Federal Court of Australia Topp (Liquidator), in the matter of Aidzan Pty Limited (in Liquidation) v Nazdia Pty Limited (No 2) [2020] FCA 1780 File number(s): NSD 306 of 2019 Judgment of: RARES J Date of judgment: 17 December 2020 Catchwords: BANKRUPTCY AND INSOLVENCY – Court appointed receivers' application for approval of remuneration and expenses and termination of receivership – whether remuneration paid to receivers reasonable – where trust deed of corporate trustee in liquidation and receivership lost – where clause in template trust deed of firm of solicitors used to draft missing trust deed provided liquidation disqualified trustee from holding office – whether provisions in template trust deed required Court not to terminate receivership Legislation: Federal Court Rules 2011 (Cth) rr 1.34, 14.24, 30.04 Corporations Act 2001 (Cth) ss 425, 471B ) Cases cited: Hosking (Liquidator); In the Matter of Business Aptitude Pty Ltd (In Liq) [2017] FCA 1417 Templeton v Australian Securities and Investments Commission (2015) 108 ACSR 545 Topp (Liquidator), in the matter of Aidzan Pty Ltd (in Liquidation) v Nazdia Pty Limited [2020] FCA 1764 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 17 Date of hearing: 17 December 2020 Counsel for the Plaintiffs: Mr Roger Marshall SC with Mr Scott Richardson Solicitor for the Plaintiffs: Ashurst Counsel for Mr Hayes (Interested Person) Mr Christopher Harris SC with Mr Watson Solicitor for Mr Hayes (Interested Person): Watson Mangioni Lawyers Pty Limited ORDERS NSD 306 of 2019 IN THE MATTER OF AIDZAN PTY LIMITED (IN LIQUIDATION) BETWEEN: ALAN GODFREY TOPP IN HIS CAPACITY AS OFFICIAL LIQUIDATOR OF AIDZAN PTY LIMITED (IN LIQUIDATION) ACN 003 889 558 First Plaintiff BRUCE GLEESON IN HIS CAPACITY AS OFFICIAL LIQUIDATOR OF AIDZAN PTY LIMITED (IN LIQUIDATION) ACN 003 889 558 Second Plaintiff AIDZAN PTY LIMITED (IN LIQUIDATION) Third Plaintiff AND: NAZDIA PTY LIMITED ACN 631 617 331 Defendant order made by: RARES J DATE OF ORDER: 17 DECEMBER 2020 THE COURT ORDERS THAT: 1. Pursuant to r 14.24 of the Federal Court Rules 2011 (Cth) the amount of the First and Second Plaintiffs' remuneration for acting as joint and several receivers and managers of the assets of the P.A.L. Property Trust ABN 12 901 829 908 (receivers) for work done for the period 9 September 2020 up to and including the date of the hearing, be fixed in the sum of $39,052.50 (exclusive of GST). 2. Pursuant to r 1.34 of the Federal Court Rules 2011 (Cth), the formal requirements of r 14.25 of the Federal Court Rules 2011 (Cth), be dispensed with and the accounts of the First and Second Plaintiffs acting as receivers be passed. 3. Pursuant to r 39.04 of the Federal Court Rules 2011 (Cth), that paragraph 3(b) of the order of 20 November 2020 is set aside to the extent that it requires the Registrar's approval of the receivers' expenses and is varied to instead provide: "the Receivers' remuneration as approved by the Registrar and expenses." 4. The First and Second Plaintiff as liquidators of the Third Plaintiff be authorised to open, operate and control a bank account in the name of the Third Plaintiff for the purposes of holding money held or previously held in the bank account of the P.A.L. Property Trust (Liquidation Account). 5. Directs that the First and Second Plaintiffs forthwith pay from the accounts of the receivership: (a) the amount in order 1 to the First and Second Plaintiffs for their remuneration as receivers; (b) the outstanding expenses of the First and Second Plaintiffs as receivers up to and including the hearing on 17 December 2020; and (c) the balance to be paid to into the Liquidation Account. 6. The First and Second Plaintiffs be discharged as receivers of the P.A.L. Property Trust. 7. Directs to the extent necessary under section 90-15, Schedule 2, Corporations Act 2001 (Cth) that the First and Second Plaintiffs as liquidators of the Third Plaintiff would be justified: (a) in lodging any Business Activity Statement of the P.A.L. Property Trust ABN 12 901 829 908 due on or after the date of this direction; (b) in causing any refund from the Commissioner of Taxation to be paid on any Business Activity Statement, if paid to a bank account in the name of the P.A.L. Property Trust ABN 12 901 829 908 controlled by them as receivers, to be paid into the Liquidation Account; and (c) to do any administrative tasks necessary in order to finalise the receivership. 8. Pursuant to section 471B of the Corporations Act 2001 (Cth) that leave be granted to Mr Alan Hayes as liquidator of K. & A. Laird (N.S.W.) Pty Limited (In Liquidation) nunc pro tunc to begin and to proceed with the proceedings against the Third Plaintiff in Supreme Court of New South Wales filed on 11 December 2020, being proceedings number 2020/00351691 (NSWSC Proceedings). 9. Directs to the extent necessary under section 90-15, Schedule 2, Corporations Act 2001 (Cth) that until further order of this Court or the Supreme Court of New South Wales the First and Second Plaintiffs would be entitled: (a) to use the funds held in the Liquidation Account to pay the remuneration of the First and Second Plaintiffs as liquidators of the Third Plaintiff approved in accordance with Division 60 of Schedule 2, Corporations Act 2001 (Cth) for time spent in managing the liquidation of the Third Plaintiff, including without limitation, defending any proceeding commenced against the Third Defendant, including the NSWSC Proceedings; and (b) to engage solicitors, counsel, experts or incur other incidental costs in connection with the liquidation of the Third Plaintiff, including without limitation, defending any proceeding commenced against the Third Defendant, including the NSWSC Proceedings with such costs and expenses to be paid from the moneys held in the Liquidation Account. 10. Directs that unless the First and Second Plaintiffs seek an earlier relisting on 3 days notice, paragraph 9 of the Interlocutory Application filed 29 July 2020 be stood over to 5 March 2021 for case management. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) RARES J: 1 On 20 November 2020, I dealt with part of the interlocutory application by the liquidators and receivers of Aidzan Pty Ltd (in Liq), the third plaintiff: Topp (Liquidator), in the matter of Aidzan Pty Ltd (in Liquidation) v Nazdia Pty Limited [2020] FCA 1764. This is the second stage of the interlocutory application filed on 29 July 2020. I will use the same defined terms that I used in my earlier reasons. The liquidators, in their capacity as receivers of the PAL Trust, now seek orders that their accounts be passed and that their appointment as receivers be terminated. They no longer press for an order today that the winding up of Aidzan also be terminated. Background 2 Peter Laird informed the receivers' and liquidators' solicitors yesterday by email that if, upon the termination of the receivership, the winding up would also terminate so that, as the director of Aidzan, he would be returned to control it and the PAL Trust, he would seek to take steps to reappoint liquidators to Aidzan. He explained that this was because of proceedings that Mr Hayes, the liquidator of K. & A. Laird (N. S. W.) Pty Ltd, filed in the Supreme Court of New South on 11 December 2020 as plaintiff, against Aidzan, in its own behalf and in its capacity as trustee of the PAL Trust, Nazdia in its capacity as trustee of the Aidzan Superannuation Fund, and Peter Laird (the Supreme Court proceeding). Mr Hayes' claims are based substantively on alleged breaches of fiduciary duty by those defendants over the course of 30 years. The Supreme Court proceeding is listed before the Equity Registrar for first directions on 22 February 2021. 3 Mr Hayes opposed the liquidators remaining in office, and so giving effect to Peter Laird's wishes to avoid a new liquidation, as appear to have been expressed in the email. Mr Hayes' opposition was on the basis that any continuing, or new, liquidation would absorb, unnecessarily, funds in the PAL Trust that could otherwise be applied for the benefit of the successful party in the Supreme Court proceeding. 4 During the course of argument, a convenient alternate possibility emerged. Mr Hayes suggested that, upon further reflection, Peter Laird would be able to decide, having regard to his necessary personal involvement as a defendant in the Supreme Court proceeding, whether he wished to also have the responsibility of defending Aidzan's and the PAL Trust's positions in respect of what, at this stage, appears to be possibly common allegations against each of the defendants that would not require them to have separate representation. This may clarify when defences and any cross-claims come to be pleaded in the Supreme Court proceeding. The fate of this proceeding, and the question of what will happen to the liquidation of Aidzan, would then be able to be considered on a more informed basis when this matter comes back for case management before me on 5 March 2021. 5 In addition, Mr Hayes has sought an order nunc pro tunc under s 471B of the Corporations Act 2001 (Cth) authorising him to begin, and subsequently proceed with, the Supreme Court proceeding. It is common ground that it is appropriate to make such an order. 6 The receivers and liquidators seek facultative orders enabling them, when they relinquish their positions as receivers, to pay moneys held in that capacity to a bank account of Aidzan and the PAL Trust so that it could then require those moneys to be used for the purposes of the liquidation. At the moment, those purposes consist, essentially, of ensuring that any outstanding taxation issues are resolved, lodging statutory returns together and considering what defence, cross-claim or other action should be taken in the Supreme Court proceeding. The liquidators would be able to apply funds they hold to those purposes, together with paying the amount of receivers' remuneration and expenses. Should the receivers' remuneration and expenses be approved? 