Supreme Court New South Wales Medium Neutral Citation: In the matter of Dungowan Manly Pty Ltd (in liq) [2015] NSWSC 491 Hearing dates: 10 – 13 and 19 March 2015 Decision date: 01 May 2015 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Held that certain levies made by administrators were authorised by the Company's articles of association and by share surrender agreements. Held that strata title unit held by Company on trust for owners of corresponding share in Company subject to mortgage to shareholders' solicitors in respect of costs of proceedings. Held that lien claimed by liquidator over trust property not established in absence of evidence of work done and costs incurred and, in respect of wider costs of winding up, where not established that non-trust assets would be insufficient to meet costs of winding up. Catchwords: CORPORATIONS – winding up – conduct and incidents of winding up – where levies were made by previous administrators and current liquidator to shareholders in Company in order to satisfy judgment debts and costs – whether liquidator was limited to reliance on levy issued in 2015 by reason of election – whether the administrators' first levy was authorised by the Company's articles of association – whether levies issued under a share surrender agreement were invalid. CORPORATIONS – winding up – where shareholders holding class D shares were entitled to occupy a unit within a block owned by the Company – where Company resolved to redevelop unit blocks and convert company title to strata title – where Company struck levy against shareholders in Company to conduct the redevelopment – where shareholders of class D shares opposed resolution and received a money judgment – where other shareholders agreed to surrender shares in return for strata title units and undertook to meet specified levies – whether unit held on constructive or resulting trust for class D shareholders. CORPORATIONS – winding up – liquidators' costs, fees and expenses – where liquidator claimed a lien over the unit for unspecified work and unquantified costs – where the unit is trust property – where not established that the costs, fees and expenses incurred by the liquidator were for the preservation of the unit rather than wider costs of the liquidation – where not established that non-trust assets of the Company would be insufficient to meet liquidators costs of the winding up. MORTGAGES – mortgages and charges generally – where class D shareholders entered into costs agreement with solicitors – where costs agreement provided for a mortgage over class D shares as security for payment – where judgment debt for oppression claim was entered in favour of class D shareholders – where orders for costs entered in favour of class D shareholders – where distributions in the winding up arose from the award of the judgment debt and costs – whether judgment debts, orders for costs, and distributions to shareholders in winding up were 'secured property' for the purposes of the mortgage Legislation Cited: - Civil Procedure Act 2005 (NSW) s 56 - Corporations Act 2001 (Cth) ss 232, 258B, 436B, 437A(1), 437F, 468A, 556, 553C, 1274B(2) - Evidence Act 1995 (NSW) s 91 - Supreme Court Act 1970 (NSW) s 75 Cases Cited: - 13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) [1999] FCA 144; (1999) 30 ACSR 377 - Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470 - Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 - Coad v Wellness Pursuit Pty Ltd (in liq) [2009] WASCA 68; (2009) 40 WAR 53 - Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) & Ors [2001] WASC 230 - Dungowan Manly Pty Ltd v McLaughlin [2012] NSWCA 180; (2012) 90 ACSR 62 - Dungowan Manly Pty Ltd v McLaughlin (No 2) [2012] NSWCA 258 - Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 - Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; 211 CLR 540 - International General Electric Co of New York v Commissioner of Customs and Excise [1962] 1 Ch 784 - McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 187 - Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2014] NSWCA 323 - Neeta (Epping) Pty Ltd v Phillips [1974] HCA 18; (1974) 131 CLR 286 - Pelenoy Pty Ltd v Donovan Oates Hannaford Mortgage Corp [2004] NSWSC 4 - Re Application of Sutherland [2004] NSWSC 798; (2004) 50 ACSR 297 - Re Berkeley Applegate (Investment Consultants) Ltd (in liq); Harris v Conway [1989] 1 Ch 32 - Re Crown Meats Pty Ltd (in liq) [2013] VSC 118 - Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361 - Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 - Re Greater West Insurance Brokers Pty Ltd [2001] NSWSC 825; (2001) 39 ACSR 301 - Re Metal Storm Ltd [2014] NSWSC 813; (2014) 100 ACSR 637 - Re Parbery & Ors (as liquidators of Trio Capital Ltd (in liq)) [2012] NSWSC 597; (2012) 88 ACSR 700 - Re S & D International Pty Ltd (No 5) [2011] VSC 30 - Re Sellers; Beckley Forge Pty Ltd [2003] FCA 523; (2003) 21 ACLC 1319 - Re Universal Distributing Co Ltd (in liq) [1933] HCA 2; (1933) 48 CLR 171 - Stewart (in his capacity as liquidator of Newtronic Pty Ltd (in liq)) v Atco Controls Pty Ltd (in liq) [2014] HCA 15; (2014) 252 CLR 307 - Thackray v Gunns Plantations Ltd [2011] VSC 380; (2011) 85 ACSR 144 - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 - Wight v Eckhardt Marine GmbH (Cayman Islands) [2004] 1 AC 147 Texts Cited: J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies, 5th ed, LexisNexis Butterworths, 2014 Category: Principal judgment Parties: Adam Farnsworth and Adam Shepard (in their capacity as joint and several liquidators of Dungowan Manly Pty Ltd (First Plaintiff/First Cross-Defendant on First and Second Cross-Claims) Dungowan Manly Pty Ltd (in liq) (Second Plaintiff/Second Cross-Defendant on Second Cross-Claim) Patrick McLaughlin (First Defendant/First Cross-Claimant on First Cross-Claim/Fourth Cross-Defendant on Second Cross-Claim) Jennifer McLaughlin (Second Defendant/Second Cross-Claimant on First Cross-Claim/Third Cross-Defendant on Second Cross-Claim) Turner Freeman Lawyers (Third Defendant/Second Cross-Defendant on First Cross-Claim/Cross-Claimant on Second Cross-Claim) Loafer Pty Ltd (Third Cross-Defendant on First Cross-Claim) Peter William Brown (Fourth Cross-Defendant on First Cross-Claim) Louise Jane Brown (Fifth Cross-Defendant on First Cross-Claim) Garmen Pty Ltd (Sixth Cross-Defendant on First Cross-Claim). Representation: Counsel: S Golledge (First Plaintiff/First Cross-Defendant on First and Second Cross-Claims) P D McLaughlin (self-represented - First Defendant/ First Cross-Claimant on First Cross-Claim/ Fourth Cross-Defendant on Second Cross-Claim) J T McLaughlin (self-represented - Second Defendant/ Second Cross-Claimant on First Cross-Claim/ Third Cross-Defendant on Second Cross-Claim) S J Philips (Third Defendant/Second Cross-Defendant on First Cross-Claim/Cross-Claimant on Second Cross-Claim) B K Nolan (Third and Sixth Cross-Defendants on First Cross-Claim) G D McDonald (Fourth and Fifth Cross-Defendants on First Cross-Claim) Solicitors: Somerset Ryckmans (First Plaintiff/First Cross-Defendant on First and Second Cross-Claims P D McLaughlin (self-represented - First Defendant/ First Cross-Claimant on First Cross-Claim/ Fourth Cross-Defendant on Second Cross-Claim) J T McLaughlin (self-represented - Second Defendant/ Second Cross-Claimant on First Cross-Claim/ Third Cross-Defendant on Second Cross-Claim) Turner Freeman (Third Defendant/Second Cross-Defendant on First Cross-Claim/Cross-Claimant on Second Cross-Claim) Harris & Co (Third and Sixth Cross-Defendants on First Cross-Claim) Gavin Parsons & Associates (Fourth and Fifth Cross-Defendants on First Cross-Claim) File Number(s): 2013/204311 Judgment Nature of the applications 1. These proceedings involve several applications. First, by Originating Process filed on 5 July 2013, the liquidator of Dungowan Manly Pty Limited (in liq) ("Company") applied for directions under ss 479(3) and 511 of the Corporations Act 2001 (Cth) in respect of competing claims, including claims by the First and Second Defendants, Mr and Mrs McLaughlin, and the Third Defendant, Turner Freeman, who are Mr and Mrs McLaughlin's former solicitors, over a unit ("lot 6") which is presently held in the Company's name. As events have developed, the liquidator now does not press those directions, since issue was joined (and then resolved) between Mr and Mrs McLaughlin and Turner Freeman as to that matter. The liquidator continues to press a claim to a lien over lot 6 which all parties now concede is beneficially owned by Mr and Mrs McLaughlin. 2. Next, by Amended Cross-Claim, Mr and Mrs McLaughlin seek relief, in their own right and also, by leave, in the name of the Company. The application brought in their own right seeks to establish that lot 6 is held by the Company on trust for them. As I noted above, it became apparent at the hearing that no party contested that aspect of their claim. The application brought in the name of the Company seeks to enforce levies made by the Company's former administrators (and, more recently, the liquidator) against several shareholders of the Company, Garmen Pty Ltd ("Garmen"), Loafer Pty Ltd ("Loafer") and Mr and Mrs Brown (together, "Shareholders"). Garmen and Loafer appeared by Counsel, Ms Nolan, and Mr and Mrs Brown adopted Ms Nolan's submissions after their Counsel, Mr McDonald, was excused from appearing at the hearing at his request. 3. Third, by their Second Cross-Claim, Turner Freeman, initially sought relief against the Company in respect of the ownership of lot 6. That relief was not pressed at the hearing. Turner Freeman also sought relief against Mr and Mrs McLaughlin, but the dispute between them narrowed at the hearing, as I noted above, since Mr and Mrs McLaughlin acknowledged that they were obliged to grant a mortgage over lot 6 to Turner Freeman once the Company transferred title to lot 6 to them. 4. I should address two other matters by way of introduction. In her written submissions, Ms Nolan repeated submissions that she had previously made at the hearing of Mr and Mrs McLaughlin's application for leave to bring derivative proceedings as to the circumstances in which the Court should intervene to "assist" Mr and Mrs McLaughlin, as unrepresented litigants, in the conduct of these proceedings. I have been conscious of the principles to which she refers and I adopt, without repeating, the comments that I made in respect of their relevance to this application in my judgment delivered on 2 December 2014 ([2014] NSWSC 1721). I drew Mr and Mrs McLaughlin's attention to the manner in which affidavit evidence would need to be led and documents tendered and identified several issues as to which it would be helpful to have submissions from all parties in the course of Mrs McLaughlin's oral submissions. 5. Second, Mrs McLaughlin's submissions put Mr and Mrs McLaughlin's position in respect of certain aspects of the conduct of the Company and its chairman with vigour and also made some criticisms of the liquidator's approach to some issues. It was not entirely surprising that Mr and Mrs McLaughlin felt strongly as to those matters, in circumstances that the Company's failure to meet a substantial judgment of this Court in their favour and its shareholders' failure to meet the levies upon those shareholders had left Mr and Mrs McLaughlin facing bankruptcy proceedings brought against them by their former solicitors. An ordinary member of the community might well have regarded that position with concern. I do not accept the submission put by Ms Nolan that Mrs McLaughlin's submissions in that respect were either scandalous or without evidentiary support, although it is has not been necessary for me to determine whether they should be accepted in order to decide this application and I do not express any view as to that matter. As I observed in the course of submissions, and as Mrs McLaughlin accepted, many of the matters to which she referred are more likely to arise as to the question of the basis of any order for costs and the persons against whom such an order would be made, and it may only be necessary to address them if agreement cannot be reached between the parties as to that question. Affidavit evidence 1. The liquidator reads several affidavits which established the factual background to the proceedings, which I will set out below. The liquidator's affidavit dated 3 July 2013 sets out the background to his original application, aspects of which are now not pressed as I noted above. That affidavit referred to the identity of shareholders in, and the directors of, the Company and the circumstances of the renovation of the unit block, its conversion to strata title and the share surrender agreements. That affidavit also referred to the fact that title in the strata lots was previously transferred by the Company to the Shareholders, and other shareholders in the Company, other than Mr and Mrs McLaughlin. That affidavit also referred to the various proceedings between Mr and Mrs McLaughlin and the Company and to the circumstances in which Mr Shephard and Mr Farnsworth were appointed, initially as the Company's administrators and subsequently as its liquidators, and the issue of special levy notices to shareholders in the Company on 19 February and 15 April 2013. That affidavit referred to Mr and Mrs McLaughlin's claim that lot 6 was held on a constructive or resulting trust for them, and the view previously expressed by Mr Rodney Garratt QC, the Chairman of the Company, that lot 6 was legally and beneficially owned by the Company and was not on held on trust for Mr and Mrs McLaughlin. That affidavit also referred to Turner Freeman's claim that it was entitled to a mortgage over lot 6 and that that unit could not be treated as the Company's property and should be transferred to Turner Freeman in satisfaction of its claim over lot 6. I will refer to the liquidator's further affidavits dated 1 July 2014, 21 November 2014 and 10 March 2015 below. 2. Mr and Mrs McLaughlin also read several affidavits in this application, including Mrs McLaughlin's affidavit sworn 23 August 2013, which sets out the history of Mr and Mrs McLaughlins' acquisition of a share conferring the right to occupy unit in the property, the development of the property, and the subsequent litigation, Mr McLaughlin's affidavit dated 19 May 2014, Mr and Mrs McLaughlin's affidavit dated 11 July 2014 and Mr McLaughlin's affidavits dated 19 August and 18 September 2014. Those affidavits were admitted without objection, other than by the Shareholders as to relevance. 3. An affidavit of Mr Gray, a solicitor with Turner Freeman, dated 2 September 2013 sets out the history, inter alia, of the entry into the share surrender agreements; the unsuccessful attempts made by Mr and Mrs McLaughlin to obtain the transfer of lot 6 to them by offering to enter into a share surrender agreement on the terms offered to other shareholders in the Company; an earlier decision of Pembroke J holding that the Company had not established a proper basis for its continuing failure to enter into a share surrender agreement with Mr and Mrs McLaughlin; and the Company's continuing failure to enter into such an agreement with Mr and Mrs McLaughlin after that judgment. That affidavit also referred to the circumstances in which Mr and Mrs McLaughlin subsequently terminated Turner Freeman's retainer and to correspondence between Turner Freeman and the liquidator's solicitors in respect of Turner Freeman's claim to lot 6. Mr Gray's further affidavit dated 26 May 2014 annexes further correspondence concerning that matter and his affidavit dated 16 June 2014 refers to bankruptcy proceedings subsequently brought by Turner Freeman against Mr and Mrs McLaughlin. 4. The Shareholders did not seek to lead affidavit evidence. No witnesses were cross-examined. Background facts 1. I now set out the background facts to these applications, which are established by the affidavits to which I have referred above and the documents tendered in these proceedings. I have also referred to these matters in several earlier judgments to which all parties referred in submissions, delivered on 25 June 2014 ([2014] NSWSC 856) and 2 December 2014 ([2014]) NSWSC 1721). By reason of s 91 of the Evidence Act 1995 (NSW) I have not treated findings of fact in those judgments as proving the existence of any fact that was in issue in those proceedings. In this case, many of the relevant facts were uncontentious, and the positions taken by parties and orders made by the Court in the earlier proceedings are themselves relevant matters. 2. The Company was the owner of a company title home unit block situated in Manly and, under the Company's articles of association, a shareholder's holding of a specific class of shares in the Company conferred a right to occupy a specific unit within the block. Mr and Mrs McLaughlin purchased shares entitling them to occupy the then unit 4 in that block in 1996. A proposal to renovate and redevelop that block and to convert it from company to strata title was put to the Company's members in September 2006 and the Company struck a special levy in 2007 to partly fund that proposal, which was also partly funded by borrowed monies. That proposal was opposed by Mr and Mrs McLaughlin. 