Lucantonio v Benscrape Pty Ltd (No 2)

This proceeding concerns a dispute arising out of a partnership conducted by the plaintiffs and the first defendant from about the mid-to-late 1990s until November 2017.

The proceeding was listed for hearing commencing on 10 August 2020, with an estimated hearing time of 10 days.

On 10 August 2020, the plaintiffs and defendants entered into an agreement resolving their dispute and providing for certain orders to be made within 14 days. The matter is listed on 25 August 2020 for the purpose of making those orders. Ordinarily, those orders would bring this proceeding to an end.

On 17 May 2018, Lindsay J made orders appointing Ms Robyn Erskine as the receiver and manager of the following assets that were, or were alleged to be, assets of the partnership with which this proceeding is concerned:

Order 1 of the May 2018 Orders specified that the duration of the Receiver’s appointment was until the determination of the proceedings or earlier further order.

The May 2018 Orders were made with the consent of the plaintiffs and defendants.

Orders 2 and 3 authorised the Receiver to get in, collect and receive and manage the Assets and conferred on the Receiver all of the powers of a receiver and manager in s 420 of the Corporations Act 2001 (Cth), save that the Receiver was not authorised to sell or dispose of any Assets without the written consent of the plaintiffs and first defendant or the leave of the Court.

Order 8 provided that the Receiver was entitled to pay all expenses and outgoings incurred by the Receiver in respect of the receivership and management of the Assets from funds held in the Operating Account.

Order 9 provided that the Receiver be allowed such remuneration as may be fixed by the Court pursuant to r 26.4 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), such remuneration to be paid from the Operating Account and/or the Assets.

Pursuant to Order 10, the Receiver is entitled to be indemnified out of the Assets on account of any debts or liabilities suffered or incurred by her in the conduct of the receivership and on account of the remuneration to which she is entitled in accordance with Order 9.

On 19 August 2020, the Receiver filed a notice of motion seeking:

The defendants and the Receiver appeared on the hearing of the notice of motion on 20 August 2020.

The Receiver relied on an affidavit of the Receiver sworn on 17 August 2020, and the documents in Exhibits RLE–1 to RLE–41 of that affidavit. The Receiver also tendered an updated schedule of receipts and payments that recorded the receipts and payments made by the Receiver up to 19 August 2020.

The defendants mentioned the appearance of the plaintiffs. The plaintiffs consented to some of the orders sought by the Receiver, and neither consented to nor opposed, or did not wish to be heard, in relation to the balance of the orders sought. The defendants neither consented to nor opposed the orders sought, although counsel for the defendants made some brief submissions to assist the Court in relation to some of the proposed orders. The Court was also assisted by the written submissions prepared by the Receiver’s counsel and provided to the Court in advance of the hearing.

At the conclusion of the hearing, I made the following orders in relation to the Receiver’s past remuneration on the basis that I would publish my reasons as soon as possible:

I reserved judgment in relation to the other aspects of the Receiver’s notice of motion.

As will become apparent, I have now determined that it is appropriate to make all but two of the other orders sought by the Receiver, with some variations to the terms of some of those orders. These are my reasons for the orders made on 20 August 2020 and for my decision in relation to the balance of the notice of motion.

The applicable principles were summarised by Brereton J (as his Honour then was) in Re Say Enterprises Pty Ltd [2018] NSWSC 396 at [6] (footnotes omitted): [1]

The Receiver is a registered liquidator and partner of Brooke Bird, a specialist firm providing advisory and insolvency services. She is a life member of the Australian Restructuring Insolvency & Turnaround Association (ARITA), a Fellow of CPA Australia and a member of Chartered Accountants Australia New Zealand (CAANZ). The Receiver has been working in the insolvency industry for over 30 years.

The Receiver’s extensive experience is no doubt the principal reason why the parties approached her to accept the appointment in May 2018 when they were in the process of negotiating the consent orders appointing a receiver over the Assets.

As I have referred to above, the Receiver sought orders pursuant to UCPR r 26.4 approving and fixing her remuneration in a specified sum for the period 17 May 2018 to 14 August 2020 and fixing her future remuneration as an amount capped at a further specified sum for the period 17 August 2020 to 16 November 2020. Counsel for the receiver informed me that 16 November 2020 is the Receiver’s current estimate of the date by which all work that remains to be done in order to finalise the receivership will be completed.

The plaintiffs and defendants neither consented to nor opposed the orders sought in relation to past remuneration and future remuneration.

The sums specified in the Receiver’s notice of motion are based on the application of hourly rates charged by the Receiver and staff of Brooke Bird. The Receiver submitted, and I accept, that time-costing was the appropriate basis of charging in this case because the Receiver was required, for an unknown but clearly substantial period of time, to maintain the Assets and operate the Business.

The Receiver provided a schedule of those hourly rates to the parties before the May 2018 Orders were made. The rates have changed slightly during the course of the receivership. At the commencement of the receivership, the hourly rate for the Receiver was $525.00. That rate increased to $550.00 at some time during the receivership. The Receiver submitted that the hourly rates are objectively reasonable, and the parties did not make any submission to the contrary. I accept that the hourly rates applied were reasonable, having regard to the complexity of the work that was required during the receivership, which I will describe in more detail below.

The Receiver was appointed in respect of the Assets identified in order 1 of the May 2018 Orders, as set out in [4] above. There was no evidence before the Court about the value of those Assets. However, the Receiver gave the following evidence about the nature of the Assets.

The commercial sheds and land located at 16–24 Whybrow Street, Griffith, New South Wales is known as “Whybrow Estate”. It is an industrial complex comprised of 28 tilt slab factory units of various sizes across three buildings. The units are rented out to tenants conducting various types of businesses, including hairdressing, children’s dancing schools, wholesale operations and agricultural supply businesses.

The leasing of the units at Whybrow Estate is the business referred to in Order 1(b) of the May 2018 Orders. There are 31 separate tenancies. The maintenance of the units is necessarily one of the activities carried out as part of the Business.

Orders 6 and 7 of the May 2018 Orders required the Receiver to appoint Ms Tania Bazzacco to manage the Business (subject to reserving a right to the Receiver to terminate Ms Bazzacco’s appointment for reasonable cause and to appoint an alternative manager). The Receiver gave evidence confirming that she has engaged Ms Bazzacco to manage the Business throughout the receivership.

The plant and equipment referred to in Order 1(c) of the May 2018 Orders, to the extent that it was able to be located by the Receiver, comprised a forklift and parts, some air conditioning systems and parts, some floor and wall coverings, a scissor lift, formwork and some steel and ducting. A very small proportion of the remuneration claimed by the Receiver relates to the work in order to locate these assets at the outset of the receivership.

In relation to the bank accounts in Order 1(d) of the May 2018 Orders, Order 5 of the May 2018 Orders provided:

The Receiver gave evidence that, upon her appointment, she opened a bank account for the purpose of the Operating Account and wrote to Westpac and to National Australia Bank requesting them to freeze the accounts referred to in order 1(d) of the May 2018 Orders, continue to accept deposits into those accounts and to transfer all credit funds in those accounts to the Receiver for banking into the Operating Account. The receipts and payments summary exhibited to the Receiver’s affidavit recorded that $24,562.50 and $262,776.61 had been paid into the Operating Account from the National Australia Bank and Westpac accounts respectively.

During the period since 17 May 2018 (approximately two years and three months), the Receiver has collected total rent of $719,692 from the Whybrow Estate tenants, notwithstanding that not all units were leased as a result of the maintenance and planning issues to which I refer in more detail below. This equates to an average annual rental of approximately $320,000. I infer from this evidence that the Assets comprising the Whybrow Estate and the Business are of significant value.

