MATTER : Trustees Act 1962, s 89, s 92

OAKLEIGH ACQUISITIONS PTY LTD (IN LIQUIDATION) ACN 008 879 454

ROWENA NOMINEES PTY LTD (RECEIVER & MANAGER APPOINTED) (IN LIQUIDATION) (SUPERVISOR APPOINTED) ACN 008 818 273

BETWEEN : MARK ANTHONY CONLAN (AS LIQUIDATOR OF OAKLEIGH ACQUISITIONS PTY LTD)

MARK ANTHONY CONLAN (AS SUPERVISOR OF ROWENA NOMINEES PTY LTD)

Corporations - Winding up - Liquidator's remuneration - Fund arising from sale under court order - Position of mortgagees and other claimants - Turns on own facts

Liquidator Of Sandgate Corporation Pty Ltd: Mr K J De Kerloy &

Various Objector Mortgagees : Mr D H Solomon (By leave)

Liquidator Of Sandgate Corporation Pty Ltd: Freehills

Commissioner v Taxation v GIO of NSW (1992) 36 FCR 314

Hewett v Court [1983] HCA 7; (1983) 149 CLR 639

1 OWEN J: This is an application by external administrators of insolvent companies for directions in relation to their fees and remuneration.

2 Mark Anthony Conlan ("Conlan") is the liquidator of Rowena Nominees Pty Ltd ("Rowena") and of Oakleigh Acquisitions Pty Ltd ("Oakleigh"). Rowena was a finance broker licensed under the Finance Brokers Control Act 1975 (WA) ("FBCA"). It carried on business under the name "Graeme Grubb Finance Broker" ("GGFB"). In May 1999 Conlan was appointed by this Court as an independent accountant to investigate the affairs of GGFB. He was appointed provisional liquidator of Rowena on 16 July 1999 and of Oakleigh on 21 July 1999. He was appointed as liquidator of Rowena on 21 July 1999 and of Oakleigh on 25 August 1999. On 23 July 1999 Conlan was appointed supervisor of the business pursuant to powers set out in s 73 of FBCA.

3 GGFB was controlled by one Graeme Grubb ("Grubb"). GGFB engaged in what are known as pooled mortgages. A potential borrower would approach GGFB with a view to obtaining finance for a venture. GGFB would, in turn, approach a number of potential investors and invite them to advance moneys for the venture. Often, the amount required was beyond the resources of an individual investor and several entities or people contributed varying amounts so as to make up the whole. Promises were made to potential investors that they would be given a first mortgage security over identified property. In the main, Oakleigh did little more than act as trustee for investors who had supplied the funds to Rowena for the advances to borrowers. Often the mortgage was registered in the name of Oakleigh as mortgagee. Some of the mortgages remained in that state. In relation to others, there was a transfer of mortgage from Oakleigh to named investors. In other instances the mortgages were registered in the names of investors as mortgagees.

4 Sandgate Corporation Pty Ltd (In Liquidation) ("Sandgate") was the registered proprietor of land in Eulup Road, Mount Barker on which a vineyard had been developed. The operation of the vineyard was part of a managed investment scheme being operated by a related company called Karri Oak Ltd ("KOL"). When Sandgate acquired the property it did so with the assistance of a pooled mortgage arranged by Rowena. The mortgage was registered at the Department of Land Administration and bears registered number G976295. The mortgage shows Sandgate as the mortgagor and borrower and lists 108 separate persons or companies as the mortgagees. Colin Chinnery is one of the mortgagees. Several other mortgagees were represented at the hearing by Mr Solomon.

5 Difficulties were encountered in relation to both the managed investment scheme and the pooled mortgage. On 30 August 1999 Vincent Anthony Smith and Bryan Kevin Hughes were appointed joint and several administrators of Sandgate. On 22 December 1999 they became joint liquidators of the company pursuant to s 439C and s 446A of the Corporations Law. They were also appointed as liquidators of KOL. The liquidators found a buyer for the vineyard property and the management rights residing in KOL. Difficulties arose in determining the exact reach and extent of the interests secured by the mortgage, which investors had claims on the funds that would arise from a sale and whether the net proceeds of the proposed sale would be sufficient to pay out all of the moneys secured by the registered mortgage.

6 As a result of these difficulties some of the registered mortgagees declined to execute a discharge of the mortgage unless they were assured of receiving payment in full. The liquidators applied to the Court for a direction under s 55(2) of the Property Law Act 1969 permitting the sale of the vineyard property. Such a direction was obtained on the basis that the net proceeds of sale should be held on trust until the competing claims to it were determined: see Sandgate Corporation Pty Ltd (In Liquidation) v Ionnou Nominees Pty Ltd & Ors [2000] WASC 91; (2000) 22 WAR 172 (which I will call "Sandgate v Ionnou"). The sale price was apportioned between the value of the vineyard land (which went to Sandgate) and the value of the management rights, which belonged to KOL.

7 Sandgate owned properties other than the Eulup Road land: see affidavit sworn by Hughes on 6 January 2000 and filed in CIV 1010 of 2000. However, for all practical purposes (and with one proviso) the only asset available to satisfy claims against Sandgate will be the proceeds from the sale of the Eulup Road land: see pars 67 and 68 of that affidavit. The one proviso is this. Sandgate is a significant creditor of KOL and stands to gain from any dividend declared by KOL. However, Conlan, as liquidator and supervisor of Rowena, has lodged a proof of debt for almost $18,000,000 in the liquidation of KOL. Although the proof has been rejected, if it is found to be a valid claim it will dramatically reduce the return to Sandgate from this source. These claims are referred to in par 11 of Hughes' affidavit of 13 September 2000 and par 5 of an affidavit sworn by Conlan on 15 August 2000.

8 After his appointment, Conlan inspected the books and records of GGFB. To say that they are in a mess is a significant understatement. There are deficiencies in the record keeping and it is clear that on many occasions GGFB did not fulfil the promises that it had made to investors or (sometimes) to borrowers. As time wore on the individual mortgages and borrowing arrangements fell due for repayment. Some mortgagors defaulted but others were in a position to fulfil their commitments. However, it has proved no easy task for Conlan to identify with certainty who is entitled to particular mortgages and to interest paid and principal payments received from borrowers.

9 On 30 September 1999 Conlan obtained an interlocutory injunction which, in substance, prevented or impeded the exercise by registered mortgagees of their rights under various mortgage arrangements entered into by, or arranged by, GGFB prior to its collapse. The injunction was varied from time to time. Some registered mortgagees applied to set aside or discharge the injunction. In the course of that application some preliminary issues were identified which, it was thought, might give guidance for the administration of the affairs of GGFB generally. In Conlan (as Liquidator Of Oakleigh Acquisitions Pty Ltd) & Ors v Registrar Of Titles & Ors [2001] WASC 201 (which I will call "Conlan v Registrar") I provided answers to the preliminary questions that had been identified. The questions dealt, in the main, with the contest between those investors who had obtained a registered mortgage and those who had not in the light of the principle of indefeasibility of title under the Transfer of Land Act 1893.

10 The answers to the preliminary questions in Conlan v Registrar should assist in determining competing claims to the funds created by the discharge of mortgages such as those taken out by Sandgate. Many other questions remain to be resolved. One of them is the status of claims by the liquidators and other external administrators of Sandgate, Oakleigh and Rowena (among others) to satisfy their fees from the same funds. That is the matter in issue in this application. These reasons should be read in conjunction with the reasons in Sandgate v Ionnou and in Conlan v Registrar.

11 I think the starting point must be the decision of Dixon J in In re Universal Distributing Company Limited (In Liquidation) [1933] HCA 2; (1933) 48 CLR 171. A company had granted a debenture that secured all of its assets and undertakings. A liquidator was appointed. The assets were insufficient to satisfy the claim of the debenture holder and nothing was available for claims ranking after the debenture. The question which arose was whether the costs and expenses incurred by the liquidator in realising the assets subject to the debenture should be paid in priority to the claims of the debenture holder. Having recognised that a court could not overreach or postpone a security in exercising its statutory power, Dixon J said, at 174:

"If a creditor whose debt is secured over the assets of a company come in and have his rights decided in the winding up he is entitled to be paid principal and interest out of the fund produced by the assets encumbered by his debt after the deduction of the costs, charges and expenses incidental to the realisation of such assets (In re Marine Mansions Co). The security is paramount to the general costs and expenses of the liquidation, but the expenses attendant on the realisation of the fund affected by the security must be borne by it (In re Oriental Hotels Co). The debenture holders are creditors who have a specific right to the property for the purposes of paying their debts. But if it is realised in the winding up, a proceeding to which they are thus parties, the proceeds must bear the cost of realisation just as if they had begun a suit for its realisation or had themselves realised it without suit (cf In re Regents Canal Ironworks Co).

