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[2009] NSWSC 1106
respondent. The review application was dismissed; the controlled monies were ordered transferred to the liquidator, who was authorised to appropriate $35,000 towards remuneration and pay proper disbursements...
The Court upheld the Registrar’s assessment of the liquidator’s remuneration because Kardiasmenos had not shown a relevant error or provided adequate evidence to displace it. The Court also directed how the money held after the sale was to be dealt with, while leaving the liquidator to decide whether Kardiasmenos ranked as a secured or unsecured creditor for the rates and land tax he had paid. The orders made the distribution conditional on that determination.
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This judgment concerns the remuneration of the liquidator of Pioneer Management Pty Ltd and the distribution of money held after the sale of land that Pioneer had held on trust for Nick Kardiasmenos. Smart AJ had previously determined that Pioneer held Lot 10, Whitechapel Road, Ambervale, on trust for Kardiasmenos. The company was a landholding company, and the Court had accepted that proper costs of the liquidator connected with administration of the trust could be met from trust property ([5], [11]).
No linked legislation citations have been extracted yet.
Pioneer was wound up by order of the Court on 2 May 2005, and RJ Porter was appointed liquidator ([6]). On 20 July 2005, the Court made declarations recognising Kardiasmenos’s beneficial interest and Pioneer’s right of indemnity against trust assets. That right included specified debts incurred by Pioneer as trustee, the petitioning creditor’s costs, and the liquidator’s costs, fees and expenses, in each case as agreed or assessed ([13]). Kardiasmenos undertook to have the land sold and to pay $50,000 into a joint account for those items. The Court anticipated that this amount would be sufficient, but imposed no limits on the items to be determined later ([13], [15]).
Kardiasmenos later paid outstanding council rates and land tax to enable transfer and sale of the land. He said he had understood that he would be reimbursed from the $50,000 fund. The liquidator disputed that this gave him an immediate right to reimbursement, and raised whether he stood in the place of the relevant authorities by subrogation, as a secured or unsecured creditor ([19], [25], [47]).
The liquidator had applied for remuneration and associated amounts. The Registrar allowed remuneration of $20,661.10, excluding GST, but did not allow disbursements, including legal expenses, as part of the remuneration claim ([20]–[23]). Kardiasmenos sought review of the Registrar’s decision. He objected to the amount of work claimed, challenged the sufficiency of the supporting evidence, and argued that the liquidator had not shown why remuneration was sought before completion of the winding up ([26]).
The Court dismissed the review application. It also ordered that the controlled monies be transferred to an account controlled by the liquidator. The liquidator was authorised to appropriate $35,000 towards remuneration and to pay proper disbursements from the balance, subject to a condition concerning whether Kardiasmenos was treated as a secured creditor for the rates and land tax payments ([52]–[53]).
The decisive question on the review was whether Kardiasmenos had demonstrated a relevant error in the Registrar’s assessment. Smart AJ concluded he had not. The Registrar had considered the principal objections, including those concerning the amount of work and the evidential support for the liquidator’s time claims. The Court considered it reasonable to expect evidence supporting objections to particular work and costs ([26], [30]–[31]).
Kardiasmenos argued, among other things, that the Registrar treated liquidations as similarly expensive regardless of company size. Smart AJ read the Registrar’s comment differently: the amount of investigation and work required to discharge a liquidator’s duties may be relatively constant in relevant respects, regardless of company size or whether it traded. The Court also rejected the characterisation that the Registrar had relied on an irrelevant lack of objectivity. In the Court’s view, the Registrar had referred to the absence of objective support for objections, which was relevant when particular claims were challenged (26–(b)).
The timing objection did not establish an error either. Rule 9.4(7)(f) required supporting material to address matters delaying completion where a winding up was continuing. The Court said this rule did not prevent the liquidator from applying before the winding up was complete. The liquidator’s later affidavit explained that the liquidation could not be finalised until costs were known, although that affidavit had not been before the Registrar. Smart AJ considered it compliant with the rule and observed that future applications should place the required material before the Registrar (26).
The judgment also explains why the Court did not resolve Kardiasmenos’s reimbursement claim by simply directing priority payment. The Court accepted that he had taken a practical course in paying the rates and land tax so the transaction could proceed. But whether those payments gave him secured or unsecured status involved questions of subrogation and the nature of statutory charges. Those questions had not been fully argued or factually investigated in the earlier proceedings ([44]–[48]). The Court therefore left the creditor-status determination to the liquidator, subject to an appeal or application for review ([48]).
The resulting payment order reflected that unresolved issue. If the liquidator treated Kardiasmenos as an unsecured creditor, and there was no appeal, the liquidator could appropriate $35,000 towards remuneration and pay proper disbursements from the remaining funds. If Kardiasmenos was treated as a secured creditor for either relevant payment, the amounts were to be paid to him in priority to the liquidator’s remuneration or disbursements (53). The Court did not purport to settle all possible future claims: it expressly preserved the liquidator’s ability to seek further remuneration or further money for proper disbursements (53).