3. Several proceedings were brought by Mr and Mrs McLaughlin against the Company in the period from 2006 in respect of issues in relation to the proposed redevelopment of the unit block. Broadly, Mr and Mrs McLaughlin alleged that the Company's conduct was oppressive to them and sought relief under s 232 of the Corporations Act 2001 (Cth) and also alleged breaches of the Company's articles of association in respect of several matters. Turner Freeman acted for Mr and Mrs McLaughlin in respect of the dispute with the Company in respect of the unit and in proceedings at first instance and in the Court of Appeal, under the terms of a costs agreement dated 5 October 2005. 4. By letter dated 16 January 2008, signed by the Company's chairman, Mr Rodney Garrett QC, the Company wrote to Mr and Mrs McLaughlin, in a manner that foreshadowed much that would follow, as follows: "In your case, there can be no final accounting, and title transfer, while your litigation remains unresolved. This is, however, not an obstacle to the other shareholders receiving their strata titles and any payment due to them, on the one hand, and surrendering the shares and making any payment due by them, on the other. The distinct possibility arises that you may be the only shareholder left in the company. In that event, the remaining assets of the company would be any direct payment due to you and strata title to unit four. Your litigation against the company would remain unresolved. In that case, the board would probably put the company into liquidation. You could continue to fight out your claims against the company. The liquidator would have the remaining assets of the company to defray the costs of the liquidator and of the liquidator's staff of the winding up, including the costs of the litigation. If necessary, the liquidator could sell unit 4 to defray those costs." The Company subsequently appears to have taken a somewhat similar course, with the modifications that administrators were only appointed after Mrs and Mrs McLaughlin had succeeded in their claims against the Company and a deed of company arrangement was proposed, before the Company transitioned to liquidation when that deed of company arrangement was not approved by the Company's creditors. 1. The Company and its shareholders subsequently sought to implement arrangements by which shares in the Company would be surrendered by its shareholders in exchange for transfer of strata title units to them. By motion filed on 29 January 2010, Mr and Mrs McLaughlin sought orders restraining the Company from entering into share surrender agreements to implement those arrangements. In a judgment dated 18 February 2010 ([2010] NSWSC 89), Ward J did not grant the relief sought but noted that each shareholder who exchanged their share in the Company for an individual strata title unit would be required to undertake to contribute any shortfall as between the Company's assets and the amount it owed to Mr and Mrs McLaughlin in respect of the proceedings. 2. Mr and Mrs McLaughlin were successful, albeit on relatively narrow grounds, in the proceedings at first instance in which judgment was delivered by Ward J (as her Honour then was) in early 2010 (McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 187). By order made by Ward J on 26 February 2010, as corrected on 15 April 2010, the Company was ordered to pay Mr and Mrs McLaughlin the amount of $214,769.97. In the meantime, the development and conversion of the property to strata title was completed. 3. In about June 2010, share surrender agreements were entered into by the Company and shareholders except Mr and Mrs McLaughlin and strata title units were subsequently transferred to shareholders other than Mr and Mrs McLaughlin. I will refer to the terms of those agreements below. The notes to the financial statements of the Company for the year ended 30 June 2010 referred to the effect of the share surrender agreements as follows: "The position of Mr and Mrs McLaughlin is secure in that each shareholder in taking strata title entered into an agreement with the company to pay the applicable portion of any money payable by the company to Mr and Mrs McLaughlin on the determination of the appeal." (Ex M8, p 425). As will emerge below, that statement did not prove to be correct. 1. The Company appealed the decision against it at first instance and Mr and Mrs McLaughlin also brought a cross-appeal against that decision. The Court of Appeal dismissed the Company's appeal and allowed Mr and Mrs McLaughlin's cross-appeal (Dungowan Manly Pty Ltd v McLaughlin [2012] NSWCA 180; (2012) 90 ACSR 62). In a second judgment, the Court of Appeal ordered judgment in the amount of $632,038.95 in favour of Mr and Mrs McLaughlin, on a basis agreed between the parties, reflecting the difference between the value of their shares in the Company in late 2006 if no breach had occurred and the estimated value of their shares at the date of the hearing (Dungowan Manly Pty Ltd v McLaughlin (No 2) [2012] NSWCA 258), and inclusive of interest of $188,909.50. Both Ward J and the Court of Appeal also ordered that the Company pay Mr and Mrs McLaughlin's costs of the proceedings. 2. On 18 December 2012, the Company's then directors placed the Company in voluntary administration and Mr Shepard and Mr Farnsworth were appointed as its joint and several administrators. On 25 December 2012, Mr and Mrs McLaughlin lodged proofs of debt in the administration, for the purpose of voting at the creditors meeting, in the amount of $1,672,338.94. That amount was comprised of the judgments in their favour in the Court of Appeal, interest and the costs of the proceedings (Ex M8, 614 – 618). Mr and Mrs McLaughlin subsequently terminated Turner Freeman's retainer on 28 December 2012, shortly after the Company was placed in administration. 3. On 19 February 2013, the Company's administrators issued a special levy notice to shareholders, including each of the Shareholders, Loafer, Garmen and Mr and Mrs Brown (Ex A1, tab 11; Ex A3), to enable the Company to meet its liability to Mr and Mrs McLaughlin in respect of the judgment debt and costs arising from the Court of Appeal's judgment. The liquidator's affidavit dated 1 July 2014 noted that the amount claimed included Mr and Mrs McLaughlin's judgment debt and also included an allowance for their legal costs, an amount referable to trade creditors of the Company and an amount referable to remuneration, costs, fees and expenses. The total amount of that special levy was $1,274,499.61, which included an amount of $1 million to be paid to Mr and Mrs McLaughlin in respect of their judgment and estimated costs and an amount of approximately $274,500 to meet payment of the administrators' remuneration, costs, fees and expenses. 4. The letter sent by the administrators' solicitors to shareholders in the Company containing notice of the February 2013 special levy referred both to clause 4 of the Company's articles of association, which provided for a levy on holders of shares in the Company, and to the Company's power to undertake a reconciliation and require amounts to be paid by shareholders under cll 8 and 9 of the share surrender agreements. That letter noted that: "Under the Articles, the company is entitled to strike levies on the shareholders, in so far as the company is in external administration, the Administrators have the power to strike a levy on behalf the company on the shareholders." From February 2013, the liquidators, in dealing with lot 6, also proceeded on the basis that it was the Company's property and that all rent should be paid to them, and directed the letting agent for lot 6 accordingly (Mrs McLaughlin 23.8.13 [19]). As will emerge below, no party, including the liquidator, sought to support that position in these proceedings. 1. A second special levy notice was issued by the Company's administrators to shareholders in the Company, including each of the Shareholders, dated 15 April 2013 (Ex A1, tab 12; Ex A4). That levy was based on cl 8 of the share surrender agreements and claimed additional amounts, as a result of an increase in the level of costs claimed by the former solicitors for Mr and Mrs McLaughlin, Turner Freeman, in respect of the conduct of the proceedings. The administrators then proceeded on the basis of reducing the figure for solicitor–client costs claimed by Mr and Mrs McLaughlin by 25% to estimate costs recoverable on a party-party basis. The Shareholders did not, in submissions, challenge that approach to the treatment of costs. The total amount of the second special levy was $254,201. 2. The administrators issued a report to creditors on 7 March 2013 and the Company was placed in liquidation by resolution of its creditors on 13 May 2013. Mr Shepard subsequently resigned as liquidator and Mr Farnsworth continues in that position. 3. The validity of the levies made by the administrators in February and April 2013 was contested, as I will note below, by the Company's chairman and only one shareholder paid the levy. The liquidator's affidavit dated 1 July 2014 sets out the attempts subsequently made to enforce the special levies, including by the issue of creditors' statutory demands to Garmen and Loafer, and the subsequent withdrawal of those statutory demands when the liquidator was not in funds to defend applications by those parties to set them aside. The liquidator also explained why he considered that he was unable to fund separate proceedings brought against the individual shareholders, if each of them sought to defend proceedings on the basis of matters raised by Garmen and Loafer in opposition to the levies. 4. The liquidator's further affidavit dated 21 November 2014 sets out steps taken by the liquidator between October and November 2014 to undertake an updated reconciliation, taking into account discussions between the legal representatives for the liquidator and Loafer and Garmen, which was emailed and posted to shareholders in the Company on 20 November 2014. That reconciliation involved a calculation of a net asset surplus under cl 7 of the share surrender agreements, reconciling the Company's assets and liabilities at 30 June 2010, because it was apparently not possible to reconcile those assets and liabilities as at 28 February 2010 as contemplated by that clause. The liquidator then reconciled the Company's obligations relating to Mr and Mrs McLaughlin under cl 8 of the share surrender agreements on two bases, one of which treated lot 6 as an asset of the Company and the other of which treated it as an asset of Mr and Mrs McLaughlin, on the basis that the Company held it on trust for them, and allocated the amount due among shareholders excluding Mr and Mrs McLaughlin. The former basis, that lot 6 is an asset of the Company, can now be disregarded since no party to the proceedings now contends that it is correct. 5. A further affidavit of the liquidator dated 10 March 2015 annexed further demands issued to shareholders in the Company on 11 February 2015. The February 2015 levy adopted a significantly higher percentage for party–party costs recoverable by Mr and Mrs McLaughlin than had been adopted in the April 2013 levy, and sought to recover 90% of solicitor–client costs rather than 75% of those costs which had been the subject of the second special levy made in April 2013 (T65). The Shareholders also did not, in submissions, challenge that approach to the treatment of costs. That further levy was not paid by the Shareholders or other shareholders in the Company. 6. Early in this hearing, the liquidator sought directions from the Court as to a potential settlement of the proceedings. Another judge of the Court declined to direct the liquidator that he would be justified in proceeding with the settlement proposal, I declined an application further to adjourn the hearing and it then proceeded to completion. The validity of the levies as against the Shareholders 1. Paragraphs 6 – 10 of the relief sought in Mr and Mrs McLaughlin's Amended Cross-Claim, brought by leave on behalf of the Company, are directed to whether the Shareholders are obliged to pay the levies made by the administrator, or the subsequent levy made by the liquidator under (as applicable) the Company's articles of association and share surrender agreements to which I referred above. Paragraphs 19 – 32 of the Amended Cross-Claim plead the appointment of administrators to the Company and circumstances leading into the entry into the share surrender agreements and paragraphs 33 – 49 deal with attempts made by the administrators of the Company to call in levies issued under the share surrender agreements. Mr and Mrs McLaughlin in turn plead material facts supporting this relief including the Shareholders' entry into the share surrender agreements and the observations of Ward J in her judgment delivered on 18 February 2010 to which I have also referred above. They also plead the judgment delivered by the Court of Appeal and the order for payment of damages in their favour and plead that the Company has continued to breach their rights by, inter alia, failing to enforce the Court of Appeal's judgment and orders in their favour. 2. The Shareholders initially submitted that the only claim available to the Company against them was one for specific performance of their obligations under the share surrender agreements. It is by no means obvious why an order could not be made in favour of the Company awarding it a monetary amount and interest arising from the Shareholders' failure to pay a monetary amount due to the Company under the share surrender agreements, if their liability to do so is otherwise established. In their opening submissions, the Shareholders also submitted that the pleading did not articulate a cause of action under the share surrender agreements. Ms Nolan did not seek to support that submission in oral submissions and I do not accept it. As I noted in my judgment granting leave to Mr and Mrs McLaughlin to bring the derivative action, the pleading of the Amended Cross-Claim is not necessarily that which would be expected of experienced legal practitioners, but Mr and Mrs McLaughlin are not legal practitioners. The case that the Shareholders have to meet has at all relevant times been sufficiently clear to them, as Ms Nolan's comprehensive submissions in opposition to the application for leave to bring the derivative action and in this hearing amply demonstrate. As I noted in my judgment granting leave to bring the derivative action, the substance of the claim now brought by Mr and Mrs McLaughlin on the Company's behalf is simply that: "(1) the shareholders agreed to pay a levy necessary to meet the judgment and costs ordered against the Company under the share surrender agreements; (2) the Court proceeded on that basis in declining to restrain entry into the share surrender agreements; (3) the Company (by its administrators) has raised that levy; and (4) shareholders failed to pay it…" 1. I should now set out the relevant terms of the share surrender agreements and the Company's articles of association on which the levies are based before turning to the submissions put by the parties as to the validity of the levies. Recital F of the share surrender agreements noted that: "The Shareholder is currently indebted to the Company as set out in item 5 of the Schedule ("Net Indebtedness") and otherwise the Shareholder is not indebted or liable to the Company on any account and the Company is not indebted or liable to the Shareholder on any account". Recital G of the share surrender agreements in turn refers to two possible courses, either a surrender of the shareholder's shares in the Company and a transfer of strata title in accordance with s 258B of the Corporations Act or the Company's entry into a contract for the sale of the shares and the transfer of the unit to the purchaser in exchange for payment of the net indebtedness and the surrender of the shares. Clause 1 of the share surrender agreements in turn provides for the surrender of the shares to the Company on the Completion Date or for entry into an unconditional contract of sale, reflecting the two approaches contemplated by Recital G, and cl 2 provides for completion to take place on 30 April 2010 or such other date as the company agreed in writing from time to time (defined as the "Completion Date"). 1. Clause 6 of the share surrender agreements provides that: "Save as provided in this Agreement, from Completion (and contingently in an option B case on the timely completion of the contract of sale entered into by the Company) neither party shall be liable or indebted to the other on any account in connection with the former relationship of shareholder and company or arising from the dealings pursuant to that relationship, and either party may from Completion rely on this Agreement as a bar to any such claim." 