The Receiver gave evidence that planning matters, Council issues and the development and oversight of a maintenance program for the Whybrow Estate have occupied the majority of the time of the Receiver and the staff of Brooke Bird working with her.

Upon her appointment, the Receiver was advised by Ms Bazzacco and a planning consultant then working with her that there were concerns about whether the Whybrow Estate complied with Council requirements and building laws and regulations. The concerns included termite infestation of buildings, ongoing leaks causing water damage to tenanted units, potential non-compliance of building structures with Council and building law requirements and concerns about whether the buildings were structurally sound.

The Receiver commenced discussions with the Council within weeks of being appointed. Those dicussions continued following the Council issuing a Notice of Intention to Serve Orders on 12 June 2018. The Receiver embarked on a program of works including termite assessment and control works, asbestos inspection, electrical safety inspection, fire safety inspection, and repairs and maintenance to tenancies. The Receiver engaged Luxmoore Project Management (Luxmoore) to assist with Council and planning issues as well as the ongoing maintenance program.

As at the date of the hearing of the notice of motion, Luxmoore was continuing to liaise with the Council to understand the basis of the Council’s concerns relating to fire safety, ceiling heights, ventilation and building works not having been carried out in accordance with approvals, and to ascertain the extent of the work required to address the Council’s concerns. During the course of these discussions, the Receiver has learned that the Council has not issued an occupation certificate for some units.

The Receiver and her staff have performed a wide range of work in relation to tenancy matters, including:

The Receiver and her staff have also attended to the administration requirements of the Business, including attending to Business Activity Statement requirements on a quarterly basis, reconciling bank accounts, payment of trading and receivership expenses, reviewing insurance arrangements annually, undertaking an occupational health and safety review and working with consultants to prepare and implement a risk management framework.

The Receiver sought an order approving payment of her remuneration in respect of the period from 17 May 2018 to 14 August 2020 in the amount of $247,755.75 (including GST) based on time-charging by the Receiver and staff of Brooke Bird, in accordance with the hourly rates to which I have referred earlier in these reasons. The GST-exclusive amount is $225,232.50.

As I have already mentioned, the plaintiffs and defendants neither consented to nor opposed the order sought in relation to past remuneration.

In addition to giving the evidence that I have summarised above concerning the nature of the work undertaken during the course of the receivership to date, the Receiver has exhibited to her affidavit:

Almost half of the GST-exclusive amount of $225,232.50 relates to work done in the “Trade On Management” category, which principally involved the work that I have described above relating to tenancies, and maintenance and other works carried out on the Whybrow Estate. In this category of work, the Receiver performed approximately 31% of the work done, with staff charging at lower rates performing the balance of the work. The total amount of work done by the Receiver and all staff for this category equates to an average of approximately 3.62 hours per week during the receivership to date [2] and the total amount of work done by the Receiver herself for this category equates to approximately 1 hour per week.

In my opinion, the total amount of time spent by the Receiver and her team during the period since 17 May 2018 in relation to this category is reasonable having regard to the nature of the work that I have described above and proportionate to the extent of the problems that the Receiver has been required to address. The time-based remuneration proposed for this category of work, being based on reasonable hourly rates, is also reasonable.

The next largest category of fees relates to “Investigations and Legal” and accounts for approximately one quarter of the GST-exclusive amount of $225,232.50 of total remuneration for the period up to 14 August 2020. This category relates principally to the work required to address the legal and regulatory issues arising from tenancy matters and Council and planning matters to which I have referred above. The total amount of work done by the Receiver and all staff for this category equates to an average of approximately one hour per week during the receivership to date, and most of that work was done by the Receiver personally.