The judgment did not announce a new general rule about liquidator remuneration or creditor ranking. Its reasoning applied the prior decision in Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd [2004] NSWSC 1224. Smart AJ followed that authority in accepting that, where a company is a landholding company and carries on no other activities, proper liquidator costs and expenses can be met from trust property ([11]). The judgment also recorded the accepted limitation that trust property is available for remuneration only for work done in and about administering the trust ([11]).
The 2005 declarations had applied that principle to Pioneer’s position as trustee of Lot 10. They recognised Pioneer’s right of indemnity for identified trust-related debts and expenses, including liquidator costs, fees and expenses ([13]). In 2009, the Court was dealing with the practical consequences of that arrangement: the fund was finite, the liquidator’s claimed costs had grown beyond what had initially been anticipated, and there remained a disagreement about Kardiasmenos’s creditor status ([15], [51]).
On statutory priorities, the Court referred to ss 555 and 556 of the Corporations Act 2001 (Cth). It stated that neither the Court nor the liquidator could vary the ranking of unsecured debts and claims ([45]). The judgment records an argument that s 556(1)(a) might give priority to some expenses, but Smart AJ doubted that the payments in question fell within that provision and noted that deciding the point would not advance Kardiasmenos’s position in the circumstances ([42]). The Court did not give a comprehensive construction of those provisions.
The practical position after the judgment was therefore conditional, rather than a final ruling on the status of the rates and land tax payments. The liquidator was to determine whether Kardiasmenos was secured or unsecured, and the distribution from the controlled monies account depended on that determination and any challenge to it ([48], 53). The decision should not be read as establishing that a beneficiary who pays trust-related rates or taxes automatically acquires secured status, nor that such payments invariably rank as unsecured debts. The judgment expressly left that question to the relevant determination process on the facts.
At [11], Smart AJ said that he had followed Grossman and accepted that proper liquidator costs can be met from trust property where the company is a landholding trustee with no other activities. In plain English, the company’s use of land as trust property did not automatically prevent the liquidator’s properly connected administration costs from being paid out of that property. The passage also records the important limit: the work must relate to administering the trust.
At 26, the Court explained that Rule 9.4(7)(f) did not prevent an application for remuneration being made before the winding up was complete. The rule required the supporting affidavit, where the winding up was continuing, to explain matters delaying completion. In plain English, an application could be made before the end of the liquidation, but the supporting material still had to address the rule’s specified information requirements.
At [31], the Court stated that Kardiasmenos had not demonstrated a relevant error in the Registrar’s assessment. This is the core outcome of the review. It does not mean that every amount claimed by the liquidator was conclusively approved in every respect. The Registrar’s determination was the decision under review, and the Court found no sufficient basis to set it aside.
At [45] and [48], Smart AJ explained that creditor ranking could not be changed by the Court or liquidator and that the liquidator had to determine Kardiasmenos’s status, subject to appeal or review. In plain English, the Court did not resolve a disputed priority question without the necessary investigation. It identified the decision-maker and preserved the possibility of court oversight.
At 53, the Court made the distribution order conditional on the liquidator’s treatment of Kardiasmenos as an unsecured or secured creditor. In plain English, the order did not treat the reimbursement question as already decided. It set out different consequences depending on the liquidator’s determination.
The decision is most directly relevant to a fact pattern involving a company in liquidation that holds land as trustee, with a beneficiary seeking to recover the property or sale proceeds. It is particularly pertinent where the company has little or no activity beyond holding the trust property and a question arises whether the liquidator’s proper costs of administering the trust may be met from that property. The judgment relies on Grossman for that proposition and stresses the connection between the claimed work and trust administration ([11]).
It also concerns a review challenge to a Registrar’s assessment of liquidator remuneration. The relevant circumstances here included detailed claims for time, disbursements and legal expenses; objections to the nature and amount of the work; and a finding that the objector had not provided adequate evidence to rebut the claims. The judgment’s reasoning focuses on whether the Registrar’s assessment was shown to contain a relevant error, not on a general rule that every such assessment must be upheld ([26], [30]–[31], [50]).
A further recurring situation is where a beneficiary or other interested party pays rates or taxes to enable trust land to be transferred or sold, and later seeks repayment from sale proceeds. The case shows that payment alone may raise unresolved questions about subrogation and whether the payer is secured or unsecured. The judgment treated those questions as requiring determination on the facts and left them open to review ([45]–[48]).
The decision is less directly informative where the company conducts substantial business beyond holding trust land, where the liquidator’s work is unrelated to trust administration, or where creditor status has already been formally determined on a developed evidentiary record. The judgment’s trust-property reasoning arose in the specific setting it describes, and its conclusions on the review depended on the evidence before the Court.
