Kelly, in the matter of Halifax Investment Services Pty Ltd (in liquidation) (No 6)

• Jurisdiction: Australia Federal only
• Court: Federal Court
• Judge: GLEESON J
• Judgment Date: 06 November 2019
• Neutral Citation: [2019] FCA 2111
• Date: 06 November 2019

FEDERAL COURT OF AUSTRALIA

Kelly, in the matter of Halifax Investment Services Pty Ltd (in liquidation) (No 6) [2019] FCA 2111

File number:	NSD 2191 of 2018
Judge:	GLEESON J
Date of judgment:	6 November 2019
Date of publication of reasons:	13 December 2019
Catchwords:	CORPORATIONS – application for directions and judicial advice – where company funds and trust funds are co-mingled – whether liquidators are justified in using trust and comingled funds to pay their remuneration for the administration and liquidation – application allowed
Legislation:	Corporations Act 2001 (Cth) Sch 2 ss 60-5(1), 60-10(1), 60-12, 90-15 Trustee Act 1925 (NSW) ss 63, 81
Cases cited:	13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) [1999] FCA 144; (1999) 30 ACSR 377 Australian Securities and Investments Commission v Rowena Nominees Pty Ltd [2003] WASC 112; (2003) 45 ACSR 424 Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 368 ALR 390 In the matter of AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 [2014] NSWSC 1004 In the matter of Primespace Property Investment Limited (in liquidation) [2016] NSWSC 1821 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 Suco Gold Pty Ltd (1993) 33 SASR 99
Date of hearing:	6 November 2019
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	62
Counsel for the Plaintiffs:	A Leopold SC with E Holmes and J Burnett
Solicitor for the Plaintiffs:	K&L Gates

ORDERS

		NSD 2191 of 2018
IN THE MATTER OF HALIFAX INVESTMENT SERVICES PTY LTD (IN LIQUIDATION) (ACN 096 980 522)
	MORGAN JOHN KELLY AND PHILIP ALEXANDER QUINLAN AS JOINT AND SEVERAL LIQUIDATORS OF HALIFAX INVESTMENT SERVICES PTY LTD (IN LIQUIDATION) (ACN 096 980 522) First and Second Plaintiffs ; HALIFAX INVESTMENT SERVICES PTY LTD (IN LIQUIDATION) (ACN 096 980 522) Third Plaintiff

JUDGE:	GLEESON J
DATE OF ORDER:	6 November 2019

THE COURT ORDERS THAT:

1. Subject to orders 2 to 4 below, pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), being Schedule 2 to the Corporations Act 2001 (Cth) (Act) and/or s 63 and s 81 of the Trustee Act 1925 (NSW), the first and second plaintiffs are justified in using and applying the funds held in the accounts set out in the schedule to the orders made on 22 August 2019 and marked “Annexure B” to pay their remuneration, whether as administrators or as liquidators, and expenses of the administration or the liquidation.

2. Until further order, the remuneration referred to in order 1 is to be determined by the Court.

3. The remuneration of the liquidators as administrators of the company be fixed in the amount of $1,700,889.00.

4. The remuneration of the liquidators for the period 20 March 2019 to 31 August 2019 be fixed in the amount of $1,096,380.50.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GLEESON J:

1. On 7 November 2019, I made an order pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Schedule 2 to the Corporations Act 2001 (Cth) (Act) and/or s 63 and s 81 of the Trustee Act 1925 (NSW) to the effect that the first and second plaintiffs (liquidators) are justified in using the funds in specified accounts to pay their remuneration and expenses, with the amount of such remuneration to be determined by the Court. The order covers the liquidators’ remuneration and expenses for the administration of the third plaintiff (Halifax AU) as well as the liquidation.

2. I also fixed the liquidators’ remuneration for the administration in the sum of $1,700,889.00 and the liquidators’ remuneration for the liquidation for the period 30 March 2019 to 31 August 2019 in the sum of $1,096,380.50.

3. My detailed reasons for making the orders follow.

Liquidators’ application

4. The liquidators’ application for the orders was made pursuant to para 16 and para 17 of the interlocutory process filed 3 July 2019.

5. The application was supported by the following evidence and submissions:

1. affidavits of the first plaintiff (Mr Kelly) affirmed 26 June 2019, 27 September 2019 and 5 November 2019;

2. exhibit “MJK-2” to Mr Kelly’s 27 September 2019 affidavit;

3. an affidavit of Jason Charles Opperman, solicitor, sworn 4 November 2019;

4. evidence given orally by Mr Kelly on 6 November 2019;

5. submissions entitled “Liquidators’ submissions re source of funds for remuneration and disbursements” dated 1 October 2019;

6. submissions entitled “Supplementary submissions – remuneration and disbursements”; and

7. oral submissions made by Mr Leopold SC, senior counsel for the liquidators, on 7 November 2019.

Legal framework Payment of remuneration from trust assets

6. In Quinlan, in the matter of Halifax Investment Services Pty Ltd (Administrators Appointed) (No 3) [2019] FCA 124 at [56], I cited the following relevant principles in relation to the use of trust funds to pay the expenses of a winding up (stated by Brereton J (as his Honour then was) in In the matter of AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 [2014] NSWSC 1004 at [13]):

(1) Where the company is trustee of a trading trust and has no other activities, the liquidators are entitled to be paid their costs and expenses, whether for administering the trust assets or for “general liquidation work”, out of the trust assets: Re Suco Gold Pty Ltd (1993) 33 SASR 99; 7 ACLR 873; Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158; Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361; Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466 at 480 [70]; In the matter of North Food Catering Pty Ltd [2014] NSWSC 77 .

(2) Where the company does not act solely as trustee, costs and expenses referable to work done in relation to trust assets which may nonetheless be considered as having been done for the purpose of winding up the company ought ordinarily be borne primarily by the (non-trust) property of the company, to the extent that the assets permit: Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 685-689; Re Greater West Insurance Brokers Pty Ltd [2001] NSWSC 825; (2001) 39 ACSR 301; French Caledonia at [209].

(3) At least where the non-trust assets do not permit that course, and perhaps even when they do, a liquidator is entitled to be indemnified out of trust assets for his costs and expenses, but only to the extent that they are referable to administering the trust assets: 13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 at 385; French Caledonia at [211], [213]. This is pursuant to the court’s equitable jurisdiction to allow a trustee remuneration costs and expenses out of trust assets, which extends to a person such as a liquidator who is, for practical purposes, controlling a trustee: Berkeley Applegate (Investment Consultants) Ltd; Harris v Conway [1989] Ch 32 at 50–51; Re Application of Sutherland [2004] NSWSC 798; (2004) 50 ACSR 297; Trio...