HN QCV Bottle Tree Pty Limited v QCV Bottle Tree Village Pty Limited

1. [1]

   HIS HONOUR: By amended notice of motion filed in Court today, Adam Shepard (the "Applicant"), in his capacity as receiver and manager of the business and assets of the QCV Bottle Tree Village Partnership (Receiver and Manager Appointed) (the “Partnership”) seeks the following orders:

2. [2]

   The Applicant was represented before me by Ms V Whittaker of Counsel who appeared with Ms B Ng of Counsel.

3. [3]

   The Court is satisfied that the Applicant is entitled to the orders he seeks, with some minor variations in relation to proposed Order 1.

Background

1. [4]

   Mr Shepard was appointed as the receiver and manager of the business and assets of the Partnership by order of this Court on 8 June 2016. Order 10 of those orders provided:

2. [5]

   The Partnership commenced operation on or about 1 September 2014. The purpose of the partnership was to build and operate an accommodation village for workers in Queensland. Construction of the village was completed prior to Mr Shepard's appointment and the Partnership had also ceased to trade prior to that time.

3. [6]

   The partners in the Partnership are (the “Partners”):

   1. (1)

      the plaintiff, HN QCV Bottle Tree Village Pty Ltd, which holds a 25% interest in the Partnership;

   2. (2)

      the third defendant, MM2 Group Pty Ltd, which holds a 50% interest in the Partnership; and

   3. (3)

      the second defendant, Qantac LOR Pty Ltd, which holds a 25% interest in the Partnership.

4. [7]

   Although they were on notice of today’s proceedings, none of the Partners appeared. The absence of any objection from them to the orders sought in the amended notice of motion — which differs from the notice of motion dated 18 April 2017 of which the Partners were on notice by the addition of further remuneration of approximately $11,000 — fortifies me in the approach which the Court is taking today.

5. [8]

   QCV Bottle Tree Village Pty Ltd was appointed as the agent of the Partnership to manage and operate the business on behalf of the Partnership.

6. [9]

   Mr Shepard was appointed on the application of the plaintiff after a deadlock between the Partners about the making of additional contributions to enable the Partnership to meet its liabilities and to continue to trade.

7. [10]

   At the time of his appointment, the principal asset of the Partnership was cash at bank in the sum of $652,881.91. After various recoveries and refunds, the current asset position of the receivership is cash at bank of $712,134.12.

8. [11]

   The total claims of the creditors of the Partnership are in the amount of $2,030,497.18, of which Mr Shepard considers as acceptable claims in the sum of $1,524,152.72.

9. [12]

   A particular feature of this administration is that the vast majority of the creditors’ claims is owed to entities which are either legally or commercially related to the Partners or those who stand behind them. There are only three creditors who might, for want of a better description, be identified as completely arm's length and independent creditors. They are Foxtel Cable Television Pty Ltd, J Mullins Plumbing, and Paradise Outdoor Advertising, who together are owed approximately $23,000. I will refer to these collectively as the “External Creditors".

Consideration — recovery from the Partners

1. [13]

   The first issue which I need to consider is the order sought by Mr Shepard in Prayer 1 of the amended notice of motion.

2. [14]

   The evidence discloses that Mr Shepard, through his own efforts and through his solicitors, has gone to considerable lengths to attempt to negotiate with the Partners for them to make contributions in accordance with their interests in the Partnership to satisfy the amounts owed to the creditors. Those attempts have thus far come to nothing and Mr Shepard has formed the opinion that he will be unable to take matters any further without pursuing legal action of a yet unspecified kind against the Partners.

3. [15]

   In considering the application, I was concerned about the utility and expense of pursuing the Partners in relation to debts owed by the Partnership to entities which, as I have said, either strictly or in broad commercial terms are related to the Partners or those who stand behind them. However, I am satisfied on the basis of Ms Whittaker’s submissions, that the creditors stand sufficiently apart from the Partners in law so that the Applicant cannot be said to be exonerated, legally or commercially, from his obligation to endeavour to recover assets sufficient to satisfy the liabilities of the Partnership to those creditors. In those circumstances, the Court is prepared to make an order in terms of Prayer 1 in the amended notice of motion, subject to one qualification.

4. [16]

   That qualification is necessary because, on the information currently available to Mr Shepard, there must be some doubt as to whether the Partners are, to use the colloquial expression, "worth powder and shot". However, that is a matter which the Court is satisfied that Mr Shepard can and should, in the exercise of his duties, pursue further. However, that same consideration gives rise to the qualification, namely that the Court is of the view that Mr Shepard is justified to take all reasonable steps in relation to recovering the contributions from the Partners up to but not including the commencement of debt recovery proceedings.

5. [17]

   What I have in mind is that Mr Shepard can and should take those steps that he considers appropriate, including, if so advised, the issuing of statutory demands and responding to any application to set aside those demands. However, he should not commence debt recovery proceedings as plaintiff without further reference to the Court. The taking of such debt recovery proceedings would require a fresh assessment as to the costs, risks and likely rewards which would warrant Mr Shepard, again if so advised, returning to the Court for further directions.

6. [18]

   In the course of exchanges with Ms Whittaker, another incidental matter arose for consideration. That was the treatment of the External Creditors.

7. [19]

   In the circumstances of this administration, and given the relatively small amount owed to those External Creditors where funds are available to pay them out, the Court is prepared to make an order that Mr Shepard is justified in paying the External Creditors.

8. [20]

   I have noted that the Partners are all on notice of today's application and have not appeared. However, they are not on notice of the proposal to pay out the External Creditors. For that reason, the Court will make orders to the effect that Mr Shepard will be justified in paying the External Creditors, but only after he has given the Partners 28 days’ notice of his intention so to do and there has been no objection from them.

Consideration — remuneration

1. [21]

   The other substantial part of today's application is Mr Shepard's application for the approval of remuneration in the sum of $68,748 excluding GST.

2. [22]

   As I have already observed, the orders appointing Mr Shepard specified that he was entitled to be remunerated in accordance with a particular rate (see paragraph [4] above). I am satisfied that the calculations which underlie the application for remuneration have been performed in accordance with those rates.

3. [23]

   The power for the Court to approve Mr Shepard's remuneration is set out in Uniform Civil Procedure Rules 2005 (NSW) Pt 26 r 26.4 — “A receiver is to be allowed such remuneration (if any) as may be fixed by the court”. Although in terms it relates to receivers appointed under an instrument, s 425(8) of the Corporations Act 2001 (Cth) (the “Act”) provides a convenient summary of the kinds of matters which the Court should take into account:

4. [24]

   The cognate provision in relation to liquidators' remuneration was considered by the Court of Appeal in Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr [2017] NSWCA 38; (2017) 118 ACSR 333 (per Bathurst CJ; Beazley P, Gleeson JA, Barrett and Beach AJA agreeing) (“Sanderson”). Their Honours noted (at paragraph [12]) that it is well established that the same principles are to be applied to the Court’s powers under the Act to determine liquidators’ and receivers’ remuneration. In my respectful opinion, there is no reason why that should not also be the case for court-appointed receivers, subject only to any specific orders the Court may make on the subject. Order 10 referred to in paragraph [4] above is an example of such a specific order.

5. [25]

   As Ms Whittaker pointed out during the course of her submissions, a significant part of the debate in Sanderson turned on the applicability of ad valorem remuneration. That is not an issue in this application because the Court has already ordered that Mr Shepard is entitled to be remunerated in accordance with specified hourly rates.

6. [26]

   In approaching today’s application, I have borne in mind, as a guide, the factors set out in s 425(8) Corporations Act and these observations of the Chief Justice in Sanderson:

7. [27]

   The evidence on this application has set out in considerable detail, which it is unnecessary for me to repeat in these short reasons, how it was, why and by whom the various tasks were undertaken in connection with this administration. I am satisfied that they were necessary and reasonable. In particular, I have taken account of the fact that this has been something of an unusual administration because of the time which the receiver has had to spend dealing with the Partners and their legal representatives in an attempt to persuade them to make the contributions for which they are liable under the partnership arrangements.

8. [28]

   I am also satisfied that Mr Shepard has been properly conscious of the seniority of the staff engaged in the administration being appropriate for the nature of the task. That is to say, those matters properly requiring his attention have been attended to by him, whereas less significant, but nonetheless necessary, tasks appropriate to more junior staff have been undertaken by them.

9. [29]

   Finally, bearing in mind the consideration of proportionality, the remuneration sought by Mr Shepard is approximately half that for which he has become liable to his lawyers in connection with the administration and represents a relatively small percentage of the current corpus of the Partnership's assets and an even smaller percentage of the liabilities of the Partnership.

10. [30]

    The Court is therefore satisfied that the amount sought by Mr Shepard is reasonable and proportionate when the particular circumstances of this administration are taken into account.

11. [31]

    For these reasons, remuneration will be approved in the sum sought in the amended notice of motion.

Conclusion

1. [32]

   I will direct the Applicant by his legal representatives to email short minutes to my Associate later today so that I can make the formal orders in chambers to give effect to these reasons.