The Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd (in liq) (No 2)

HIS HONOUR: By an amended notice of motion filed 11 June 2019 (“the amended motion”), Pharmacy Depot Hurstville Pty Ltd (in liquidation) (“Pharmacy Depot”), the first defendant, applied pursuant to ss 24(1)(c) and 24(1)(d) of the Proceeds of Crime Act 2002 (Cth) (“the Act”) for the Court to allow: debts incurred by; and remuneration, costs and disbursements of, the liquidators of Pharmacy Depot to be met out of funds held in an account, which, prior to restraining orders being made, was conducted in the name of Pharmacy Depot with ANZ Bank (“the Restrained Bank Account”)

The Commissioner opposed the amended motion. It was agreed between the parties that there is presently no authority which shares precise the factual scenario of the present proceedings, that is, an application by a liquidator, under the Act, to exclude company property the subject of restraining orders under the Act.

On 17 April 2015, the Commissioner of the Australian Federal Police (“the Commissioner”) brought the primary proceedings against Pharmacy Depot, Yaakop (Jacob) Youssef (“the second defendant”) and Hamza Amin Zoghbi (“the third defendant”). The Commissioner sought restraining orders, custody and control orders, and forfeiture orders against the property of Pharmacy Depot, against the second defendant and the third defendant pursuant to the Act.

The second and third defendants were, and at all relevant times have been, the sole directors and shareholders of Pharmacy Depot, a company through which they operated a pharmacy at Westfield, Hurstville, and through which it is alleged they perpetrated a fraud in obtaining in excess of $18 million from the Commonwealth. The relief sought by the Commissioner included an application for forfeiture orders pursuant to s 47 of the Act and pecuniary penalty orders against each defendant pursuant to s 116(1) of the Act.

Restraining orders were made in the primary proceedings pursuant to s 18 of the Act on the basis that the second and third defendant, through Pharmacy Depot, are reasonably suspected of having committed the offences of:

The fundamental allegation underlying the suspected offending was that between about 30 November 2013 and 12 March 2015, the defendants engaged in a systematic and serious fraud on the Commonwealth through the Pharmaceutical Benefits Scheme (“PBS”). It is alleged that the defendants submitted fraudulent PBS claims to Medicare for the supply of Vitaflo brand products in respect of which Pharmacy Depot was paid approximately $18,660,260.95 by the Department of Human Services. Pharmacy Depot allegedly claimed PBS reimbursements for prescriptions of Vitaflo products which were not, in fact, prescribed by a medical practitioner, nor in fact dispensed and supplied by the defendants. The funds obtained from the Commonwealth under the alleged fraud were deposited into the Restrained Bank Account.

Restraining orders were made against various items of property on 17 April 2015. Further restraining orders were made in the proceedings on 8 December 2015, 28 October 2016 and 10 March 2017.

The property restrained on 17 April 2015 included funds in the amount of $9,606,394.97 standing to the credit the Restrained Bank Account, which is the subject of the present application. On 29 April 2015, the Restrained Bank Account was transferred to the custody and control of the Official Trustee pursuant to the orders of the Court.

The suspected offending is now the subject of criminal proceedings against the third defendant. A Court Attendance Notice was filed on 5 July 2018 with respect to the second defendant, but it has not been served as he left Australia in December 2017 and has not subsequently returned.

On 22 November 2017 (more than two years after the primary proceedings were commenced) the second defendant commenced separate proceedings in this Court, seeking the appointment of a provisional liquidator to Pharmacy Depot and orders winding up Pharmacy Depot on just and equitable grounds.

On 4 December 2017, the Court made orders appointing Daniel Frisken as provisional liquidator of Pharmacy Depot. Order 9A was made in the following terms:

By subsequent order of the Court on 25 June 2018, Pharmacy Depot was wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) and Mr Frisken and Maxwell Prentice were appointed liquidators. On 14 December 2018, Mr Prentice ceased to be a liquidator of Pharmacy Depot and Mr Frisken (“the Liquidator”) is now the sole liquidator of Pharmacy Depot.

Pursuant to s 471B of the Corporations Act, the appointment of the Liquidator prevented the Commissioner from taking further steps in these proceedings except with the leave of the Court. The Commissioner filed an application for such leave on 10 April 2018. The Liquidator opposed the granting of leave from 27 April 2018 until September 2018 when he changed his position and consented to leave being granted. The Court granted leave, with the consent of the Liquidator, on 6 September 2018. During the period in which he opposed the granting of leave under s 471B, the Liquidator pursued a separate application against the Commissioner which was determined in the Commissioner’s favour: Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd (In Liquidation) [2018] NSWSC 1284.