The supplied judgment identifies Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd [2004] NSWSC 1224 as the authority Smart AJ followed on the availability of trust property for proper liquidator costs in the relevant landholding-company circumstances ([11]). It does not cite any later decisions, and the supplied text provides no information about how later courts have treated Kardiasmenos.
Accordingly, no claim about later approval, limitation, distinction or treatment can be grounded in this judgment alone. The decision itself is a first-instance judgment of Smart AJ in the NSW Supreme Court. Its stated reasoning and orders should be distinguished from any later appellate or judicial consideration, which is not described in the material provided.
For research purposes, the judgment’s own account supports two separate propositions, not a broader claim about its later precedential reach. First, Smart AJ applied Grossman to the trust-property issue. Second, the review failed because Kardiasmenos did not demonstrate a relevant error in the Registrar’s assessment. Whether later courts adopted or confined either proposition is not ascertainable from this source.
The judgment expressly left unresolved whether Kardiasmenos was a secured or unsecured creditor in respect of the council rates and land tax he paid. Smart AJ noted that the liquidator had not made a formal determination and that the underlying questions had not been fully explored or factually investigated ([45], [48]). The order made the funds distribution dependent on that determination and any appeal from it (53).
The judgment also did not finally decide whether the payments satisfied the requirements of s 556(1)(a). Smart AJ doubted that they could be characterised as expenses incurred in preserving, realising or getting in company property, or carrying on the company’s business, but did not finally resolve the issue ([42]). The statutory priority question was therefore not comprehensively settled.
There was also a gap between the $50,000 fund anticipated in 2005 and the much larger total later claimed by the liquidator. Smart AJ noted that the original orders set no limits on the relevant items and that the later claims substantially exceeded the costs and expenses then envisaged ([15], [33], [51]). The judgment authorised a particular distribution but did not determine every item in the liquidator’s later schedule as a final, comprehensive assessment.
Finally, the judgment does not determine the precise boundaries of reimbursable trust-administration work beyond recording the principle applied from Grossman and its connection to work in and about administration of the trust ([11]). Nor does it provide a later history of the case. Those matters would require sources beyond the judgment provided.
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CITATION : Kardiasmenos v Pioneer Management Pty Ltd (In Liquidation) [2009] NSWSC 1106
DECISION : Application to review Registrar's Determination of Liquidator's Remuneration dismissed. See further paragraph [53] for other orders.
CATCHWORDS : Determination of Liquidator's remuneration - disposition of monies in controlled monies account consequent upon settlement of sale of trust property - company acting as trustee - landholding company
CASES CITED : Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd [2004] NSWSC 1224
PARTIES : Nick Kardiasmenos (Plaintiff) Pioneer Management Pty Ltd (In Liquidation) (Defendant)
SOLICITORS : N Kardiasmenos in person Access Lawyers (Liquidator)
IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION
5469/2002 Nick Kardiasmenos v Pioneer Management Pty Ltd (in Liquidation) JUDGMENT
1 Mr Kardiasmenos has sought the review of the decision of a Registrar determining the remuneration of the liquidator (Mr RJ Porter) of the company pursuant to his Notice of Motion of 22 December 2008 and consequent upon UCPR 49.19. 2 On 13 March 2009 Mr Porter filed what was described as an "Interlocutory Application … made under section 473 of the Corporations Act 2001" seeking the following interlocutory relief: "1. An Order that the Liquidator be paid the sum of $25,000.00, or such other sum as determined by the Court, be paid to the Liquidator in part payment of his remuneration..
The matter was adjourned to 9 June 2005. 7 On 2 June 2005 Mr Porter sent a letter to the Court indicating that he did not wish to stop the proceedings. 8 As he had earlier foreshadowed, Mr Vescio filed a Motion on 9 June 2005, the effect of which was to seek portion of the proceeds of sale of Lot 10. He contended that Pioneer Management held Lot 10 on behalf of a partnership. Fuller details are set out in the judgment of 20 July 2005. 9 On 9 June 2005 Mr C Venegas appeared for the liquidator and made submissions as to the orders that should be made. The proceedings were adjourned to 23 June 2005 and on that day the Court heard Mr Vescio's Motion of 9 June 2005. I also heard submissions from the plaintiff's solicitor and Mr Venegas for the Liquidator. It became apparent that Lot 10 would have to be sold. The transcript of 23 June 2005 (page 13, lines 52 - 54) records my suggestion that on the sale of Lot 10 a certain sum of money could be held in a trust account to cover any outstanding debts. On p 14 of the transcript the following appears: "HIS HONOUR: I think I ought to protect the liquidator adequately. TASSELL (plaintiff's solicitor): I cannot argue with that. He has his lien. He will have your Honour's findings. I do not have a problem with your Honour giving a direction about a sum of money. I do not know we can agree on a sum. It may be too much or too little.
HIS HONOUR: That can always be varied. Mr Venegas, have you any idea of what sort of debts you are looking at? $50,000.00 or less? I am not talking about costs and fees.
VENEGAS: This does not take into consideration fees and expenses that the liquidator has incurred. It comes to just under $20,000.00.
HIS HONOUR: I would probably have to set aside a fund of $50,000.00.
VENEGAS: That would be sufficient." 10 On 20 July 2005 I delivered a further judgment dismissing Mr Vescio's application of 9 June 2005. In paragraph 34 of that judgment I recorded that the Liquidator was of the view that the winding up could not progress without a determination of the beneficial ownership of land currently held in the company's name, my agreement with that view and that the Liquidator had no objection to the matter proceeding to judgment. Reference was made by the parties to paragraphs 44 and 46. 11 In that judgment at [43] I followed the decision in Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd [2004] NSWSC 1224 and accepted the principle that where the trustee is a land holding company and carried on no other activities, the proper costs and expenses of the Liquidator can be met from the trust property. Pioneer was a land holding company and statutory charges arising out of the holding of the land had been incurred. At [44] I recorded that it was accepted that "trust property" is available to meet the remuneration of a Liquidator only in respect of work done in and about the administration of the trust. In the present case the Liquidator was concerned with a company whose role was as a trustee of the land it held, that is, Lot 10. 12 At [47] I stated: "Ultimately, after considering the authorities, the plaintiff accepted that (i) the Liquidator was duty bound to ensure that all debts incurred by Pioneer as trustee of the larger block were paid out of the trust property; and (ii) that the costs of the petitioning creditor in the winding up of Pioneer and the Liquidator's fees and expenses should be paid out of the trust property." 13 On 20 July 2005 I made these Declarations and this Order: "1. Declare that the larger block (being Lot 10 DP 700704) known as Lot 10 Whitechapel Road Ambervale) is held on trust by Pioneer Management Pty Ltd (In Liq) for the plaintiff, Nick Kardiasmenos.
"4. Note that on settlement of the sale and payment of the sum of $50,000 in to the joint account in the names of the solicitors of the plaintiff and the solicitor for the Liquidator, the Liquidator will execute in registrable form and deliver a withdrawal of his caveat to the solicitor for the plaintiff or his nominee." I also gave:
"15. Liberty to apply to the plaintiff, Pioneer and the Liquidator of Pioneer". 14 Formal orders to the above effect were entered on 19 August 2005. 15 It was anticipated at the time the Orders of 20 July 2005 were made that the sum of $50,000.00 would be sufficient to cover the items mentioned in Declaration 2. However, no limits were placed on any of the items mentioned. They were left for future determination. 16 In the Liquidator's report to the Creditors Meeting in July 2007, Mr Porter stated: "Following my appointment I became aware of court proceedings in the Supreme Court of New South Wales against both the company and its directors which had been commenced prior to my appointment. The proceedings related to a dispute over the ownership of the property at Ambarvale which was registered in the company's name.
On 20 July 2005 His Honour Smart AJ delivered a judgment which recognised the plaintiff in the proceedings, Mr Nick Karkiasmenos, as the rightful owner of the property at Ambarvale and allowed for the transfer of the land back to the plaintiff. The judgment also ordered that sufficient funds should be set aside from the sale of the property to allow the payment of outstanding creditor claims together with the Liquidator's costs, fees and expenses." 17 In his affidavit of 18 May 2009 Mr Kardiasmenos details the difficulties experienced in transferring Lot 10 Whitechapel Road into his name, its sale and the sums he paid. They include:
Sundry miscellaneous expenses (searches, valuation fee, registration fees) $471.00 Land tax (outstanding) $7,443.28 Council rates (outstanding) $8,245.78 $16,160.06
He also paid $20,690.00 for stamp duty on the transfer. 18 The outstanding debts for land tax and council rates would fall within sub-paragraph (a) of Declaration 2, but the other amounts paid by the plaintiff would not. They were not payable out of the $50,000.00 which was set aside. Mr Kardiasmenos did not suggest the sum of $20,690.00 for stamp duty should be paid out of the $50,000.00. 19 Mr Kardiasmenos records reaching an agreement with the Liquidator (via Mr Barrett of the Liquidator's office) that he (Mr Kardiasmenos) would pay the outstanding land tax and council rates and that the amounts he paid on account of these would be refunded to him out of the $50,000.00 to be deposited. Subsequently, in July 2007, he attended a meeting at which Messrs Mansfield and Barrett of the Liquidator's office were present as was Mr Lancaster of Access Business Lawyers, the solicitors for the Liquidator. Mr Mansfield told Mr Kardiasmenos that he was not going to be paid the monies he had paid out for outstanding council rates and land tax because he (Mr Kardiasmenos) would be benefited. In his affidavit of 9 August 2007 Mr Porter contended that the meeting held in July 2007 was informal and conducted on a without prejudice basis. 20 The Registrar has recorded that the Liquidator applied for a determination that his remuneration be fixed in the sum of $41,116.75 plus GST by way of interlocutory process filed on 6 April 2006. This claim is supported by an affidavit of RJ Porter of 21 February 2006. 21 The claim was made up as follows: Remuneration for 2 May 2005 to 1 February 2006 $20,816.10 Disbursements $1,322.58 AON Australia $996.60 Champion Legal (Petitioning Creditors legal fees) $3,328.64 Access Business Lawyers Pty Ltd (Liquidator's legal fees) $7,609.94 Total remuneration and disbursements $37,481.25 Access Business Lawyers Pty Limited (Liquidator's legal fees in preparing application) $3,305.00 GST (10%) $330.50 Total claim for remuneration for the period from 2 May 2005 to completion of this application $41,116.75
22 In paragraph 10 of Mr Porter's affidavit it is stated, "this is the final application for remuneration in the liquidation." 23 The Registrar allowed the Liquidator's remuneration in the sum of $20,661.10, which excluded GST. The Registrar held that the disbursements (including disbursements for legal expenses) were not to be claimed in accordance with the Supreme Court (Corporations) Rules as they did not form part of the remuneration of the Liquidator. 24 I have had regard to Mr Porter's affidavits of 21 February 2006, 2 August 2006 and 9 August 2007 and that of Claudio Venegas of 24 March 2006 which were before the Registrar. In paragraph 5 of Mr Porter's affidavit of 12 March 2009 reference is made to the work set out in his previous affidavits. 25 In his affidavit of 9 August 2007 Mr Porter did not dispute that Mr Kardiasmenos paid the amounts alleged for outstanding land tax and council rates in order to allow Lot 10 to be sold. Mr Porter contended, "the payment of these amounts by Mr Kardiasmenos seems to be subrogated to the claims of those creditors in the winding up of the defendant". He raised the question whether Mr Kardiasmenos would stand as a secured or unsecured creditor in respect of these payments. Mr Porter contended that ultimately the claim by Mr Kardiasmenos for reimbursement of these amounts was not within the scope of his application to determine his remuneration as Liquidator. That may well be so but Mr Porter is seeking an order that the amount in the controlled monies account be paid to him. With interest the balance as at 1 May 2009 was said to be about $59,381.00. 26 In support of his motion for review, Mr Kardiasmenos relied on his affidavit of 22 December 2008. That set out the grounds of his attack on the Registrar's decision. (a) He erred in finding that all liquidations are equally expensive regardless of the size of the company.
Comment: This is not what the Registrar found. He commented "the amount of work conducted in a liquidation and the investigation required to discharge the Liquidator's duty are relatively constant in the sense that it needs to be carried out regardless of the size of the company or whether or not it is trading". The liquidator did not have any prior experience of the company. He had to investigate what occurred. He does not have to accept all that he is told by the company's officers or former officers. The Registrar considered each of the major objections of Mr Kardiasmenos.
(b) He took an irrelevant consideration into account, namely, that Mr Kardiasmenos' objections were not always objective. Mr Kardiasmenos submitted that it would be impossible to have an objective objector.
Comment: The Registrar, in dealing with the various objections, notes the objection made and then deals with the lack of evidence in support. In paragraph 34 he refers to the lack of "any objective support".
It was not unreasonable for the Registrar to require evidence in support of the objections given the particularity of the claims and the details of the time claimed to be spent.
(c) He erred in making an order as to the Liquidator's remuneration prior to the company being fully wound up in circumstances where the Liquidator has not provided any explanation as to why remuneration is sought prior to the completion of the winding up. See Rule 9.4(7)(f) of the Supreme Court (Corporations Rules) 1999 (NSW).
Comment: Rule 9.4(7)(f) requires the affidavit in support of the interlocutory process seeking an order determining the Liquidator's remuneration, if the winding up is continuing, to give details of any matters delaying the completion of the winding up. The Rule did not prevent Mr Porter making his application.
In his affidavit in reply of 12 March 2009 Mr Porter stated: "7. It is not a requirement of the Act or Rules that an Application for remuneration be made once the Company is fully wound up as claimed by Mr Kardiasmenos in paragraph 2(c) of his affidavit sworn 22 December 2008.
Paragraph 7 does not accurately state the submission which Mr Kardiasmenos was making.
This affidavit meets the requirements of Rule 9.4(7)(f) but it was not before the Registrar. In future, Rule 9.4(7)(f) should be complied with in the material placed before the Registrar, even if the Liquidator takes the view that the point he makes in paragraph 8 of his affidavit is self-evident.
(d) The Liquidator has not paid any of the company's debts.
Comment: The Liquidator was not bound to pay any of the company's debts if he did not have the funds to do so and was entitled to proceed on the basis that he would not personally pay them. He did not have control of the funds in the joint account into which $50,000.00 was paid. Once Mr Kardiasmenos paid the outstanding land tax and council rates questions arose whether he was a secured or unsecured creditor.
(e) The amount of remuneration claimed by the Liquidator is excessive considering that it is greater than the total amount of debt owed by the company at the time of Liquidator's appointment. The debts owed by the company were paid by me personally after the Liquidator's appointment, as the Liquidator failed to pay the debts. I had to pay the debts to comply with Court orders.
Comment: The matters contained in the first sentence of this ground provide no answer at law to the Liquidator's claim to have his remuneration determined and no ground at law to review the Registrar's assessment. It is not a valid ground of complaint that the Liquidator did not pay the outstanding land tax and council rates. Mr Kardiasmenos paid these amounts to obtain a transfer of Lot 10 so he could sell it.
(f) Had Pioneer Management not been put into liquidation, it would have eventually been deregistered by ASIC by the lodging of a single form. The work the Liquidator performed went over and above the Liquidator's legal obligations and was unnecessary or excessive. It was not fair and reasonable for the Liquidator to be paid the amount of remuneration awarded.
Comment: The company was put into liquidation upon the petition of the Chief Commissioner of State Revenue and Mr Porter appointed Liquidator. That imposed duties upon him. The Liquidator was neither entitled nor permitted to take the course hinted at by Mr Kardiasmenos. The liquidation, by Court order, of the company raised some serious problems which were canvassed at some length. The Court welcomed the assistance of the liquidator at the various hearings. It is not to the point that the court did not adopt all his suggestions. It did in Declaration 2 accept his suggestions as to what might be paid from the controlled monies account. The Liquidator did assist in facilitating the transfer of the property but not as promptly as Mr Kardiasmenos desired. 27 I was informed by Mr Kardiasmenos that Lot 10 sold for approximately $675,000.00 and that out of the proceeds of sale $50,000.00 was placed in what has been described as the controlled monies account and that a significant proportion of the proceeds of sale went towards his legal fees in the form of a substantial solicitor and client bill. Although the plaintiff obtained costs orders they were probably of little financial use to him. He probably had to pay all his costs of the complex proceedings and received no re-imbursement. That is not the responsibility of the Liquidator. It was Mr Kardiasmenos who became involved in a business development with the defendants which failed. I can well understand Mr Kardiasmenos' annoyance and disappointment that he ended up with relatively little from the sale of Lot 10. 28 In his affidavit of 22 March 2009 Mr Kardiasmenos expanded upon and added to the objections taken in his earlier affidavit. I have considered these. 29 Mr Kardiasmenos submitted that the Registrar erred by not considering that many of the items in the Liquidator's bill relate to his pursuit of his own remuneration rather than work carried out in and about the administration of the Trust. The Liquidator, as an incident of his appointment and the administration of the Trust, is entitled to secure his own remuneration and to take reasonable steps in that regard.
30 Mr Kardiasmenos contended that the Registrar erred in not considering that the Liquidator's bill was not an accurate reflection of the work carried out by the Liquidator in and about the administration of the Trust. The Registrar had to satisfy himself that the work alleged to have been done was done and allow a reasonable amount in respect thereof. 31 In my opinion, Mr Kardiasmenos has not demonstrated any relevant error in the Registrar's assessment and the application of Mr Kardiasmenos to review that assessment and decision should be dismissed.
32 The Registrar has power to assess the liquidator's remuneration. It is for the Liquidator to satisfy himself, by appropriate checks, that the disbursements are correct. In some instances he may seek the approval of the Court to their payment or seek their payment out of controlled monies.
33 In the present case, in his written submissions of 15 May 2009, the Liquidator seeks: Remuneration as determined by Registrar $20,661.10 Interest on remuneration $ 5,620.35 Disbursements $ 1,322.58 AON Australia - insurance cover $996.60 Champion Legal - petitioning creditors' costs $ 3,228.94 GST on petitioning creditor's costs $ 330.50 Legal fees for representation in proceedings 5469 of 2002 (Access Business Lawyers) $ 7,572.19 Disbursements - DG Thompson for preparation of assessable bills $ 2,393.94 Costs of liquidators solicitors $16,781.62 Bill of costs assessed by DG Thompson Tax Invoice of Access Business Lawyers of 19 December 2008 $ 2,863.30 Tax Invoice of Access Business Lawyers of 12 March 2009 $ 166.00 Work in Progress $ 2,857.50 $22,668.42 Liquidator's work in progress since February 2006 $ 8,969.68 $73,764.30
34 The item "Bill of costs assessed by DG Thompson $16,781.62" is a solicitor/ client bill of costs prepared by DG Thompson setting out in itemised form the costs of Access Business lawyers for acting for the Liquidator from 2 May 2005 to 6 June 2008. 35 The item "Tax Invoice of Access Business Lawyers of 19 December 2008 $2,863.30" covers work allegedly done from 16 October 2007 to 5 December 2008. Most of the work claimed for is in the period 10 June 2008 - 5 December 2008. The item "Tax Invoice of Access Business Lawyers of 12 March 2009 $166.00" represents a filing fee of $166.00 for a Notice of Motion - presumably the Interlocutory Application filed 13 March 1999. 36 In the Liquidator's written submissions it is stated that the Liquidator has incurred additional work in progress costs since February 2006, in the amount of $8,969.68 and has written off work worth $35,893.17. I do not know how these amounts are calculated. 37 The Liquidator submitted that, while it was open to the Court to continue the process of having the liquidator's Work in Progress itemised, examined by Mr Kardiasmenos and objected to, there was merit in bringing the matter to a more sudden resolution in order to preserve funds. 38 The Liquidator submitted that the Court had a power to determine the Liquidator's remuneration and that the method of determining that remuneration was not limited. Under section 473(10) of the Corporations Act the Court must have regard to whether the remuneration is reasonable taking into account any or all of the matters listed in that subsection. 39 The Liquidator submitted that it was open to this Court to finalise this matter by assessing the material and coming to some lump sum determination. That was the Liquidator's preferred approach. 40 It was further submitted that, if all of the claims listed above totalling $73,764.30 were allowed and the total of the monies presently held in the controlled monies account ($59,381.29) were paid to the Liquidator, there would still be a shortfall in the amounts due to the Liquidator but it would result in some finality. 41 In his written submissions Mr Kardiasmenos contended that, as he had to pay some $15,689.06 in total for council rates and land tax to have the title to Lot 10 transferred from Pioneer to him, it would not be just and equitable for him to be left out of pocket for the amount he necessarily paid to cover those debts in circumstances where the Liquidator refused to pay them but agreed to allow a reimbursement for those expenses to be paid out of the funds held in trust. I have omitted his claim for $471.00 for miscellaneous expenses. At the stage when Mr Kardiasmenos spoke to Mr Barrett about payment of outstanding council rates and land tax the Liquidator held no funds and was not obliged to pay these amounts personally. It would have been surprising if he had. Mr Barrett explained to Mr Kardiasmenos that all outstanding amounts should be paid on settlement out of the proceeds of sale of Lot 10. Mr Kardiasmenos expected to be reimbursed for the amounts but there were no funds under the control of the Liquidator. The Council and the Office of State Revenue wanted the outstanding amounts paid promptly. The latter had caused a caveat to be placed on the title. That had to be withdrawn before settlement could take place. It would be unusual for the Council and Office of State Revenue to attend on settlement unless their costs and those of their solicitors were paid. Mr Kardiasmenos took a practical course that enabled settlement to take place. 42 Mr Kardiasmenos submitted that if the Liquidator had paid the amounts he would have been reimbursed for those expenses first in order of priority according to s 556(1)(a) of the Corporations Act. That is arguable, but that submission does not advance Mr Kardiasmenos' position when the Liquidator was under no obligation to make the payments and declined to do so because he did not have the funds and a regime had not been established to cover their payment. Further, I doubt if the expenses in question could be said to have been incurred in preserving, realising or getting in the property of the company, or in carrying on the company's business, under s 556(1)(a). The Court could have been asked to vary its orders, declarations and notations but that would have cost money and was not a practical alternative for the relatively small sum involved. Further, could the Court have made any useful order to overcome the looming problems? 43 Mr Kardiasmenos submitted that a strict application of the ranking of priority payments as set out in s 556(1)of the Corporations Act 2001 would result in an unjust and inequitable result, particularly if it results in him being left out of pocket for having covered these expenses. 44 I intended that the outstanding council rates and land tax would be paid out of the controlled monies account first. There was a practical difficulty. They had to be paid before settlement could take place whereas the declaration and notation envisaged that they would be paid out of the controlled monies account, such monies being set aside out of the proceeds of sale. That assumed settlement had taken place. 45 In the events which have happened the Liquidator treated Mr Kardiasmenos as being subrogated to the rights of the Council and the Office of State Revenue and possibly as an unsecured creditor. Those were not issues I addressed when I delivered the judgment of 20 July 2005 and made the orders, declarations and notations of that date. They had not received attention in argument. Neither the Court not the Liquidator has the power to vary the ranking of payments of unsecured debts and claims. See ss 555 and 556 of the Corporations Act. The Liquidator has yet to make a formal determination whether, in respect of the Council rates and land tax payments, Mr Kardiasmenos should be treated as a secured creditor or unsecured creditor and I should not pre-empt the Liquidator's determination. The affidavit of the Liquidator mentioned later suggests that he is inclined to treat Mr Kardiasmenos as an unsecured creditor. 46 From 23 June 2005 to 20 July 2005 the Court was concerned with the trust which it had found existed. This involved the transfer of Lot 10 to the plaintiff, facilitating the sale by him of Lot 10 and setting aside a fund sufficient to meet the expenses mentioned in Declaration 2. I did not take into account the difficulties that would be encountered with the outstanding rates and taxes. In Declaration 2 the equitable interest of the plaintiff in Lot 10 was stated to be "subject to Pioneer's right of indemnity against the assets of the trust including the right of Pioneer to be indemnified for (a) Debts incurred by Pioneer as trustee of [Lot 10]" for the plaintiff. 47 The company had incurred debts, that is, the liability for council rates and land tax. The Liquidator has furnished these explanations in his affidavit of 9 August 2007: "6. I am aware that the Office of State Revenue had a Caveat over the subject property and Mr Kardiasmenos' payments resulted in them providing a Withdrawal of Caveat. There may be an argument that Mr Kardiasmenos, to that extent, under the rules of subrogation stands in place of a secured creditor. However as the security was a statutory charge, enjoyable only by the Commissioner for State Revenue, I am not certain that it was capable of assignment to Mr Kardiasmenos, or that he could enjoy the rights of the security as part of the subrogation. In that event, I assume he would stand as an unsecured creditor only. 7. In respect of his payment of the Council Rates, I am initially of the view that Mr Kardiasmenos would stand as an unsecured creditor under the principles of subrogation, particularly as the Campbelltown City Council did not seek to enforce its statutory charge or otherwise assert any security over the subject property." 48 I am not at liberty to intervene and give priority to repayment of the monies paid by Mr Kardiasmenos for council rates and land tax. Ultimately, it will be for the liquidator to adjudicate on this matter, subject to any appeal to or application for review by the court. These matters were not fully explored before the Court. There was no factual investigation. 49 The continuing disputes between the Liquidator and Mr Kardiasmenos are proving very costly and limited funds are rapidly being expended. 50 Mr Kardiasmenos should appreciate that the Liquidator is entitled to pursue his claims for remuneration and that if the Liquidator succeeds in his claims, Mr Kardiasmenos will have to meet the costs of the Liquidator and his solicitor of those claims and overcoming the objections. Mr Kardiasmenos was not able to lead adequate evidence rebutting the claims of the Liquidator. The Registrar made an assessment of the evidence. That has not been shown to be erroneous. 51 I appreciate the frustrations of Mr Kardiasmenos. He took a practical course in relation to the payment of the council rates and taxes. The company was a landholding company. He was effectively the only creditor as the other creditors (council rates and land tax) had been paid out by him. The Liquidator was required by law to deal with various proofs of debt and claims to be paid monies. The judgments delivered effectively disposed of one claim that was alleged to be secured. One claim was objected to by Mr Kardiasmenos and not pursued and another claim was not pursued. It did not appear to Mr Kardiasmenos that a lot of work was required of the Liquidator and Mr Kardiasmenos was largely instrumental in Lot 10 being transferred and sold. However, the law imposes extensive duties on a court-appointed liquidator who is not entitled to sit by and allow the company to be removed from the Register after the lapse of a number of years. In 2005 it was thought that $50,000 would cover the council rates, land tax and the items mentioned in Declaration 2. There is a substantial gap between the costs and expenses of the Liquidator envisaged in 2005 and those now claimed. That has caused me to look at the matter closely. 52 On the assumptions mentioned in the order, the prudent course is to order the transfer of the monies in the controlled monies account to the Liquidator and authorise him to appropriate $35,000 to himself and to pay all proper disbursements (including the costs of the petitioning creditor). 53 I make the following orders:
Dismiss the application of 22 December 2008 of Mr Kardiasmenos seeking the review of a decision of a Registrar determining the remuneration of the Liquidator of Pioneer Management Pty Limited (In Liquidation).
Order that within 21 days the monies in the controlled monies account in the name of Verekers Lawyers and Access Business Lawyers be transferred to an account under the control of the Liquidator (RJ Porter) as nominated by him.
On the assumption that the Liquidator treats Mr Kardiasmenos as an unsecured creditor in respect of his payment of Council rates and land tax (and there is no appeal from the Liquidator's determination), order that the Liquidator be authorised to appropriate $35,000 on account of his remuneration to date to himself and to pay all proper disbursements (including the costs of the petitioning creditor) out of the balance. If, on the other hand, the Liquidator treats Mr Kardiasmenos as a secured creditor in respect of either of these payments, then in respect of such payments it or they would have to paid out of such monies to Mr Kardiasmenos in priority to any payments to the Liquidator for his remuneration or disbursements. This does not preclude the Liquidator and Mr Kardiasmenos reaching a compromise on these issues to avoid further expense. This Order is without prejudice to the rights of the Liquidator to make application for further remuneration if so advised or seeking to obtain further monies to pay proper disbursements.
Order Mr Kardiasmenos to pay the costs of the Liquidator of the application to review the Registrar's decision of 27 November 2008.
Order that the costs of the application of the Liquidator filed 13 March 2009 be costs of the winding up.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Kardiasmenos
Pioneer Management Pty Ltd
The review application was dismissed; the controlled monies were ordered transferred to the liquidator, who was authorised to appropriate $35,000 towards remuneration and pay proper disbursements subject to Kardiasmenos’s creditor status; Kardiasmenos was ordered to pay the review costs, and the liquidator’s application costs were made costs of the winding up.