FEDERAL COURT OF AUSTRALIA Tonks, in the matter of PWG Holdings Pty Ltd (in liquidation) (No 2) [2017] FCA 893 File number: NSD 275 of 2017 Judge: YATES J Date of judgment: 4 August 2017 Catchwords: CORPORATIONS – creditors' voluntary winding up – where company in liquidation is a bare trustee of trust assets – plaintiffs acting as liquidators of the company and as receivers and managers of the trust assets – determination of the plaintiffs' remuneration as liquidators and as receivers and managers in dealing with the trust assets – dispensation with the requirement to pass final accounts in the receivership – discharge of the plaintiffs as receivers and managers Legislation: Corporations Act 2001 (Cth) s 499(3)(b), s 511(2) Trustee Act 1925 (NSW) s 63(1) Cases cited: Alphena Pty Limited (In liq) v PS Securities Pty Ltd as trustee of the Joseph Family Trust (2013) 94 ACSR 160; [2013] NSWSC 447 Ide v Ide (2004) 184 FLR 44; [2004] NSWSC 751 In the matter of Independent Contractor Services (Aust) Pty Limited ACN 119 186 971 (in liquidation) (No 2) [2016] NSWSC 106 Kerr, in the matter of Angel's Castle Pre-School Pty Ltd (in liquidation) (No 2) [2012] FCA 57 Kite v Mooney, in the matter of Mooney's Contractors Pty Ltd (in liq) (No 2) [2017] FCA 653 Re Application of Sutherland (2004) 50 ACSR 297; [2004] NSWSC 798 Tonks, in the matter of PWG Holdings Pty Ltd (in liquidation) [2017] FCA 246 Date of hearing: 28 July 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 23 Counsel for the Plaintiff: Mr Rose ORDERS NSD 275 of 2017 IN THE MATTER OF PWG HOLDINGS PTY LTD ACN 601 520 665 (IN LIQUIDATION) BRADLEY JOHN TONKS AND JOHN VOURIS IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF PWG HOLDINGS PTY LTD ACN 601 520 665 (IN LIQUIDATION) Plaintiff JUDGE: YATES J DATE OF ORDER: 4 august 2017 THE COURT: 1. ORDERS that the plaintiffs be allowed remuneration in respect of their administration as receivers and managers of the property, assets and undertaking (the assets) of the 262 Pennant Hills Road Unit Trust (the Trust) in the sum of $45,910.00 plus GST. 2. ORDERS that, in dealing with Lots 18 and 19 in Deposited Plan 836230 in the period 24 November 2016 to 26 February 2017 as liquidators of PWG Holdings Pty Ltd (in liquidation) (the company), the plaintiffs be allowed remuneration in the sum of $47,982.50 plus GST. 3. DIRECTS pursuant to s 511(2) of the Corporations Act 2001 (Cth) and s 63(1) of the Trustee Act 1925 (NSW), that the plaintiffs would be justified in distributing the assets of the Trust in payment, first, of their remuneration as approved in Orders 1 and 2, and then among the admitted creditors of the company acting as trustee of the Trust, pari passu. 4. ORDERS that, following the distribution of the assets of the Trust as provided for in Direction 3, the plaintiffs be discharged as receivers and managers of the assets of the Trust, provided there is no surplus remaining after such distribution. 5. ORDERS that the requirement for the plaintiffs to pass final accounts as receivers and managers of the assets of the Trust be dispensed with. 6. ORDERS that the costs of this proceeding be costs in the winding up of the company. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT YATES J: 1 The plaintiffs are the joint and several liquidators of PWG Holdings Pty Limited (in liquidation) (the company). 2 On 27 February 2017, I made an order appointing the plaintiffs as joint and several receivers and managers of the property, assets and undertaking (the assets) of the 262 Pennant Hills Road Unit Trust (the Trust). At the time, I also made an order that the costs, expenses and remuneration incurred by the plaintiffs in acting as receivers and managers be paid from the assets of the Trust. My reasons for making those orders are set out in Tonks, in the matter of PWG Holdings Pty Ltd (in liquidation) [2017] FCA 246 (my earlier reasons). 3 On 11 July 2017, the plaintiffs filed an interlocutory process seeking various directions, orders and declarations. In light of the recent decision by Markovic J in Kite v Mooney, in the matter of Mooney's Contractors Pty Ltd (in liq) (No 2) [2017] FCA 653, the plaintiffs did not press for all the relief claimed in the interlocutory process. The matters that arise for present consideration are whether orders should be made: discharging the plaintiffs as receivers and managers; dispensing with the requirement to pass final accounts in the receivership; determining the plaintiff's remuneration as liquidators of the company and as receivers and managers in dealing with the Trust assets; providing for the distribution of the Trust assets; and providing for the costs of the proceeding. 