The present proceedings initially proceeded by a notice of motion filed 2 October 2018 (“the motion”), in which relief was sought confined to reliance upon to s 24(1)(d) of the Act. That proceeding was listed and heard on 28 May 2019. During the course of the hearing, Pharmacy Depot sought leave to amend the motion to seek relief pursuant to s 24(1)(c) of the Act. That leave was granted on 28 May 2019 and the matter was fixed for a further hearing day on 29 October 2019 to hear argument with respect to the prayers for relief brought pursuant to s 24(1)(c).

In the result, the relief claimed by way of the amended motion was relevantly as follows:

It is evident from the prayers of relief on the amended motion that Pharmacy Depot seeks a primary prayer for relief (“the first prayer for relief”) and two alternative prayers for relief, namely, paras 2 and 2A (which shall hereinafter be referred to as “the first alternate prayer for relief” and “the second alternate prayer for relief”, respectively).

The first prayer for relief seeks that the payment of either debts incurred in good faith by the liquidators of Pharmacy Depot or the remuneration, costs and disbursements of the liquidation of Pharmacy Depot be excluded from the Restrained Bank Account. The sum so excluded is to be derived from the expression used in the first prayer for relief “as are necessary from time-to-time to meet the payment”.

The first alternate prayer for relief seeks that a specified sum of $750,000 (or such other amount as the Court thinks fit) be excluded from the Restrained Bank Account and there upon transferred to the liquidators to satisfy what is described as the “Liquidators’ statutory indemnity” regarding the remuneration, costs and disbursements of the liquidation of Pharmacy Depot.

The second alternate prayer for relief seeks that a specified sum of $524,644 be excluded from the Restrained Bank Account.

The amended motion effectively operates differently to the motion in two ways. First, it calls in aid an additional source of power under the Act for each prayer for relief, namely, s 24(1)(c). Secondly, it brings in the second alternate prayer for relief.

In relation to the second alternate prayer for relief, it should be noted that the prayer relies solely on s 24(1)(c) of the Act; and further, the specified sum of $524,644 represents the sum of the unpaid balance of the provisional liquidation remuneration of Pharmacy Depot ($359,644) and the unpaid balance of the liquidation of Pharmacy Depot ($165,000), as at the date of deposition in the affidavit of Daniel John Frisken, sworn 11 June 2019.

A principle issue in the proceedings concerned the proper construction of s 24 of the Act, which is entitled “Allowance for expenses”.

The Act is divided into six chapters, of which Ch 1, 2, 5 and 6 are material. In summary, the relevant chapters concern the following:

The principal objects of the Act are stated in s 5, in Ch 1 Pt 1-2, and relevantly include:

In Commissioner of the Australian Federal Police v Hart (2018) 262 CLR 76; [2018] HCA 1 at [32]-[33], Gordon J observed the principal objects of the Act. Her Honour stated:

Gordon J continued (at [64] and [66]) to observe that:

Section 24(1) is in the following terms:

Section 24(2), which outlines the circumstances in which the Court’s discretion to grant relief under subs (1) is enlivened, relevantly states:

The references to “person” in s 24 of the Act, in light of the absence of contrary intention, are to be construed to include a body corporate: Acts Interpretation Act 1901 (Cth), s 2C(1). Pharmacy Depot constitutes, therefore, a “person” for the purposes of the Act.

It is apparent from considering s 24(1)(a) that the references to “that person” in ss 24(1)(c) and (d) are references to “the person whose property is restrained”.

Pharmacy Depot bears the onus of proving the matters necessary to establish the grounds for the order for which it has applied: s 317(1) of the Act. Questions of fact are to be decided by the Court on the balance of probabilities: s 317(2) of the Act.

The principles of statutory construction were outlined by French CJ and Hayne J (with whom Kiefel J agreed in this respect) in Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross; Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander (2012) 248 CLR 378; [2012] HCA 56 at [23]-[26], as follows:

The High Court, in recent years, has repeatedly stressed the importance of reading the statutory text having regard to considerations of context and purpose. In SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34 (“SZTAL”), the plurality (Kiefel CJ, Nettle and Gordon JJ) said (at [14]):

In SZTAL, Gageler J (who was in the minority but not as to the principles of statutory construction) also observed (at [37]-[39]):

As to context in particular, in Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55 at [39], the High Court stated:

Pharmacy Depot’s case proceeded on the basis that the central issue in the present application stems from the intersection of two Commonwealth statutes, namely, the Act and the Corporations Act and, it was contended, the lack of contemplation by each statute as to the existence of the other. As to the latter issue, counsel for Pharmacy Depot, Mr E Hyde, contended:

The affidavit of the Liquidator detailed that, as at the date of deposition, the available company property wholly consisted of cash funds in the amount of $265,135.63, which was insufficient to meet the total sum of the unpaid balance of the provisional liquidation and the unpaid balance of the liquidation, as at 11 June 2019, which amounted to $524,644.

Pharmacy Depot raised related issues concerning the construction of each piece of legislation.

It may be noted that, the parties agreed that, pursuant to s 24(2)(ca) of the Act, the Court may not make an order under s 24(1) of the Act for expenses or debts which relate to legal costs in connection with proceedings under the Act or proceedings for an offence against a law of the Commonwealth, a State or a Territory.

In my view, upon the proper construction of the Act, the relief sought by Pharmacy Depot (in its primary and alternate form) pursuant to s 24(1)(d) should be refused. My reasons for that conclusion appear below.

First, to “specify” something, as correctly submitted by Senior Counsel for the Commissioner, Ms E Cheeseman SC, means to mention or name it specifically.

The amounts sought to be excluded from the Restrained Bank Account, with respect to the first prayer for relief and the first alternate prayer for relief, fail to identify, with any specificity whatsoever, a debt or debts to which said amounts attach. Such orders would therefore not be in respect of any “specified debt”. The terms of the first prayer for relief do not particularise any specified sum and, in substance, would permit access to the funds held in the Restrained Bank Account for any debt whatsoever as may be incurred by the Liquidator over time, save that the provisions of s 24(1)(d) of the Act would require the debt to be incurred in good faith. The terms of the first alternate prayer for relief primarily seek $750,000. That sum however, although a specific figure, cannot be attributed to any debt. Hence, neither the amount of $750,000, nor “such other amount” that the Court may think fit, may constitute a “specified debt”. It follows that the Court is not empowered by s 24(1)(d) of the Act to make an order in terms of either the first prayer for relief or the first alternate prayer for relief.

Further, the Commissioner correctly submitted that there is a distinction between the debts of a company and a liquidator’s remuneration, to which I will address below. With respect to the former, the Commissioner, again correctly, submitted that the only outstanding “specified debt” incurred by Pharmacy Depot to which the evidence served by Pharmacy Depot makes reference is the “Scentregrid final bill” in the sum of $12.55. The Court may not make an order under s 24(1)(d), even with respect to the “Scentregrid final bill”, as the evidence of the Liquidator makes it plain that the expense could be satisfied by property not the subject of a restraining order.

The Court’s power under s 24(1)(d) is constrained by the temporal element that results from the presence of the word “incurred”. It is plain that the subsection regards the allowance out of property covered by a restraining order for debts that have already materialised (that is, “incurred”). It follows that the subsection does not apply to any debt that is yet to be incurred.

Counsel for Pharmacy Depot contended that subpara (a) of the first prayer for relief is drafted to ensure that a debt ultimately will be incurred. That is, the relief sought by subpara (a) is a prospective order that does not seek to transfer out a sum of money, but varies the restraining order to ensure that monies are available from time to time to meet the debts which are incurred.

Further, Pharmacy Depot submitted that s 24(1)(d) of the Act “doesn’t say that such an order can only be made following the incurring of a debt.”: see s 24(1)(a) and (b) of the Act, which set a regime whereby reasonable living expenses can be paid out of restrained property (those provisions were relied upon to support that submission).

In Australian Leisure and Hospitality Group Pty Ltd v Director of Liquor Licensing [2012] WASC 463 at [22], Hall J said:

In SZTAL, Edelman J said (at [94]): “where a statute employs a term in its ordinary sense, there can be no warrant for the extension of the meaning beyond its ordinary sense”.

It is plain that the word “incurred” contained in s 24(1)(d) of the Act is the past tense form of the verb “incur”. The word “incurred” should therefore be given its natural and ordinary meaning. That is, its meaning should not be extended to debts that have not already been made. By the provisions of subs (1), the legislature establishes a procedure for the exclusion of property from a restraining order in four distinct circumstances. The fact that para (a) and (b), within that subsection, provide regimes that afford an allowance from restrained property for the future expenditure of a person (or their dependants) does not deny the natural and ordinary meaning of “incurred” for the purpose s 24(1)(d): SZTAL at [14]. The immediate context of the statutory provisions in s 24(1)(a) and (b) of the Act do not, therefore, warrant an alteration to the ordinary use of the word “incurred” found in s 24(1)(d) of the Act. The Court is not empowered, pursuant to s 24(1)(d), to make an order allowing the release of restrained property to meet prospective debts, such as those which are, “from time-to-time”, sought by the first prayer for relief.

Secondly, the Court may only exercise its discretion under s 24(1)(d) of the Act if satisfied that the “debt” that is to be the subject of the order was “incurred in good faith”.

The Commissioner submitted, and I accept, that it is impossible for the Court to be so satisfied, as to the question of “good faith”, where the Court is asked to make an order that “from time-to-time” the Liquidator be entitled to draw on the funds if he, rather than the Court, considers he has incurred debts in good faith or to set aside a separate fund out of the funds from which the Liquidator can decide to draw his remuneration, costs and disbursements without any judicial determination of whether they are “a specified debt incurred in good faith by [Pharmacy Depot]”. The effect of such an order would render the Liquidator, rather than the Court, the exerciser of the discretion inherent in s 24(1) of the Act without an understanding of all of the circumstances of the proposed expenditure, nor independent consideration of it. Phrased differently, it would give the Liquidator a prospective licence to decide what debts will fall into the category of not merely debts, but debts incurred in good faith. If it is assumed that an identical application came before the Court, but by a corporation as opposed to a liquidator, its granting would provide the corporation the power to determine when funds could be taken out of restrained property carte blanche.

Such a course is not permissible under s 24(1)(d) of the Act, as it would have the effect of the Court delegating to the Liquidator the discretionary power vested in the Court.

Further, there is a real question as to whether future expenses incurred in the liquidation of Pharmacy Depot could be said to be incurred in good faith for the purposes of s 24(1)(d) of the Act. From the date of his appointment as provisional liquidator, the Liquidator has been aware of the restraining orders with respect to the Restrained Bank Account and other property. The Liquidator has been aware that the Commissioner seeks forfeiture orders pursuant to s 47 of the Act and pecuniary penalty orders against Pharmacy Depot pursuant to s 116(1) of the Act. The Liquidator also had knowledge that criminal proceedings were on foot against the third defendant and that the second defendant had left the jurisdiction. In those circumstances, there is, at the least, a possibility, that the conviction-based forfeiture regime under the Act may ultimately be engaged.

The Liquidator was on notice that the Commissioner intends to proceed to obtain such orders and sought leave pursuant to s 471B of the Corporations Act to enable that to take place (leave which the Liquidator initially opposed but eventually consented to). The Liquidator must therefore have been aware that there is a real likelihood that, among other property, the Restrained Bank Account will not be available to the Liquidator in the liquidation of Pharmacy Depot.

Senior Counsel for the Commissioner submitted that, with respect to those circumstances, the question arises as to whether expenses incurred, for which the Liquidator does not or will not have funds to meet without recourse to the Restrained Bank Account, can be said to be expenses incurred in good faith. That is especially so given that, pursuant to s 545(1) of the Corporations Act, “a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property”. Thus, I consider that, if the property that is available to the Liquidator as at 11 June 2019, being total cash funds of $265,135.63, is insufficient in order to meet the expenses in the winding up, the Liquidator is under no obligation to incur any further expenses.

I will briefly deal with the submissions of Pharmacy Depot as to good faith. It was submitted by Pharmacy Depot that as the Liquidator was appointed by and subject to the control of the Court, the notion “that an officer of the Court would do something that is, in effect, in bad faith is an easy comfort that can be provided”. If a situation of a so called “rogue liquidator” were to arise, “there is a mechanism by which those liquidators are personally liable for expenses which are wrongly incurred”. Those submissions did not touch upon the issue of the Court delegating its power pursuant to s 24 of the Act as to the determination of whether a debt was incurred in good faith. In any event, I reject Pharmacy Depot’s submission that the good faith requirement under s 24(1)(d) of the Act is met by virtue of the liquidators having been appointed by the Court alone. Further, Pharmacy Depot’s submission concerning the protections against misconduct, in that a liquidator can be held personally liable for wrongly incurred expenses, is misconceived. The fact that there is a scheme to hold liquidators whom conduct themselves in bad faith does not operate in the converse to satisfy the good faith requirement under s 24(1)(d).

In Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 152 ALR 127 at 130, Finn J stated “the formula ‘good faith’ derives its meaning from its particular context” and continued:

The requirement of “good faith” must be construed by reference to the principal objects of the Act (see s 5 above), including, relevantly in s 5(a), “to deprive persons of the proceeds of offences, the instruments of offences and benefits derived from offences”. That object is affected by a Court making a forfeiture order under Part 2-2 of the Act: Commissioner of the Australian Federal Police v Elzein (2017) 94 NSWLR 700; [2017] NSWCA 142 at [11] (per Basten JA, with Beazley ACJ agreeing).

It is uncontroversial that one of the principal objects of the Act would be undermined if a person whose property is the subject of a restraining order was able to incur debts in the knowledge that those debts could only be paid out of the property the subject of the restraining order. It follows that a debt so incurred does not meet the requirement of “good faith” in s 24(1)(d), properly construed in the context of the Act, as the incurring of such a debt would unduly and deliberately circumvent the objects of the Act.

I note that Senior Counsel for the Commissioner submitted that to enable fraudsters or money launderers, who perpetrate their offending through a captive company vehicle, to circumvent confiscation of the proceeds and instruments of their crimes by using the apparatus of voluntary liquidation years after assets are restrained would not be consistent with the requirement that an allowance only be made for debts incurred by the company in good faith. Given the conclusions I have reached it is unnecessary to make a determination as to that submission.

For the above reasons, I find that to incur a debt in the expectation that the debt will be met out of the restrained property is not to incur the expense “in good faith” for the purposes of s 24(1)(d) of the Act. Thus, the Court cannot, in accordance with s 24(1)(d) of the Act, make orders in terms of the first prayer for relief or the first alternate prayer for relief.

The first alternate prayer for relief sought the past and future remuneration of the liquidators.

A liquidator is entitled, pursuant to s 60-5 of Sch 2 – Insolvency Practice Schedule (Corporations) of the Corporations Act (“the IPS”), to receive remuneration for “necessary work properly performed”.

The quantum of such remuneration is determined by resolution of the creditors, by a committee of inspection or by the Court: s 60-10 of the IPS. I note that those provisions replaced the former s 473(3) of the Corporations Act.

Pharmacy Depot submitted, in reliance upon ss 443D, 443E and 443F of the Corporations Act, that a liquidator generally has a right of indemnity out of the assets of the company for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers. Those provisions, however, are inapplicable to this application as they relate only to voluntary administrators rather than liquidators.

A liquidator’s remuneration is given a high priority in the order of distribution of assets of a company. That priority is provided by s 556(1) of the Corporations Act, which relevantly provides:

Section 556(2) sets out the definitions for the provision and relevantly provides:

Further, “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”: In the matter of Dungowan Manly Pty Ltd (in liq) (2015) 105 ACSR 648; [2015] NSWSC 491 at [85] (per Black J). Such a lien, however, is not presently relevant, as it cannot be said that that the Liquidator preserved, recovered or realised the funds in the Restrained Bank Account.

In Wellnora Pty Ltd v Fiorentino (2008) 66 ACSR 229; [2008] NSWSC 483 (“Wellnora”) at [20], Barrett J (as his Honour then was) considered the right of a liquidator to remuneration:

The facts of Wellnora involved an application to set aside a statutory demand on the ground that there was a genuine dispute as to existence of debt for remuneration of an administrator of a deed of company arrangement (“DOCA”) owed by the company that was subject to the DOCA.