In applying this principle only those expenses appear to have been thrown against the fund belonging to the debenture holders which have been reasonably incurred in the care, preservation and realisation of the property."

12 I can see no reason why this statement of principle should not apply equally where the security is a registered mortgage over Torrens system land. In Conlan v Registrar I have considered in some detail the principle of indefeasibility of title. However, I see no necessary tension between the two. The Corporations Law and its predecessors have always contained a statutory system of priorities which recognise the primacy of claims of secured creditors. The general law principles to which Dixon J was referring in In re Universal Distributing Co Ltd were seen to be relevant notwithstanding the statutory scheme. I think the same considerations would apply in the Torrens system context.

13 The juridical basis for the claim against the fund is an equitable lien: see Shirlaw v Taylor [1991] FCA 415; (1991) 31 FCR 222 at 228-231. This cannot provide the entire answer because, in the circumstances in which the issue arises in this case there is competition between an equitable lien and a legal interest. Issues of public policy are also involved. A court will be anxious to protect the position of its officers to avoid a situation where qualified persons will be reluctant to accept office as an external administrator. For that reason, a claim of this nature has some of the indicia of ancient "salvage": Shirlaw at 230. But again, notions of public policy cannot, of themselves, ground an avoidance of entrenched legal rights.

14 I acknowledge that the registered mortgagees did not "come in and have [their] rights decided in the winding up" willingly. They were dragged in by force of circumstances. Nonetheless, the dispute which arose occurred within the context of the winding up. The liquidator was successful in obtaining an order of the court directing the sale of the property. In these peculiar circumstances I think the principle of which Dixon J spoke applies. I do not think the indefeasibility principle stands in the way of a conclusion that the registered mortgagees may have to suffer the deduction of the costs, charges and expenses incidental to the realisation of the Eulup Road property before the balance of the fund is distributed to them. Whether the proper explanation for this is that there is a right in personam in support of the equitable lien (which would therefore be an exception to the indefeasibility principle) is problematic. It may simply be the existence of statutory regimes which require the assistance of the general law in order to sit comfortably together.

15 There are other claimants asserting an interest in the Eulup Road land either as equitable mortgagees or as the beneficiaries under constructive or resulting trusts. The principle arising from In re Universal Distributing would apply equally to persons claiming an interest as an equitable mortgagee. To the extent that the funds arising from the sale of the Eulup Road property are impressed with a trust (of whatever variety), similar considerations arise: Re G B Nathan and Co Pty Ltd (In Liquidation) (1991) 24 NSWLR 674 at 689. To the extent that it is trust property, it is available as a fund from which a liquidator can draw his or her costs, expenses and remuneration: In re Suco Gold Pty Ltd (In Liquidation) [1982] 33 SASR 99 at 110.

16 The liquidator of Sandgate can look to the fund arising from the sale of the Eulup Road property only for the costs and expenses (and his remuneration) insofar as they relate to the care, preservation and realisation of that asset. He cannot claim from the fund other costs, expenses and remuneration associated with or incidental to the general administration of the affairs of Sandgate.

17 In Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 the Court confirmed that a provisional liquidator is entitled to remuneration that is fair and reasonable and that he or she carries the onus of establishing that entitlement. In order to do so a provisional liquidator is obliged to adduce adequate evidentiary material to enable the court to determine whether the amount claimed is fair and reasonable. I can see no reason why the same principle should not apply to a liquidator.

18 In this case the liquidators have filed an affidavit sworn by Bryan Hughes on 13 September 2000 which contains a whole raft of supporting documentation. The claim, as summarised in Annexure BH7 is as follows:

Administrators'/Liquidators remuneration: $340,108.31

Administrators'/Liquidators disbursements: $ 26,888.98

Care, preservation and realisation costs: $257,790.31

19 The total remuneration expense that has been vouched is $589,916.20: see Annexure BH4. However, the claim made in this application is for part only of that amount: see par 23 and Annexure BH4. In pars 12 to 17 of the affidavit Hughes describes the time recording system employed by his firm as utilised for the Sandgate and KOL administrations. It is apparent that remuneration has been assessed and charged on a time cost basis according to the scale recommended by the Insolvency Practitioners Association. I do not think any objection can be taken to that manner of proceeding: Venetian Nominees at 106. In par 18 Hughes identifies the persons who worked on these administrations. In par 18(a) he says that he initially allocated all time to Sandgate but then separated time spent on KOL matters. He also says that he removed time which was not directed to the care, preservation and realisation of Eulup Road and apportioned the balance between the general affairs of Sandgate (15 per centum) and the care preservation and realisation of Eulup Road (85 per centum). He then explains why he selected that percentage apportionment. A further analysis relating to Hughes' work with a daily diary schedule is then the subject of a supplementary affidavit sworn 22 September 2000. In relation to his employees, Hughes says in par 19:

"At my request and under my supervision I asked [two employees] to analyse their manual timesheet entries and include only time related to the care, preservation and realisation of Eulup Road ... . I have reviewed the apportionments of [the employees'] time and consider them to be correct and reasonable. I conducted the review of the [another employee's] timesheets myself and included only time related to the care, preservation and realisation of Eulup Road ... ."

20 These general statements are then supported by lever arch files, designated Exhibits 2 and 3, consisting of time sheets and associated schedules and computer generated accounts. From February 2000 the firm installed a new software system for recording time. Exhibit 3 contains details of those records. It is apparent from the "ticks" on the original copy of the exhibit that an analysis has been conducted to ascertain those items that relate to care, preservation and realisation of the property and those that do not.

21 Paragraph 22 and Annexure BH3 of the affidavit detail the office disbursements amounting to $26,888.98. Again, an explanation is given as to the method employed to isolate those disbursements that relate to the care, preservation and realisation of the property.

22 Paragraphs 25, 26 and 27, Annexure BH5 and Exhibit 4 give similar detail in relation to disbursements paid or payable to entities outside the liquidators firm. The most significant of these is the legal fees claimed by Freehills. I will have more to say about them shortly. Once again the deponent goes into some detail concerning the method employed to isolate those disbursements that relate to the care, preservation and realisation of the Eulup Road property.

23 The legal fees of Freehills are the subject of pars 28 to 33 and Annexure BH6. Copies of accounts or vouchers from Freehills are included in Exhibit 4. They account for $225,794.91 of the total claim (in this category) of $257,790.31.

24 I have not conducted an in-depth examination of the time sheets and individual vouchers filed by or on behalf of Hughes. That would be the province or task of a taxing officer. Following the principles in Venetian, I have to decide whether, prima facie, the liquidators of Sandgate have made out a case that the remuneration they have claimed is fair and reasonable. In Venetian, Kennedy and Ipp JJ said, at 103:

"Ordinarily, to commence the proceedings, the provisional liquidator will provide the court with a statement of account reflecting in appropriate itemised form, details of the work done, the identity of the persons who did the work, the time taken for doing the work, and the remuneration claimed accordingly. The statement of account should also reflect in appropriately itemised form the expenses incurred by the provisional liquidator, accompanied where necessary by voucher proof. Sufficient detail should be provided to enable the court to determine whether the disbursements were reasonably incurred and that the amounts claimed are reasonable."

25 There was a general objection to the liquidator's application based on the assertion that the information supplied did not satisfy these requirements. As will appear shortly, there are some respects in which I think clarification is required. However, the essential purpose of an account of this nature is (among other things) to enable a person interested in the fund from which fees will be drawn to ascertain whether there are matters to which objection should be taken. In my view, the information supplied by the liquidators of Sandgate and verified by the affidavits is sufficiently comprehensive and detailed to enable a person interested to make that assessment. The next question is whether, prima facie, the information supports the assertion that the amounts claimed are fair and reasonable. Like many of the participants in this hearing I have developed a "feel" for the complexities of the situation which GGFB and its associated entities have left behind. I have made some reference to these complexities in Conlan v Registrar and in an earlier decision Re Oakleigh Acquisitions; Ex parte Conlan [2000] WASC 41. While $400,000 (which is the approximate amount claimed less the legal fees) sounds a great deal of money for caring for, preserving and then selling some vineyard land, it does not come as a great surprise to me. If there were two things at which those connected to the GGFB business excelled they were obfuscation and failing properly (or at all) to document transactions.

26 There is another matter. By the time the administrators came to be appointed the vineyard had been planted. It was a wasting asset. As Hughes says in pars 48 to 58 of the affidavit, in order to maximise the return on sale the vineyard had to be tended and maintained at a cost of $447,000 for the last four months of 1999 and with a budget of $490,000 for the first six months of 2000. While I am not suggesting the liquidators or their staff personally did the vineyard work, their professional responsibilities would no doubt have involved a considerable allocation of time.

27 Having considered, carefully, the schedules provided by the applicants and the explanations proffered by Hughes as to the methodology employed in arriving at the figures, I am satisfied that, prima facie, the claim is fair and reasonable. I repeat that I have reached this conclusion without subjecting the supporting material to an in-depth analysis such as would be necessary on a taxation.

28 The next question is whether, in the light of the particular objections that were raised by the various objectors during the hearing (or otherwise) I should reconsider that prima facie position.

29 One of the criticisms made by Conlan is that there is no allocation made between the costs of selling the KOL management rights and those involved in the sale of the land. When the property was eventually sold the purchase price was allocated as to $1,500,000 for the management rights and as to $4,950,000 to the land. There was an advantage to Sandgate in selling the rights and the land together: see pars 5 to 8 Hughes' affidavit.

30 In this respect, I see no reason not to accept Hughes' sworn testimony, particularly in pars 18 and 19, that he has claimed only for work done on behalf of Sandgate and not KOL. There will, inevitably, have been some work done in which it would be extremely difficult, if not impossible, to differentiate between that which ought to be apportioned to Sandgate (the land) and that for which KOL would be responsible (the management rights). An example, is a conference at which the terms of a draft contract of sale containing both the sale of the land and of the rights, was being negotiated. On the information contained in the affidavit there is no question that the apportionment of the purchase price was to the disadvantage of Sandgate. Indeed, it seems that the figure of $4,950,000 exceeded the highest offer that the liquidator had received for the sale of the Eulup land alone.

31 It was, I think, at the heart of the objection raised by Mr Hawkins on behalf of Conlan that the management of the vineyard was actually carried on by Sandgate rather than by KOL even though the contractual arrangements were between the investors and KOL. It seems that Sandgate (not KOL) had the employees, plant and equipment and that Sandgate developed the vineyard and maintained it on a loose sub-contract with KOL. By the time the liquidator came to be appointed Sandgate was the only entity capable of carrying out those functions even though KOL might have had the legal responsibility to do so. When the winding up commenced KOL was indebted to Sandgate in an amount of approximately $3,000,000. In hindsight questions might be asked whether KOL and Sandgate should have had a common liquidator. But the fact is the liquidator was faced with a wasting asset that had to be maintained so as to maximise the return to be obtained from its sale. It would hardly have been appropriate to enter into a contract with another insolvent company (KOL) to effect that purpose.

32 I am not satisfied that costs attributable to the sale of KOL's management rights have a sufficient impact to alter the prima facie position.

33 Settlement of the sale of the Eulup Road property occurred on 1 May 2000. Another objection is that the liquidator effectively delegated maintenance of the Eulup Road property to the purchaser from December 1999 and yet has claimed remuneration for care, preservation and realisation after December 1999 and, indeed, after settlement.

34 Of course, the fact that the purchaser was effectively maintaining the property pending settlement (and in this case pending the obtaining of a court order to authorise the sale) does not mean the liquidator can no longer claim costs. If the import of the work was, for example, on bringing the sale to finality and in developing alternative strategies should the court decline assistance, then it would be part of the costs of realisation. On a brief perusal of the supporting documentation it is not immediately apparent to me whether all of the work claimed is referable to the realisation of the property or, if not, how it relates to care and preservation. This should be the subject of some further evidence and I will deal with it a little later.