4 The application for this relief is supported by four affidavits made by the firstnamed plaintiff, Mr Tonks (27 February 2017; 3 May 2017; 31 May 2017; and 24 July 2017) and by Kristen Susan Triglone (27 July 2017). 5 The company has never traded in its own right. It has only acted as the trustee of the Trust. At the time of the plaintiffs' appointment as receivers and managers, the assets of the Trust comprised two properties at Thornleigh in New South Wales, being Lots 18 and 19 in Deposited Plan 836230. 6 Following the making of the orders on 27 February 2017, the properties were sold at auction for $9.5 million plus GST. The sale has now been completed. The secured liability of the registered mortgagee, Hyde Round Capital Pty Limited (Hyde Round) has been discharged, although there was a shortfall in the amount due under its security. As a consequence, Hyde Round remains as an unsecured creditor in respect of that part of the secured sum that it did not receive on completion of the sale of the two properties. There is no fund available to unsecured creditors. 7 In his affidavits of 3 May 2017 and 31 May 2017, Mr Tonks gave a full explanation of the events concerning the sale of the properties; the costs incurred in achieving the sale; the amount received on settlement; the allowances and adjustments that were made in that regard, and how the proceeds received of sale were disbursed. 8 The plaintiffs seek remuneration as liquidators in the sum of $47,982.50 plus GST in respect of their dealing with the two properties in the period 24 November 2016 to 26 February 2017. Subject to the matter next noted, the plaintiffs seek remuneration as receivers and managers in the sum of $40,910.00 plus GST in respect of their dealing with the two properties in the period 27 February 2017 to 30 April 2017. 9 In his affidavit of 3 May 2017, Mr Tonks said that he expected to incur further remuneration of $5,000.00 plus GST in association with the present application up to the finalisation of the proceeding. In his affidavit of 24 July 2017, Mr Tonks said that, in the period up to 10 July 2017, the plaintiffs had, in fact, incurred further remuneration of $17,007.50 plus GST. However, the plaintiffs have limited their application for further remuneration as receivers and managers to the sum of $5,000.00 plus GST originally indicated. 10 Thus, the total remuneration sought by the plaintiffs in relation to dealing with the two properties, as liquidators and subsequently as receivers and managers, is $93,892.50 plus GST. 11 The separate remuneration sought by the plaintiffs as liquidators, and as receivers and managers, in dealing with the two properties is supported by reports in the form of spreadsheets that record and itemise the work that has been performed by the plaintiffs and their staff, based on six minute time units. The information in the reports has been reviewed and verified by Mr Tonks who has deposed that: the times recorded are reasonable for the work performed; the work performed was reasonably necessary to give effect to the plaintiffs' appointment to sell the properties; the work was performed professionally by staff who were adequately qualified to perform that work; and the work was performed in a timely and efficient manner. 12 I note that, on 14 December 2016, a meeting of the company's creditors approved the plaintiffs' remuneration as liquidators in the sum of up to $40,000 plus GST. This resolution was passed in reliance on s 499(3)(b) of the Corporations Act 2001 (Cth) (the Corporations Act) and covered the periods 24 November 2016 to 30 November 2016 and 1 December 2016 to the conclusion of the liquidation. At the time, the possibility that the plaintiffs might seek approval from the creditors for further remuneration was raised. As events transpired, approval for further remuneration was sought. On 27 April 2017, a meeting of the company's creditors approved the plaintiffs' remuneration as liquidators in the sum of up to $45,580 plus GST for the periods 12 January 2017 to 5 April 2017, and 6 April 2017 to the conclusion of the liquidation. In his affidavit of 3 May 2017, Mr Tonks noted that the plaintiffs' remuneration as liquidators, approved on 14 December 2016 and 27 April 2017, includes time costs for general administration tasks associated with the liquidation as well as time costs for dealing with the properties. Thus, in respect of liquidators' remuneration, the remuneration sought by the plaintiffs in respect of dealing with the two properties is a part of the remuneration that has been approved by the creditors in meeting. 13 Notwithstanding the approval by the creditors of the plaintiffs' remuneration in the liquidation, the plaintiffs sought the Court's approval of their remuneration when dealing with the two properties on the basis that their entitlement to remuneration in that regard arises from an exercise of the Court's inherent equitable jurisdiction to allow remuneration out of trust assets in connection with the administration of a trust fund rather than as a matter of entitlement under the Corporations Act: In the matter of Independent Contractor Services (Aust) Pty Limited ACN 119 186 971 (in liquidation) (No 2) [2016] NSWSC 106 at [31]; Alphena Pty Limited (In liq) v PS Securities Pty Ltd as trustee of the Joseph Family Trust (2013) 94 ACSR 160; [2013] NSWSC 447 at [37]. The inherent jurisdiction of the Court to allow remuneration in connection with the administration of a trust fund extends to the remuneration of one who is, for practical purposes, controlling a trustee. This includes a liquidator of the trustee: Re Application of Sutherland (2004) 50 ACSR 297; [2004] NSWSC 798 at [11]-[17]. 14 Further, as I have already noted, when appointing the plaintiffs as receivers and managers, I specifically ordered that their costs, expenses and remuneration incurred in that capacity be paid from the Trust's assets. 15 Thus, it falls to the Court to approve the plaintiffs' remuneration in respect of their separate capacities as liquidators, and as receivers and managers, in dealing with the two properties. 16 Based on Mr Tonks' evidence, I accept that the amount sought as remuneration by the plaintiffs, as liquidators dealing with the two properties up to 27 April 2017, is fair and reasonable. I also accept that the amount sought by the plaintiffs as receivers and managers on and from 27 April 2017 is fair and reasonable. 17 I note, in this connection, that the combined amount sought for remuneration is less than 1% of the realised value of the properties. I also note that the amount sought as remuneration in the liquidation is within the amount approved by the creditors in meeting. 18 I further note that all the creditors have been given notice of the present application. No creditor has come forward to oppose the amount of the remuneration that is sought. 19 I will, therefore, approve the remuneration that is sought by the plaintiffs in each capacity. 20 I will also direct that the plaintiffs would be justified in distributing the assets of the Trust in payment, first, of their remuneration as approved, and then among the admitted creditors of the company when acting as the trustee of the Trust. I am satisfied that there was no practical alternative to the plaintiffs administering the Trust to realise its assets. It would be fanciful to suggest that the work performed by the plaintiffs would and could have been done by someone else acting gratuitously. 21 I am satisfied that it is appropriate to make an order dispensing with the requirement for the plaintiffs to pass final accounts. The courts have dispensed with this requirement in cases where the cost of complying with the formal procedure of passing accounts exceeds any benefit that may accrue from doing so. I refer, in this connection, to the discussion in Ide v Ide (2004) 184 FLR 44; [2004] NSWSC 751 and to Jacobson J's acceptance and application of that principle in Kerr, in the matter of Angel's Castle Pre-School Pty Ltd (in liquidation) (No 2) [2012] FCA 57 at [5]. In light of the full explanation given by Mr Tonks (to which I have referred at [7] above), and bearing in mind that the plaintiffs' administration of the Trust assets was limited to the discrete activity of selling the two properties, I am persuaded that no material benefit would be provided by requiring the plaintiffs to pass final accounts. 22 Finally, as the purpose of the plaintiffs' appointment as receivers and managers has been fully effectuated, it is appropriate that a formal order now be made discharging them from their duties as receivers and managers upon the distribution of the Trust assets as contemplated. 23 I accept that an order should be made that the costs of this proceeding be costs in the winding up. The apparent need for the plaintiffs' appointment as receivers and managers in the course of the liquidation is discussed in my earlier reasons. It is not necessary to repeat that discussion. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate: Dated: 4 August 2017