SVEHLA: Correct."
14 It thus appears that the plaintiffs are concerned with recovery of both remuneration for the period from 23 March 2006 to 5 April 2006 (being remuneration approved by creditors at the s.439A meeting) and a number of outgoings related to things done by them in clarifying the title position, insuring the property, attending to matters essential or reasonably incidental to bringing the development project and construction of the building to a conclusion, taking steps towards sale of units in the building (including retaining selling agents and solicitors) and, in general, "putting together the structure by which completion would occur and sales would be effected".
15 It is, to my mind, clear that the plaintiffs, as administrators, took the several enumerated steps in due exercise of powers conferred on them by the Corporations Act. Under s.437A, they had control of the company's business, property and affairs and were empowered to carry on the company's business. All the steps to which I have referred were steps towards completion and marketing of the home units and therefore realisation of the benefits sought to be obtained from the company's development project. They were all therefore steps in the carrying on of the company's business.
16 It follows from this, first, that the plaintiffs, as administrators, became liable for the debts they incurred in taking those steps (s.443A(1)); second, that they were entitled to be indemnified out of the company's property for those debts, as well as their remuneration (s.443D); third, that that right of indemnity took priority over all of the company's unsecured debts and debts of the company secured by a floating charge on the company's property (s.443E(1)); and, fourth, that that right of indemnity was secured on the company's property by a statutory lien enjoying the right of priority specified in s.443F.
17 It is in this statutory context that the plaintiffs claim, in addition, an equitable lien over the whole of the company's property arising by operation of law in accordance with principles most often associated with the judgment of Dixon J in Re Universal Distributing Co Ltd (1933) 48 CLR 171. It is therefore necessary to consider the question whether the undoubted existence of the statutory lien (given, by s.443F, a particular priority position) precludes any meaningful assertion of an equitable lien arising at general law. Reference was made, in that connection, to the decision of Young J (as he then was) in Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64. It was held in that case that Part 5.3A administrators were entitled to an equitable lien distinct from the statutory lien. Young J said (at p.71):
"I do not consider that the Corporations Law should be construed as
excluding equitable liens which would otherwise be held to exist by a court of equity were it not for the specific provisions of Pt 5.3A. One should not read a statute as over-riding pre-existing rights unless it says so with some clarity."
18 The reference here to "equitable liens which would otherwise be held to exist by a court of equity" was, as his Honour made clear, a reference to an equitable lien of the kind described in Re Universal Distributing Co Ltd (above), that is, a lien to which an official who has incurred expenses in assembling a fund for the benefit of creditors is entitled in relation to the fund in priority to a secured creditor who derives benefit from the assembling of the fund. The lien arises from the principle that the fund itself must bear the costs of realisations and other actions involved in its creation, with those costs being satisfied out of the fund before striking the balance available to the secured creditor and thereafter to creditors generally.
19 The case before Young J concerned liability of a Part 5.3A administrator for conversion of goods sold in violation of the rights of the true owner. The liability the administrator thereby incurred was a liability in damages. Young J held that this was beyond the scope of the s.443D indemnity and, therefore, the s.443F lien. This was because the liability in damages was not covered by the words "debts for which the administrator is liable under Subdivision A". Those words appear in s.443D and refer back to s.443A(1) which is concerned solely with "debts" as such. It was from that starting point - that is, that the particular liability, not being a "debt", was not covered by the s.443E indemnity (and was therefore beyond the s.443F lien) - that Young J approached the question whether the administrator was entitled at general law to an equitable lien upon the company's property as security for the liability to pay damages for conversion of goods.
20 As I read his judgment, Young J was concerned to make it clear that a Part 5.3A administrator was not confined to the statutory lien by some legislative intention that that lien should, as it were, cover the field and be the only available lien. In respect of claims not related to "debts", the court recognised general law rights of the administrator permitting resort to the company's property rather than seeing the liabilities become a burden upon the administrator's own pocket.
21 Nothing in Young J's judgment seems to me to suggest that an equitable lien arising according to general law equitable principles is somehow to be superimposed upon or made to operate beside the statutory lien, so that both secure the same right of the administrator to indemnity or recoupment out of company property. Suggestions to that effect may, however, be found in two other cases to which I now turn.
22 The first such case is Weston v Carling Constructions Pty Ltd (2000) 35 ACSR 100. Austin J there held that a Part 5.3A administrator had an equitable lien of the kind enjoyed by a receiver, liquidator or provisional liquidator, that is, a lien securing a right of indemnity to recover expenses and fees out of the property realised in the course of the receivership, liquidation or provisional administration. In relation to receivers, Austin J referred in particular to the decision of the Full Federal Court in Shirlaw v Taylor (1991) 31 FCR 222 and quoted this passage in the joint judgment of Sheppard, Burchett and Gummow JJ (at p.228):
"[I]n addition to equitable liens arising from contractual dealings in property, equity may raise liens based either upon general considerations of justice or upon the principle that he who seeks the aid of equity in enforcing some claim (eg in administration of assets) must admit the equitable rights of others directly connected with or arising out of the same subject matter."
23 Having decided that a Part 5.3A administrator has an equitable lien of the kind that enjoyed by a receiver, liquidator or provisional liquidator, Austin J then directed attention to the statutory lien created by s.443F:
"There being an equitable lien arising out of the nature of the administrator's office and the services performed for creditors, what does the statutory lien conferred by s 443F add? In my opinion the statutory lien confirms the position at general law, but does not replace the equitable principles. True it is that the statute, in establishing a statutory lien, could limit or qualify its scope and (expressly or by implication) the scope of the equitable lien as well. But in my opinion there is nothing in Pt 5.3A that does so. The statutory lien is conferred in unqualified terms by s 443F. The words 'subject to section 556' qualify the priority of the administrator's statutory right of indemnity but not the scope of the statutory lien which supports it.
24 His Honour's reference to the words "subject to section 556" is a reference to the part those words play in s.443F(1). By causing the priority afforded by s.443E to the administrator's right of indemnity to be "subject to" s.556, the Act does not diminish the administrator's right of recovery and recoupment. Rather, it indicates that, if any assets over and above those realised in the course of the voluntary administration are recovered by a subsequently appointed provisional liquidator or liquidator, the administrator's priority of payment out of those additional assets in the subsequent winding up is governed by s.556.
25 The second case in which attention was given to the co-existence of the administrator's equitable lien and the statutory lien under s.443F is Lockwood v White (2005) 11 VR 402, a decision of the Court of Appeal of Victoria. That case, like Weston v Carling Construction Pty Ltd, was concerned with the priority to be afforded in a winding up to the right of former administrators to be indemnified out of the company's property for their remuneration and expenses incurred in the Part 5.3A administration. Winneke P (with whom Buchanan JA and Gillard AJA agreed) said (at p.417):
"It is also true that the administrators' statutory indemnity is secured by the statutory lien (s 443F) over 'the company's property', and thus makes the administrators 'secured creditors'. However, the administrator also has an entitlement to an indemnity in equity out of the assets of the company which is supported by an equitable lien which attaches to those assets which are realised in the administration. The administrator's equitable lien is separate and distinct from his statutory lien. The equitable lien makes the administrator a 'secured creditor' and, to the extent that it attaches, gives the administrator priority over the unsecured priority creditors referred to in s 556. This, in my view, is the point which was being made by Austin J in Weston's case; a point which was made clear by the Full Federal Court in the case of Shirlaw v Taylor . Those authorities also make it clear that a liquidator, too, has an equitable lien which attaches in the same way over assets which he has realised in the winding up. The liquidator's equitable lien gives him the same priority over unsecured priority creditors as does the administrators' equitable lien. The court in Shirlaw's case made it quite clear that where a party has, by his efforts, brought into court a fund in the administration of which various parties are interested, that party's costs and expenses should be a first claim upon that fund. Indeed, that was the essence of the decision of Dixon J (as he then was) in Re Universal Distributing Co Ltd (in liq) . The reasoning in Shirlaw's case was directed to the rights and claims of a provisional liquidator; but in Weston v Carling Constructions Austin J concluded that the rights and claims of an administrator were governed by the same principles. Thus the statutory lien conferred by s 443F of the Act upon the administrator makes him a secured creditor for fees and expenses incurred; and in that sense entitles the administrator to precedence over the unsecured priority creditors listed in s 556; but - nevertheless - subject to the liquidator's equitable lien."
26 It seems to be assumed in this passage that the statutory lien and the equitable lien arising in the manner derived from case law are or may be co-extensive. It is said of the equitable lien that it "makes the administrator a 'secured creditor' and, to the extent that it attaches, gives the administrator priority over the unsecured priority creditors referred to in s.556". It is then said of the statutory lien conferred by s.443F upon the administrator that it "makes him a secured creditor for fees and expenses incurred; and in that sense entitles the administrator to precedence over the unsecured priority creditors listed in s.556 …". Each lien is thus described in virtually identical terms, although in such a way as to accommodate the possibility that each may not secure precisely the same moneys as the other.
27 It was not necessary in either Weston v Carling Constructions Pty Ltd or Lockwood v White for the court to look beyond the position occupied by the administrator's lien (whether general law or statutory) vis-à-vis the claims of unsecured creditors - both those afforded precedence in a winding up by s.556 and those enjoying no such priority. From the standpoint of their co-existence with the scheme for ranking unsecured debts in a winding up, the two types of lien were regarded as indistinguishable from one another. In the present case, by contrast, the relevant competition is competition between secured creditors. On the one hand, DOHM has the two securities I have called the "land mortgage" and the "general charge" - that is, a registered legal mortgage of the company's land (being virtually its sole asset) and an equitable mortgage and floating charge over the company's assets generally. Both the land mortgage and the general charge secure all moneys owing by the company to DOHM. On the other hand, the plaintiffs have the statutory lien created by s.443F(1) securing the right of indemnity in respect of remuneration and liability for debts and, on the basis of the observations in Weston v Carling Constructions Pty Ltd and Lockwood v White, are also to be regarded as the holders of an equitable lien securing the same right.
28 The question of the respective priorities of DOHM's securities and the s.443F(1) lien is entirely a matter of statute. Section 443F(2) says that a s.443F(1) lien has priority over a "charge" only insofar as the s.443D right of indemnity has priority over debts secured by the "charge". Each of DOHM's land mortgage and its general charge is a "charge" within the s.9 definition of that expression. Section 443F(2), on its face, thus prescribes the priority enjoyed by the s.443F(1) lien in relation to both DOHM's land mortgage and its general charge. That priority is, by operation of s.443F(2), such priority as the s.443D right of indemnity is given by s.443E(1). The priority afforded by s.443E(1) to the s.443D right of indemnity is, as regards other secured obligations, priority only over "debts of the company secured by a floating charge on the property of the company": s.443E(1)(b).
29 In the present case, the moneys owed by the company to DOHM are, as stated in s.443E(1), "secured by a floating charge on property of the company". DOHM's general charge is a "floating charge" as defined by s.9. But those moneys are also secured by DOHM's land mortgage which is not a "floating charge". That circumstance raises the question whether, when s.443E(1)(b) speaks of "debts of the company secured by a floating charge on property of the company", it is referring to debts that are secured solely in that way or has in contemplation debts that are secured both in the way described and in some other way (that being the position in this case).
30 It seems to me reasonably clear that s.443E(1) does not afford priority over debts secured by a fixed or specific security, whether or not the debts are also secured by a floating charge. In other words, the reference in s.443E(1)(b) to "debts of the company secured by a floating charge on property of the company" should be read as if "only" appears after "secured". This interpretation is in line with the intent outlined in the Harmer Report (The Law Reform Commission, "General Insolvency Inquiry", 1989, Vol 1, para 93):
"The indemnity will not take priority over debts secured by fixed or specific securities, or over a debt or liability secured by a floating charge where a receiver or other person has taken possession of property under the terms of the charge before the administrator was appointed and the receiver or other person has continued in possession …"
31 The Harmer Report continues (also at para 93):
"The administrator will have a lien over the property of the company as a means of securing the indemnity, which will rank behind a fixed security but ahead of a floating security in the circumstances described above."
32 This indicates the correctness of the interpretation according to which a fixed charge, even if securing the same moneys as a floating charge, will take priority over the statutory lien so that the moneys secured by both the fixed charge and the floating charge will be met out of the relevant property before the moneys secured by the statutory lien. This means, in the present case, that the company's indebtedness to DOHM, being indebtedness secured by a fixed charge (the land mortgage), is senior to rights secured by the plaintiffs' s.443F lien; and this is so even though the indebtedness to DOHM is also secured by DOHM's floating charge.
33 In the light of this statutory specification as to the ranking inter se of DOHM's land mortgage (and the moneys it secures) and the administrator's statutory lien (and the moneys it secures), it becomes necessary to consider whether the same moneys as are secured by the plaintiffs' statutory lien may also be regarded as secured by a general law lien which might, by application of equitable principles most recently discussed in Dean-Willcocks v Nothintoohard Pty Ltd [2006] NSWCA 311 (10 November 2006), be found to enjoy priority over DOHM's land mortgage. In addressing that question, it is necessary to go back to the three cases concerning the availability of an equitable lien to a Part 5.3A administrator.
34 In Commonwealth Bank of Australia v Butterell (above), the equitable lien was seen as an adjunct or supplement to the statutory lien. I say this because the case was concerned with the administrator's right to resort to company property to recoup liabilities beyond those covered by the statutory lien. Young J approached the matter by considering the availability of the statutory lien. Only when it appeared that that lien did not apply did his Honour address the question whether an equitable lien was available. In Weston v Carling Constructions Pty Ltd, Austin J approached the matter in a different way. He considered first the availability of the general law lien. His reason for proceeding in that manner was stated at p.103:
"I begin with the equitable lien because the law in that area, as it applies to receivers, liquidators and provisional liquidators, was presumably known to the drafters of Pt 5.3A of the Corporations Law, especially since the law had been clearly set out by the Full Federal Court shortly before Pt 5.3A was enacted in 1993: see Shirlaw v Taylor (1991) 31 FCR 222; 102 ALR 551; 22 ATR 533."
35 Having decided that a Part 5.3A administrator is entitled to an equitable lien over the company's property, Austin J then turned his attention to the statutory lien, asking what, if anything, it added. The relevant part of the judgment is quoted at paragraph [23] above. His answer was that the statutory provisions confirm the position at general law and that the statutory lien "does not replace the equitable principles". In the passage quoted, Austin J then addressed the possibility that the statute, in establishing the statutory lien, might limit or qualify the scope of both that lien and the equitable lien, either expressly or by implication. He expressed the opinion that nothing in Part 5.3A imposes any such limitation.
36 Austin J was not, however, considering any question concerning the ranking of either of the liens as against other securities affecting (or interests in) the company's property. His concern was only with the position as against unsecured creditors, both those with claims preferred in a winding up by s.556 and those with claims not so preferred. There was therefore no occasion for Austin J to turn his mind to the comparative ranking of interests in the property. His Honour's opinion that nothing in Part 5.3A limited or qualified the scope of either the statutory lien or the equitable lien must be understood accordingly. Because of the particular context, he was not expressing an opinion about the ranking, in point of security, of either species of lien in relation to other interests. Indeed, had he addressed that question, he would, of necessity, have referred to the particularly defined priority given by s.443F(2) to the statutory lien.
37 In Lockwood v White, the Court of Appeal of Victoria did no more than recognise the co-existence of the two forms of lien, albeit possibly as security for somewhat different moneys. That, of course, is consistent with Commonwealth Bank of Australia v Butterell. There was no discussion of the comparative ranking of the liens or the position occupied by either by comparison with other interests in the affected property.
38 In the present case, there is no suggestion that the rights and moneys secured by the equitable lien claimed by the plaintiffs are not the same rights and moneys as are secured by the statutory lien. That being so, the question is whether both liens are independently available - the statutory lien with the ranking, as against DOHM's securities, dictated by s.443F(2) and the equitable lien with such ranking, as against DOHM's securities, as might be created by the general law apart from s.443F(2).
39 I am of the opinion that the equitable lien cannot be recognised in these circumstances - or, more precisely, that the equitable lien cannot be recognised as existing in a form which makes it capable of enjoying some ranking, in point of security, that does not (or may not) correspond with the ranking prescribed by s.443F(2). I say this because to recognise that the equitable lien may operate, in relation to the rights secured by the statutory lien, in a way that attracts some priority or ranking superior to that dictated by s.443F(2) would be to deny the intended operation of that statutory provision. The general law lien enjoyed by a Part 5.3A administrator in respect of the company's property should, in my view, be regarded principally as a means of affording protection in respect of rights of recoupment not secured by the statutory lien. Where precisely the same rights are secured by the statutory lien and by the equitable lien, the statutory specification of the ranking of the former, by comparison with other securities over and interests in the company's property, must also affect the latter. This is because equity, in recognising any such equitable lien, would pay attention to the statutory context and the statutory intention concerning security for the particular moneys. Equity would not regard it as consonant with good conscience to recognise a priority which, because more beneficial than the statutory priority to the person asserting it, placed the persons against whom the priority was asserted in a position inferior to that which the statute intended them to occupy.
40 Because, according to the view I thus take, the equitable lien the plaintiffs have over the company's land takes the same priority, in point of security, as the statutory lien created by s.443F(1) (being the priority stated in s.443F(2)), DOHM's land mortgage, not being a floating charge as described in s.443E(1)(b), is not postponed by s.443E(1) so as to rank behind the equitable lien. DOHM's land mortgage thus has priority over the equitable lien. On that basis, the plaintiffs are not entitled to the declaratory relief outlined at paragraph [6] above.
41 I proceed nevertheless to a consideration of the consequences of the view I do not favour, that is, that the general law equitable lien of a Part 5.3A administrator is not confined to the priority position occupied by the statutory lien, where the two operate as security for the same rights. According to that view, the plaintiffs' general law lien, although equitable (and therefore of its nature subordinate, in point of security, to a legal interest), could, in certain circumstances, be seen to have attained priority over the legal interest represented by DOHM's land mortgage. Whether it was entitled to such priority would depend on the application of principles explored and discussed by the Court of Appeal in Dean-Willcocks v Nothintoohard Pty Ltd (above). That case involved a receiver appointed out of court by the holder of a debenture. The question was whether the receiver's right to be reimbursed for expenditures and remuneration was charged upon the property in his hands in such a way that the lien or charge enjoyed priority over a legal mortgage.
42 Beazley JA (with whom McColl JA agreed) referred, in the Dean-Willcocks case, to "the principle of salvage". She quoted, in that connection, a passage in the joint judgment in Shirlaw v Taylor (above) at p.230:
"In addition to the anxiety of the court to protect the position of its officer, in particular, lest there be in the future an absence of persons willing to take such appointments, the claims of the officer under a court-appointed administration may be seen as in the nature of "salvage". The principle is that those taking the benefit of the administration should not escape bearing the burden of the proper cost of it: see In the Matter of Tharp (1852) 2 Sm & Giff 578; 65 ER 533 and Re Berkeley Applegate (Investment Consultants) Ltd (In liq) ; Harris v Conway [1989] Ch 32 at 51. In the latter decision, it was held (at 50-51) that there was:
'... a general principle that where a person seeks to enforce a claim to an equitable interest in property, the court has a discretion to require as a condition of giving effect to that equitable interest that an allowance be made for costs incurred and for skill and labour expended in connection with the administration of the property. It is a discretion which will be sparingly exercised; but factors which will operate in favour of its being exercised include the fact that, if the work had not been done by the person to whom the allowance is sought to be made, it would have had to be done either by the person entitled to the equitable interest (as in Re Marine Mansions Co (1867) LR 4 Eq 601 and similar cases) or by a receiver appointed by the court whose fees would have been borne by the trust property (as in Scott v Nesbitt (1808) 14 Ves Jun 438); and the fact that the work has been of substantial benefit to the trust property and to the persons interested in it in equity (as in Phipps v Boardman [1964] 1 WLR 993; [1964] 2 All ER 187).'