In my opinion, the total amount of time spent by the Receiver and her team during the period since 17 May 2018 in relation to this category is reasonable having regard to the nature of the work that I have described above. The time-based remuneration proposed for this category of work, being based on reasonable hourly rates, is also reasonable. The legal issues affecting tenancies that arose as a result of the COVID-19 pandemic and the extent of the issues raised by the Council in relation to the Whybrow Estate were very complex and put the entire foundation of the Business at risk. Those issues therefore required careful attention at the most senior level. The Receiver and her team provided this attention in an efficient way, with the benefit of appropriate external advisers and experts.

In coming to these conclusions about the two largest categories of remuneration, I have taken into account that the Receiver has had the benefit of the services of Ms Bazzocco, as manager of the Business, and the project management services of Luxmoore.

The evidence discloses that Ms Bazzocco has charged a total amount of $23,968.75 for her services over the period since 17 May 2018, which is described in the receipts and payments summary exhibited to the Receiver’s affidavit as “site management and book keeping services”. I infer from this relatively modest charge that the routine site management and business management matters were attended to by Ms Bazzocco whilst the more complex matters were attended to by the Receiver and her team. In my view, this represents an appropriate allocation of resources and expertise.

The project management fees charged by Luxmoore over the course of the receivership amount to $56,930.38. Again, I consider these charges for professional services addressing complex issues which threatened the ongoing operation of the Business to be reasonable. I infer that the outsourcing of these services has reduced the remuneration that would otherwise have been payable for the services of the Receiver and her staff.

The next largest category of fees relates to “Administration”, which concerns preparation of Business Activity Statements and attending to other taxation matters, banking, preparation of accounts, attending to insurance matters and other administrative tasks. The time-based remuneration sought in relation to these matters accounts for approximately 20 per cent of the GST-exclusive amount of $225,232.50 of total remuneration for the period up to 14 August 2020. The total amount of work done by the Receiver and all staff for this category equates to an average of approximately one and a half hours per week during the receivership to date, and most of that work was done by staff other than the Receiver.

The final two categories of fees – “Assets” and “Creditors” – relate to securing the Assets of the partnership, many of which could not be located based on the information provided by the parties as I have already mentioned above, and dealing with the Australian Taxation Office as a creditor of the Business. The total remuneration sought in these categories is $802.50 for “Assets” and $846 for “Creditors”. All of the work in relation to “Assets”, save for approximately half an hour, was done (appropriately, in my view) by a paraprofessional within the Receiver’s team. Most of the work in relation to “Creditors” (again, appropriately in my view) was done by the Receiver personally.

In my opinion, the total amount of time spent by the Receiver and her team during the period since 17 May 2018 in relation to these last three categories of work is also reasonable and the time-based remuneration proposed for this category of work, being based on reasonable hourly rates, is also reasonable. These categories of work are of a kind that is an inherent aspect of the operation of any business, and Receiver and her team appear to have attended to it efficiently.

I add that, whilst I have not undertaken a line-by-line review of the itemised time-charging records exhibited to the Receiver’s affidavit, I have reviewed them in a broad way. [3] They appear to me to be consistent with the other evidence adduced by the Receiver in support of the application for approval of remuneration in respect of the period up to 14 August 2020. In particular, my review disclosed a general pattern of the nature of the work described in the time-charging records being recorded as having been carried out by a person of an appropriate level of seniority within the Receiver’s team.

I also note that the Receiver has confirmed in paragraphs 88 and 95 of her affidavit that she has reviewed the claim for remuneration and considers that the work done was necessary and proper, and that the remuneration claimed for that work is proper, having regard to the length of the receivership and the difficulties encountered in managing the Whybrow Estate and the Business.

For those reasons, I am satisfied that the work undertaken by the Receiver during the period up to 14 August 2020 was reasonably undertaken and that the amount of remuneration for that work for which the Receiver seeks approval is a fair and reasonable reward for that work. I therefore made the orders referred to in [15] above at the conclusion of the hearing on 20 August 2020.