7 The receivers seek that their remuneration of $39,052.50, excluding GST, up to and including today, be approved under s 425 of the Act. 8 In Templeton v Australian Securities and Investments Commission (2015) 108 ACSR 545 at 553–554 [28]–[32] and 599 [60], Besanko, Middleton and Beach JJ explained that, in approving or fixing the amount of remuneration paid to a person who has been appointed as a receiver, it was not necessary or appropriate for the Court to review, line by line, the work the receiver did. They said that the key question for the Court in considering the approval of a receiver's remuneration, was to identify whether the charges claimed were reasonable. They said that this involved, among other matters, having regard to the proportionality of the charges, the quality and complexity of the work done, the value and nature of the property dealt with and the time spent in performing the relevant tasks. They held that, ultimately, this involved the Court fixing the reasonable remuneration, which was not an exercise of discretion. 9 The receivers' claim remuneration for work done in the period up to the attainment of the objects of the receivership, namely to realise the property of the PAL Trust, pay the creditors of both the PAL Trust and Aidzan, and then to retire or be retired. I am satisfied on the evidence before me that the receivers have achieved the objects of the receivership identified in the order that Yates J made on 6 March 2019, and that it is appropriate to act on their application for their discharge once I fix their remuneration and approve their expenses: see Hosking (Liquidator); In the Matter of Business Aptitude Pty Ltd (In Liq) [2017] FCA 1417 at [8]–[9] per LG Foster J. 10 Mr Topp swore affidavits on 27 November 2020 and 16 December 2020 in which he explained in detail the work done by the receivers and liquidators. That comprised the sale of the Blacktown property, finalising all the expenses and debts in relation to it, managing the ordinary affairs of the receivership to its current stage, including the payment of legal fees and associated sale expenses, together with the fees incurred in relation to the foreshadowed claim by Mr Hayes, as it was until 11 December 2020, when it became an actual claim in the Supreme Court proceeding. 11 As Mr Topp pointed out, he is still waiting for the issue of a clearance certificate or confirmation from the Australian Taxation Office which, he anticipates, will not require the PAL Trust or Aidzan to pay any money. 12 He noted that the actual trust deed for the PAL Trust is missing, but a template prepared by the same firm of solicitors, Ebsworth & Ebsworth, that acted for Aidzan in establishing the PAL Trust contained a clause (cl 41(b)) that provided that the trustee would be disqualified from holding office if it went into liquidation. The template deed also provided that on the disqualification of the trustee under cl 41(b), the unit holders would be entitled, by a special resolution, to appoint a substitute trustee. 13 There is no direct evidence that a clause in the terms of cl 41(b) in the template, or one to its effect, was in the original trust deed for the PAL Trust. This state of affairs was a basis for Mr Topp wishing to terminate the liquidation so that Aidzan would continue to be eligible to be the trustee of the PAL Trust. This issue will require consideration in the mix of matters to which I have referred before this proceeding is listed for further case management on 5 March 2021. In the meantime, the funds held will be under the control of the liquidators as Court officers. It is not necessary, at the moment, to resolve whether, and if so what, particular provision applies to Aidzan, if it is to continue in liquidation, that might disqualify it from being the trustee of the PAL Trust. The orders, that I will make, for the liquidators to place surplus funds in a bank account will ensure that there is an interim regime and no danger to the trust fund by reason of any risk of its dissipation. 14 Having reviewed the evidence in Mr Topp's affidavits of 27 November 2020 and 16 December 2020, I am satisfied that the receivers' remuneration as claimed appears to be reasonable, having regard to the matters referred to in s 425(8) of the Act and the detailed explanations in both counsels' submissions and Mr Topp's evidence. 15 The receivers and liquidators pointed out, in the course of their submissions today, that there was an error in order 3(b) made on 20 November 2020. That was because the order authorised the receivers to pay, from the funds they held in that capacity, their remuneration and expenses already approved by the Registrar. However, the Registrar's prior orders culminated in his order of 25 September 2020, all of which approved the receivers' remuneration up to 8 September 2020, but not their expenses. 16 Mr Topp set out in detail in his two affidavits the basis of the expenses that the receivers have incurred for which they now seek approval. I am satisfied that the expenses claimed from the inception of the receivership were reasonable, because they were appropriate and justified as expenses of the PAL Trust, and that the receivers should be authorised to reimburse themselves from the trust fund for those expenses. I will also make an order varying order 3(b) by authorising the payment of the expenses as well as the remuneration approved by the Registrar. Conclusion 17 Accordingly, I will make orders in the form that counsel and I clarified during the course of argument. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate: Dated: 15 January 2021