1. Clause 7 of the share surrender agreements provides that, save as provided in that clause and cl 8, the liability of the relevant shareholder and the Company was to be determined on the basis of a reconciliation of assets and liabilities of the Company as at 28 February 2010. Clauses 8 and 9 of the share surrender agreements in turn provide: "8. Notwithstanding clause 7, the Company may from time to time perform a further reconciliation, taking account only of the matters referred to in clause 9 or monies owing to or becoming owing between the parties to proceedings number 4924 of 2006 in the Supreme Court of New South Wales (McLaughlin v Dungowan Manly Pty Ltd) in consequence of the judgment pronounced therein on 26 February 2010 (including any revision thereof at first instance, or reversal thereof on appeal, and including in respect of any order for costs therein at first instance or on appeal), and if on any such further reconciliation: (a) a balance is owing in favour the Company [sic], the Company shall distribute the same to persons who were the members and liable to pay and who paid the levy struck by the Company on 16 January 2010 in the proportions in which they were obliged to pay that levy; (b) A balance is owed by the Company, the Shareholder shall pay to the Company the proportion thereof which corresponds with the proportion of the levy struck by the Company on 16 January 2010 which the Shareholder was obliged to pay; (c) Any party liable to make payment on another on the said reconciliation shall make payment within 14 days of receiving notice to do so. For the purpose of making a reconciliation in accordance with this clause or the preceding clause, the Company may take and act upon professional advice as to the quantum of any item to be taken into account in the reconciliation. 9. This Agreement does not displace or otherwise affect: … (c) Any debt or liability of the Company or any Shareholder the subject of any action in any proceeding to bring which on behalf of the Company leave is granted in the action for any debt or liability which may arise from any judgment in the action, including any judgment on appeal; (d) Any obligation of the Shareholder to contribute to the Company's costs and expenses of the action or any appeal of the costs and expenses of compliance of any judgment in the action or on appeal or its costs and expenses of any proceeding (including any appeal) to bring which leave is granted in the action, by way of levy or otherwise under the Company's constitution." 1. Mr and Mrs McLaughlin also relied on what were described as amended articles of association of the Company, which took effect from 30 November 2008 (Ex M7). Those amended articles of association appear to be identical with those on which the liquidator relied (Ex A1, tab 2) and, in particular, article 4 is in the same terms. That article permits the Company's directors to make a levy on holders of shares in the Company for "expenses charges and outgoings", including provision for a shortfall levy if a levy is not paid by some shareholders. Relevant expenses, charges and outgoings are specified in several categories. The categories on which the administrators relied, in their levy issued in February 2013, included, inter alia: * expenses of carrying on the Company including directors' fees, accountancy and legal charges, management charges, caretakers' expenses, cleaners' expenses and lift maintenance and replacement (article 4(h)); * all charges and outgoings which the Board in its discretion considers it expedient to maintain or enhance the value of the property; and * such amount as the Board in its discretion considers desirable to provide for further repairs or other contingencies (article 4(k)). 1. Mr Golledge, who appears for the liquidator, submits, and I accept, that the administrators had the same power as the Company's directors to issue the February 2013 levy, relying on the Company's articles, by reason of s 437A(1)(d) of the Corporations Act (T58). Although article 4 provides for the directors of the Company to determine to make the relevant levy, that section provides that an administrator may perform any function, and exercise any power that, relevantly, any of the company's officers could perform or exercise if the company was not under administration. No party contended that that section was not sufficient to support the making of a levy by the administrators if the requirements of article 4 of the Company's articles of association were otherwise satisfied. Whether the liquidator is limited to reliance on the February 2015 levy 1. In her oral submissions, Ms Nolan identified issues raised by the Shareholders as including that the two levies made by the Company's administrators in 2013 were displaced by reason of an election by the liquidator; there was also an issue as to the validity or "competence" of the two levies made by the administrators in 2013; and there was an issue as to the validity of the 2015 levy, which the Shareholders contended the liquidator had now elected to pursue to the exclusion of the 2013 levies. 2. The Shareholders submitted that the only claim maintainable against them would be the enforcement of the further levy struck by the liquidator on 11 February 2015 under the terms of the share surrender agreements, if it were to conform to the share surrender agreements, but that it did not do so. Although Mr Golledge had foreshadowed that Ms Nolan might take a point that the liquidator had no power to issue the February 2015 levy, because the powers conferred on an administrator under s 437A(1)(d) of the Corporations Act are not extended to a liquidator, Ms Nolan did not take that point and I will proceed on the basis that no such point is taken by the Shareholders (T59). 3. The first proposition, that the only claim maintainable against the shareholders was for the enforcement of the February 2015 levy, depends upon a proposition, which Ms Nolan identified but did not seek to establish by reference to authority, that the issue of the February 2015 levy amounted to an election by the liquidator to abandon the earlier levy. It appears that the Shareholders contend that the making of the February 2015 levy is inconsistent with reliance by the liquidator, in the alternative, on the earlier levies. I do not accept that submission. First, there is not a complete overlap between the 2013 levies and the February 2015 levy, so far as the February 2013 levy was founded on both the share surrender agreements and the Company's articles of association and included the administrators' costs of the winding up, in reliance on the Company's articles of association, and the February 2015 levy was founded only on cl 8 of the share surrender agreements and did not include those costs. Second, there is no evidence of any determination or representation by the liquidator that he did not press the earlier levies, at least in the alternative. There is also no evidence that the Shareholders have acted to their detriment by proceeding on any assumption that only the February 2015 levy is pressed by the liquidator or that the earlier levies are not pressed, particularly where they have not met any of those levies. 4. I accept, of course, that the liquidator would not be entitled to judgment against the Shareholders for all of the levies, at least to the extent that they overlap. However, I am not persuaded that the liquidator has made any unequivocal election to rely on one levy rather than the others, or would not be entitled to make that election after delivery of this judgment and prior to the entry of orders. It may be necessary to hear the parties as to the consequences of any such election, at least so far as any question of interest payable by the Shareholders on earlier unpaid levies, or part of them, may be concerned. Whether the February 2013 levy was authorised by the Company's articles of association 1. By letter dated 28 February 2013, the Company's then chairman, Mr Rodney Garrett QC, set out several reasons why he contended that the February 2013 levy on the Company's shareholders was invalid, and also contended that Mr and Mrs McLaughlin did not have any entitlement to a transfer of title in lot 6. Loafer and Garmen, which are companies associated with Mr Garrett, did not pursue all of the arguments advanced by Mr Garrett as to the former proposition in these proceedings and did not seek to support the latter proposition. Mr Garrett advanced an argument, inter alia, that article 4 of the Company's articles of association was concerned with "operational expenditure" of various kinds. It seems to me that that reading of the article is too narrow, where the Company throughout its existence would incur expenses which did not directly relate to the conduct of the home unit building including, as Mr Golledge pointed out, expenses relating to the lodgement of annual returns with the Australian Securities and Investments Commission and its predecessors, and would likely also incur expenses in relation to accounting and other administrative and non-operational matters. That letter also advanced other arguments as to the limits of an administrator's role, which do not seem to me to be correct, but which I need not further address since Ms Nolan did not seek to support them. 2. It seems to me that article 4(h) of the Company's articles of association is sufficient to support the February 2013 levy, since the reference in that article 4(h) is to expenses of "carrying on the company", not to expenses of carrying on the relevant building, and those expenses will be incurred until the point that the administration and subsequent winding up is completed and the Company is deregistered. It seems to me that the expenses of the administration and the subsequent winding up are properly characterised as "expenses of carrying on the company" for the purposes of that article, although an administrator and a liquidator carry on a company for limited purposes, and are also "management charges" so far as the administrators and subsequently the liquidator undertake the management of the Company's affairs. The amounts claimed under the February 2013 levy also seem to me to fall within article 4(k) of the Company's articles of association so far as they were amounts that the administrators (standing in the position of the board) in their discretion considered desirable to provide for other contingencies, namely the costs of the administration. 3. Ms Nolan contended that the terms of the share surrender agreements excluded reliance on the Company's articles of association to support the levies. So far as the parties' submissions raised questions of construction of the share surrender agreements, I have had regard to well-established principles as to the manner in which the Court should approach such questions, although Counsel did not address the case law. In Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109, Gibbs J (as his Honour then was) observed that: "It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust." 1. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40], the High Court observed (citations omitted): "It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." The approach was confirmed in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35] where French CJ, Hayne, Crennan and Kiefel JJ observed that (citations omitted): "[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'." In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2014] NSWCA 323 at [36]-[39], Macfarlan JA (with whom Meagher and Barrett JJA agreed) in turn noted that the meaning of the terms of a contract is to be determined by what a reasonable businessperson would have understood those terms to mean; and that process will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. 1. Ms Nolan referred to Recital F of the share surrender agreements, to which I referred above. That recital does no more than record the position as between the Company and the shareholders as at 3 June 2010, the date of the relevant share surrender agreement, and has no operative effect to avoid liabilities arising in the future. I have also referred to Recital G and cll 1 and 2 and 6.8 of the share surrender agreement above. 2. Ms Nolan placed particular reliance on cl 6 of the share surrender agreements which reads as follows: "Save as provided in this Agreement, from Completion … neither party shall be liable or indebted to the other on any account in connection with their former relationship of shareholder and company or arising from the dealings pursuant to that relationship, and either party may from Completion rely on this Agreement as a bar to any such claim " Ms Nolan sought to rely on that clause as an answer to the February 2013 levy, so far as it was founded in the Company's articles of association, on the basis that any rights under the articles of association were extinguished by that clause. In particular, Ms Nolan submitted that Recital F and cl 6 of the share surrender agreements: "rendered the shareholders and the Company without liability to one another upon surrender of the shares in the Company and payment of any single 'Net Indebtedness' as therein provided for. The sole debt that the parties were to have to one another was provided for in clause 7 and was to be on the basis of a reconciliation of all assets and liabilities of the Company as at 28 February 2010." 1. I do not accept that submission. It seems to me that cl 6 is, on its terms, directed to the position with where there is a "former" and not a current relationship of shareholder and company. That clause could potentially apply if the relevant shares had been surrendered and cancelled so that the Shareholders and the Company did not have a continuing relationship of shareholder and company. That is not the case, since company searches indicate that each of Loafer, Garmen and Mr and Mrs Brown remain as shareholders of the Company and their relationship with the Company is therefore not a "former relationship of shareholder and company" but a current relationship of that character. 2. The notes to the Company's financial statements for the year ended 30 June 2010 indicated that, other than for four strata units, the Company had then not cancelled shares held by remaining shareholders (Ex M8, p 425). The Company relied on that position to its and the Shareholders' advantage in proceedings before Pembroke J in March 2011 ([2011] NSWSC 215), where it relied on the fact that its shareholders remained on the register, notwithstanding the terms of the share surrender agreements, to defeat a claim by Mr and Mrs McLaughlin that they and one other shareholder were the only remaining shareholders in the Company and were entitled to exercise control of it. Pembroke J there referred to the significance of the register of members in determining the identity of shareholders in the Company, recognised in article 25 of the Company's articles of association, and noted (at [32]) that: "In the practical day-to-day management of the affairs of a company, I should not lightly infer that a shareholder has lost all rights until the steps leading to cancellation of shares and alterations of the register of members have been taken." That observation is not, of course, binding upon the Shareholders who were not parties to the proceedings before Pembroke J, although the Company was party to the proceedings. However, it seems to me to be correct. 1. That position continued beyond 2011. A company search indicates that each of Loafer, Garmen and Mr and Mrs Brown remained as shareholders in the Company as at 21 January 2013 (Ex A1, tab 1). A further company search conducted on 13 March 2015 (Ex M10) indicates that Loafer, Garmen and Mr and Mrs Brown remained as shareholders of the Company at the time the hearing before me. Section 1274B(2) of the Corporations Act in turn provides that: "In a proceeding in a court, a writing that purports to have been prepared by ASIC is admissible as prime facie evidence of the matters stated in so much of the writing as sets out what purports to be information obtained by ASIC, by using a data processor, from the national database." 1. No evidence led in the proceedings displaced that prima facie position. The Shareholders did not seek to tender the Company's share register or lead any evidence of any step taken on their part to seek to have themselves removed from the register or contradict the position taken by the Company before Pembroke J that they were still on the register. In these circumstances, it does not seem to me that there is any evidence that would overcome the prima facie position which arises from ASIC's records. I note, for completeness, that there is no suggestion that shares in the Company could have been transferred away from the Shareholders at any time after the appointment of the administrators in December 2012, because s 437F of the Corporations Act would avoid such a transfer without the administrator's consent after his appointment and s 468A of the Corporations Act would avoid such a transfer during the liquidation without the liquidator's consent or leave of the Court, reflecting the legislative purpose to "maintain the status quo as regards the rights and obligations of shareholders existing at the commencement of an administration": Re Sellers; Beckley Forge Pty Ltd [2003] FCA 523; (2003) 21 ACLC 1319. 2. It seems to me that cl 6 of the share surrender agreements therefore does not assist the Shareholders, since the proposition that neither party shall be liable or indebted to the other in connection with a former relationship of shareholder and company has no application where the parties are in a current relationship of shareholder and company. I should note, for completeness, that Ms Nolan also referred to the use of the term "party" in subsequent clauses of the share surrender agreements as contemplating that the relationship of shareholder and company would cease when the shares were surrendered to the Company. That may well be the case, but the fact that that may have been contemplated does not assist the Shareholders where what was contemplated did not occur. 3. Given the views which I have reached as to this question, it is not necessary to address the further submission put by Mr and Mrs McLaughlin that any obligation of the Shareholders to contribute to the costs of the winding up could be treated as falling within the concept of "the costs and expenses of compliance of any judgment" which are preserved under cl 9(d) of the share surrender agreements. I do not consider that such an obligation would arise under cl 12 of the share surrender agreements, to which Mrs McLaughlin also referred, which deals with cooperation between the parties following completion. 4. Accordingly, the February 2013 levy was authorised by the Company's articles of association and the Company is entitled to enforce it (or, potentially, that part of it which relates to the costs of the administration) as against the Shareholders, subject to the liquidator now making an election between the several levies, to the extent they overlap. Whether the levies under the share surrender agreement were invalid by reason of the lack of an earlier reconciliation under cl 7 of the share surrender agreements 1. Ms Nolan also submitted that the two levies issued in 2013 and the February 2015 levy, so far as they relied on the share surrender agreements, were invalid because there had not previously been a reconciliation under cl 7 of the share surrender agreements so as to allow a reconciliation to occur under cl 8 of the share surrender agreements. Ms Nolan also submitted that the share surrender agreements were intended to operate as a final and once only accounting as between the shareholders in the Company. In oral submissions, Ms Nolan submitted that: "what this agreement was intended to do is to provide a once and for all disposition of the obligations, liabilities and rights of the parties to the agreement in respect of their occupancy of the unit or their shareholding in the Company previously and because of that there needs to be this cumulative performance of reconciliation so as to achieve that end and that is this wash–up, this larger settling of accounts. That's the reason why cl 7 [of the share surrender agreement] needs to happen because in the settling of accounts there may be a credit, there may be a debit, and effectively there can be an offset by reason of what happens in cl 7 reconciliation and cl 8 reconciliation. So once and for all there's a disposition of a liability of either the Company to the parties to the agreement or of the parties to the agreement to the Company" (T88–89). 1. I do not accept the submission that the February 2015 levy (and, by extension, presumably the earlier levies) are invalid because the reconciliation under cl 8 of the share surrender agreement is required to be a "further" reconciliation taken at the same time as or subsequent to a reconciliation under cl 7 of the share surrender agreement, rather than a "further" reconciliation which may be undertaken together with or in the alternative to the first reconciliation. The introductory words "notwithstanding clause 7" in cl 8 of the share surrender agreements seem to me to contemplate that the reconciliation in cl 8 may be undertaken separately and the further words "taking account only of" the specified matters indicate that such a reconciliation would be based solely on those matters. The language "further reconciliation" in cl 8 of the share surrender agreements is, in my view, apt to describe an additional or alternative reconciliation to that contemplated by cl 7 of the share surrender agreements, without requiring that the cl 7 reconciliation take place prior to the cl 8 reconciliation or that both reconciliations take place at the same time and on a "once and for all" basis. Had the parties intended to provide that a reconciliation under cl 8 of those agreements could only be performed after or in conjunction with a reconciliation under cl 7 of those agreements, it would have been straightforward to do so, either by express language, or by combining the two clauses on the basis that they were intended to provide for, in effect, a single reconciliation, rather than two reconciliations that could be undertaken in the alternative or separately and in any order. 2. That reading of cl 8 of the share surrender agreements is consistent with the language of that clause and commercially sensible, since otherwise the Company would have left itself exposed to the risk that it could not promptly cause its shareholders to place it in funds to meet a judgment against it, if there was any delay or difficulty in performing the separate reconciliation contemplated by cl 7 of the share surrender agreements. In the commercial context of the share surrender agreements, it seems to me inconceivable that the Company and its shareholders could have objectively intended that a reconciliation under cl 8 of the share surrender agreements would be dependent on the Company's ability to perform a reconciliation under cl 7 of those agreements. The apparent purpose of cl 8 of the share surrender agreements was to place the Company in a position to meet a judgment against it, if such a judgment was awarded in the proceedings brought by Mr and Mrs McLaughlin against it. In those circumstances, there was an obvious commercial need for the Company to be able to undertake a reconciliation under cl 8 of the share surrender agreements promptly, so as to allow it to meet a judgment in sufficient time to avoid enforcement action against it, including potentially a winding up based on an unsatisfied judgment debt. There would be every reason for the Company to avoid a situation where its ability to perform a reconciliation under cl 8 of share surrender agreements would be frustrated by difficulties (which have in fact arisen) in performing a reconciliation under cl 7 of the share surrender agreements, whether in a timely fashion or at all, including because the date at which such a reconciliation is required did not coincide with the end of a financial reporting period. 3. Ms Nolan also submits that a reconciliation under cl 8 of the share surrender agreements could not be undertaken without a reconciliation under cl 7 of the share surrender agreements on the basis that the reconciliation under the latter clause did not have regard to any estate or interest in land which was the subject of the strata plan or any underpaid levy payable to the Company by a shareholder and those matters would need to be the subject of a reconciliation under cl 8 of the share surrender agreements. In oral submissions, Ms Nolan relied on the fact that a levy issued by the Company to Mr and Mrs McLaughlin in early 2010 was reflected in the judgments of both Ward J (as her Honour then was) and the Court of Appeal (T93 – 94). Ms Nolan also submits that the February 2015 levy (and presumably its predecessors) does not take into account an equitable set-off of Mr and Mrs McLaughlin's liability for the levy made by the Company in 2010 and not paid by them. 4. Mr Golledge responds that cl 7 of the share surrender agreements is subject to cl 9 of those agreements (which I have set out above), by reason of the introductory words of cl 9, which in turn preserved obligations that existed or arose outside of the share surrender agreements, and that cl 9(c)-(d) preserved any entitlement to recover additional amounts from shareholders falling within those clauses (T68). Mr Golledge also submits that the argument put by Ms Nolan as to the levy made by the Company in 2010 was inconsistent with the structure of the share surrender agreements, which provided the parties would take title to the units on terms that they pay the 2010 levy on settlement, in return for the transfer of title (T70), and that is in turn reflected in the exclusion of any debt payable by any member for outstanding levies from the reconciliation provided under cl 7 of the share surrender agreements. In particular, Mr Golledge points to Recital G of the share surrender agreement which contemplates payment of "Net Indebtedness", including in respect of the 2010 levy upon Mr and Mrs McLaughlin, on transfer of title (T71). Mr Golledge also submits that the 2010 levy upon Mr and Mrs McLaughlin is to be treated in the same way as the levy issued to other shareholders, namely that it is to be paid if and when a share surrender agreement is offered to Mr and Mrs McLaughlin and a conveyance of title takes place (T72). 5. I do not accept the Shareholders' submission in this regard, first, because cl 8 of the share surrender agreements expressly provides that it has effect notwithstanding cl 7 of the share surrender agreements and that only matters referred to in cl 9 or "moneys owing or to become owing between the parties to [the litigation] in consequence of the of the [first instance judgment and any appeal]" are to be taken into account. I do not accept the Shareholders' submission that the levy was payable in consequence of the judgment, since Mr and Mrs McLaughlin's liability to pay the 2010 levy arose from the making of that levy by the Company, as authorised by cl 4 of its articles of association, not from any recognition of the fact that it existed in the judgment of Ward J or the Court of Appeal. It also seems to me that cl 8 of the share surrender agreements does not require that the liability of Mr and Mrs McLaughlin in respect of the 2010 levy be taken into account in such a reconciliation, rather than on the transfer of lot 6 to Mr and Mrs McLaughlin, for the reasons pointed out by Mr Golledge. As Mr Golledge submitted, the share surrender agreements deal with the liability in respect of outstanding levies by including it in the concept of "Net Indebtedness", which must be discharged on the transfer of lot 6 to, relevantly, Mr and Mrs McLaughlin. The submission put by Ms Nolan has the difficulty that, where the liability of Mr and Mrs McLaughlin for the outstanding January 2010 levy is to be discharged as a condition of the transfer of lot 6 to them, there is no need for a further and separate equitable set–off (for which Ms Nolan contends) to be applied under cl 8 of the share surrender agreement. I can also see no basis for Ms Nolan's submission that Mr and Mrs McLaughlin should be required to pay interest on a levy that they were required to pay on transfer of title to lot 6 to them under the share surrender agreements, when that title was not transferred to them in early 2010 or to date, notwithstanding all parties now acknowledge that they were entitled to such a transfer. 6. Ms Nolan also submitted that Mr and Mrs McLaughlin could not have been required to pay the 2010 levy without the judgment against the Company in their favour being paid and that, by parity of reasoning: "one can not urge upon the shareholders to pay the judgment without the McLaughlins paying the levy because it is a recognised set off" (T95). The difficulty with that proposition, which seems to me not merely one of expression, is that the question here is not whether the Shareholders are obliged to pay the judgment, which is a liability of the Company and not of the Shareholders, but rather whether they are obliged to pay levies issued under the share surrender agreements and the Company's articles of association, and the latter question turns upon the terms of those documents and not any question of the kind formulated by Ms Nolan. 1. In their opening written submissions, the Shareholders also put an argument, which Ms Nolan did not address in oral submissions, that Mr and Mrs McLaughlin are not creditors of the Company because their entitlement to lot 6 and the rights arising from the judgment had been conveyed to Turner Freeman under the costs agreement with Turner Freeman and the share mortgage executed in connection with that agreement, to which I will refer below. That submission is inconsistent with the common position of Mr and Mrs McLaughlin and Turner Freeman as to the operation of the costs agreement and the mortgage, which seems to me to be correct for the reasons noted below, and I do not accept it, if it is still pressed. No submission was put by the Shareholders to impeach the calculations in the 2013 levies, or in the February 2015 levy, other than in respect of the issues noted above. It is therefore not necessary for me to address any issue as to the correctness or otherwise of those calculations, where they were not contested in these proceedings other than in respect of those issues. 2. Ms Nolan, in the course of oral submissions, also provided a suggested reconciliation which might support a further levy on shareholders, involving a combined reconciliation under cll 7 and 8 of the share surrender agreements, and submitted that the Court could direct the liquidator to issue a levy in that form. In supporting that suggested reconciliation, Ms Nolan contended that it is open to the liquidator to undertake a reconciliation under cl 7 of the share surrender agreements as at 30 June 2010, on professional advice, notwithstanding that clause provides for a reconciliation at 28 February 2010. That contention reversed the Shareholders' earlier position that a reconciliation as at 30 June 2010 did not comply with cl 7 of the share surrender agreements, and to that extent sought to avoid the conclusion that the construction of the share surrender agreements for which the Shareholders contended would have the consequence that no levy could ever be made, if the Company did not have the necessary information to perform a reconciliation as at 28 February 2010. I will assume, without deciding, that position is open, since no party contested it. 3. Nonetheless, I do not consider that I could or should make such a direction. It seems to me that no cause for a further direction arises, since I have held that the levies issued by the administrators in 2013 and by the liquidator in February 2015 are valid, although it will be necessary for the liquidator to elect which of them is pressed to the extent that they overlap, prior to entry of judgment against the Shareholders. (As I noted above, I reach that view as to the February 2015 levy on the basis that the Shareholders did not contend the liquidator could not exercise the directors' power to make that levy. That power could arguably not have been established had it been contested, absent a corresponding provision to s 437A(1)(d) of the Corporations Act applicable to a liquidator.) It also does not seem to me that the Court should intrude on the liquidator's functions by making a direction of that kind, where it is not sought by the liquidator, as distinct from determining the validity of the levies that the administrators, and now the liquidator, have in fact made. 4. Mrs McLaughlin in turn submitted that the directors of the Company should have undertaken a reconciliation under cl 7 of the share surrender agreements soon after the strata plan for the redevelopment was registered and certainly after the Court of Appeal's judgment was handed down and, second, that cl 8 of the share surrender agreements had an independent operation from cl 7 of the share surrender agreements, and related specifically to the judgment debt in favour of Mr and Mrs McLaughlin and costs, and that cl 9 of the share surrender agreements provides for that money to be collected from shareholders proportionately or, under the Company's articles of association, from other shareholders if some shareholders do not pay (T48). I do not consider it necessary to determine the first submission, as to what directors should have done in respect of a reconciliation under cl 7 of the share surrender agreements, because I accept, for the reasons noted above, the second submission that the reconciliation under cl 8 of the share surrender agreements does not depend on any prior reconciliation under cl 7 of the share surrender agreements. 