A deed administrator has an equitable right to indemnity and lien in respect of his or her remuneration and expenses. It was submitted to Barrett J, and his Honour agreed, that “the sole right was to have the particular property applied towards meeting remuneration”. His Honour concluded that: “The proposition that that right was a proprietary right which did not entail a debt as such is so strongly arguable that there is obviously a genuine dispute as to the existence of any such debt” (at [32]). His Honour also made reference to the position of a trustee (at [29]):

A liquidator has an entitlement for expenses, including remuneration as “deferred expenses” to be paid in priority to unsecured debts and claims. However, such an entitlement does not give rise to a relationship of debtor and creditor as between the company in liquidation and the liquidator. The entitlement to be reimbursed out of the property of the company is not a debt incurred by the company. Such entitlement depends for its existence on the operation of statutory provisions, in particular s 60-5 of the IPS and s 556 of the Corporations Act, not upon the existence of a debtor/creditor relationship. There is no legal obligation on Pharmacy Depot to pay money to the Liquidator which may be enforced as such. In The King v Brown (1912) 14 CLR 17 at 25, Griffith CJ observed:

As Pharmacy Depot is under no legal obligation to pay the Liquidator, it follows that the Liquidator’s remuneration is not “a specified debt incurred in good faith by [Pharmacy Depot]”. Thus, there is no entitlement under s 24(1)(d) of the Act for that remuneration to be met out of the Restrained Bank Account as property subject to a restraining order.

Pharmacy Depot submitted that, unlike s 58A of the Bankruptcy Act 1966 (Cth), “there are no provisions in the Corporations Act which gives priority to State of Federal Proceeds of Crime/Criminal Property Confiscation proceedings”. The Commissioner submitted that s 58A of the Bankruptcy Act is not relevant in present proceedings and, therefore, there is no tension between the Act and the Corporations Act. I accept the Commissioner’s submission, in that respect, for the following reasons. The terms of s 58A of the Bankruptcy Act are of no assistance to Pharmacy Depot. In bankruptcy, the property of the bankrupt vests in the trustee in bankruptcy pursuant to s 58 of the Bankruptcy Act. Section 58A(1) simply provides that such vesting does not apply to property the subject of a restraining order or a forfeiture order as at the date of bankruptcy. Such a provision is not necessary in the case of a corporate liquidation because the property of the company in liquidation always remains that company’s property until distribution. It does not vest in the liquidator. The absence of a similar provision in the Corporations Act does not assist Pharmacy Depot.

It follows from the above considerations that s 24(1)(d) of the Act, does not empower the Court in the circumstances of this matter to grant, to the extent that section is relied upon, the first prayer for relief or the first alternate prayer for relief sought by Pharmacy Depot.

In their supplementary written submissions, Pharmacy Depot submitted:

In supplementary oral submissions, Pharmacy Depot submitted:

In summary, the Commissioner submitted:

Properly construed, s 24(1)(c) of the Act can only extend to expenses which Pharmacy Depot had “reasonably” incurred in the operation of the “business” it conducts. Such a construction is necessary to give the express terms “business” and “reasonable” work to do and reflects the principal objects of the legislative regime, such as depriving the person of the proceeds of offences against laws of the Commonwealth and the provision of confiscation and restraining orders made in respect of such offences: s 5(a) and (g) of the Act.

I note, in that respect, in construing s 24(1)(c) of the Act, the Court must have regard to the principal objects of the Act. The observations of the High Court in Commissioner of the Australian Federal Police v Hart (per Gordon J) at [32] and [66] (extracted above) and [25]-[26] are apposite.

I note that “reasonable business expenses” is a form of words utilised in various proceeds of crime legislative schemes to limit the circumstances in which an allowance may be made out of restrained property. See for example, Confiscation Act 1997 (Vic), s 14(4)(b); Criminal Assets Confiscation Act 2005 (SA), s 27(1)(c); Criminal Property Confiscation Act 2000 (WA), s 45(e); Criminal Proceeds Confiscation Act 2002 (Qld), ss 34(1)(a), 93Q and 126(1)(a); Crime (Confiscation of Profits) Act 1993 (Tas), s 26(3); Criminal Property Forfeiture Act 2002 (NT), ss 46(1)(e) and 49(3); Australian Federal Police Act 1979 (Cth), s 49C(1)(a).

It is true, as mentioned earlier that, pursuant to the s 556 of the Corporations Act, a liquidator has an entitlement to be paid remuneration. That entitlement is given a high priority in the order of distribution of company assets.

However, Pharmacy Depot, as a business, has not incurred the remuneration of the Liquidator (whether as provisional liquidator or liquidator), and is not under any legal obligation to pay the Liquidator which may be enforced. Therefore, remuneration claimed by the Liquidator as provisional liquidator and liquidator does not constitute “the reasonable business expenses of [Pharmacy Depot]” as is required by s 24(1)(c) of the Act.

There is a clear and well-recognised distinction between a liquidator’s remuneration and expenses properly incurred. In Kardiasmenos v Pioneer Management Pty Ltd [2010] NSWSC 683 at [39], Barrett J (as his Honour then was) stated:

Thus, as “the reward he receives for performing his function”, a liquidator’s remuneration is not incurred in the operation of a business conducted subject to his or her external administration, but as a consequence of the statutory regime of the Corporations Act, in particular s 60-5 of the IPS and s 556.

Section 556 of the Corporations Act, as earlier mentioned, concerns priority payments in the winding up of a company. That contrasts markedly to the limited circumstance wherein an allowance may be made out of restrained property, pursuant to s 24(1)(c), within the confiscation scheme of Ch 2 of the Act. The provisions of the Corporations Act and the Act, therefore, clearly deal with different subject matter. It follows that the Corporations Act operates cohesively with the Act. Thus, the phrase “deferred expenses” contained in s 556 of the Corporations Act does not factor into construing the meaning of “reasonable business expenses” contained in s 24(1)(c) of the Act.

Pharmacy Depot did not elaborate upon its submission that liquidator’s remuneration is comparable to the director’s pay and, therefore, similarly, the unpaid remuneration of the Liquidator constitutes an “expense” pursuant to s 24(1)(c) of the Act.

Pharmacy Depot’s submission was premised upon the similarity as between the roles of director and liquidator when they are perceived through the prism of company control.

Such a comparison underscores Pharmacy Depot’s observation that payment to a director, whom controls a company’s management and affairs, constituted an expense of the company. Consequently, Pharmacy Depot contended that a liquidator’s remuneration, too, constituted a company expense.

It is unnecessary to make a determination as to that submission given my earlier conclusions and the lack of development of Pharmacy Depot’s submission. However I note that, in my view, Pharmacy Depot’s analogy between liquidators and directors goes no further than merely observing that those roles share a common feature. That is, a liquidator and director both, in some sense, control the management and affairs of a company.

However, whilst the comparison highlights the commonality of “control”, it does not address key differences that exist between a liquidator and a director. One difference is the differing purpose of both roles. That is, a director controls the management and affairs of a company, for the benefit of its shareholders, while solvent. Conversely, a liquidator controls the management and affairs while the company is being wound up and has a duty to all the creditors.

Ultimately, it seems to me that the utility of Pharmacy Depot’s submission, with respect to the similarity between liquidators and directors, is nugatory.

Finally, whilst it is clear that, as mentioned earlier, corporations are captured by the expression “that person” for the purposes of s 24(1)(c) of the Act, the same cannot be said with certainty as to whether a company in liquidation is capable of constituting “that person”.

The parties agreed that s 24(1)(c) of the Act did extend to the operation of a business in liquidation. However, in light of my finding that the Liquidator’s remuneration is not a “reasonable business expense”, it is ultimately unnecessary to determine that question.

Ultimately, Pharmacy Depot has not discharged its onus of proving that the remuneration sought by the provisional liquidator and the Liquidator constituted, pursuant to s 24(1)(c) of the Act, the “reasonable business expenses of that person” (i.e. Pharmacy Depot). Accordingly, the Court’s discretion to make an allowance was not enlivened and the application, insofar as reliance is placed upon s 24(1)(c) of the Act by the first prayer for relief, the first alternate prayer for relief and the second alternate prayer for relief, should be dismissed.

Pharmacy Depot held cash in the sum of approximately $265,135.63 (as at 11 June 2019). That cash is not subject to any restraining order under the Act.

The Commissioner submitted that as an additional basis upon which the application ought be refused is that the Court would, pursuant to s 24(2)(d), take into account that if (which the Commissioner denied) any part of the claim made properly falls within s 24(1)(c) or (d) of the Act, that expense could be met out of unrestrained property.

Due to the conclusion reached, that, in my view, the Court’s discretion was not enlivened pursuant to ss 24(1)(c) or (d), it is unnecessary to make a determination as to that issue.

I note that the Liquidator, pursuant to s 545(1) of the Corporations Act, was never obliged, as contended by Pharmacy Depot, to incur expenses in relation to the winding up of Pharmacy Depot unless there was sufficient available property.

For the reasons detailed above, I have concluded that the amended motion should be dismissed.

The Commissioner sought that Pharmacy Depot be ordered to pay the Commissioner’s costs.

There is no apparent reason why costs should not follow the general rule: r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW). Hence, Pharmacy Depot should pay the Commissioner’s costs.

The Court orders: