New South Wales Supreme Court CITATION : Crouch v Abell; Application of Crouch [2005] NSWSC 1308 HEARING DATE(S) : 12 December 2005 JUDGMENT DATE : 12 December 2005 JURISDICTION : Equity JUDGMENT OF : Campbell J DECISION : Short Minutes to be brought in CATCHWORDS : BAILMENTS - goods of a particular kind purchased and stored for investors - appropriation of particular items to particular investors not able to be demonstrated - how title to goods of that kind held - dealing with fractional entitlements to an item of goods of that description - SALE OF GOODS - passing of property and risk - goods of a particular kind purchased and stored for investors - appropriation of particular items to particular investors not able to be demonstrated - how title to goods of that kind held - dealing with fractional entitlements to an item of goods of that description - RECEIVERS - court-appointed receivers - entitlement to lien - approval of fees - CORPORATIONS - winding up - authorising liquidator to dispense with proof of debts CASES CITED : Application of Crouch [2005] NSWSC 1122 Nicholas James David Crouch - Plaintiff (6045/05 & 2928/05) Heritage Fines Wines Pty Ltd (in liq) - Second Plaintiff (2928/05) PARTIES : John Abell - First Defendant (6045/05) 2,909 other Defendants (6045/05) Peter Ngan - 2911th Defendant (6045/05) FILE NUMBER(S) : SC 6045/05; 2928/05 MR Aldridge SC - Plaintiff (6045/05 & 2928/05) MR Gracie - 2911th Defendant (6045/05) COUNSEL : M Sneddon, solicitor - certain investors (6045/05) Parry Carroll - Plaintiffs (6045/05 & 2928/05) SOLICITORS : LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J MONDAY 12 DECEMBER 2005 6045/05 NICHOLAS JAMES DAVID CROUCH v JOHN ABELL & ORS 2928/05 NICHOLAS JAMES DAVID CROUCH & ANOR JUDGMENT – Ex Tempore 1 HIS HONOUR: This is an application by the court-appointed receiver and manager of wine of which Heritage Fine Wines Pty Ltd (in liquidation) is the bailee. It is also an application brought by the liquidator of that company seeking some declarations and orders as to the title to wine and the distribution of wine, future storage of wine, liens and charges for unpaid levies which have been permitted to be made in accordance with the Court orders, the sale and delivery of investor wine, and unpaid storage and insurance costs owing to the second plaintiff by investors. The second plaintiff is the company in liquidation. 2 There are 2911 defendants in these proceedings. They have been served, some in person, and some pursuant to orders for substituted service which have been made. Many have not appeared. Some of the defendants were legally represented. Those defendants who were legally represented are aware of the general nature of the orders now proposed to be made, and do not oppose them. Under those circumstances, these reasons can be briefer than they otherwise might be. 3 The company had a business under which it invited members of the public to purchase from it wine of superior quality, and to engage the company to store that wine on behalf of the purchasers. The wine was located in several different spots. The records relating to ownership of stored wine were inadequate to enable a complete matching of investors to individual bottles of wine which were held in storage. In some cases, investors had agreed to purchase, and paid for, wine of a particular description (and by description I mean the identification of wine by reference to its manufacturer, brand name and vintage year), but no wine of that description is to be found in the warehouses which the company used. There is, however, in certain of those cases, wine which meets the description, save for the vintage year. 4 There have been some shortfalls in the wine which is able to be allocated, of a particular description, to the investors in wine of that description. Some of the wine, in general the more valuable wine, was individually bar coded, and bar codes enabled a matching to be made between particular investors and particular bottles of wine. The receiver has carried out a vast task of analysis and matching, and has taken the matching exercise as far as is practical to do. Broadly, it has been possible to match the bar coded wine with individual investors. The receiver will give that wine in specie to the investors entitled to it. 5 The principle upon which the receiver proposes to deal with the rest of the wine now is by allocating in specie such wine as he can, to those investors who have purchased wine of that description. That allocation necessarily must be done in a way that recognises that, if there is a shortfall in the amount of wine physically present, and the allocation of that shortfall pro rata amongst the investors results in an individual investor having only a fractional entitlement to a bottle of wine, it is not possible to distribute that fraction in specie. 6 I am satisfied that the contractual documentation which was adopted between the company and investors - which was a standard form - contemplated that at all times there would be an appropriation of wine purchased by the company to individual investors. The company held out to investors that it would proceed in that way with the wine that it purchased for them. Insofar as an actual appropriation of wine to particular investors can be demonstrated to have been made, because the number of bottles on hand matches the number that the company purchased, the legal title in that wine has passed to the investors. To the extent to which it is not possible to say that there has been such an appropriation – and this is the case where there is less wine available than is needed to satisfy the claims of investors in wine of that particular description – the company would be estopped, as against any investor in wine of that description, from denying that one or other of the investors in wine of that description had title to the wine. In circumstances where the company is estopped from denying that the investors have title in this way, yet it is not possible to establish that title at law has passed to any particular investor, it is appropriate to recognise the wine as being held on a remedial constructive trust, for the benefit of all investors in the wine of that description, and in proportion to their respective claims. It can then be divided in specie among them. 7 The receiver is proposing to sell any wine which cannot be allocated in specie in this way, and to distribute the proceeds between investors in accordance with there being such a constructive trust, in the proportions of their claims. That way of proceeding is right in principle. 8 The receiver has had the benefit of certain voluntary levies which, pursuant to an earlier order of the Court, he has been permitted to raise from investors. That voluntary levy was designed to finance the ongoing costs of the receivership. To the extent to which there is no levy paid by any particular investor, the receiver is entitled to a lien to cover his costs and disbursements of the necessary task of sorting out entitlements to the wine. 9 Through the exercise which the receiver has carried out, he is the person who has the best knowledge, of anyone in the world, of who has title to a particular item of the stored wine, and what contracts to purchase wine the company entered. The receiver is also the liquidator of the company. Under those circumstances, it is appropriate to authorise him to dispense with formal proofs of debt in the liquidation of the company arising from contracts to purchase wine, to the extent that seems appropriate to him. 10 There are some investors who paid for wine, and concerning whom the receiver has been able to identify certain particular items of wine as being held, but where the investor is uncontactable. The wine continues to incur storage costs. In those circumstances, it is appropriate to authorise the receiver to sell this wine, and, after paying proper costs and expenses, pay the proceeds into court. 11 To enable the administration to be concluded, it is also appropriate to authorise the raising of another voluntary levy, and to declare that a lien will exist in relation to proper receivership costs to the extent to which any investor does not pay the levy. 12 The receiver seeks approval of his fees and expenses. I considered an earlier claim for such approval by the receiver in an earlier judgment: Application of Crouch [2005] NSWSC 1122. 13 The present case is not different in principle, and evidence is presented in similar detail now to justify the amounts claimed. It is appropriate to authorise the fees and expenses which are claimed. 14 There are also certain more detailed orders which the receiver seeks, concerning the way in which he ought apply certain particular bottles of wine. I am satisfied with the appropriateness of his proposals. 15 I have discussed with counsel the detail of the orders which are needed to be made to give effect to these principles. Upon short minutes of such orders being brought in to Chambers, I will make orders which give effect to the principles identified in this judgment. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.