5. Mrs McLaughlin also submitted that the costs of the winding up should have been included in the April 2013 and February 2015 levies under cl 8 of the share surrender agreements, on the basis that they were preserved by cl 9 of the share surrender agreements. That question does not arise, because the claim brought by Mr and Mrs McLaughlin in the name of the Company may go no further than enforcing the demands issued by the administrators and the liquidator under the Company's articles of association and the share surrender agreements. It may, of course, still be open to the liquidator (or an administrator appointed by him under s 436B of the Corporation Act) to make further levies, if so advised having regard to the findings in this judgment, but a determination as to any dispute as to the validity of any further levies cannot be made unless and until they are made. 6. Accordingly, the two 2013 levies and the February 2015 levy are each authorised by, and consistent with, the share surrender agreements and the Company is entitled to enforce them against the Shareholders, again subject to the liquidator making an election between those levies to the extent they overlap. There should be judgment against the Shareholders reflecting the outcome of such an election. Mr and Mrs McLaughlin's claim to ownership of lot 6 1. As I noted above, by his Originating Process filed 5 July 2013, the liquidator sought three alternative directions, that he would be justified in treating lot 6 as belonging legally and beneficially to the Company, such that it could be realised as property in the liquidation with the net sale proceeds to be distributed in accordance with s 556 of the Corporations Act; or that he would be justified in transferring lot 6 to Mr and Mrs McLaughlin on the basis that it was held by the Company for them on a constructive or resulting trust; or directions as to how he should proceed to resolve the issue as to which party held the legal and beneficial interest in and to lot 6; and, if lot 6 was found to be legally and beneficially owned by the Company, that he would be justified in rejecting Turner Freeman's claim that it held an equitable lien, charge or mortgage over lot 6 which secured payment of legal costs owing to that firm by Mr and Mrs McLaughlin. By his Amended Originating Process filed by leave on 12 March 2015, the liquidator did not press the alternative claim for directions as to how he should proceed to resolve the issue as to which party held a legal and beneficial interest in and to the property. In the course of the hearing, he indicated that the alternative directions as to ownership of lot 6 were not pressed, where that matter would now be determined in determining Mr and Mrs McLaughlin's Amended Cross-Claim and Turner Freeman's Second Cross-Claim. 2. The first five prayers for relief in Mr and Mrs McLaughlin's Amended Cross-Claim raise the question of their claim to an interest in lot 6. Paragraphs 1 – 18 and 50 – 55 of the Amended Cross-Claim in turn support that relief. The issue as to ownership of lot 6 was also initially raised by Turner Freeman's Second Cross-Claim and Turner Freeman sought, inter alia, a declaration that all rights, title and interest in lot 6 was held on trust by the Company for Turner Freeman; an order that Mr and Mrs McLaughlin do all things necessary to transfer title in lot 6 to Turner Freeman and a declaration that Turner Freeman was entitled to any or all rent paid and payable in relation to lot 6. During the course of the hearing, Mr Phillips, who appeared for Turner Freeman, indicated that part of that relief was not pressed. By Turner Freeman's Amended Second Cross–Claim filed, by leave, on 13 March 2015, Turner Freeman sought amended relief, namely a declaration that all rights, title and interest in lot 6 was held on trust by the Company for Mr and Mrs McLaughlin, subject to a mortgage to Turner Freeman; that Mr and Mrs McLaughlin do all things necessary to execute and provide to Turner Freeman a further mortgage over lot 6; and a declaration that the proceeds of the Judgments (as defined) and interest on them have been validly assigned and are payable to Turner Freeman, subject to Mr and Mrs McLaughlin's right to redeem any such proceeds which are in excess of the total unpaid costs (as defined) plus interest and any costs orders in favour of Turner Freeman in the proceedings and Turner Freeman's enforcement costs. 3. In support of Mr and Mrs McLaughlin's claim to ownership of lot 6, Mrs McLaughlin pointed, in oral submissions, to correspondence in which she and Mr McLaughlin, by their solicitors, had sought the opportunity to enter share surrender agreements, and pointed to a letter from the Company's solicitors to Mr and Mrs McLaughlin's solicitors dated 25 June 2012, by which the Company invited Mr and Mrs McLaughlin to submit a form of transfer of the strata title (Ex M8, p 558), and to a letter from Mr and Mrs McLaughlin's solicitors that enclosed a form of that transfer (Ex M8, p 560), which was not progressed by the Company before it was placed in administration (T50). It was also common ground between the parties that Ward J and the Court of Appeal had proceeded, on a basis accepted by the Company, to calculate damages on the basis that Mr and Mrs McLaughlin were the owners of lot 6, and had to give credit for its value. 4. In correspondence from their solicitors in respect of the first special levy in February 2013, the administrators expressed the view that Mr and Mrs McLaughlin had an entitlement to seek transfer of lot 6 to them and the Company did not beneficially own that lot but held it on trust for Mr and Mrs McLaughlin, although they seem to have acted inconsistently with that view in requiring rent on the unit to be paid to them and not accounting for it to Mr and Mrs McLaughlin. The view that lot 6 was held for Mr and Mrs McLaughlin was then rejected in strong terms by the Company's chairman, Mr Garrett, notwithstanding the position taken by the Company before Ward J and in the Court of Appeal. It seems to me, for the reasons noted below, that the view then expressed by the administrators was correct, and it is not now contested by any party in the proceedings, including the Shareholders associated with Mr Garrett. 5. The liquidator now submits that the Company was obliged, either as a matter of contract or in equity, to convey title to lot 6 to Mr and Mrs McLaughlin or to Turner Freeman, depending upon the outcome of Turner Freeman's Second Cross-claim. (It is now common ground between Turner Freeman and Mr and Mrs McLaughlin that such title should be conveyed to Mr and Mrs McLaughlin, subject to the mortgage to Turner Freeman.) The liquidator submits that the obligation arises in contract, because the redevelopment proposal contemplated that each shareholder would, subject to relevant terms and conditions, receiver transfer of the relevant unit upon registration of the strata plan. No party put any substantive submission to the contrary, although Ms Nolan contended that any trust should not be described as a constructive trust as distinct from, presumably, a resulting trust. 6. It seems to me likely that a constructive trust is established, so far as the share surrender agreements were specifically enforceable by Mr and Mrs McLaughlin against the Company, or at least an estoppel would prevent the Company from denying Mr and Mrs McLaughlin's beneficial title to lot 6. As the liquidator points out, and as I noted above, the Company conducted itself in proceedings both before Ward J (as her Honour then was) and in the Court of Appeal on the basis that the damages payable to Mr and Mrs McLaughlin were to be calculated on the basis that they were the owners of unit 4 (corresponding to lot 6) and that the full value of that unit should be deducted from the damages awarded to them. The liquidator points out, and I accept, that where both Ward J and the Court of Appeal adopted the approach for which the Company then contended in calculating the damages awarded to Mr and Mrs McLaughlin, that would give rise to either a conventional estoppel or an estoppel by representation binding on the Company, which would prevent the Company from resisting a claim for a transfer of title to lot 6 to Mr and Mrs McLaughlin to give effect to that ownership. Ms Nolan also acknowledged in oral submissions that the fact that the judgment of Ward J (and, by implication, the Court of Appeal) proceeded on the basis that title to the unit was that of Mr and Mrs McLaughlin disposed of the earlier position taken by Loafer and Garmen (or at least their principal, Mr Garrett) that the unit was the Company's property (T93). It is not necessary to seek to be more precise as to the terms of any such contract or estoppel, where no party sought to make submissions about that matter or to contest Mr and Mrs McLaughlin's entitlement to a transfer of lot 6 to them subject to the terms of the mortgage to Turner Freeman. 7. The liquidator submits, and I broadly accept, that a transfer of the unit to Mr and Mrs McLaughlin should be subject to the execution of a form of share surrender agreement and to their payment to the Company of the amount due under the levy raised in early 2010, to which I referred above, which was in turn taken into account in the damages awarded in their favour by Ward J and the Court of Appeal. The liquidator acknowledges that such a payment by Mr and Mrs McLaughlin would take place by set off against the debt owed to them by the Company under s 553C of the Corporations Act, and I did not understand Mr and Mrs McLaughlin to contest that such an adjustment should be made. It will, however, be necessary to hear the liquidator and Mr and Mrs McLaughlin further as to the terms of any such share surrender agreement if they cannot agree them, or any corresponding conditions of a transfer, against the risk that some of the terms of the share surrender agreement may be inappropriate, given the passage of time and the events which have occurred in the long period since Mr and Mrs McLaughlin first sought to be given the opportunity to execute a share surrender agreement, during which lot 6 was not transferred to them. 8. I should note, for completeness, that the liquidator also raised the possibility of a reconciliation under cl 7 of the share surrender agreement in respect of Mr and Mrs McLaughlin. There seems to me nothing to prevent such a reconciliation, although it is not immediately apparent that it is necessary so far as any amount owing by Mr and Mrs McLaughlin in respect of the 2010 levy will be set off against the debt due to them by the Company as a condition of the transfer of lot 6 to them. Turner Freeman's Second Cross-Claim 1. I have referred to the scope of Turner Freeman's Second Cross-Claim above. I now turn to the documentation relevant to this claim. On or about 5 October 2005, Mr and Mrs McLaughlin and Turner Freeman entered into a costs agreement (Ex M8, p 53) by which Turner Freeman agreed to provide legal services to Mr and Mrs McLaughlin in respect of the proceedings. That costs agreement provided that it was a condition of Turner Freeman carrying out the relevant services that Mr and Mrs McLaughlin provide security in the form of a mortgage (cl 11); that Turner Freeman's costs and disbursements would be paid out of any verdict or settlement monies received (cl 12); provided for an assignment and transfer to Turner Freeman of the whole of the proceeds of the litigation commenced by Mr and Mrs McLaughlin against the Company in the Equity Division and subsequently in the Court of Appeal (cl 14); provided that any order requiring another party to pay Mr and Mrs McLaughlin's costs of the proceedings would not affect their liability to pay Turner Freeman's costs under the costs agreement (cl 24); and provided for Turner Freeman to send a bill to Mr and Mrs McLaughlin for legal costs, and for such costs to be payable, at the end of the matter (cl 30). Turner Freeman ultimately invoiced Mr and Mrs McLaughlin for costs of $1,391,094.23 in respect of the proceedings and, on 24 February 2014, certificates of determination of costs were issued in Turner Freeman's favour following an assessment (Ex M1, Ex M2) in the amount of $984,565.39. Those certificates were registered with the District Court of New South Wales on 12 March 2014, and it entered two judgements totalling $966,294.14, being the amount of the then unpaid costs in favour of Turner Freeman. 2. Mr and Mrs McLaughlin and Turner Freeman also executed a deed of mortgage of company title unit (Ex M8, p 61). Clause 2.1 of the deed of mortgage of company title unit provided that Mr and Mrs McLaughlin, as mortgagor, conveyed the "secured property" to Turner Freeman to secure the payment of the "secured money". The term "secured property" was defined in cl 1.1 as any present or future interest of Mr and Mrs McLaughlin in the shares they held in the Company, the share certificates, any "new rights" and all moneys and damages owing (whether actually or contingently) from time to time by any person to the mortgagor in relation to the unit shares. The term "new rights" was defined as "all future rights of the mortgagor relating to the unit shares". The term "secured money" was defined to include all moneys or damages now or in the future owing (actually or contingently) by Mr and Mrs McLaughlin to Turner Freeman for any reason and, without limitation, included particular liabilities. It seems to me that the amount of costs and disbursements owing by Mr and Mrs McLaughlin to Turner Freeman fell within that term. 3. There is a substantial degree of common ground between the parties as to the scope of the mortgage given by Mr and Mrs McLaughlin to Turner Freeman. By prayer 1 of their Amended Cross–Claim filed in the proceedings, Mr and Mrs McLaughlin accept that their entitlements with respect to lot 6 are subject to that mortgage. The fact that Mr and Mrs McLaughlin had mortgaged their shares in the Company and the consequential interest in lot 6 to Turner Freeman is also acknowledged in paragraph 18 of their Amended First Cross–Claim and in paragraphs 23 and 25 of their outline of submissions and again in the course of their oral submissions at the hearing. An issue raised in Mr and Mrs McLaughlin's submissions as to whether the mortgage was executed was not pressed at the hearing, and an executed copy of the mortgage was tendered. A further issue addressed in Mr and Mrs McLaughlin's outline of submissions as to the extent of disclosure of the mortgage to the Company also did not seem to be pressed in oral submissions and, as Turner Freeman point out, does not have any apparent impact on the validity of the mortgage. 4. In closing submissions, Turner Freeman in turn accepted that the conveyance and assignment affected by the deed of mortgage of company title unit is not absolute and is only effective so far as necessary to secure the payment of the secured money, as contemplated by cl 2.1 of the mortgage, and that Mr and Mrs McLaughlin have an equity of redemption to have returned to them any of the secured property which is in excess of the value of the secured money. Although Turner Freeman initially submitted that the fruits of the derivative action in the hands of Mr and Mrs McLaughlin's were also secured by the mortgage, Mr Phillips, who appears for Turner Freeman, withdrew that submission in oral submissions, recognising that the fruits of the derivative action were the property of the Company, not Mr and Mrs McLaughlin, and the mortgage could only potentially attach to any distribution made to Mr and Mrs McLaughlin in the liquidation. 5. The first issue that remains in dispute as between Mr and Mrs McLaughlin and Turner Freeman is whether Turner Freeman's mortgage extends to any distribution made to Mr and Mrs McLaughlin in the liquidation and referable to the judgments in their favour. The winding up of the Company did not extinguish the judgment debts owed by it to Mr and Mrs McLaughlin, although their right to bring proceedings on those debts was, at least in the usual case, replaced by their right to prove in the winding up, as they have done: Wight v Eckhardt Marine GmbH (Cayman Islands) [2004] 1 AC 147 at [27]. There may be a question whether a distribution in a winding up may properly be characterised as "moneys or damages" owed by the Company to Mr and Mrs McLaughlin in relation to the unit shares, for the purpose of cll 1.1 and 2.1 of the mortgage, although the debts which continued to exist and which could be recognised in a distribution would have that character. That question was not addressed by any detailed submissions and it is not necessary to determine it. It seems to me that any distribution made to Mr and Mrs McLaughlin in the winding up, derived from the judgment debt, in any event falls within the definition of "new rights" in the mortgage, so far as that distribution results from the judgments in favour of Mr and Mrs McLaughlin compensating them for oppression in respect of their shareholdings in the Company. A distribution that arises in that manner seems to me plainly to relate to the unit shares, the rights to which are its ultimate source, so as to fall within the definition of "new rights" in the mortgage. 6. The second issue that remains in dispute is whether the orders for costs payable to Mr and Mrs McLaughlin are also subject to the security in favour of Turner Freeman. Turner Freeman submit that the orders for costs against the Company in favour of Mr and Mrs McLaughlin made by Ward J and by the Court of Appeal also fall within the definition of "secured property", read in the context of the surrounding circumstances and the commercial purposes of the mortgage, being to secure amounts due to Turner Freeman arising under the costs agreement, which contemplated deferred payment by Mr and Mrs McLaughlin. Turner Freeman submit that the mortgage must be read as giving effect to the obligation under the costs agreement to assign and transfer by way of security "the whole of the proceeds of the litigation which is the subject of the work", including not only the benefit of any judgment or damages but also any costs order made in favour of Mr and Mrs McLaughlin. Turner Freeman also rely on a wider principle supporting the imposition of a solicitor's union to protect a claim for costs, where property has been recovered as a result of the solicitor's exertions, and extending to an order for costs, as supporting a wide construction of the mortgage and refer to Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470 at 473–474. Mr and Mrs McLaughlin respond that Turner Freeman's right to costs was secured only by a mortgage over lot 6 and not over distributions in the liquidation (T152). 7. The term "secured property" in the mortgage includes, as I noted above, both moneys owing by any person to Mr and Mrs McLaughlin in relation to the unit shares and any future rights of Mr and Mrs McLaughlin relating to those shares, being "new rights" as defined. As I noted above, there may be a question whether a distribution in a winding up referable to costs orders made in proceedings may be characterised as "moneys or damages" owed by the Company to Mr and Mrs McLaughlin. However, it seems to me, for the reasons noted above in relation to the claim for damages, that a distribution in respect of a claim for costs arising in oppression proceedings relating to the unit shares plainly relates to those shares, and is therefore within the definition of "new rights" so as to fall within the definition of "secured property" in the mortgage. Mr and Mrs McLaughlin did not develop any substantive submission to the contrary. Subject to the further submissions made by Mr and Mrs McLaughlin as to Turner Freeman's conduct to which I will now refer, it seems to me that distributions in the winding up referable to the costs orders against the Company are also subject to Turner Freeman's mortgage. 8. Mr and Mrs McLaughlin contest Turner Freeman's claim to security over distributions in the winding up and costs on the basis of several criticisms of their conduct of their retainer for Mr and Mrs McLaughlin. They submit that Turner Freeman sent correspondence to the Company demanding that it allow Mr and Mrs McLaughlin to surrender their shares in exchange for the strata title to lot 6 and threatening to apply to the Court to enforce Mr and Mrs McLaughlin's rights, but did not take the action which had been threatened. Mr and Mrs McLaughlin also contend that Turner Freeman had a conflict of interest, at least by December 2012, when they withdrew Turner Freeman's authority to act for them in the administration, and contend that Turner Freeman's conduct continues to harm them. Mr and Mrs McLaughlin also contend that Turner Freeman failed to enforce the share surrender agreements and failed to secure the title to lot 6 which secured their costs. In fairness, I should observe that Mr and Mrs McLaughlin's criticisms of Turner Freeman must be understood in in the context of the position taken by the Company and its chairman, Mr Garrett, in the litigation and in the administration, including the continued assertion of the Company's title to lot 6, and its shareholders' continuing failure to meet the levies issued to them, notwithstanding the position which the Company had taken in the proceedings before Ward J and in the Court of Appeal, which obviously created difficulties in enforcing Mr and Mrs McLaughlin's rights. Mr and Mrs McLaughlin also criticise conduct of Turner Freeman in proceeding to an assessment of their costs and bringing bankruptcy proceedings against Mr and Mrs McLaughlin in respect of that assessment. It does not seem to me to be necessary or appropriate to seek to resolve any dispute as to these matters, in order to determine the issues as to construction of the mortgage, to the extent that they remain in dispute between Mr and Mrs McLaughlin and Turner Freeman. Turner Freeman has a judgment as to costs against Mr and Mrs McLaughlin arising from the assessment of those costs, which is not open to collateral challenge in these proceedings, and any distribution referable to the judgment in their favour and as to costs falls within the mortgage for the reasons noted above. 9. Mr and Mrs McLaughlin also submit that, due to Turner Freeman's suggested inaction in protecting Mr and Mrs McLaughlin's position following the demand for transfer of lot 6 to Mr and Mrs McLaughlin, they should be ordered to wait for payment upon collection of monies owed relating to the costs they are claiming from Mr and Mrs McLaughlin. It also does not seem to me that a basis for making such an order is established, so far as Turner Freeman's entitlement to costs has already been established by the assessment of their costs and judgments entered by the District Court consequential upon that assessment, and the issues raised by the Amended Cross Claim otherwise turn upon the proper construction of the costs agreement and the mortgage. Mr and Mrs McLaughlin also submit that the retainer of Turner Freeman states that they were to be paid when the matter was finished, and the matter is not finished. I do not accept that submission, first, because Turner Freeman's right to payment is established by the assessment of their costs and the entry of judgments by the District Court and, second, because the proceedings before Ward J and the Court of Appeal are plainly completed, notwithstanding that these further proceedings were commenced by the liquidator and have given rise to further issues involving Mr and Mrs McLaughlin, Turner Freeman, the Company and the Shareholders. 10. Mr and Mrs McLaughlin also submit, with some force, that Turner Freeman's previous claim to beneficial ownership of lot 6, as distinct from a right to security over that unit, has contributed to the length of these proceedings and the related costs incurred. However, that is a matter to be addressed in respect of the costs of the proceedings, and does not impact upon their substantive rights under the mortgage. 11. I am therefore satisfied for the reasons noted above that Turner Freeman are entitled to security over distributions in the winding up that arise from the judgments and costs orders in Mr and Mrs McLaughlin's favour. By the Second Cross-Claim, Turner Freeman also sought an order that, within 14 days, Mr and Mrs McLaughlin do all things necessary to execute and provide to Turner Freeman a further mortgage in registrable form over the strata title unit. I do not propose to grant relief in that form at this point, which has the immediate difficulty that the Company has not at this point conveyed strata title to Mr and Mrs McLaughlin, although the effect of this judgment is that it will be obliged to do so. Such an order also does not seem to be necessary, in circumstances that Mr and Mrs McLaughlin made clear that they acknowledge that they are obliged to grant such a mortgage when lot 6 is conveyed to them. I will, however, reserve liberty to Turner Freeman to apply, if any difficulty arises in that regard. Liquidator's claim for a declaration as to a lien over lot 6 1. By his Amended Originating Process filed, by leave, on 12 March 2015, the liquidator seeks a declaration that, if lot 6 is found to be beneficially owned by Mr and Mrs McLaughlin, the liquidator and the former liquidator, Mr Shepard: "are entitled to an equitable charge over the Property to secure payment of: (i) all of their costs, fees and expenses incurred by them in their capacity as liquidators and former voluntary administrators of the Company; alternatively (ii) that part of their costs, fees and expenses incurred by them as were in connection with the care and preservation of the Company property including the costs of these proceedings but excluding the costs arising from or relating to the applications by Mr and Mrs McLaughlin to conduct a derivative action on behalf of the company, the calculation of any amount claimed from shareholders of the first plaintiff pursuant to the articles of association or the Share Surrender Deed or the enforcement of such claims." 1. I will first say something as to the scope of the principles on which the liquidator relies, then turn to the parties' submissions, and then return to the scope of the declarations sought and whether they can properly be made. The applicable principles 1. The liquidator submits, and I accept, that the remuneration, costs and expenses incurred by a liquidator in preserving, recovering and realising a fund on behalf of others would generally be paid out of, and are secured by an equitable lien over, the relevant fund. That proposition is well-recognised in the case law, although it raises a critical question as to what are the costs of preserving, recovering or realising the relevant fund: Re Universal Distributing Co Ltd (in liq) [1933] HCA 2; (1933) 48 CLR 171; Coad v Wellness Pursuit Pty Ltd (in liq) [2009] WASCA 68; (2009) 40 WAR 53; Re Parbery & Ors (as liquidators of Trio Capital Ltd (in liq)) [2012] NSWSC 597 at [18]; (2012) 88 ACSR 700. In 13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) [1999] FCA 144; (1999) 30 ACSR 377 at [34], Finkelstein J observed that: "These cases establish, clearly enough in my opinion, that provided a liquidator is acting reasonably he is entitled to be indemnified out of trust assets for his costs and expenses in carrying out the following activities: identifying or attempting to identify trust assets; recovering or attempting to recover trust assets; realising or attempting to realise trust assets; protecting or attempting to protect trust assets; distributing trust assets to the persons beneficially entitled to them." 1. In Stewart (in his capacity as liquidator of Newtronic Pty Ltd (in liq)) v Atco Controls Pty Ltd (in liq) [2014] HCA 15; (2014) 252 CLR 307, the High Court also considered the circumstances in which a liquidator's equitable lien would be available over a settlement amount in liquidation, and observed that that principle in Re Universal Distributing above applies where an insolvent company is in liquidation; the liquidator has incurred expenses and rendered services in the realisation of an asset; the resulting fund is insufficient to meet both the liquidator's costs and expenses of realisation and the debt due to a secured creditor; and the secured creditor claims the fund. Their Honours noted that the application of the principle avoids the result that a secured creditor would unconscientiously take the benefit of the liquidator's work without the liquidator's expenses being met and observed (at [41]) that such a lien arose simply from the fact that the liquidator's costs and remuneration were incurred in realising the assets that created the relevant fund. 2. Mr Golledge also relies on the decision in Re Crown Meats Pty Ltd (in liq) [2013] VSC 118 in support of the liquidator's claim to a lien. That decision has some similarities with the present case, so far as it involved a dispute as to the proceeds of sale of a property. Robson J (at [39]ff) undertook a comprehensive review of the case law relating to the Universal Distributing lien. His Honour noted that such a lien could arise where the relevant work was necessary and the costs incurred to do it were reasonably incurred and could include the costs of distributing trust assets to persons beneficially entitled to them, or necessary to a "salvage objective". In that case, his Honour was prepared to make an order that the liquidators were justified in claiming the indemnity and lien, with the quantum to be worked out by agreement or, in default of agreement, to be determined by the Court. The liquidators adopt an apparently similar approach in this case although, for reasons that will emerge below, it seems to me that the issues which they would leave undetermined include not only the quantum of the claim secured by the lien, but substantive issues as to what should or should not be included within it, as to whether those costs were reasonably incurred and as to the priority of the lien. The first issue – whether the liquidator acted properly in respect of lot 6 1. Turner Freeman contest the liquidator's claim to a lien on the basis, first, that the liquidator did not act reasonably in seeking directions from the Court as to the ownership of lot 6. Mr Phillips, on behalf of Turner Freeman, submits that the decision in Crown Meats above did not involve a claim by the liquidator to any of the trust property (T147) and submits that the liquidator's claim in these proceedings that the Company should be entitled to lot 6 is a matter which excludes such a lien. Mr Phillips also submits that the Company's claim to any entitlement to lot 6 should not have been brought before the Court, because the liquidator should have known, by reason of correspondence sent by parties including Turner Freeman, then acting on behalf of Mr and Mrs McLaughlin, that lot 6 was not an asset of the Company. Mr Golledge responds that at least a substantial part of that correspondence was between Turner Freeman and the Company's former solicitors, prior to the administrators' or liquidator's appointment, and there is no evidence as to the extent to which it had been made available to the administrators on their appointment (T160). It is also by no means clear to me that that correspondence was conclusive of the question of the Company's entitlement to lot 6, such that the administrators (or, later, the liquidator) should have taken a view as to that question rather than seeking a direction from the Court. However, it is not necessary to determine that matter, since, as I will note below, the dispute between Mr and Mrs McLaughlin and Turner Freeman as to title to lot 6 required the liquidator to seek the Court's directions in any event. 2. Turner Freeman also submit that a lien in favour of the liquidator cannot attach to lot 6, because the Company, contrary to its obligations, failed to provide Mr and Mrs McLaughlin with strata title to that lot despite repeated demands for it to do so. In particular, Turner Freeman point to observations made by Pembroke J in his judgment on 25 July 2011 that the Company's refusal to enter a share surrender agreement with Mr and Mrs McLaughlin and transfer the strata title to them was unjustified and oppressive. Turner Freeman submit that permitting any charge in favour of the liquidator to attach to lot 6 would allow the Company to take advantage of its own wrong, namely its failure to transfer lot 6 to Mr and Mrs McLaughlin at an earlier point. Turner Freeman also point out that they had given notice of their claim to an interest in the shares, from which Mr and Mrs McLaughlin's entitlement to lot 6 derived, by way of mortgage by lodging a caveat over that lot. 3. Mr Golledge responds that it is reasonable for a liquidator, faced with competing claims that raise legal issues, to seek directions from the Court in respect of those issues and submits that it was not appropriate for the liquidator to simply transfer lot 6 to whoever advanced its claim to that property most vigorously (T139). He points out that the claim by Turner Freeman to title to lot 6 was not obviously flawed, notwithstanding that it has subsequently not been pressed. He submits that, irrespective of any lack of merit to the claim advanced by Mr Garrett on behalf of the Company to ownership of lot 6, Turner Freeman's claim was such that was proper for the liquidator to seek guidance from the Court, by his original application for directions in respect of the manner in which lot 6 was to be dealt with. Mr Golledge also submits that the liquidator did not assert a substantive claim on behalf of the Company to lot 6, but instead sought directions as to the range of possibilities as to ownership of the property in an orthodox manner (T158), in circumstances that Turner Freeman had asserted a substantive claim to lot 6 in competition with that of Mr and Mrs McLaughlin (T159). He points out that there is no reason to think that Turner Freeman would not pursue that claim even if the liquidator had not sought directions as to the Company's claim to lot 6 as articulated by Mr Garrett (T159). 4. I do not accept Mr Phillips' submission that the proceedings were such that the "first and principal relief" sought by the liquidator was a direction that the Company should be treated as the legal and beneficial owner of lot 6 (T149). That direction was the first of three possibilities raised in the directions sought by the liquidator, and the liquidator throughout the proceedings made clear that he considered that Mr and Mrs McLaughlin, not the Company, had the strongest claim to lot 6, the position which has now been accepted by all parties. It seems to me that the structure of the liquidator's Originating Process made plain that the liquidator was raising several alternatives as to ownership of lot 6, by the Company, Mr and Mrs McLaughlin and Turner Freeman, and seeking a direction from the Court as to those alternatives. Contrary to Mr Phillip's submissions, this was not a case where the liquidator was bringing a claim to ownership of lot 6, adverse to claims made by Mr and Mrs McLaughlin or Turner Freeman, as distinct from seeking to have a determination as to which of the various claims the parties had articulated was properly founded. 5. I also do not consider that administrators or the liquidator acted unreasonably in seeking directions from the Court. The administrators, and subsequently the liquidators, were faced with competing claims to lot 6. By letter dated 9 January 2013, Turner Freeman advised the administrators of their claim under the mortgage, and asserted that title to the unit should be transferred to Turner Freeman in its own name or alternatively in the name of Mr and Mrs McLaughlin and subject to Turner Freeman's rights (Ex A1, tab 25). That claim plainly complicated that the issues facing the administrators and subsequently the liquidators, and Turner Freeman subsequently filed an interlocutory process in the proceedings, on 2 September 2013, and the Second Cross Claim on 17 April 2014, seeking to give effect to their claim to title to lot 6, including seeking an order that lot 6 be transferred to them. As I noted above, Turner Freeman subsequently abandoned any claim to an entitlement to transfer of lot 6 to them, as distinct from a claim to a mortgage over that unit by way of security, in the course of this hearing. 6. Mr and Mrs McLaughlin also claimed an entitlement to the unit, at least from 21 January 2013, when their then solicitors advised the liquidator that their position was that the Company held lot 6 on trust for them and was bound to affect a transfer of the legal title forthwith (Ex A1, tab 19). By letter dated 28 February 2013, Mr Garrett in turn rejected any claim that the Company held the unit in trust for Mr and Mrs McLaughlin and asserted that the Company held it beneficially (Ex A1, tab 20). It is arguable that a claim to lot 6 should not have been raised by Mr Garrett, on the Company's behalf, where it was apparently inconsistent with the basis on which the Company had sought to have damages calculated before Ward J and in the Court of Appeal. However, it does not seem to me that that proposition affects the liquidator's claim to a lien, where he was seeking a determination as to alternative claims, including not only the claim raised by Mr Garrett but also potentially the claim put by Turner Freeman. Even if the liquidator had not sought directions as to the claim raised by Mr Garrett, it would still have been necessary for him to seek directions from the Court as to the competing claims to lot 6 by Mr and Mrs McLaughlin on the one hand and by Turner Freeman on the other. 7. By their report to creditors dated 3 May 2013, the administrators advised creditors that, if they were appointed liquidators, they would apply for directions regarding the question of ownership of lot 6 (Ex A1, tab 15) and they subsequently brought that application. Mr Farnsworth, in his affidavit dated 3 July 2013, sets out the basis on which each of Mr and Mrs McLaughlin, Mr Garrett on behalf of the Company and Turner Freeman made claims to ownership of lot 6 to which I have referred above, and his evidence, as to which he was not in cross-examined, was that: "The liquidators have sought legal advice in relation to the claims asserted by the Defendants in respect to the Property but are unable to conclusively determine which (if any) of the various claimants, including the Company, is beneficially entitled to the Property. Given the competing claims to the Property, the liquidators request that the court make the directions as sought in the originating process". (Farnsworth 3.7.13 [52]-[53]. I am reinforced in the view that the liquidator had a proper basis for seeking directions as to the competing claims by the fact that Mr Farnsworth was not required for cross-examination and the contrary was not put to him. The position taken by the liquidator in seeking such directions seems to me to been reasonable in the circumstances, given the three competing claims by Turner Freeman, Mr and Mrs McLaughlin and Mr Garrett on behalf of the Company which had then been identified. Further issues – clarity and finality of the declarations sought 1. Further issues arose, in the course of oral submissions, as to whether the declarations sought by the liquidator should not be made by the Court because they lacked finality or would not sufficiently resolve the substantive issues between the parties. 2. A first issue arises because, as Mr Golledge accepted in oral submissions, if the declarations sought by the liquidator were made, difficulties may arise as to whether the cost of particular work should be treated as costs of the winding up as distinct from costs of the administration of trust property and acknowledged the possibility, recognised in the case law, that costs may fall within both categories (T142). He also accepted that the work for which the liquidator sought to establish a lien could properly be characterised as either costs of the winding up generally, where the Company was the legal owner of lot 6 at the time of the liquidator's appointment or, implicitly, as costs referable to the trust asset. He acknowledged that, in Re GB Nathan & Co Pty Ltd (in liq) above at 689, McLelland J declined to make an order for a liquidator's remuneration and expenses to be paid from trust assets where the evidence suggested that there would be realisable assets available to the liquidator in the winding up generally to meet such remuneration and expenses (T143). He sought to distinguish that decision on the basis that the only property available to the liquidator in this case is presently lot 6, namely a trust asset. However, that distinction depends upon determining the position as at the date of this hearing, rather than as the winding up progresses, or as at the completion of the winding up, and takes no account of the prospect that costs orders will be made in these proceedings in favour of the liquidator or the prospect of recovery against the Shareholders by reason of this judgment or against other shareholders in any further proceedings brought by the liquidator or by Mr and Mrs McLaughlin on the Company's behalf, by leave. 3. A second issue arises because Mr Phillips, for Turner Freeman, submits that any lien in favour of the administrators and liquidators would have arisen subsequent in time to, and would have a lower priority than, Turner Freeman's mortgage, to the extent that the latter constituted an equitable mortgage over Mr and Mrs McLaughlin's shares in the Company (T155). Mr Golledge responds that the question of priority between the interest claimed by Turner Freeman and the interest claimed by the liquidator, by way of a lien, is not presently before the Court (T157). Mr Golledge points out, and I accept, that the relief sought by Turner Freeman did not extend to any determination of priorities as between the lien claimed by the liquidator and the mortgage in favour of Turner Freeman (T157). I should add that the relief sought by the liquidator also did not extend to any such determination. I accept that the liquidator would be prejudiced by determining a question of priority which was not pleaded and as to which he has not led evidence. However, the lack of resolution of that issue would leave unresolved a further, and significant, dispute as to the operation of the lien. 4. I invited further written submissions from the parties as to the question of the finality of the declarations sought and the extent to which they would resolve the disputes between the parties after reserving judgment. Mr Golledge submits that the alternative declarations which he seeks do not leave matters of substantive relief unresolved although, he submits, there remains some "working out" to give effect to his claim. It seems to me that rather more than "working out" is left to be done where the declarations sought raise questions which cannot now be resolved as to what work is properly subject to the claimed lien and whether it was reasonably done, whether (depending on whether the scope of the work claimed extends to wider costs of the winding up) trust assets rather than non-trust assets should bear the costs of that work and the priority of the lien. 5. Mr Golledge also submits that declarations of the kind that he seeks are commonly made, although further quantification of the costs claimed is required, and refers to Pelenoy Pty Ltd v Donovan Oates Hannaford Mortgage Corp [2004] NSWSC 4 at [50] – [51]; Conlon (as liquidator of Oakleigh Acquisitions Pty Ltd) & Ors [2001] WASC 230; Re Crown Meats Pty Ltd (in liq) above and Re S & D International Pty Ltd (No 5) [2011] VSC 30. Mr Philips for Turner Freeman, respond that the Court made a declaration confirming the existence of a Universal Distributing lien, without evidence of the quantum, nature or extent of costs and expenses which were the subject of that lien, in only one of the cases to which the liquidator refers, Pelenoy, where all of the parties accepted the claim was properly founded. By contrast, in both Conlon and Re S & D International (No 5), the liquidator led evidence of the nature and extent of the costs and expenses claimed and the Court determined the entitlement to a lien on the basis of that evidence. It seems to me that the cases to which Mr Golledge refers are distinguishable on that basis. 6. Mr Golledge also submits that the quantification of the claim for which security exists is practically important but not a matter of substantive relief but a matter of working out the effect of the Court's declaration. It seems to me that that submission does not give sufficient weight to the fact that, at least if the lien would extend to costs that are properly treated as costs of the winding up, the quantum of the claim, and whether the Company's non-trust assets would ultimately be sufficient to meet it, are relevant to whether those costs should be met by the Company's non-trust assets or lot 6 as a trust asset. Mr Golledge alternatively submits that the Court could make the declaration and reserve liberty to apply depending on the course of future events. However, that submission seems to me to assume that the Court can presently reach a state of satisfaction, on a final basis, that a declaration is appropriate. I do not consider that I can reach that view for the reasons noted below. 7. The Shareholders, who had not sought to be heard as to the question of the lien at the hearing, also made supplementary submissions in respect of that issue. They submit that a right to a lien arises by operation of law, without the need for a declaration to that effect, and refer to Thackray v Gunns Plantations Ltd [2011] VSC 380; (2011) 85 ACSR 144 in that regard. I do not accept that submission, at least so far as the lien extends to costs of the winding up which would, in the first instance, ordinarily be borne by the Company's non-trust assets. (I should repeat that the extent to which the liquidator's claim to a term so extends is unclear, because of the way in which the alternative declarations sought are formulated and the absence of evidence as to the particular work and costs as to which the claimed lien would attach.) The Shareholders also submit that it cannot be doubted that some work has been undertaken by the liquidator and the quantification of the expenses involved will only arise for consideration upon the conclusion of the winding up. It seems to me that that submission also does not sufficiently recognise the significance of the anterior question as to whether the particular costs sought to be secured by the lien (again, subject to the uncertainty as to what they are) are properly imposed upon trust rather than non-trust assets, if the latter are available at the conclusion of the winding up. 8. In their supplementary submissions, Mr and Mrs McLaughlin submitted that the declarations sought by the liquidator would leave substantial issues undetermined and would not allow orders that could properly be characterised as final in character. They submitted that the declarations sought by the liquidator would prevent a transfer of the unencumbered title of lot 6 to them, without further applications to the Court, and prevent them from satisfying their obligations to Turner Freeman. They also noted that the declarations sought by the liquidator as to the lien might continue the position that they had no access to the title to lot 6 until the liquidator had compelled the shareholders to pay the monies they owe to the Company. That submission seems to assume that the lien which the liquidator presently seeks to have imposed, on a final basis, could be removed if the liquidator can ultimately meet the costs of the winding up from non-trust assets, and specifically recoveries from the Company's shareholders. That submission raises a wider question, which I will address below, as to whether such a declaration could properly be made on a final basis, so far as it is based on the assets presently in the liquidator's hands rather than the position at the conclusion of the winding up. Mr and Mrs McLaughlin also point to the lack of any quantification of the costs which are subject to the claimed lien and to the likelihood of dispute as to whether expenses were in fact incurred in connection with the care and preservation of lot 6, submitting that the liquidator had not in fact paid the usual expenses of property ownership. 9. Turner Freeman, who are in the same interest as Mr and Mrs McLaughlin in respect of this issue, submit that a declaration cannot be made until the Court is in a position to make a final declaration, as distinct from an interim order that is provisional in its nature, and refer to Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540 at [127] – [128] in that regard. They submit that, to determine whether an asset is charged by way of an equitable lien with the payment of a liquidator's remuneration, costs and expenses, it is first necessary to determine what the liquidator did to care for, preserve or realise that asset: Re S & D International Pty Ltd (No 5) above at [261]. They also submit that there would be little utility in determining the abstract (and possibly uncontroversial) proposition that a liquidator is entitled to a lien for work or costs in preserving an asset, in the absence of evidence or any determination of whether any work falls in that category, and refer to my decision in Re Metal Storm Ltd [2014] NSWSC 813; (2014) 100 ACSR 637 at [107], [112] in that regard. Turner Freeman also submit, as I will also note below, that the first formulation of the liquidator's proposed declaration, referable to a lien for all of his costs, fees and expenses incurred in his capacity as liquidator, goes well beyond the principle in Universal Distributing above. They submit that, so far as the liquidator seeks a narrower lien in respect of part of his costs and expenses, referable to the care and preservation of lot 6 and some costs of the proceedings, he has not identified what part of his costs and expenses should be secured by that lien. 10. Turner Freeman submit that the question of any entitlement to a lien can only be determined by reference to evidence of the nature of the liquidator's fees and expenses which is not before the Court. They point to the possibility that the Court might ultimately determine that, in the light of that evidence, no such fees and costs fell within the scope of the relevant lien, so that a declaration as to the existence of the lien would be unnecessary, illusory or, I would add, not properly based. They submit that a declaration that there exists a lien for "an unspecified part of unquantified and unapportioned costs and expenses" would not have the effect of quelling a controversy between the parties, but would be anterior to the further controversy as to which fees and expenses were incurred in securing or preserving lot 6, with the question of the scope of costs and expenses that fell within that category likely to be disputed and to be the subject of further evidence by the liquidator and Mr and Mrs McLaughlin. Outcome - whether declarations in the form sought can properly be made 1. I now return to the form of the declarations sought by the liquidator. The first form of declaration sought by the liquidator, as noted above, is that he (and the former liquidator) are entitled to a lien over lot 6 for all of the costs, fees and expenses incurred in his and their capacity as liquidators and former voluntary administrators of the Company. It might immediately be observed that part of the costs of the proceedings self-evidently do not relate to the recovery, care or realisation of lot 6, as distinct from, for example, the validity of the levies upon the Shareholders (as to which the liquidator made helpful submissions) which do not relate specifically to lot 6 and will be for the benefit of the Company's creditors generally, including trade creditors, and for the benefit of the liquidators so far as they could recover their costs by the levies under the Company's articles of association. A declaration in this form does not seem to me to have a sufficient relationship with the care and preservation of lot 6 so as to fall within the principles noted above. 2. The second form of declaration sought by the liquidator is somewhat narrower, so far as it relates to costs, fees and expenses incurred in the care and preservation of lot 6, and excludes certain matters, namely the costs relating to Mr and Mrs McLaughlin's application to conduct a derivative action and the calculation of any amount claimed from Shareholders under the Company's articles of association and the share surrender deeds. The exclusion may be intended to clarify matters that the liquidator does not contend fall within the concept of costs, fees and expenses incurred in the care and preservation of lot 6, but leaves open the questions of whether all the liquidator's costs that are not within that exclusion are said to fall within that concept; if not, which of the liquidator's costs that are not excluded fall within that concept; and the extent to which such costs, once identified, could be treated as reasonably incurred. The uncertainty as to these matters would have a considerable impact on the application of the principles to which I referred above to particular work and costs, depending on how wide a view the liquidator took as to which costs were treated as incurred for the care and preservation of lot 6. To take an example used in oral submissions, the strength of a claim to a lien over lot 6 would differ depending on whether it relates to the cost of repairing a broken window in the unit so as to preserve its physical condition or to wider costs of the liquidation. 3. If the liquidator takes a wider view of the costs that are properly treated as incurred for the care and preservation of lot 6, and treats costs that could properly be characterised as costs of the winding up as falling in that category, then that form of declaration also raises the question whether such costs should be borne by lot 6, a trust asset, rather than the Company's non-trust assets. The authorities indicate that the Court has an inherent equitable jurisdiction to allow a trustee remuneration, costs and expenses out of trust assets, which extends to a liquidator which for practical purposes controls a trustee: Re Application of Sutherland [2004] NSWSC 798; (2004) 50 ACSR 297. However, that jurisdiction would generally not be exercised where a company does not solely act as trustee and has sufficient non-trust assets to meet the liquidator's remuneration, costs and expenses, and where the work done by the liquidator in relation to trust assets may properly be treated as done for the purposes of winding up the company's affairs: Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 685–689; and see the authorities considered by Young CJ in Eq in Re Greater West Insurance Brokers Pty Ltd [2001] NSWSC 825; (2001) 39 ACSR 301 and by Campbell J in Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361. I also recognise that, in the event of a shortfall of funds, a discretionary order allowing payment may also be made in favour of a liquidator of the kind referred to in cases such as Re Berkeley Applegate (Investment Consultants) Ltd (in liq); Harris v Conway [1989] 1 Ch 32 and Re French Caledonia Travel Service above. 4. This issue in turn raises a question whether the Company's non-trust assets as the winding up proceeds or at its conclusion (including any costs orders made in the liquidator's favour these proceedings and any amounts recovered by the liquidator against the Shareholders and other shareholders) would or may be sufficient to meet those costs. The amount of the recoverable costs which would form part of the Company's non-trust assets is necessarily speculative, since the liquidator pressed for the determination of his application for declaratory relief in respect of a lien prior to the making of costs orders in the proceedings. The extent of other non-trust assets as at the conclusion of the winding up is also uncertain. I accept that, as Mr Golledge noted in submissions, there may be an open question whether the Company's shareholders will ultimately have sufficient assets to meet the levies against them. However, I cannot properly assume that the Shareholders and other shareholders do not have such assets, absent any evidence of that matter, so as to make a final declaration of a lien on the basis that lot 6, a trust asset, rather than non-trust assets at the conclusion of the winding up should bear the relevant costs. I will address that issue further below. It does not seem to me to be possible or appropriate to resolve the question whether wider costs of the winding up should be borne by lot 6 in this application, where the evidence does not identify the scope of the work and costs sought to be secured by the lien with specificity, or allow an assessment of the quantum of those costs to allow a determination whether they could be met by the non-trust assets that would or may be available in the winding up, after orders for costs are made and after any recovery against the Shareholders and other shareholders under the levies I have addressed above and any further levies that may be made. 5. In my view, the Court also cannot make either of the alternative declarations sought by the liquidator, by reason of a lack of clarity as to their content and the extent of the substantive disputes that would be left unresolved by them. The Court may, of course, make a declaration of right under s 75 of the Supreme Court Act 1970 (NSW) where, inter alia, the making of a declaration has practical utility. However, the Court does not have power to make an interim or interlocutory declaration, as distinct from making a declaration as a form of final relief when it is in a position finally to determine the rights of the parties in a manner that will bind them by res judicata: International General Electric Co of New York v Commissioner of Customs and Excise [1962] 1 Ch 784; Graham Barclay Oysters Pty Ltd v Ryan above at [128], observing that an interlocutory declaration is a form of order "not known to the law"; and see the cases cited in Meagher Gummow & Lehane's Equity, Doctrines & Remedies, 5th ed, [19-140]. In Neeta (Epping) Pty Ltd v Phillips [1974] HCA 18; (1974) 131 CLR 286 at 307, Barwick CJ and Jacobs J also observed that a declaration should not be made where the consequences that flow from it may leave other issues between the parties undetermined and no other relief is sought, or where the suggested declaration is merely an anterior step to inevitable future litigation. That principle is not controversial, although it should not be applied too rigidly: see the cases cited in Meagher Gummow & Lehane's Equity, Doctrines & Remedies, 5th ed, [19-305]. 6. It seems to me that the form of declarations sought by the liquidator would leave substantial issues between the parties unresolved, including the questions of what work was done or what costs were incurred are properly the subject of the lien that he claims, whether that work was reasonably done or those costs reasonably incurred, and (if the lien is given wider application) whether that work and those costs are properly referable to the Company's capacity as trustee of lot 6 rather than being treated as costs of the winding up that should be borne by non-trust assets of the Company. In particular, as I noted above, there seems to me to be a substantial issue as to whether any, and which, work done by the liquidator and costs incurred would be properly the subject of a lien against lot 6, as distinct from being treated as costs in the winding up to be borne by non-trust assets, and the form of the declarations sought would either leave that question unresolved, or assume its answer in favour of the liquidator where the basis of that assumption has not been established. 7. At least if the liquidator will seek to treat costs that could also be characterised as costs of the winding up as within the scope of the lien claimed, it also seems to me that a basis for making the declarations sought on a final basis was not established. The liquidator did not establish, in a manner that would support final relief, that non-trust assets of the Company will not, on the balance of probabilities, be available to pay his costs and disbursements of the winding up. Indeed, his submission rose no higher than the proposition that he is presently without non-trust assets and that position may continue if he is ultimately unsuccessful in enforcing this judgment against the Shareholders, recovering his costs of the proceedings under any costs orders made in them and obtaining and enforcing orders made in respect of similar claims that the Company (or Mr and Mrs McLaughlin, by leave) may bring against other shareholders. The proposition that the liquidator is presently without non-trust assets, and that that position may continue, does not seem to me to establish a basis for final declaratory relief that would continue to bind the parties even where the liquidator then recovered such non-trust assets. None of the authorities to which the liquidator refers have held that a liquidator should be entitled to his costs and remuneration against trust assets merely because they are the only assets available to him at a point in time, prior to the completion of the winding up, and notwithstanding the prospect the non-trust assets will or may ultimately be sufficient to meet those costs and remuneration. 8. I am also not satisfied that the declarations sought by the liquidator should now be made as a matter of discretion. I recognise that, as Mr Golledge notes, there is a risk that, absent a declaration of a lien, lot 6 will now be transferred to Mr and Mrs McLaughlin subject to the mortgage in favour of Turner Freeman and sold, to the potential disadvantage of the liquidator if he ultimately establishes an entitlement to a lien. That matter does not, however, seem to me to support making a declaration on a final basis as to the existence of a lien where it would leave the issues noted above unresolved and where it is not established that the costs and remuneration should properly be borne by trust rather than non-trust assets. 9. Mr Golledge accepted in submissions that the liquidator's claim, which was the subject of the suggested lien, would be substantially less than the value of lot 6 (T145). However, the declarations sought by the liquidator, if made on a final basis without determining the availability of non-trust assets to the liquidator and the other issues noted above, would permit the liquidator to place a caveat on the title (as Mr Golledge foreshadowed the liquidator would do) (T145) and potentially frustrate a sale of lot 6, unless agreement could be reached as to how the proceeds of sale would be treated or that matter could be urgently determined on a further application to the Court. That course would bring about a real and substantial injustice to Mr and Mrs McLaughlin, where it would leave them exposed to continuing bankruptcy proceedings brought by Turner Freeman by reason of their inability to access that asset. That injustice would be acute if, for example, non-trust assets were ultimately available to the liquidator such that a lien should not have been imposed, or the amount that was properly subject to such a lien was substantially less than the value of lot 6 and the liquidator's claim could have been addressed (had he led evidence to quantify it) by, for example, an order that a part of the sale proceeds of lot 6 be set aside rather than by preventing its sale. That injustice would be exacerbated if a declaration is made as to a lien over lot 6, in substance on an interim basis and by reference to the assets which the liquidator presently holds rather than the assets he will ultimately hold, and no undertaking as to damages is given so as to protect Mr and Mrs McLaughlin if it ultimately emerges that the Company has sufficient non-trust assets to meet the liquidator's costs and expenses and a lien should not have been imposed upon lot 6 as a trust asset. 10. The liquidator also seeks an order that the question of his and Mr Shepard's costs, expenses and remuneration secured by the charge be referred for determination by a Registrar of the Court. Given the complexity of the issues, and the extent to which they depend upon the history of the conduct of these proceedings before me, I consider that is more likely to promote the just, quick and cheap resolution of the matters in dispute in the proceedings, for the purposes of s 56 of the Civil Procedure Act 2005 (NSW), for that question to be heard before me when evidence is lead to permit its determination. Summary and orders 1. I have held that the Company is entitled to judgment against the Shareholders in respect of the levies upon them, subject to the liquidator's election as to which levies are pressed, to the extent they overlap. It is now common ground that Mr and Mrs McLaughlin are entitled to a transfer of lot 6 to them, subject to a mortgage in favour of Turner Freeman. I have held above that Turner Freeman's mortgage extends to any distribution to Mr and Mrs McLaughlin relating to the judgment and costs in their favour in the proceedings before Ward J and the Court of Appeal. The liquidator has not established an entitlement to a declaration that he has a lien over lot 6, where the form of declarations which he seeks would also leave significant issues unresolved, including the scope of the lien claimed and its priority as against Turner Freeman's mortgage. 2. I should note, for completeness, that Mr and Mrs McLaughlin's Amended Cross Claim also pleaded claims for other relief against other shareholders of the Company, although those other shareholders were not parties to the proceedings. Those matters are not properly in issue in the proceedings, which proceeded only against the Shareholders, and would need to be the subject of separate proceedings which the liquidator or Mr and Mrs McLaughlin, by leave, brought against those other shareholders, if they do not meet the levies against them, having regard to the matters determined in this judgment as against the shareholders who were party to these proceedings. Mr and Mrs McLaughlin also sought orders that they are not liable for any of the costs of the voluntary administration and the winding up. I have addressed that issue, to some extent, in dealing with the liquidator's claim for a lien over lot 6 above. No substantive submissions were otherwise made in support of that relief, and it seems to me to be premature to seek to determine it, so far as it may be directed to any further levies which may be issued by the liquidator or any administrator which might in future be appointed by the liquidator under s 436B of the Corporations Act. 3. The parties should bring in agreed short minutes of order to give effect to this judgment within 14 days and, in the event of any disagreement, short submissions as to any differences between them, indicating whether an oral hearing is required. ********** 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. Decision last updated: 06 May 2015