HIS HONOUR: Peter Hillig (Hillig) and Michael John Morris Smith are receivers and managers (the Receivers) of the assets and undertakings of the J & Lee Group Trust (a unit trust) (the Trust), and Hillig is the liquidator of the Trust's erstwhile trustee, J & Lee Property Investment Group Pty Limited (in Liquidation) (the Trustee).
The Trust is regulated by a Trust Deed bearing the date 15 May 2009, and it discloses the original unit holders (which apparently have not changed) as the defendants. The first and second defendants have addresses in South Korea, and the receivers have had little or no success in making contact with them for a long period of time. This is unsurprising when it comes to the first defendant, in circumstances which are more fully described below. The third defendant has an address in Toongabie in New South Wales. She recently made telephone contact to disavow any interest as a unit holder in the Trust.
The Trustee was wound up in insolvency on 13 February 2017, at which time it was the registered owner of three properties, its only realisable assets. One of the properties has been determined to be owned by the Trustee in its own right and can be disregarded for present purposes.
The other two properties, being 13B Church Avenue, Mascot NSW and 10 Garfield Street, Vineyard NSW (referred to respectively as the Mascot Property and the Vineyard Property), were sold by the Receivers, and they presently hold the proceeds of $8,829,527 in bank accounts.
By Originating Process issued on 2 December 2021, the Receivers sought a series of orders, including for the payment of their renumeration, that they were justified in treating the two properties as assets of the Trust, that they are justified in paying from the trust funds the amount of $5,129,543.93 to the Commissioner of Taxation, that they are justified in distributing the balance of the assets to the defendants as unit holders of the Trust, or alternatively that a new trustee be appointed, and to bring about the end of the receivership.
The order that the surplus be paid to the defendants has not been pressed, correctly, because it would be inappropriate to make such an order given the uncertainty of the unitholders' status, in particular that of the third defendant. There is reason to suspect that the properties may have been acquired with the proceeds of crime. There is a distinct possibility that the first and second defendants may lay no claims to the Trust.
The Commissioner of Taxation undertook an audit of the affairs of the Trust, and consequent on the sale of the properties issued Notices of Assessment. The trust-related tax liabilities presently stand at the amount earlier referred to.
Nyman Gibson Miralis Lawyers (the firm) is a firm of lawyers who acted for the first defendant in New South Wales Crime Commission proceedings and criminal proceedings, including proceedings in the District Court in which on 16 March 2011 the jury returned a guilty verdict in respect of certain drug and firearm charges brought against him. An appeal was dismissed by the Court of Criminal Appeal on 3 April 2013. However, on 21 May 2014 (after having granted special leave) the High Court allowed an appeal, quashed the convictions, and ordered a new trial. The first defendant was subsequently convicted (at a time when he was self-represented), and, after he had served his sentence, deported to South Korea. The firm is owed an assessed amount of costs by the first defendant totalling $558,237.39 in respect of legal services provided to the first defendant. Interest continues to accrue. The District Court entered judgment for the costs on 17 January 2022.
There is a paucity of reliable information about the true ownership of the properties and interests in the Trust. The affidavit evidence of the Receivers discloses their investigations of the ownership of the properties. The material available includes contracts for the sale of land showing the Trustee as purchaser and minutes of meetings referring directly or indirectly to the Trust and the properties, which satisfy me that the liquidators were justified in treating those properties as property of the Trust.
The receivership should now be brought to an end.
The Receivers have provided information concerning their claimed remuneration, that is their costs and expenses, including timesheets and information concerning the complexity of the tasks they undertook and the seniority of the staff members who undertook them. They have complied with the requirements on receivers to provide sufficient information to permit the Court to make an assessment of the reasonableness or otherwise of their claim for remuneration. I am satisfied that the amounts claimed by them, including an amount of $11,000 for future costs, are reasonable.
By Interlocutory Process filed on 15 July 2022, the firm applies for a charging order over the first defendant's interest in the assets of the Trust to secure his liability to them under the judgment. Section 106(1)(c) of the Civil Procedure Act 2005 (NSW) (the Act) gives the Court power to make such an order. Section 126(1)(c) of the Act extends the operation of a charging order to any equitable interest in property, which is concerned with the first defendant's underlying interest in the Trust funds. I consider that a charging order as sought can (and should) justly be made: see Jonsue Investments Pty Ltd v Balweb Pty Ltd [2013] NSWSC 325 at [48] (White J, as his Honour then was); Rahme v Benjamin & Khoury Pty [2016] NSWSC 774 at [21] (Rein J); Sebie v Pham [2021] NSWCA 115 at [30]-[31] (Brereton JA).
Debate with counsel for the Receivers revealed the lack of utility of appointing a new trustee. In my view, the balance of the trust funds should be paid into Court as if on an interpleader, which is a course more likely to bring about finality one way or another. Appointing a new trustee will simply create new charges on the fund without any discernible enhancement of the prospects of resolution. Payment of monies into Court will also facilitate the enforcement of the charging order which I intend to make in favour of the firm.
The Court makes the following declarations and orders:
THE COURT DECLARES THAT:
1. Peter Hillig in his capacity as liquidator of J & Lee Property Investment Group Pty. Ltd. (In Liquidation) ("the Liquidator"), and Peter Hillig and Michael John Morris Smith as Receivers and Managers of the Assets and Undertakings of the J & Lee Group Trust ("the Receivers") be justified in considering the following properties to have been assets of the J & Lee Group Trust ("the Trust"):
1. 13B Church Avenue, Mascot NSW 2020 (folio identifier 2/547700) ("the Mascot Property"); and
2. 110 Garfield Street, Vineyard NSW 2765 (folio identifier 2/560886) ("the Vineyard Property").
(collectively "the Properties")
THE COURT ORDERS THAT:
1. The remuneration of the Receivers is determined as:
1. $41,487.50 (inclusive of GST) for the period 1 March 2020 to 30 September 2021; and
2. $20,128.90 (inclusive of GST) for the period 1 October 2021 to 30 August 2022.
1. The future remuneration of the Receivers incurred during the period 31 August 2022 to 14 October 2022 (calculated at the standard hourly rates of Smith Hancock from time to time for work of that nature, together with all reasonable out of pocket expenses) be fixed in the sum of $11,000.00 (inclusive of GST) provided that if they are less, only the actual amount will be taken from the Trust Funds.
2. The Receivers remuneration and expenses be paid from the proceeds received in the realisation of the Properties in the amount of $8,829,527.91 plus any interest that accrues on this amount as held by the Receivers until the date of distribution ("the Trust Funds").
3. The Plaintiffs costs of this application be payable from the Trust Funds.
4. The Receivers to distribute, and are justified in paying, the Trust Funds:
1. firstly, to the costs and expenses incurred in respect of this application and any other costs and expenses incurred in connection with the receivership of the assets and undertaking of the Trust, being;
1. the Receivers remuneration of $41,487.50 (inclusive of GST) for the period 1 March 2020 to 30 September 2021;
2. the Receivers remuneration of $20,128.90 (inclusive of GST) for the period 1 October 2021 to 30 August 2022;
3. the Receivers remuneration of $11,000.00 (inclusive of GST) for the period 31 August 2022 to 14 October 2022;
4. the Receivers expenses (including legal fees) incurred up to and including 14 October 2022;
1. secondly, the amount of $5,129,384.00 to the Deputy Commissioner of Taxation for outstanding tax liabilities of the Trust, comprising:
1. Income tax liability for the year ended 30 June 2019 in the amount of $5,077,175.59;
2. Activity Statement Account 002 liability in the amount of $43,886.64; and
3. Activity Statement Account 003 liability in the amount of $8,321.77.
1. The Receivers to file their final account as Receivers and Managers of the assets and undertaking of the Trust by 14 October 2022.
2. The Receivers are to pay the balance held by them ("the Surplus") into Court as if on interpleader.
3. The Receivers:
1. be discharged as Receivers and Managers of the assets and undertakings of the Trust; and
2. be released from any liability arising out of their appointment as Receivers and Managers of the assets and undertakings of the assets and undertakings of the Trust;
effective from 5pm on 14 October 2022 provided the Surplus has by then been paid into Court or upon the Surplus being paid into Court, whichever occurs first.
1. Pursuant to section 106(1)(c) of the Civil Procedure Act 2005 (NSW), order that a charging order be made in favour of Phillip James Gibson and Dennis Miralis trading as Nyman Gibson Miralis ABN 89 340 323 906 (a partnership) ("NGM"), the judgment creditor in proceedings 2022/13710 in the District Court of NSW, against the first defendant, in funds held by the Receivers on behalf of the Trust in the assessed amount of $582,116.95 (inclusive of interest, as at 19 September 2022) ("Security Interest") to satisfy the judgment debt.
2. The Receivers are restrained from dealing with the Security Interest otherwise than in accordance with the directions of NGM or in order to comply with order 8 above.
3. Direct that immediately after 3 months have elapsed from the date of these orders, NGM file an affidavit deposing as to:
1. whether any money has been paid to it by or on behalf of the first defendant in respect of the judgment debt for $558,237.39 issued on 17 January 2022 by the District Court of NSW in proceeding no. 2022/13710 (Judgment Debt); and
2. the updated amount owing to it on the Judgment Debt including any post-judgment interest pursuant to section 101 of the Civil Procedure Act 2005 (NSW).
1. The Receivers to provide a copy of these orders to creditors of the Trust and the Defendants by 5pm on 26 September 2022.
2. Liberty to apply on 7 days' notice.
Hammerschlag CJ in Eq makes the following further orders:
1. Stand over the proceedings to the Corporation List on 30 January 2023.
2. Liberty to apply may be used by the firm to make returnable any applicable motion on 30 January 2023.
3. Interlocutory Process filed 8 December 2021
(1) Notes Interlocutory Process is not pressed.
(2) The Interlocutory Process filed 8 December 2021 is dismissed with no order as to costs.
The Interlocutory Process of 8 December 2021 concerned a release from a Harman undertaking.
I stand the matter into the Corporations List on Monday 30 January 2023.
The liberty to apply, which I have ordered, may be used by the firm to return any appropriate motion on 30 January 2023.
[3]
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Decision last updated: 28 September 2022