Such a receiver will normally be entitled to be indemnified by the appointing creditor and to remuneration out of the moneys received or from the appointor. Such a remuneration regime applied in the present case.
27 A receiver appointed by a mortgagee is not concerned to advance or protect the interests of the unsecured creditors. But, to the extent that such a receiver works to get in property for the benefit of the secured creditor, it may also benefit the general body of unsecured creditors who will derive advantages if the receiver's recoveries cause to be available, in the aggregate, more than is required to cover the secured debt. The receiver's primary duty is to serve the interests of the secured creditor alone and to see its debt paid. Thereafter, the receiver simply accounts to the mortgagor for any balance of funds in his or her hands and it is only at that point that the receiver's efforts may be seen to have worked to the advantage of unsecured creditors.
28 The evidence before me shows clearly enough that the ability of Mr Tolcher, as liquidator, to achieve the outcome he did in relation to the s.588FF and s.588M claims against Key was enhanced by information elicited by the National's receiver in the course of the Part 5.9 examinations conducted by him and that the receiver was cooperative in otherwise furnishing useful information to Mr Tolcher. It is true that Mr Tolcher obtained information from the Part 5.9 examinations by having his solicitor actually attend and listen while the examinations were in progress which is, of course, a right or ability enjoyed by the community at large, since such an examination is, under s.597(4), to be held in public except to the extent that the court may order that, because of special circumstances, it be held in private. But attendance by his solicitor at the public examinations was not the only benefit that Mr Tolcher, as liquidator, derived from the receiver's decision to undertake those examinations. The cooperative basis on which the liquidator and the receiver worked was in accordance with arrangements mapped out between them in advance. Those arrangements are summarised in a letter written by the liquidator's solicitors on 19 October 2001:
"The National Australia Bank will fund the receiver to conduct public examinations of officers of Leasetec Australia Pty Limited (Leasetec) and Capital Finance Australia Pty Limited (Capital) under the Corporations Act (Act), and possibility their solicitors. The receiver has applied to the Australian Securities & Investment Commission for authority to conduct the examinations. It is intended that 3 to 4 days be set aside for the examinations in December or January 2002.
The Bank is not prepared to fund the liquidator to prepare for and attend the examinations but has no objection to the liquidator attending conferences with Counsel briefed to conduct the examinations, providing Counsel with proposed questions and having access to any documents produced by all parties pursuant to orders for production. The Bank will also make the transcripts available to the liquidator. We have also sought that the Bank's solicitors provide to us documents collected by them to date which includes police statements given by Scott, his solicitors files (at least more than those provided to the liquidator) to date and an internal investigation by the Bank (for which privilege will likely be claimed).
Mr P Wood of Counsel is proposed to be briefed.
The liquidator will need funding for his part in the examinations but, given that the Bank will be carrying out much preparation work and briefing Counsel, his costs and legal expenses will be significantly reduced. We estimate the liquidator's legal costs to participate in the examinations (conferring with Counsel, reviewing documents produced and attending the examinations) should be no more than $10,000.
The Bank's decision to fund the receiver to conduct examinations is motivated by its desire to investigate all possible causes of action it may have against the parties involved. We expect some overlap between the facts relating to proposed preference actions and the examinations. In essence the Bank is willing to allow the liquidator "a free ride" with the Bank to some extent. It is also possible at a public examination conducted by the Bank that reference will be made to various officers of the Bank involved in the subject transactions, from whom further enquiries (including public examinations) could be made by the liquidator.
The liquidator can also conduct his own public examinations at any time.
The Bank intends to reassess its position following the examinations and, at that stage, make a decision in relation to funding the preference actions."
29 The evidence shows that such a cooperative approach was followed as envisaged. The liquidator had no funds with which to conduct Part 5.9 examinations of his own. He obtained useful information and other assistance from the receiver who, in turn, could make investigations, including by Part 5.9 examinations, only because funded by the National. The arrangement under which the receiver gave information and assistance to the liquidator was obviously sanctioned by the National and went substantially beyond merely the creation of an opportunity for the liquidator's solicitor to hear what transpired at the receiver's examinations.. The judgment of Palmer J on the question of the status of the recoveries from Key suggests that the National had an expectation that those recoveries would, contrary to his Honour's ultimate finding, accrue to its benefit as secured creditor. But the National obviously knew that it was the liquidator alone who could institute the recovery action. The National must therefore be taken to have knowingly and actively assisted in the achieving of the outcome in the recovery proceedings which, in the final result (not being the result preferred by the National), yielded proceeds for the benefit of the general body of creditors, not for the National as secured creditor.
30 In the events which happened, it has been shown that the National's funding of the receiver's Part 5.9 examinations and the preparations and other activities associated with them played a direct role in enabling the liquidator to recover money by means of the compromise of the s.588FF and 588M claims that the liquidator alone was competent to pursue. The result to which the National thus contributed financially was a result that benefited the general body of creditors, not, as the National expected or hoped, the secured creditor alone. But the disappointed expectation or hope of the National in that respect does not detract from the outcome to which it in fact contributed, being an outcome which was to the benefit of the general body of creditors. While that was not the outcome the National sought, it was the outcome actually achieved. The court is entitled to look at matters with the benefit of hindsight in circumstances such as this: see observations to that effect by Hodgson JA (with whom Handley JA agreed) in State Bank v Brown (above). On that basis, the funds provided by the National to enable the receiver to undertake Part 5.9 examinations and related activities may properly be taken into account for the purposes of s.564.
31 It is now possible to quantify the extent of the financial assistance provided by each of Fuji, Suncorp and the National in connection with the series of allied events (consisting of the Part 5.9 examinations, the mediation and the proceedings to determine the status of the settlement sum) which culminated in the receipt by Mr Tolcher from Key of the sum of $2.5 million for the benefit of the general body of creditors. Leaving aside the sum provided to enable the business to be continued during the Part 5.3A administration, Fuji's contributions were $8,800 towards the cost of the mediation, $10,000 towards the cost of the proceedings before Palmer J, $35,407.79 in relation to the attendance of the liquidator's solicitor at the Part 5.9 examinations and $21,818.18 for a solvency report - a total of $76,025.97. I should deal here, by way of aside, with the question raised in submissions whether the cost of the solvency report is properly to be included when determining Fuji's contribution to the events that culminated in the $2.5 million settlement. I am satisfied that, for reasons advanced in submissions made on Fuji's behalf, this should be taken into account. A rational decision to make claims under s.588FF or s.588M can only be made in the light of an assessment of the company's solvency at the relevant time. Unless the liquidator is confident that he or she can prove that the company was insolvent at that time, the claim cannot responsibly be advanced. The solvency report provided the necessary confidence.
32 Suncorp's outlay was $8,800 in relation to the mediation and $10,000 for the proceedings before Palmer J - a total of $18,800.
33 In the case of the National, the contributions were $8,800 towards the cost of the mediation and the contribution by way of funding of the receiver in connection with the Part 5.9 examinations. I do not consider it appropriate to regard the whole of the $150,000 outlaid by the National in relation to the examinations as having had a relevant connection with the recovery, protection or preservation of property in the winding up by means of the s.588FF and 588M claims. The evidence shows that the examinations occupied four days and that persons associated with Key (the company against which the s.588FF and 588M claims were advanced by the liquidator) were examined for about three days. On that basis, three-quarters of the outlay of $150,000 (that is $112,500) should be regarded as having been hazarded for purposes relevant to s.564. The National's contribution should therefore be taken to be $121,300 (being $8,800 plus $112,500).
34 With the contribution relativities thus set at $76,025.97 for Fuji, $18,800 for Suncorp and $121,300 for the National, it becomes necessary to decide how the power conferred by s.564 should be exercised, if it is to be exercised at all. In that connection, I first record my conclusion that the respective financial outlays are within the purview of s.564. It is now established that the actual outlay of funds leading to a relevant beneficial effect in relation to "property" with which the section is concerned represents an activity of the kind with which the section is concerned: see Re Kyra Nominees Pty Ltd (1987) 11 ACLR 767, Power Demolitions Pty Ltd v Tosich Constructions Pty Ltd (1998) 26 ACSR 22, Re Parkston Ltd (2000) 35 ACSR 114, Re Pinnacle Constructions Pty Ltd [2001] NSWSC 1210 and Re Home Corp Projects Pty Ltd (2002) 20 ACLC 1751. This, coupled with the conclusion, already expressed, that the claims under s.588FF and s.588M involved "property" of the kind with which the section is concerned, leads to the conclusion that the power conferred on the court by the section is available.
35 The factors that he court is to take into account in deciding whether it is just to give some creditors an advantage over other are not prescribed by the legislation. Some relevant factors were stated by Brownie J in Household Financial Services Pty Ltd v Chase Medical Centre Pty Ltd (1995) 18 ACSR 294 at 296:
"The last words of s 564 provide for, and the authorities accent the need to assess the risk run by the indemnifying creditors, for whose benefit an application is made, but the authorities show that it is also appropriate to look to the sum recovered (or the value of the property recovered), the failure of other creditors to provide the indemnity, the proportions between the debts of the indemnifying creditors and the other debts, the public interest in encouraging creditors to provide indemnities so as to enable assets to be recovered, and, generally, the totality of the circumstances; and there has been a tendency in recent times to adopt a more liberal approach, in favour of indemnifying creditors. See Re Bavistock (1946) 14 ABC 30; Re Ivermee; Ex parte Official Receiver (1974) 36 FLR 187; Re Passmore; Ex parte Official Receiver (in liq) (1984) 56 ALR 181 at 186; Re Kyra Nominees Pty Ltd (in liq) (1987) 11 ACLR 767; 5 ACLC 811 at 819; Re Ken Godfrey Pty Ltd (in liq) (1994) 14 ACSR 610; 12 ACLC 1071."
36 This statement cannot be regarded as exhaustive and, in the present case, it is, I think, very important to recognise at once that two points are agreed (or, at least, not contested) by all of Fuji, Suncorp, the National, Capital and Mr Tolcher as liquidator: first, that financial contributions by creditors to the sequence of events that led to the $2.5 million settlement for the benefit of creditors generally warrant recognition in the form of the grant of advantage under s.564; and, second, that Suncorp deserves a priority dividend of $60,000 in respect of its debt. It is, to my mind, particularly significant that Capital, a creditor for whose benefit no order under s.564 is sought, does not seek to contest these two points, even though it argues that the advantage to be given to Fuji should be less than the liquidator proposes and that, for reasons I have considered but not accepted, the National should receive no priority. The attitude of Capital as to the two points I have mentioned may, it seems to me, be regarded as a proxy for the views of the general body of creditors, other than those to which the liquidator's application relates. Capital does not have any interest, as regards those matters, distinct from the interests of any other non-participating creditor and its acceptance, after what has obviously been detailed consideration and legal advice, of the two basic matters mentioned is something to which the court should pay close attention. It is also significant, I think, that the liquidator sought financial assistance from all creditors, including Capital, and that, despite its decision (in common with all creditors except Fuji, Suncorp and the National) not to provide funding, Capital has the attitude of non-opposition it has expressed on the general issue of recognition of financial contributions actually made and on the specific matter of the amount of the recognition to be afforded to Suncorp.
37 All of Fuji, Suncorp, the National, Capital and Mr Tolcher may be taken to accept that Suncorp's contribution amounting to $18,800 merits recognition in the form of a preferential dividend of $60,000, being 3.1915 times the contribution. There is no reason to question this unanimous view. The court should accept that it represents an appropriate basis for the making of an order under s564 in respect of Suncorp. Given that the financial contributions of the other parties, like the contribution of Suncorp, related to some part of the overall process which culminated in the receipt of $2.5 million from Key by way of settlement, it is appropriate, in my view, to apply the same multiplier to the contributions of those other parties to determine the amounts of preferential dividends to be ordered in their favour on the same basis. The appropriate preferential dividends are thus $76,025.97 x 3.1915 = $242,636.88 for Fuji and $121,300 x 3.1915 = $387,128.95 for the National.
38 The order of the court should accordingly be to the effect that there be distributed by the liquidator of Lloyd Scott Enterprises Pty Ltd, by way of interim dividend to creditors, an aggregate sum of $689,765.83 and that that sum be paid as to $60,000 to Suncorp-Metway Limited in respect of its debt, as to $242,636.88 to Fuji-Xerox Australia Limited in respect of its debt and as to $387,128.95 to National Australia Bank Limited in respect of its debt, such distribution to be the exclusion of any like payment to any other creditor and without prejudice to the right and ability of each payee to participate rateably with other creditors in the winding up in respect of the balance of its debt. I direct that the liquidator file, by delivery to my Associate within 21 days, a form of order agreed to by all parties as suitable to give effect to this.
39 I shall hear the parties on costs at a time to be fixed.
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