The Court also referred to Re Berkeley Applegate (Investment Consultants) Ltd ; Harris v Conway [1989] Ch 32 at 50-51.
101 It is apparent, in my opinion, from this discussion that the principle being discussed in Re Universal Distributing Co was the principle of salvage. In that regard, it must be recognised that 'salvage' is merely a convenient expression to describe the basis upon which a receiver is entitled to be reimbursed for costs and to be paid remuneration before other persons entitled to the funds. However, I will continue to use the term 'salvage' for ease of reference. If I am correct in this, that is that Re Universal Distributing Co was an application of salvage, then Pattison was likewise an application of that principle, either by analogy or extension of the principle. The difference or extension was that in Pattison, no fund had been realised - but there were assets to which the charge or lien could attach. Finn J held that was sufficient.
102 However, Barrett J at [21] considered that 'salvage' as discussed in the authorities arose in circumstances where equitable interests were involved. In this case, Sovereign was asserting its right as legal owner of the property. His Honour considered that the equitable principle of salvage did not apply. However, his Honour considered that a wider principle might apply to "protect" the costs of the receivers. He said at [22]:
"But there may be a wider basis for the plaintiffs' 'salvage' claim, namely, that it is necessary to impose an equitable lien, as in Hewett v Court … to ensure that the second defendant, in relying upon its rights at law to sell the property as a means of obtaining satisfaction of moneys owing to others, does not unconscientiously reap the reward of outlays by the plaintiff productive of 'incontrovertible benefit' to the property and therefore to the second defendant as the holder of a legal interest in it. Such an approach - characterised as an aspect of the law of restitution - has been recognised in somewhat analogous circumstances: see, for example, Monks v Poynice Pty Ltd (1987) 11 ACLR 637; Young v ACN 081 162 512 Pty Ltd [2005] NSWSC 139. Such a 'salvage' claim, if properly available as a matter of principle, would be an example of the intervention of equity to prevent unconscientious reliance on common law rights and would operate as a qualification upon such rights."
103 In Monks v Poynice Pty Limited (1987) 8 NSWLR 662, the third defendant had purportedly been appointed as receiver and manager of a company. As it turned out, the appointment was invalid. Notwithstanding that, the third defendant sought his reasonable remuneration and reimbursement of costs and charges in acting as manager. Young J (as his Honour then was) considered that having regard to the invalidity of the appointment, the only basis upon which the claims of the third defendant could be satisfied was under the law of restitution. His Honour at 664 analysed the circumstances where, under the law of restitution, a person would be liable to pay a reasonable sum for services provided to it. Those circumstances included a class of case where the service conferred "incontrovertible benefit on [a party] and it would be unconscionable for [that] party to keep the benefit of the service without paying a reasonable sum therefore". His Honour then referred to the principle as stated in Company Receivers and Managers, Law Book Co, 1981 at 165, where Professor O'Donovan stated:
"The legal basis of this principle lies not simply in the acceptance of the services … but rather in the incontrovertible benefit the company derived from the [services]."
104 Monks v Poynice was applied by Gzell J in Young v ACN 081 162 512 (2005) ACSR 629; [2005] NSWSC 139.
105 Shirlaw v Taylor was referred to by Bryson J (as his Honour then was) in Shawyer v Amberday (In liq) (2001) 10 BPR 18,869; [2001] NSWSC 399. Bryson J at [15] observed that in Shirlaw v Taylor the Full Court of the Federal Court referred to another ground upon which an officer under a court-appointed administration could be protected in the nature of salvage, on the basis that those taking the benefit of the administration should not escape bearing the burden of the proper cost of it. His Honour concluded that in the case before him, the salvage principle did not apply to the conflicting claims because although the receiver had a lien over the mortgagor's property for his remuneration and costs, the mortgage, which although created earlier in time, was unregistered and was otherwise imperfectly constituted, such that it constituted a mere equity and ranked behind the receiver's lien. In that case, the matter was determined on principles of priority alone.
106 Counsel for Sovereign relied upon Shawyer v Amberday as demonstrating that questions of priorities and salvage were closely linked - in the sense that a claim such as that made by the receivers was either governed by priority principles, including the principles that governed the displacement of a legal interest, or had to establish that salvage applied.
107 It was submitted that this was apparent, not only from Shawyer, but also Choudhri v Palta [1994] 1 BCLC 184; [1992] BCLC 787; Westpac Banking Co v ITS. In the latter case, Austin J, having stated at [23] that the priority of the respective claims to the fund by the receivers and the chargeholders was to be determined in accordance with the principle concerning priority (in that case) of equitable interests, continued at [27]:
"Where, however, one of the claimants to priority is a court-appointed receiver seeking to recover remuneration and costs, there are some special factors in the equitable calculus. This is a case (unlike Shawyer : see Bryson J's observation at [15]) where the principle of salvage applies. In the words of the Full Federal Court in Shirlaw , those taking the benefit of the receiver's administration should not escape bearing the burden of the proper cost of it."
108 In my opinion, the authorities support Sovereign's submission to which I have just referred, namely that, in an appropriate case, a receiver appointed by or out of court may recover costs and, if applicable, be paid remuneration, for undertaking work and/or the management of a fund, a business or property. Such entitlement will depend upon the usual principles of priority, whether such priority will be postponed by the conduct of other claimants with a priority interest, or in circumstances where the Court will recognise a form of salvage claim, including the extended nature identified by Barrett J and recognised in cases such as Monks v Poynice.
109 Barrett J held at [23], however, and without himself coming to any firm conclusion whether such a principle was available, that it would not avail the receivers in this case because he was satisfied that none of the moneys expended by the receivers in relation to the sale of the property could:
"… be said to have protected or preserved the property or enhanced its value in a way that produced incontrovertible benefit that ultimately enured to the advantage of [Sovereign] and the sale [Sovereign] effected."
110 In this regard, there was uncontroverted evidence from Steven Hindes, Sovereign's solicitor, who had had carriage of the matter since 1 November 2004 and was acquainted with all aspects of Sovereign's exercise of its power of sale over the Mascot property. Mr Hindes referred to the history of the matter including the correspondence between the parties to which I have referred in relation to the marketing of the property by the receivers. He then gave evidence that Sovereign appointed Colliers International as selling agent for the Mascot property on 26 October 2004. The property was eventually sold, post-auction, by contract of sale dated 24 December 2004, for a sale price of $4m.
111 Mr Hindes further referred to each of the steps undertaken by the receivers in relation to the proposed sale of the property by them and gave evidence that none of those steps was of any benefit in achieving the sale of the Mascot property. In particular, he gave evidence that the receivers' actions in engaging the agent and in having solicitors prepare a contract for the sale of land was of no benefit to Sovereign in its exercise of its power of sale. Sovereign's solicitors prepared a fresh contract for sale of the land and Mr Hindes also gave evidence that the agents appointed by the receivers made comments to potential buyers during the course of the marketing campaign that were liable to adversely affect the campaign. Mr Hindes acknowledged that a copy of the valuations had been provided to him on 11 November 2004, but it was said that this valuation was not given to Colliers and was provided too late in the selling process to be of any benefit. Mr Hindes' evidence concluded with the statement that, in his view, none of the work carried out by the receivers in any way assisted Sovereign in exercising its power of sale, nor did it save Sovereign any costs in the sale process.
112 Barrett J did not refer to this evidence. Rather, he referred directly to the evidence of the second appellant, in which he itemised the work that was carried out by or on behalf of the receivers in the course of undertaking the proposed sale. His Honour found that the expenditures incurred "were directed simply to putting the plaintiffs in a position where they might sell - which, of course in the long run they did not do". This finding is not challenged. More importantly however, the evidence of Mr Hindes was not challenged. In those circumstances, I am of the opinion that his Honour's conclusion was correct. This conclusion also disposes of any claim in respect of costs up until 23 August 2004: see [11] above.