The Receiver submitted, and I accept, that the Court’s power to fix remuneration includes a power to fix future remuneration: see, for example, HN QCV Bottle Tree Village Pty Ltd v QCV Bottle Tree Village Pty Ltd (No 2) [2019] NSWSC 433; Macquarie Bank Ltd v Two Eagles Pty Ltd [2014] NSWSC 367.

The Receiver seeks an order approving the Receiver’s remuneration from 17 August 2020 until the conclusion of the receivership, up to an amount capped at $21,991.75 (including GST).

As I have already mentioned, the plaintiffs and defendants neither consented to nor opposed the order sought in relation to future remuneration.

The nature of the work that the Receiver considers will need to be done after 17 August 2020 is described in paragraph 97 of her affidavit. That description is necessarily in general terms, but the work involves two main components:

In relation to the first component, much of that work has been done in a very short timeframe in the week commencing 17 August 2020, it is not covered by the order concerning past remuneration and falls into the future remuneration category.

In relation to the second component, the Receiver stated in paragraph 73 of her affidavit that she is responsible for lodging the taxation returns of the partnership under the provisions of s 254(1)(a) and (b) of the Income Tax Assessment Act 1936 (Cth).

Section 254(1)(a) and (b) of that Act provides:

Section 6 of that Act defines “trustee” as including, relevantly, a receiver.

Counsel for the Receiver informed the Court on the hearing of the notice of motion that this obligation continues for tax returns relating the period of the receivership, even after a receiver’s appointment has been terminated. No submission to the contrary was made on behalf of the plaintiffs or defendants.

The Receiver gave evidence that she has been unable to lodge tax returns for the Business to date, because the plaintiffs and first defendant have been unable to agree on the share of profit to be distributed to each partner in the partnership. The Receiver has been corresponding with the Australian Taxation Office about this situation.

I accept that it is necessary for the Receiver to undertake the work set out in paragraph 97 of her affidavit in order to finalise the receivership in an orderly fashion and in accordance with her obligations under s 254(1)(a) and (b) of the Income Tax Assessment Act.

I also accept that it is difficult for the Receiver to estimate accurately in advance the amount of work and time that will be required to attend to these tasks, and so the amount sought to be approved for future remuneration can be no more than an estimate. However, given that the Receiver described it in paragraph 97 or her affidavit as a capped amount, I need not be troubled by whether the amount is overstated. Having regard to the reasonable and proper manner in which the Receiver has undertaken the work necessary for the receivership to date, I have no reason to be concerned about whether a reasonable and proper approach will be taken to this future work necessary to finalise the receivership.

As submitted by counsel for the Receiver, the making of orders in respect of future remuneration now avoids the time and cost that would be involved in an additional application in the future to approve that remuneration after the work has been done.

If the receivership were to be terminated immediately upon the orders made giving effect to the settlement between the plaintiffs and the defendants, there would be practical difficulties in making the orders sought by the Receiver approving the future remuneration and permitting her to pay it out of the Operating Account. However, this difficulty does not arise because, for the reasons addressed below, I am satisfied that it is appropriate to make orders that will have the effect of continuing the receivership in respect of the Operating Account only in order to facilitate the orderly finalisation of the receivership.

For those reasons, I am satisfied that a capped amount of $21,991.75 (including GST) is a fair and reasonable reward for work that is necessary to be undertaken in order to conclude the receivership. I consider that it is appropriate to make an order substantially in the terms of paragraph 1(b) of the Receiver’s notice of motion, subject to the terms of that order making it clear that the amount is a maximum or capped amount. I am also satisfied that it is appropriate to make an order permitting the Receiver to pay an amount up to that capped amount out of the Operating Account as and when the work to which the payment relates is performed.

There is no requirement for a Court-appointed receiver to seek the Court’s approval for the payment of disbursements or expenses, in the absence of a challenge to those disbursements. No such challenge has been made, but the Receiver seeks the Court’s approval in respect of those disbursements that are internal charges made by her firm, Brooke Bird, as a matter of abundant caution and because those internal charges may contain some element of profit for the firm.

The orders sought relate to internal charges of $4,999.69 already incurred, and a further $550.00 to be incurred in the future. Both amounts include GST. The evidence discloses that the past charges relate principally to printing, with some additional charges for parking and travel, telephone conferences, stationery and similar matters. I was informed at the hearing of the notice of motion that the future charges are expected to relate to the archiving of the files concerning the receivership, together with some minor bank charges, printing and stationery charges.

The plaintiffs and defendants neither consented to nor opposed the orders sought in past and future internal disbursements.

In my view, the amounts of the past and future internal disbursements are modest having regard to the period of more than two years over which they have been made, and are the very kind of charges likely to be incurred in the course of a receivership that involves the ongoing operation of a business.

I am therefore satisfied that it is appropriate to make an order in terms of paragraph 3 of the Receiver’s notice of motion, together with an order permitting the Receiver to pay the internal disbursements out of the Operating Account.

As I have already referred to, the Receivers appointment under the May 2018 Orders does not continue beyond the determination of the proceedings. Ordinarily, the orders expected to be made on 25 August 2020 giving effect to the settlement between the plaintiffs and the defendants would bring the proceedings to an end.

However, because the Receiver is operating the Business as a going concern in discharging her obligations under the May 2018 Orders, and has ongoing obligations in relation to taxation matters for the reasons explained above, the sudden resolution of the dispute between the plaintiffs and defendants has occurred at a time when the Receiver:

Paragraphs 91 to 92 of the Receiver’s affidavit identify the liabilities that have been incurred, but not yet paid, as costs for rectification works to the units at the Whybrow Estate (including repairing termite damage, and roof leaks, and works relating to the emergency exit system), the preparation of “as constructed” drawings (which I infer are required in order to obtain occupation certificates from the Council so that the premises can continue to be occupied and leased) and services provided by Luxmoores during the month of August 2020. The works schedule in exhibit RLE–41 to the affidavit lists all of these works, together with other works and services that had been commissioned but that have been cancelled by the Receiver where practicable to do so in order to leave those matters to the parties given the imminent termination of the receivership. The liabilities that have been incurred, but not yet paid, total $76,904.50 and there may be some additional costs relating to urgent repairs arranged through Ms Bazzacco in respect of which the Receiver is waiting to receive invoices.

In paragraph 96 of the affidavit, the Receiver deposed that the estimated costs of the notice of motion are $36,174 (including GST), comprising:

As I have mentioned earlier, the Receiver seeks an order fixing her costs of the notice of motion in the gross sum of $36,174 (including GST).

Counsel for the Receiver referred to the applicable principles, as recently summarised by Black J in Re Beverage Freight Services Pty Ltd [2020] NSWSC 797 at [19]:

The plaintiffs and the defendants did not oppose the gross sum costs order in the amount proposed by the Receiver. It may be that, in the absence of the order, the plaintiffs and the defendants would have agreed to the Receiver being paid that amount out of the Assets in respect of the costs of the notice motion. Alternatively, it may be that they recognised that the Receiver would be likely to achieve a similar or better result on assessment and wished to avoid the expense and delay of assessment.

In my opinion, the Court is well placed to make a broad brush determination of the Receiver’s legal costs in relation to the notice of motion. The notice of motion and supporting evidence was prepared and heard within a very short timeframe, the Court is familiar with all of the evidence and submissions made by the Receiver and the manner in which the hearing was conducted. The hearing was able to be conducted efficiently in less than one hour, as a result of the detailed and well presented evidence and the helpful written submissions that were prepared by the Receiver in advance of the hearing and the lack of opposition from the plaintiffs and the defendants. I infer that the lack of opposition was, at least to some extent, due to discussions between the Receiver and her legal representatives and the parties and their legal representatives prior to the hearing, when the preparation of the Receiver’s evidence or an advanced draft thereof had been provided to the parties.

Having regard to range of hourly rates typically charged by solicitors and counsel experienced in receiverships and similar matters, the extent of the work that would have been required in order to prepare the detailed evidence adduced in support of the notice of motion and formulate the orders sought, and the time that would have been required for discussions with the parties prior to the hearing, I consider that the amount of $36,174 in paragraph 3 of the notice of motion (including GST) is a fair and appropriate sum to fix as a gross sum in respect of the Receiver’s legal costs of the notice of motion.

Assuming that the costs agreement between the Receiver and her solicitors contains terms of the usual kind, the Receiver will have incurred the liability to pay the legal costs by the conclusion of the hearing of the notice of motion, although the costs will not be payable until the solicitor issues a bill.

However, the remaining expenses that the Receiver expects to incur, and that I am satisfied it is proper to incur, in relation to insurance and in discharging her taxation obligations in relation to the Business have not yet been incurred and are not even contingent liabilities at this stage.

It is well settled that a Court appointed receiver is entitled to be indemnified out of the assets in respect of which he or she is appointed for remuneration, liabilities and costs properly incurred in his or her capacity as receiver, and has an equitable lien over those assets to secure payment: see Macquarie Bank Ltd v Two Eagles Pty Ltd (supra) at [30] and the authorities there cited, including Shirlaw v Taylor (1991) 31 FCR 222; [1991] FCA 415 at [29]–[31].

The equitable lien covers actual, as distinct from contingent, liabilities. It survives termination of the receiver’s appointment and continues notwithstanding the return of the assets that were the subject of the receivership to the parties entitled to them: Shirlaw v Taylor (supra) at [32]; Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 158 FLR 307; [1999] VSC 500 at [47]; Re Jackgreen (International) Pty Ltd [2010] NSWSC 817 at [48]–[50]; Banning v Lean (No 3) (2019) 54 WAR 259; [2019] WASCA 30 at [146]–[147]; see also T Robinson and P Walton, Kerr & Hunter on Receivers and Administrators (20th ed, Sweet & Maxwell, 2018) at [10–8].

Although the lien is not dependent on the receiver’s possession of the assets, a receiver may resist removal and delivery up of assets in her possession whilst a claim to be indemnified for which the lien stands as security remains unsatisfied: Re Jackgreen (International) Pty Ltd (supra) at [50]–[53] and the authorities there cited; Banning v Lean (No 3) (supra) at [146]–[147].

It follows that, to the extent that the costs referred to in [76] above represent actual liabilities already incurred but not paid, the Receiver would be entitled if the receivership terminated now to resist returning to the parties funds in the Operating Account up to the total amount of those costs. The Receiver would then be entitled to pay those costs out of the Operating Account as when they become due and payable.

However, this does not apply in relation to the expenses that are merely contingent or potential future liabilities. The Receiver presently has no equitable lien over the Assets in respect of the estimated amounts of those expenses, and would have no right to retain part of the Assets in order to cover those expenses as and when she becomes liable for them in the future. Because those potential future liabilities relate principally to the preparation of Business Activity Statements and income tax returns for the Business, it is not possible for the Receiver to avoid incurring those expenses.

The solution to this problem proposed by the Receiver, and not opposed by the plaintiffs and defendants, is that the receivership should be terminated with immediate effect insofar as it relates to the Assets other than the Operating Account, and continue in relation to the Operating Account only until such time as the Receiver has paid all debts, expenses, outgoings and other liabilities incurred in the discharge of her duties and powers as receiver of the Assets. In that scenario, the Receiver will have a right of indemnity in respect of the future expenses as and when they are incurred, and that right of indemnity will be secured by an equitable lien over the Operating Account.

Counsel for the Receiver submitted, and I accept, that this not only provides the Receiver with the ability to be paid for those future expenses but also benefits the parties by ensuring that the Receiver remains an officer of the Court and the Receiver’s conduct in incurring and paying those expenses is subject to the control and supervision of the Court.

The orders sought by the Receiver to give effect to this proposal are set out in paragraphs 5 to 9 of the notice of motion:

I note that the present balance of the Operating Account is $549,234, prior to deduction of the Receiver’s past remuneration of $247,755.75 (including GST) approved on 20 August 2020, past internal disbursements, future remuneration and disbursements and future expenses in an amount exceeding $113,000 (including the expenses of $76,904.50 incurred but not yet payable and the costs of the notice of motion in the gross sum amount of $36,174).

Initially, I had reservations about the continuation of the receivership in respect of any of the Assets, given that the dispute between the plaintiffs and defendants that gave rise to the appointment of the Receiver has been resolved. However, having regard to the nature of the accrued liabilities and future liabilities and expenses, and the impossibility of the Receiving avoiding the need to incur the future taxation-related expenses even if the receivership is terminated immediately, I am persuaded that the course proposed by the Receiver is the most appropriate way to facilitate the orderly termination of the receivership within a relatively short period of time.

As I indicated during the hearing of the notice of motion, it is my view that the terms of proposed order 9 do not provide sufficient certainty for the parties as to the time at which the receivership has been terminated and the first defendant is entitled to receive the balance of the Operating Account. I consider that is appropriate to make orders in substantially the same terms as paragraphs 5 to 7 of the notice of motion, and to adjourn the further hearing of the notice of motion to 16 November 2020, by which time the Receiver expects to have paid all debts, expenses, outgoings and other liabilities incurred in the discharge of her duties and powers as Receiver. Orders can then be made terminating the appointment of the Receiver and requiring the Receiver to remit the balance of the Operating Account to the first defendant (consistently with the terms of the settlement agreement as between the plaintiffs and the defendants). Those orders will also bring these proceedings to an end. The parties and the Receiver should have liberty to apply in the meantime in respect of any matter arising in relation to the receivership.

I do not consider that it is necessary or appropriate to make the declaration sought in paragraph 8 of the notice of motion. The Receiver does not require the Court’s approval to pay debts, expenses and outgoings properly incurred in the discharge of her duties and powers as Receiver of the Assets. Given that the receivership is continuing insofar as it concerns the Operating Account, the Receiver’s position is adequately covered by the May 2018 Orders, in my view.

The Receiver also sought the following order in paragraph 10 of the notice of motion:

In my opinion, it is not appropriate for the Court to make such a declaration for several reasons.

First, it is clear from paragraph 99 of the Receiver’s affidavit that the declaration is sought because the Receiver has been unable to obtain the agreement of the plaintiffs and the defendants in relation to the scope of rectification works to the Whybrow Estate, and says that she has “therefore been restricted to undertaking the necessary minimal work in order to ensure that the buildings on the Property are safe and reasonably maintained”. There is no evidence to suggest that the plaintiffs, the defendants or any other person has foreshadowed or threatened to make any claim against the Receiver relating to the extent of work undertaken or the manner in the work has been undertaken. The declaration, if made, would be a declaration as to a mere matter of fact and would not formally determine any legal state of affairs. The Court does not make declarations for that purpose: see, for example, Sutton v NRS(J) Pty Ltd [2020] NSWSC 826 at [21].

Second, even if the Court were prepared to make a declaration concerning factual matters, the terms of the declaration do not clearly identify all of the relevant works, the meaning of “proper”, “necessary” and “reasonable” is unclear and there are no legal standards against which those concepts could be applied in the absence of an existing legal dispute.

Third, the evidence was addressed principally to the work that was done and the reasonableness of the proposed remuneration in respect of that work. The evidence was not addressed to what further work could have been done, but was not done. The Court is therefore not in a position to evaluate all of the factual matters raised by the proposed declaration.

For the reasons above, I make the following orders and declarations in addition to the orders made on 20 August 2020: