditor has been paid out, the Deed of Appointment of Receivers ought be terminated and the surplus held by or on behalf of the Receivers should be the subject of an order for payment to the Plaintiff. 49Reliance was placed on what was said by Needham J as to the extent of a receiver's duty in Expo International Pty Ltd (in liq) v Chant [1979] 2 NSWLR 820, namely that: The receiver has a duty both to the mortgagee and mortgagor. He is appointed for the purpose of enforcing the security. He has a duty to the mortgagee to pay over to it the amount secured by the mortgage; he has a duty to the mortgagor to pay over or surrender to it the surplus assets. (emphasis as per Mr Lonergan's submissions) 50Reliance was also placed on his Honour's observation that, included in the duties of a receiver appointed otherwise than by the Court (and possibly distinct from the case where the receiver is appointed), was the duty "to act strictly within, and in accordance with, the condition of his appointment; to act to the mortgagor after the mortgagees security has been discharged, not only for the surplus assets, but also for his conduct of the receivership" and had added that the latter duty, in his Honour's opinion, involved "the duty to terminate the receivership by handing over the surplus assets to the mortgagor as soon as the interest of the mortgagee have been satisfied". 51Mr Lonergan referred to the recent decision of Yates J in Forest Marsh Pty Ltd v Pleash [2011] FCA 134; (2011) 82 ACSR 164 in which his Honour considered the Expo case and said (at [81]): ... In Expo Needham J at 834 conditioned his statement of that duty on the interests of the mortgagee having been satisfied. His Honour gave colour to this state of affairs by the further observation that a receiver would be acting outside power in failing to terminate a receivership because of "some extraneous or collateral consideration". By expressing himself in terms of satisfaction of the mortgagee's interests, his Honour (unlike the applicants) was not conditioning the duty simply on payment of the secured debt. Rather, his Honour was invoking a wider set of considerations affecting the mortgagee's or chargee's interests, including what the security document itself might provide in that regard. It is the security document that sets out the expressly agreed rights, powers and responsibilities of the receiver affecting the mortgagor or chargor. It represents the formal bargain made between the mortgagor or chargor and the secured creditor: Bank of New South Wales v Federal Commissioner of Taxation (1979) 145 CLR 438 at 454. The security document may well impose or provide for, as here, a broad range of liabilities and obligations on the part of the mortgagor or chargor for the benefit of the secured creditor extending beyond what might be ordinarily understood as being "the secured debt". Indeed, as I will later describe, the applicants' submissions, in effect, give the expression "the secured debt" (as used by them) a somewhat limited meaning in light of the liabilities and obligations that were actually imposed on the first applicant by the charge. And, plainly, the primary duty of the receiver is to the mortgagee or chargee under the mortgage or charge in respect of which he or she has been appointed: Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd (2006) 64 ATR 524 at [39].... 52In Forest Marsh , Yates J concluded that after the security had been discharged (at which time Needham J had seen the duty to the mortgagor or chargor to terminate the receivership as having arisen), it was "difficult to see what legitimate interest of the appointor the receiver could possibly serve by continuing the receivership" and that arguably, the receiver would then be acting "because of some extraneous or collateral consideration". His Honour considered that, while the contractual position between the receiver and his or her appointor would be governed by the instrument of appointment, as a practical matter, it would be difficult to conceive of circumstances where the instrument of appointment would stipulate that the receivership was to continue after the security has been discharged. 53In the present case, while the Receivers have accounted to NMLNL for the principal sum and interest thereon, part of their duties as receivers (to account for any surplus to the mortgagor) requires that surplus to be properly determined. Further, under the security documents, any expenses for which they may become liable in connection with the receivership form part of the moneys secured by the mortgage. Therefore it cannot be said, in my view, that continuation of the receivership can only be due to some extraneous or collateral considerations. 54As noted earlier, the basis on which Goldana Investments brings this application is in reliance on the power contained in s 423 of the Corporations Act . In the proceedings before me, no criticism of the conduct of the Receivers and Managers (other than failure to pay over the surplus and failure to notify in advance of the sale) was made. The complaint as to the exercise of the Receivers' powers is in essence that the surplus has not yet been transferred - it is not suggested, as I understand it, that the failure to notify in advance of the sale is something that of itself would warrant enquiry under s 423 and consequential removal of the Receivers. 55Mr White submits that s 423 of the Corporations Act does not provide a basis for the relief sought by Goldana Investments. He notes that s 423 permits the Court to inquire into the conduct of a receiver upon complaint being made about the exercise of the receiver's powers or functions. 56Reliance is placed on Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16; (2002) 10 BRP 19,565 at [137] for the proposition that the power under s 423 is an incident of the supervisory jurisdiction developed by the Court in relation to its own officers, and applied both to controllers of property by the Court in relation to its own officers and controllers of property not appointed by the Court. Mr White notes that the section is primarily concerned with empowering the Court (and also ASIC) to inquire into faithful performance of functions of controllers of property (citing GE Capital Australia v Davis & Ors [2002] NSWSC 1146; (2002) 180 FLR 250 at [63]). 57In Australian Securities and Investments Commission v Forestview Nominees Pty Ltd (recs and mgrs apptd) [2006] FCA 1530; (2006) 236 ALR 652, the Court noted that s 423 does not enable a person to challenge the decision of a receiver made in good faith. 58Mr White submits that a decision taken by the Receivers as to whether they should retire or not does not belong to the class of acts or omissions which permit the court to make an order as it thinks fit under s 423, relying on Bowesco Pty Ltd v Cronin [2008] WASC 296; (2008) 223 FLR 21 where Master Sanderson said at [8]: [8] In my view, the proper interpretation of the subsection [s 423(1)(b)] is that it relates to the actual doing of some act by the receiver (controller) with respect to his functions or powers. In other words, the subsection is focused on a particular act. It is true that the subsection refers to 'omission', but that must mean the failure to do a particular act. For instance, a complaint could be made about a decision of a receiver to take legal action against a particular creditor. Equally, a complaint could be made about the failure of a receiver to take legal action. In both instances, there is a specific decision which affects the property of the company. A decision as to whether to retire or not is not in the same class. In my view, it is not open to the plaintiffs to rely on this subsection. (my emphasis) 59In the same case, Master Sanderson went on to say at [14] - [17] that: [14] During the course of his submissions, counsel for the defendants suggested that the proper approach when a company maintains that the receivership is complete is for the company to issue proceedings against the party holding the security. Effectively, the company would be seeking a declaration that the mortgage has been redeemed. If that order was obtained, it could, if necessary, be allied with a mandatory injunction requiring the security holder to terminate the receivership. In my view, that is the proper course to adopt. Of course, that is not to suggest that the court does not have the power to remove a receiver. Clearly, it does. But the statutory provisions appear to be directed at a receiver who has not performed his functions properly. In O'Donovan, Company Receivers & Administrators, Vol 1 at 15.50, the learned author laments the absence of what he refers to as a 'simple device' which might be used to bring a receivership to a conclusion. Whatever the merits or otherwise of the learned author's views, it is clear from the authorities cited in the text that the attempted use of statutory provisions is inappropriate. They are not designed to bring about the termination of a receivership simply because the company is of the view that all the work the receiver needs to undertake has been completed. [15] This view of the operation of the Act is reinforced by reference to s 434B. That section allows a court to remove a 'redundant controller'. Pursuant to s 434B(2), such an order can only be made where the objectives of the controller's appointment have been achieved. That is really what is being submitted in this case. But under s 434B(4), it is only a liquidator who may apply for an order removing a redundant controller. It would be strange indeed if other sections of the Corporations Act could be used to remove a redundant controller when s 434B deals specifically with that circumstance and limits an application to a liquidator. The implication must be that it is not open to a corporation or a director or anyone else to apply to remove a receiver simply on the grounds that he is redundant. [16] Finally, reference is made to s 1321. That section deals with appeals from decisions of receivers. Counsel for the plaintiffs did not deal specifically with this section either in his written or oral submissions. Presumably it is said that in declining to resign, the receivers have made a decision and that decision can be reviewed under the section. I very much doubt that a decision not to resign is a reviewable decision under that section. As was submitted by the defendants, the section is concerned with decisions of the receiver in the course of the receivership. It is not a mechanism allowing the court to remove receivers. [17] Accordingly, I am not satisfied that there is statutory power available to allow the making of orders as sought by the plaintiffs. 60With respect, I consider, the learned Master's reasoning to be compelling. I do not consider that s 423 of the Corporations Act is enlivened on the present application. However, for the reasons set out below, even if it were so enlivened I would not consider this to be an appropriate case for its exercise. 61Mr White submits that in circumstances where the Receivers have a substantial contingent personal liability to pay capital gains tax, (which liability was properly incurred in the exercise of their functions as receivers), and where the securities pursuant to which the receivers were appointed to Goldana Investments justify the provisioning for any capital gains liability, the Receivers are justified in the continuation of the receivership at the present time. I agree. 62It is submitted that it is the failure of Goldana Investments (and Mr Kwok) to produce the books and records of the company (and of Mr Kwok to provide the Receivers with a report as to affairs as required) that has hampered the Receivers' ability finally to determine the existence and amount of any capital gains tax liability. 63The potential capital gains tax liability is said to arise because the sale price was somewhere in excess of $12m above the initial purchase price insofar as that has been determined (and it is clear that the purchase by Goldana Investments was after the commencement of the capital gains tax legislation). 64It is submitted that the Receivers have, prima facie , derived "profits or gains of a capital nature" in a representative capacity for the purposes of the Income Tax Assessment Act 1936 (Cth) and are, prima facie, personally liable for any amount that ought to have been retained (being the amount required to pay the tax which is or will become due in respect of the income, profits or gains). 65My attention was drawn to s 260-75 of Schedule 1 of the Taxation Administration Act 1953 (Cth) which provide for a receiver to notify the Commissioner of the appointment, and for the Commissioner to notify the receiver of the amounts considered sufficient to discharge outstanding tax liabilities. While the Deputy Commissioner has notified the receivers that (as of 14 October 2010) he had no present claim in the administration, this was subject to claims that might be made after the filing of further income tax returns. Further, it is noted that s 260-90 provides that the provisions of the subdivision do not reduce any obligation or liability of the receiver or receivers arising elsewhere. 66Sections 254 and 255 of the Income Tax Assessment Act 1936 (Cth), contain provisions upon which agents and 'trustees' become liable for the payment of tax. (By section 6 of the Act a 'receiver' falls expressly within the definition of a 'trustee'.) 67Relevantly, as 'trustees' for the purposes of s 254, the receivers (under s 254(1)(a)) will be "answerable as taxpayer" for the doing of all such things as are required to be done by virtue of the Act in respect of the income, or any profits or gains of a capital nature, "derived ... in [their] representative capacity, or derived by the principal by virtue of [their] agency, and for the payment of tax thereon"; (under s 254(1)(b)) shall in respect of that income, or those profits or gains, make the returns and be assessed thereon in their representative capacity; are by (s 254(1)(d)), "authorised and required to retain from time to time out of any money which comes to [them] in [their] representative capacity so much as is sufficient to pay tax which is or will become due in respect of the income, profits or gains"; and are (pursuant to s 254(1)(e)) "made personally liable for the tax payable in respect of the income, profits or gains to the extent of any amount that [they have] retained, or should have retained , under para (d)" (but not otherwise personally liable for the tax) (my emphasis). 68Mr White notes that in Bluebottle UK Ltd v DCT (2007) 232 CLR 598, the High Court held that s 255(1)(b) of the Act (which applies to persons in receipt or control of money from non-residents) obliges the controller to retain and pay only such tax that has been assessed as due and payable but submits that this is of little comfort to the Receivers in the present circumstances since (although the provisions of s 254(1)(d) and of s 255(1)(b) are virtually identical) s 254 is part of a statutory regime whereby the trustees "shall be answerable as taxpayer" and which compels the trustees to make a return based upon the profit or gain realised and to be assessed upon it. Mr White notes that, when considering the legislative precursors to s 255, the High Court described as 'radically different' the provisions of s 52 of the 1915 Act (at [84]), being similar to those now appearing in s 254 of the current legislation. 69While the same construction as applicable to s 255 has since been regarded as the "better construction to s 254(1)(e), when read in isolation from the other provisions of the Act" (in Barkworth Olives Management Pty Ltd v DCT [2010] QCA 80 per Fraser J at [29] with whom McMurdo P and Peter Lyons J agreed), Mr White notes that this observation was obiter and without reference to the particular statement of the High Court indicated above. 70Mr Lonergan submitted during the course of argument before me that any personal potential capital gains tax liability on the part of the Receivers would not arise once the Receivers had retired, but cited no authority for that proposition and a reading of s 254 would not suggest that this would be the case. Section 254 appears to impose a liability to answer as taxpayer for, relevantly, profits or gains of a capital nature which are derived in the receivers' representative capacity even though the receivers may later dispose of those gains (as part of the receivership). Subsection (c) makes the receivers in those circumstances personally liable for tax payable in respect of gains they "should have retained". 71In any event, it is submitted by Mr White that the Court need only be satisfied that the Receivers are entitled to take the view that they are obliged to make appropriate provisions against such tax liabilities in order to make the continuation of the receivership appropriate (citing Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd; ASIC v Bowesco Pty Ltd [2006] FCA 1493; (2006) 64 ATR 524 per French J, though noting that an appeal against the this decision was allowed, on different grounds in Fraser v Australian Securities and Investments Commission, Re Lanepoint Enterprises Pty Ltd [2007] FCAFC 85; (2007) 62 ACSR 708 ). 72In Bowesco, Master Sanderson (at [25]) accepted that it was not frivolous or vexatious for the receivers to pursue all steps necessary to ensure they were not personally liable for a capital gains tax liability to the Commissioner, even though in that case he considered that the company's contentions that the tax liability should be considered illusory were logically compelling (finding that the Commissioner's failure to issue a nil assessment left matters unresolved in relation to the receivership). Similarly, in Forest Marsh , the receivers were found to be justified in provisioning for a contentious damages claim against them, where "prudence and reason dictated" the investigation of the claim (at [104]). 73Mr White submits, and I agree, that the Receivers have a sufficient basis for concern that they may have a personal liability for the payment of tax on a capital gain that was realised by Goldana Investments while the subject property was in the hands of the Receivers, having regard to the fact that it was sold at a sum considerably in excess of the initial purchase price and in circumstances where there are no books and records available to enable a precise calculation of any capital gains tax owing. (To the extent that it was suggested that the Receivers should be in a position to make an indicative assessment based solely on the costs of the sale process, i.e. after the Receivers were appointed, this seems to me to be unrealistic but in any event even if that were the case it would surely not result in a situation where no capital gain was made at all - given the substantial differential between the initial purchase price and the subsequent sale and the lack of information as to the indexation required to the costs base of the asset.) 74Similarly, whether or not (as Mr Lonergan submits) the principal liability for that tax (if any) would rest with Goldana Investments, that does not seem to me adequately to address the basis of the receivers' concerns. 75Mr White further notes that the consequences of returning proceeds of sale to Goldana Investments, while the question of taxation liability remains outstanding, would be to place the control of the surplus proceeds into the hands of Mr Kwok, who has recently committed an act of bankruptcy (having sought unsuccessfully to set aside the bankruptcy notice) and is the subject of a creditors' petition for sequestration of his estate. (In that regard, I note that undertakings as to the holding of the funds in the solicitors' trust account have been proffered but in my view that does not address the potential exposure for the Receivers if the surplus funds, over which the security remains in order to meet any liabilities incurred in connection with the receivership, were to be expended in defence of the bankruptcy proceedings and the Receivers might then be left personally liable for any capital gains tax that might ultimately be found to be payable). Moreover, the uncertainty as to what instructions have actually been received from Mr Kwok makes any reliance on the proffered undertaking (which is not proffered by Mr Kwok but, rather, by his lawyers) problematic. 76Mr White accepts that the Receivers have accounted to NMLNL for the amount of $23,792,541.80, being the amount of the debt owed to NMLNL by Goldana Investments, at the time of payment. However, he contends that Goldana Investments remains liable to NMLNL, on a contingent basis at least, for expenses (such as any capital gains tax liability) and that any consideration of the termination of the receivership at this stage is therefore premature. I agree. 77I have referred above to the provisions of the Memorandum of Mortgage. Mr White notes that the contingent liability for capital gains tax is one to which the Receivers are or may become liable for or on behalf of Goldana Investments in "circumstances connected" to the mortgage for the purposes of the definition of secured sum in the Mortgage. He notes that the expression "Mortgagee" includes the mortgagee's assigns (clause 26(c)) and therefore, submits that NMLNL has (after the transfer of NMLA's interest in the Mortgage) assumed a liability acquired by the Receivers directly, as a result of the Deed of Indemnity. Hence, should the Receivers be liable for any capital gains tax liability of Goldana Investments, NMLNL is liable to indemnify the Receivers for that liability (and this would fall within the definition of moneys hereby secured under the Mortgage). Accordingly, it is submitted that Goldana Investments remains indebted under the terms of the Mortgage to NMLNL and is entitled to have the Receivers continue to act in that capacity in relation to Goldana Investments. 78Further, Mr White submits that nothing in subsection 58(3) of the Real Property Act 1900 (NSW) is inconsistent with proposition that the Receivers may regard the capital gains tax liability as one which is to be discharged in priority to the payment of any surplus to the mortgagor. Further, he notes that the Receivers have been unable properly to progress the assessment of any liability (by Goldana Investments and/or by the Receivers) to pay capital gains tax, because the Receivers have not been provided with the books and records of the company. I think there is force in that submission. Conclusion 79Neither Mr Kwok nor Ms James has responded to requests for information as to the books and records of the company. The response from Goldana Investments' solicitors, based apparently on instructions conveyed by Mr Kwok to Mr Lalic, if correct, leaves open the fairly compelling inference that there has been a breach of s 286 of the Corporations Act and/or of Mr Kwok's statutory duties as a director of the company (since Mr Kwok apparently was unaware at any time where the books and records were, assuming they ever existed). If they existed but are feared to have been destroyed by some disgruntled employee, that does not explain why no information as to this has been provided or why an accountant of the company or a director in Mr Kwok's position would not be able to provide documents relating to the accounts of the company in order to assist in the process of determining its financial position and, in particular, the cost base of the capital asset disposed of by the receivers. 80The inconsistent stance taken by Jackson Lalic as to whether it acts or does not act for Mr Kwok in the present proceedings (and the curiosity that instructions seem to be able to be obtained on some matters and not others) is hardly something to inspire confidence in the reliability of the information now conveyed (second-hand) to the court on instructions said to have been received from the apparently elusive Mr Kwok and nor is the failure of anyone with first-hand information as to those instructions to go on oath as to why it is that no affidavit from Mr Kwok was served in compliance with White J's orders. 81I am informed by Mr White that the Receivers' intention is to seek the company records, including income tax returns, before attempting to calculate the company's capital gains tax liability. Mr Melluish deposed to the Receivers' intention once that material was to hand to obtain legal advice as to the merits of seeking a private ruling as to any capital gains tax liability ([50]-[52]). If no further material is to hand then it is hard to see how Goldana Investments would itself be in any better position to demonstrate that there had been no capital gain (notwithstanding the "emerging" view expressed by Jackson Lalic that there would be a nil or negative liability). Mr White invited me to draw the inference that the reason that no expert or accounting evidence had emerged on the present application from Goldana Investments, notwithstanding that it had sought an adjournment for that very purpose, was that the advice it had obtained was contrary to the position for which it contends in the present proceeding. However, equally, the position might be that the suggestion that such evidence was being sought was not consistent with the instructions ultimately obtained from Mr Kwok. Whether or not that be the case, I am satisfied that it is not unreasonable for the Receivers to wish to be in a position to have any capital gains tax liability determined (or provision made to meet the maximum potential liability until such time as any liability is finally determined) before termination of the receivership. 82I accept that at an earlier stage the receivers appeared to be prepared to accept an undertaking as to the preservation of the surplus in the Jackson Lalic trust account as adequate protection against any ensuing personal liability they might have in relation to capital gains tax. Whether or not that was in the course of negotiations to compromise a dispute (and hence privileged), I consider that, given the manner in which Goldana Investments has apparently instructed its lawyers to proceed in this matter (particularly in relation to the failure to serve an affidavit in relation to the company books and records or to procure the production of those books and records) it is not unreasonable for the Receivers now to wish to have control of the preservation of the fund out of which any capital gains tax liability for which they might be personally liable should be met. 83I accept that the course of action the Receivers propose to take falls within the terms under which the Receivers were appointed to act and that any liability in respect of capital gains tax would fall within the moneys secured under the Mortgage and charge. 84I do not accept that an order for the termination of the receivership (even if, which I doubt, it did fall within the power under s 423 in the absence of any proceeding or enquiry into the receivers' conduct as such) is warranted. 85I therefore dismiss the Summons with costs. I have given consideration as to whether, as part of the orders that I make on the present application, there would be merit in making further orders requiring compliance with the orders of White J (in order to assist in the process of enabling the capital gains tax issue to be determined once and for all and the receivership finalised). However, I have not been asked for such relief the effect of the above orders is now finally to dispose of these proceedings. Suffice it to say, however, that it seems to me to be clear that if Mr Kwok (and Goldana Investments) do indeed wish to have the receivership terminated quickly, whilst honouring any tax liabilities the company might have in relation to the disposal of the property in question, it is incumbent on them to take steps to assist in the provision of information that will enable the quantum of any such liability to be determined. Orders 86I dismiss the Summons with costs. I will hear Counsel as to whether any further order in relation to costs or otherwise is sought.