[2024] NSWSC 642

In the matter of Salvestrin Enterprises Pty Ltd (in liquidation) (No 2)

Receiver’s accounts of the receivership passed, receiver entitled to remuneration from the assets of the receivership of the trust and further relief (see [38]).

Catchwords

CORPORATIONS — receivers appointed — application for the passing of the receiver’s accounts, payment of the receiver’s remuneration and expenses out of the assets of the receivership of the trust, payment of the balance of the assets of the receivership to creditor, and discharge of the receiver thereafter

Cases cited

Calverley v Green(1984) 155 CLR 242
Foundas v Arambatzis[2020] NSWCA 47
Hebbel Constructions Pty Ltd v Bitar Pty Ltd (2021) 153 ACSR 500;[2021] NSWSC 810
In the matter of Salvestrin Enterprises Pty Ltd (in liquidation)[2023] NSWSC 1348
In the matter of Sans Pareil Estate Pty Ltd (in liquidation)[2024] NSWSC 255
In the matter of Say Enterprises Pty Ltd[2018] NSWSC 396
Sprowles, in the matter of Triumph N Triumph Pty Ltd (in liq) (No 2)[2021] FCA 405
Stojanovski v Stojanovski[2023] NSWSC 1645

Legislation cited

Corporations Act 2001 (Cth)

Judgment

INTRODUCTION

[1]
This is an application by the plaintiff, Gavin Moss in his capacity as receiver of the Salvestrin Enterprises Trust (Receiver), for the passing of the Receiver’s accounts, the payment of the Receiver’s remuneration and expenses, the payment of the net proceeds of the receivership of the Trust (after the payment of the remuneration and expenses) to Sans Pareil Estate Pty Ltd (in liquidation) and the discharge of the Receiver.
[2]
There is no appearance by any other party and the orders are uncontested.
[3]
On 27 October 2022, before being appointed as the Receiver, Mr Moss was appointed as the liquidator of Salvestrin Enterprises Pty Ltd and several of its subsidiaries, including Sans Pareil Estate, and related companies. In his capacity as liquidator of Salvestrin Enterprises, I will refer to Mr Moss at the Liquidator. In his capacity as receiver of the Trust, I will refer to Mr Moss as the Receiver.

RELEVANT FACTS

[4]
On 9 November 2023, Williams J handed down judgment (In the matter of Salvestrin Enterprises Pty Ltd (in liquidation) [2023] NSWSC 1348) which set out many of the following relevant facts at [2]–[14], evidence of which is also before me:
1. (1)
  On 12 August 2021, Salvestrin Enterprises was incorporated.
2. (2)
  Aaron Salvestrin is the sole director and shareholder of Salvestrin Enterprises.
3. (3)
  The Trust is a discretionary trust established by Trust Deed dated 4 September 2017, pursuant to which Mr Salvestrin was appointed as the trustee.
4. (4)
  An undated Deed of Ratification and Amendment (Ratification Deed) in relation to the Trust provided for the removal of the “Old Trustee” and the appointment of the “New Trustee” but those terms were defined by reference to a schedule which was not attached to the Ratification Deed.
5. (5)
  A further Deed of Amendment dated 23 June 2022 in relation to the Trust names Salvestrin Enterprises as the trustee.
6. (6)
  On 1 February 2022, Salvestrin Enterprises entered into a contract to purchase land at 39 Brooks Street, Griffith, New South Wales, in its capacity as trustee of the Trust (Property). The transfer of the title to the Property to Salvestrin Enterprises was registered on 4 April 2022.
7. (7)
  The available inference from the evidence is that Salvestrin Enterprises became the trustee of the Trust in place of Mr Salvestrin at some time between 12 August 2021 and 1 February 2022.
8. (8)
  On 27 October 2022, Salvestrin Enterprises entered into liquidation in a creditors’ voluntary winding up and the Liquidator was appointed as the liquidator of Salvestrin Enterprises, resulting in the termination of the appointment of Salvestrin Enterprises as trustee of the Trust pursuant to cl 49 of the Trust Deed.
9. (9)
  The Liquidator was also appointed as the liquidator of several related companies of Salvestrin Enterprises, including Sans Pareil Estate. Mr Salvestrin is the sole director, and Salvestrin Enterprises is the sole shareholder, of Sans Pareil Estate.
10. (10)
  San Pareil Estate was the main trading entity within the Salvestrin group.
11. (11)
  Mr Salvestrin did not provide a Report on Company Activities and Property, and failed to provide all books and records of Salvestrin Enterprises, to the Liquidator.
12. (12)
  The Liquidator’s investigations led him to believe Salvestrin Enterprises acquired the Property as trustee of the Trust and Sans Pareil Estate provided the funds for the purchase of the Property to Salvestrin Enterprises. Business records of the solicitor who acted for Salvestrin Enterprises on its purchase of the Property record Sans Pareil Estate as the source of the funds paid into the solicitor’s trust account to complete the transaction. A balance sheet for “Salvestrin Enterprises” records that entity’s current assets as “Property Acquisition”, and records that entity’s non-current liabilities as including a loan in the same amount as the value of the “Property Acquisition”.
[5]
On 9 November 2023, Williams J made the following orders:
1. (1)
  Order pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) in Schedule 2 of the Corporations Act 2001 (Cth) that the liquidator of Salvestrin Enterprises Pty Limited ACN 652 772 284 (in liquidation) (the Company and the Liquidator) would be justified in treating the property described in land title reference 12/1104189 known as 39 Brooks Street, Griffith, New South Wales (the Property) as an asset of the Salvestrin Enterprises Trust (the Trust).
2. (2)
  Order pursuant to s 67 of the Supreme Court Act 1970 (NSW) that the Liquidator is appointed as receiver and manager, without security, of the property, assets, and undertaking of the Trust (the Receiver), with the following powers:
3. (3)
  Order that the Receiver is not to distribute any surplus funds or assets of the Trust without further order of the Court.
4. (4)
  Order that the Receiver is to be paid remuneration on a time-spent basis to be calculated at the standard rates set out in the Liquidator’s initial remuneration notice to creditors dated 10 November 2022 at pages 176–179 of Exhibit GM-1 to the Liquidator’s affidavit affirmed on 10 October 2023, provided that the Receiver is not to draw remuneration from the Trust assets except with the prior approval of the Court and in an amount fixed by the Court.
5. (5)
  Order that, within 14 days of the completion of the receivership, the Receiver:
6. (6)
  Order that the Liquidator’s costs of the originating process filed on 10 October 2023 be costs in the winding up of the Company.
[6]
Following the appointment of Mr Moss as Receiver, he caused to be established a new bank account for the receivership (Receivership Bank Account).
[7]
Before the appointment of the Receiver, the Property was the subject of a residential tenancy agreement (Lease). The Receiver directed the managing agent of the Property to pay the rent from the Lease to the Receivership Bank Account. The Receiver also took steps in relation to the termination of the Lease so that the Property could be sold with vacant possession.
[8]
On about 24 January 2024, the Receiver entered into an Agency Agreement with Fireyork Pty Ltd trading as LJ Hooker Griffith (Agent) to market and sell the Property. The Receiver also engaged Hunts.Law as his solicitors in respect of the sale of the Property.
[9]
On about 29 February 2024, the Receiver entered into a Contract for Sale of the Property and the purchaser paid the deposit.
[10]
Under the terms of the Contract for Sale, land tax was payable on or before settlement. The land tax for the 2023 and 2024 land tax years was assessed by the New South Wales government at $24,079.90.
[11]
Under the terms of the Contract for Sale, the purchase price was to be adjusted by amounts for rates and other monies owing to Griffith City Council (including water and sewerage rates), all of which totalled $6,944.05.
[12]
In addition, pursuant to the terms of the Agency Agreement, the Agent was also entitled to be paid its commission and marketing expenses on settlement, totalling $23,020.25.
[13]
On 15 March 2024, I gave judgment in In the matter of Sans Pareil Estate Pty Ltd (in liquidation) [2024] NSWSC 255 for the Liquidator against Mr Salvestrin, declaring that numerous transactions were unreasonable director-related transactions under s 588FDA of the Corporations Act and therefore voidable under s 588FE(6A) of the Corporations Act, and ordered that Mr Salvestrin pay $8.457 million to various companies in the Sans Pareil group.
[14]
On 22 March 2024, the Official Trustee in Bankruptcy was appointed to the bankrupt estate of Mr Salvestrin by debtors’ petition.
[15]
On about 22 March 2024, settlement of the Contract for Sale occurred.
[16]
After the sale of the Property, the net amount of all receipts to and payments from the Receivership Bank Account as at 24 May 2024 is $699,119.08, which is also the amount held in the Receivership Bank Account. The Receiver has verified these accounts.
[17]
On 15 May 2024, emails were sent by the solicitors for the Receiver to Mr Salvestrin and the Official Trustee in Bankruptcy which attached the originating process, the interlocutory application and the supporting affidavits of the Receiver and informed them that the application was listed for hearing today. The Official Trustee in Bankruptcy has stated that it is aware of this application and does not oppose it. Mr Salvestrin has not responded to the communications sent to him and there was no appearance by him at the hearing after he was called outside the court.

ISSUE 1: PASSING OF ACCOUNTS

[18]
In Sprowles, in the matter of Triumph N Triumph Pty Ltd (in liq) (No 2) [2021] FCA 405, Yates J at [13] observed that the object of passing accounts is to verify that all amounts received in the course of the receivership are accounted for and that all payments made in the course of the receivership have been properly made and are evidenced. This statement of principle was approved in Hebbel Constructions Pty Ltd v Bitar Pty Ltd (2021) 153 ACSR 500; [2021] NSWSC 810, Black J at [22].
[19]
I am satisfied that all receipts and payments in the course of the receivership are accounted for, evidenced and verified by the Receiver. Accordingly, I propose to pass those accounts.

ISSUE 2: RECEIVER’S REMUNERATION

[20]
In Stojanovski v Stojanovski [2023] NSWSC 1645, I gathered together the principles from the authorities in relation to the remuneration of receivers at [85]–[90], saying:
[21]
It is clear from a review of the authorities cited above that the relevant considerations before me are ones of reasonableness and proportionality, requiring the court to assess the extent to which the work performed by the Receiver was reasonably necessary and to arrive at a sum or devise a formula which will reasonably compensate the Receiver for the time and trouble expended in the execution of his duties. It is clear that the question of proportionality is one of the factors involved in the overall consideration of reasonableness. The authorities also direct me to approach the matter as one of principle and not by undertaking a line-by-line analysis of time entries.
[22]
The Receiver seeks payment of $48,059.00 (inclusive of GST) as remuneration. The remuneration has been calculated based on time recorded multiplied by hourly rates ranging from $165 for a Clerical Assistant, $275 for a Graduate, $350 for an Intermediate, $405 for a Senior, $520 for a Manager, $665 for a Principal and $695 for an Appointee, being the Receiver himself. The total number of hours recorded is 70.70 over the period between 9 November 2023 to 22 April 2024 (the date of the last time entry), with the Receiver having personally recorded 42 of those hours (59.4%), with the rest of the time delegated to others. The time records also contain the split between work undertaken on “Assets” (53.10 hours), the “Investigation” (10.30 hours) and “Admin” (7.30 hours).
[23]
The Receiver observed the principles and standards of conduct prescribed by the ARITA Code of Professional Practice in conducting his billing practices.
[24]
In relation to the work undertaken, the process leading to the sale of the Property and afterwards was not straightforward. It is clear that the work involved complexity which required the Receiver to be personally involved in the work undertaken and not delegate as much of it to others charging a lower hourly rate as would have occurred for a simpler set of transactions. The complexity is demonstrated by the following matters:
1. (1)
  There were a large number of corporate entities and trusts associated with Mr Salvestrin, which meant that decisions to be made by the Receiver about the sale of the Property had to be made by someone at a high level of seniority who was familiar with the interaction and complexity surrounding the corporate group. Because the Receiver was also the liquidator of a number of those other group entities it was necessary for him to personally attend to a significant number of tasks.
2. (2)
  It was necessary for the Receiver to determine how the net sale proceeds from the Property should be applied and, in particular, whether as liquidator of Sans Pareil Estate it was the entity entitled to all of those sale proceeds.
3. (3)
  To enable the Property to be sold with vacant possession, it was necessary for the Receiver to deal with the managing agent on the termination of the Lease.
4. (4)
  It was necessary to determine whether there were any creditor claims against the Trust.
[25]
The rates which have been charged are in excess of those which were the subject of the orders made by Williams J on 9 November 2023, which required them to be calculated at the standard rates contained in the Liquidator’s initial remuneration notice to creditors dated 10 November 2022 at pages 176–179 of exhibit GM-1 to the Liquidator’s affidavit affirmed 10 October 2023.
[26]
I am prepared to allow the slightly increased rates now in light of the fact that those hourly rates were those current as at July 2022, and nearly two years has passed since then with the consumer price index having risen 8.7% to the end of the March 2024 quarter. If the remuneration were calculated at the July 2022 rates, it would have been $44,581.90, an amount which is 7.2% lower than the $48,059.00 now sought. I consider that it is fair and reasonable to allow the increase in rates, which are less than the prevailing rate of inflation over the same period.
[27]
In terms of proportionality, the calculated remuneration of $48,059.00 is only 6.2% of the total amount of the receipts of $774,940.11 (inclusive of GST), which is a proxy for the value of the services provided.
[28]
I do not need to perform a line-by-line analysis of the time entries and have not done so.
[29]
In my judgment, the remuneration sought of $48,059.00 is fair and reasonable.

ISSUE 3: RECEIVER’S EXPENSES

[30]
In the matter of Say Enterprises Pty Ltd [2018] NSWSC 396, Brereton J at [6(9)] explained (citations omitted):
[31]
Applying this approach, I am satisfied that each of the identified expenses was reasonable and properly payable, covering repairs and maintenance, agents/valuers fees, legal fees and disbursements, agent’s marketing fees and commission, land tax, council rates, water rates, PEXA fees and rental management. These expenses variously arose as a consequence of the Property being owned by Salvestrin Enterprises as trustee, the Property being the subject of the Lease and the Property being marketed and sold.

ISSUE 4: PAYMENT OF FUNDS TO SANS PAREIL ESTATE

[32]
The evidence demonstrates that Sans Pareil Estate provided the funds to Salvestrin Enterprises for the purchase of the Property in 2022. Those funds would appear to have been loaned (although there is no supporting loan documents), which would give rise to a claim for Sans Pareil Estate in debt against Salvestrin Enterprises. Alternatively, Sans Pareil Estate has a proprietary claim over the Property because it has a resulting trust in its favour by reason of it having provided the funds to enable the acquisition of the Property to occur: Foundas v Arambatzis [2020] NSWCA 47, White JA (Bell P and Basten JA agreeing) at [48]–[49], applying Calverley v Green (1984) 155 CLR 242.
[33]
There do not appear to be any other unpaid creditors of the Trust, save for any legal fees and disbursements incurred as a result of this application.
[34]
I note that the Receiver is also the Liquidator of Sans Pareil Estate, so he will continue to control those net proceeds in that capacity.
[35]
In the circumstances, I authorise the Receiver to pay the net proceeds of the receivership of the Trust, after the payment of the Receiver’s remuneration and expenses, to Sans Pareil Estate.

ISSUE 4: DISCHARGE OF RECEIVER

[36]
Once the Receiver’s remuneration has been paid, the expenses of the receivership have been paid and the net proceeds of the receivership have been transferred to Sans Pareil Estate, the work of the Receiver will be completed.
[37]
As a result, I am prepared to order the discharge of the Receiver once those steps have all been completed without further application to the court.

ORDERS

[38]
For the reasons set out above, I propose to make the following orders:
1. (1)
  Order that the accounts of the receivership of the plaintiff in his capacity as receiver (Receiver) of Salvestrin Enterprises Trust (Trust) as set out in the affidavit of Gavin Moss affirmed 24 May 2024 are passed.
2. (2)
  Order that the Receiver is entitled to be paid from the assets of the receivership of the Trust the remuneration of the Receiver fixed in the amount of $48,059.00 (Remuneration).
3. (3)
  Order that the Receiver would be justified in making payment of the expenses of the receivership of the Trust from the receivership assets of the Trust (Expenses), including the payment of legal fees of the application to appoint the plaintiff as receiver from the receivership assets of the Trust, notwithstanding the order on 9 November 2023 of Williams J that those fees be costs in the winding up of the defendant.
4. (4)
  Order that the Receiver pay the net proceeds of the receivership of the Trust after payment of the Remuneration and Expenses to the liquidator of Sans Pareil Estate Pty Ltd (in liquidation).
5. (5)
  Order that upon satisfaction of the matters set out in orders (1) to (4) above, that the Receiver is discharged as receiver of the Trust.