35 Looking at the schedule on p 75 of Hughes' affidavit sworn 13 September 2000, it seems that the remuneration claim for the period on and after 1 May 2000 is approximately is $40,800. Some of this work might have included the settlement on 1 May 2000. At first glance, it is difficult to imagine how costs of that magnitude could have been incurred in the finalisation of the sale. There would come a point (in my view very shortly after settlement) when matters relating to the finalisation of the sale should properly be seen as part of the general administration. This, too, will need to be the subject of further evidence.

36 In Venetian Nominees there was a claim for legal fees of about $32,000. Kennedy and Ipp JJ said, at 105: "In passing, it might be said that, having regard to the relatively large amounts charged, [the provisional liquidator] would have been well advised to have required the solicitors to tax their fees under O81G r 110". The claim here exceeds $200,000. While the fact that a particular figure is seen to be "relatively large" in one case does not necessarily mean that it is so in another. Each case falls to be determined according to its own circumstances. I must confess to being somewhat uncomfortable about making assessments on the legal costs. I have been away from private practice for more than ten years and, unlike some other officers of the Court (such as the Registrars) am only very rarely called upon to intervene in a costs issue.

37 Having said that, a charge of $225,000 for legal costs solely attributable to the care, preservation and realisation of the Eulup Road land does seem large. Without in any way indicating a view that they are not justified, I think the legal costs ought to be taxed so that all persons concerned can have confidence that they have been subjected to independent scrutiny.

38 Mr Chinnery submitted that the sale of the vineyard was virtually forced on the registered mortgagees "but it was forced on us with an understanding that the funds would be available to [the registered mortgagees]". Mr Chinnery pointed to the minutes of a meeting of creditors (the date of which is not specified) in which the Chairman (presumably Hughes) indicated that once the property had been sold the court would set in place a process so the funds could be held until all parties could have a say with respect to claims.

39 As I understood him, Mr Chinnery was saying that because of the expectations that were raised at the meeting it would be inappropriate for there to be any call on the funds until such time as all questions relating to entitlements of all parties to the fund had been resolved.

40 I appreciate the point Mr Chinnery was making. However, I am not sure that what was said at the meeting or, indeed, what occurred in Sandgate v Ionnou, should lead to a situation where all of the Grubb related matters had been resolved before any claim could be made on the Sandgate funds. I say "all of the Grubb related matters" because, one possible view is that the unsatisfied claims of all persons may eventually fall on the general trust funds of the Grubb operation. I think each mortgage or investment situation has to be assessed individually, at least in the first instance. Some claims can be resolved on the individual facts. Others need to take their colour from the Grubb operation in a broader context.

41 Much of what I have said, as a statement of general principle in relation to the liquidator of Sandgate applies equally to the entitlement of the liquidator (and provisional liquidator) of Oakleigh and Rowena to remuneration. But there are some fundamental differences. Sandgate was the registered proprietor of the Eulup Road land and the liquidator was engaged in the realisation of an asset of that character. The complicating factor is, of course, the legal and equitable interests claimed by others in the land (through mortgages, charges and trusts). To the extent that there are assets of Oakleigh and Rowena held in the name of the companies or either of them, similar principles will apply. But where (as, for example, in the Hardie Developments test case which was the subject of the reasons in Conlan v Registrar) the asset concerned is legally and beneficially owned by another person (as was the case with the holders of registered interests in the mortgage) the liquidator can have no resort to the fund arising from the realisation of the asset.

42 In relation to Oakleigh, or more particularly to Rowena, there is a further complicating factor. Conlan was appointed as supervisor of the finance broking business of GGFB under s 73 of the FBCA. As can be seen from the reasons in Conlan v Registrar, I have grave doubts about the extent of the powers which a supervisor can exercise under the FBCA. This is going to complicate the final resolution of the remuneration issue in relation to Rowena. It will be necessary to isolate the work done on behalf of Rowena from that done on behalf of Oakleigh. It will also be necessary to identify the work done by Conlan in his capacity as supervisor from that done as a liquidator. Nice questions might arise about entitlement to remuneration purportedly done as supervisor but which were beyond the limits of the powers properly exercised in that capacity. The situation will be made even more difficult where the work purportedly done as supervisor could have been done by a liquidator.

43 These matters were not properly addressed or argued at the hearing, largely because my views on the powers of a supervisor had not then crystallised. I do not think it would be appropriate to say anything more or to give directions about the remuneration of the liquidator and supervisor of Rowena. This should await further argument after the issues relevant to the administration and which might affect the outcome become clearer.

44 So far as concerns Oakleigh, I think the object of the application was to obtain some guidance as to the general principles that might be applied rather than to establish a specific claim to a particular fund. Generally speaking, the principle in In re Universal Distributing will apply to the entitlement to remuneration of the provisional liquidator or liquidator of Oakleigh from trust or charged assets.

45 Where work done by a liquidator in relation to trust assets is done for the purpose of the winding up of the affairs of the company, remuneration and expenses attributable to that work may be paid out of non-trust property of the company in accordance with s 556 of the Corporations Law to the extent that such property is available. If there is not sufficient non-trust property available it is normally permissible to make an allowance to the liquidator out of trust property: Re G B Nathan at 689. In other words, a provisional liquidator or liquidator must first seek to satisfy his or her remuneration from assets held beneficially by the company but if they are insufficient then resort may be had to the proceeds from the realisation of trust property.

46 Where there is more than one trust from which the costs can be drawn the provisional liquidator or liquidator should estimate the costs attributable to each trust. If this cannot be done, then the costs should be apportioned pro-rata between the affected trusts. This is an application of the maxim that equality is equity: In re Suco Gold at 110. If the liquidator has performed work on behalf of investors for whom no property was held on trust he or she could look to trust assets to satisfy a claim in respect of that work if, and only if, the costs and expenses were not divisible at all: Coramandel v CL Custodians [1999] FCA 144; 30 ACSR 377 at 386.

47 Although I have not carried out what would, in effect, be a taxation of the claim made by the liquidators of Sandgate, I have subjected the material to sufficient scrutiny to enable me to say that:

(a) there is enough information on which to form a view as to the fairness and reasonableness of the claim; and

(b) the claim is, generally speaking, fair and reasonable.

48 I am not satisfied that the questions or objections raised to individual items or categories of charge are sufficiently weighty to justify a full inquiry or assessment by a Master. Such a course would be possible but I think the costs that would be incurred would better be spent in any one of a myriad of other problem areas in this unfortunate litigation.

49 There are a couple of exceptions to that statement. I think the legal fees need to be taxed. I believe also that the liquidators of Sandgate should file a further affidavit in which they describe with precision how all work done on or after 1 May 2000 relates to the care, preservation or realisation of the Eulup Road property. The liquidators are entitled, I think, to an order justifying an interim payment pending finalisation of this application. I think the appropriate amount for the interim payment (referring to Annexure BH7) is:

(c) all of the costs associated with the care, preservation and realisation of the Eulup Road property other than the legal fees;

(d) two-thirds of the legal fees which would otherwise have been included in item (c).

50 I suggest the following programme to finalise the application:

(a) within 21 days, the liquidators of Sandgate file and serve any further affidavit material and an explanatory memorandum in relation to the charges for work done on or after 1 May 2000;

(b) by the same date, the solicitors for the liquidators of Sandgate are to file and serve a bill of costs in taxable form for taxation by a Registrar;

(c) within 14 days of receipt of the documents referred to in pars (a) and (b), any other party may file and serve:

(i) affidavit materials in response and a memorandum outlining with precision the nature of any objections to the items or amounts claimed;

(ii) a notice of intention to appear on the taxation of the legal costs, again outlining with precision the nature of any objections to the items or amounts claimed;

(d) unless any party requests a further hearing, the liquidators' claim for post-1 May 2000 expenses and costs will be determined by the Judge on the papers;

(e) following final determination of the claim for post-1 May 2000 costs and expenses and the taxation of costs the liquidators may forthwith draw the balance of the amounts to which they are entitled or shall forthwith reimburse the fund, as the case may be.