William Timothy Cape v Robert George Maidment; Redarb Pty Limited (Receiver and Manager Appointed); Kerry John Breeze; Lawrence Victor Quigg and Serendipity Pty Limited [1993] ACTSC 54 (21 May 1993)

SUPREME COURT OF THE ACT

WILLIAM TIMOTHY CAPE v. ROBERT GEORGE MAIDMENT; REDARB PTY LIMITED (Receiver
and Manager Appointed); KERRY JOHN BREEZE; LAWRENCE VICTOR QUIGG and
SERENDIPITY PTY LIMITED
No. SC333 of 1989
Number of pages - 13
Estoppel - Companies

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Higgins J(1)

CATCHWORDS

Estoppel - Res judicata - Issue estoppel - Trustee company receivers and managers appointed - Objections to accounts prepared by receiver/manager - Objections referred to referee - Adoption of referee's report previously ordered by Court - Plaintiff estopped from raising objection to any transaction disclosed in the accounts or which he contends should have been disclosed in the accounts.

Companies - receivers and managers - correct remuneration - application of IPAA Scale.

Australian Insolvency Management Practice - Vol.1, 5-490, 4212-4213, 35-410, 21,672-3

Port of Melbourne Authority v Anshun Proprietary Limited [1981] HCA 45; (1981) 147 CLR 589

Chamberlain v Deputy Commissioner for Taxation [1988] HCA 21; (1987-88) 164 CLR 502

HEARING

CANBERRA, 21-22 December 1992; 15 April 1993
21:5:1993

Counsel for the Plaintiff: Mr M J Neil QC with

Mr T Johnstone

Instructing solicitors: Messrs Crossin Barker Gosling

Counsel for the Second

Defendant: Mr P Biscoe QC, with

Mr W B Loftus

Instructing solicitors: Messrs Gallens Crowley
Chamberlain

Counsel for the Fifth

Defendant: Mr B W Collins QC with

Mr C P Comans

Instructing solicitors: Messrs Sly and Weigall

ORDER

The court orders that:
The matter be remitted back to the Registrar to amend and allow the receivers' accounts in accordance with the findings and directions herein.

DECISION

HIGGINS J On 21 and 22 December 1992, I heard certain applications by the plaintiff. The major issue was whether the plaintiff was entitled to pursue certain objections to the accounts presented by the receiver/manager of the trust of which the plaintiff and fifth defendant are the sole beneficiaries. The second defendant is the trustee. Mr Robert John Yeomans is the receiver/manager of the trust. It is convenient, because of the various capacities in which the various parties are involved in these matters, to refer to them by their last names in the case of individuals, and by their first name in the case of corporations.

2. Cape seeks, in these proceedings, to raise certain objections to approval by the Registrar of the accounts. Save for the rate at which remuneration should be allowed to the receiver for the services of Mr Warwick Davis ("Davis"), those objections relate to matters allegedly wrongly included in, or excluded from, the accounts taken as between Cape and Serendipity, Maidment's company. Submissions concerning remuneration for Mr Davis were heard on 15 April 1993.

3. Mr Biscoe QC, for the receiver, and Mr Collins QC, for Serendipity/Maidment, contend that Cape should be precluded from pursuing the latter objections either on the grounds that they are res judicata or, at least, because, insofar as they are not the subject of express or implicit determination, Port of Melbourne Authority v Anshun Proprietary Limited [1981] HCA 45; (1981) 147 CLR 589, would preclude Cape from raising now any objection which could, and should, have been raised earlier.

4. The res judicata principle is referred to in Chamberlain v Deputy Commissioner for Taxation [1988] HCA 21; (1987-88) 164 CLR 502.

5. In this suit, Cape claimed an entitlement to have accounts taken as between himself and Serendipity/Maidment in respect of their entitlements to the Redarb trust.

6. The disposal of assets and taking of accounts has been a complex matter. The receiver has produced accounts. That was done, initially, pursuant to an order for the taking of accounts pronounced by Lockhart J on 14 December 1989. His Honour ordered that any objections to the accounts (then in draft form) be notified by 26 January 1990.

7. On 29 January 1990, Cape requested further details rather than specifically taking objections to the draft accounts. On 20 February 1990, time for objection was extended to 21 days following delivery of accounts produced by the receiver in final form.

8. On 8 March 1990, the receiver produced four volumes of accounts. Cape took issue with certain entries favouring Serendipity/Maidment.

9. On 10 April 1990, terms of settlement were entered into between the parties in this matter. They resolved some matters in issue, but did not finally resolve all issues as to the accounts.

10. The dispute came before Miles CJ on 14, 15 and 20 June 1990. During the course of that hearing, Cape was requested to produce a list of his objections to the accounts. It could not be suggested, at that stage, that he was lacking legal and accounting assistance to understand and scrutinize the report which had been produced by the receiver.

11. Cape stated, after reflection, that there could well be other objections, additional to those he had made in his affidavit of 16 May 1990. He indicated areas in which further enquiry might be necessary.

12. There were, then, negotiations between the parties. Those negotiations resulted in a consent order being made by Miles CJ on 27 June 1990.

13. Pursuant to the terms of that consent order, the orders of Lockhart J of 14 December 1989 were vacated. The further taking of accounts was referred to Sir Laurence Street, former Chief Justice of New South Wales, "for enquiry and report". Various directions were given to facilitate that enquiry.

14. The terms of reference for the enquiry were briefly stated. They were:

"... the quantification of unit holders' capital accounts in
respect of the Redarb Unit Trust, such appropriate quantification
to be determined after determining the validity or otherwise, or
proper extent, of the claims made by the Plaintiff in his
affidavit sworn 16 May 1990 and in his oral evidence on 14
and 15 June 1990."

15. It should be noted that the reference to "oral evidence" was designed to and had the effect of enabling Cape to bring forward, for Sir Laurence Street's consideration, any matter of objection not raised by his affidavit of 16 May 1990.

16. On 16 July 1990, Cape filed an affidavit detailing his further claims in relation to the accounts. Claims were raised in respect of matters totalling $1,244,091.00. There was an additional matter referred to. It was in relation to what has been referred to in these proceedings as the "CAM loan".

17. Between 3 September 1990 and 8 September 1990 proceedings concerning the accounts and the claims and objections of the parties were heard before Sir Laurence Street. During the hearing, Cape sought to raise another additional claim, calling for a "cash enquiry". He suggested that there were grounds to suspect that not all cash takings had been accounted for by Maidment. Hence, he said, there could be a significant omission from the accounts. Serendipity/Maidment objected and Sir Laurence declined to deal with that issue.

18. On 19 September 1990, the referee produced a report. The "cash enquiry" claim was raised, separately, by Cape on 10 October 1990. Those proceedings were heard before me and some directions were given with a view to enabling Cape to satisfy himself as to the cash takings reported.

19. At Cape's request, on 25 October 1990, there was a further hearing before the referee to consider objections to the initial referee's report. Some matters of objection were accepted by the referee. However, the referee expressly declined to re-adjust the reported allocation of losses for the financial years 1985/86 and 1986/87, although requested to do so by Cape.

20. Cape's contention was that they should not have been adjusted from 25:75 to 50:50. It had, however, been his contention that the profit for the year 1987/88 should have been 50:50 rather than 25:75 (Cape:Serendipity/Maidment). The referee was of the opinion that the 1985/86 and 1986/87 years should be adjusted similarly to the 1987/88 year and be 50:50 for each such year.

21. On 13 November 1990, a further report was produced by the referee. It reflected the acceptance of the matters of objection referred to above. To that report was attached a detailed "quantification of unit holders' accounts".

22. The matter then came back before Miles CJ. There was argument as to whether the report should be adopted as presented. Miles CJ, on 17 December 1990 ordered that the report, and the accounts as presented therein, be adopted. On 1 March 1991, his Honour further ordered that,

"The parties ... be precluded from raising any claim in these
proceedings inconsistent with the accounts taken by Sir Laurence
Street ..."

23. That ruling was, however, subject to one reservation, expressed in the following terms,

"This ruling does not dispose of any question raised by the
plaintiff's notice of motion dated the 13th day of February
1991 which is stood over to the 22nd day of March 1991 on
condition that within 14 days the plaintiff set out and
serve upon the defendants the points of claim whereby he
challenges any finding of the receiver contained in the
reports of accounts volumes 6 and 7."

24. Cape filed such an affidavit on 15 March 1991.

25. The matters raised by the notice of motion came on for hearing before Miles CJ on 22 March 1991. The notice of motion was then dismissed by consent. His Honour further ordered,

"... by consent that the Receiver is under no obligation to
make any further investigation or to take any other step in
relation to the accounts of the unit holders in the Redarb Unit
Trust with respect to the period prior to the 31st day of October
1990 in these proceedings ...".

26. On 2 March 1992, application was made to the Registrar for approval of accounts. Those accounts restated those approved by Miles CJ and added subsequent transactions including claims by the receiver for remuneration and for reimbursement of expenses. Objections were taken by Cape to certain matters referred to therein. Following exchanges between the parties clarifying the objections and answers thereto, some of them were on 28 September 1992, referred by the Registrar to a Judge for determination.

27. I heard evidence and argument thereon on 21 and 22 December 1992.

28. Given the history of the matter, as I have briefly reviewed it, it cannot be contended that any question relating to any transaction disclosed on the face of the accounts, the subject of report by Sir Laurence Street, may now be questioned with a view to some other result than so found being substituted. It is res judicata. In the absence of fraud, the result so determined and adopted by the Court must stand.

29. I am also persuaded that, in the case of any transaction or matter which Cape now contends should have been included in those accounts, it would be unconscionable now to permit Cape to raise such an issue. The principle affirmed in Port of Melbourne Authority v Anshun Proprietary Limited (supra), in my view, mandates that result.

30. I now turn to the referred objections.

1. Remuneration Rate for Messrs Aspen and Davis
31. The issue concerning Mr Aspen was not agitated before me. The parties have reached agreement. I formally dismiss that objection.

32. The rate of remuneration of Davis was challenged. Davis was, variously, employed directly or through a consulting arrangement with a company which received fees for his services. The appropriate charge to the Trust by the receiver, however, was on the Insolvency Practitioners Association of Australia ("IPAA") scale. The appropriateness of the charge made depends on Davis' status and the services he provided, at the relevant date, not on the remuneration he was paid by the receiver or by any consulting company to the receiver by which he was employed.

33. Davis was described variously as a "supervisor" or "manager". Those categories are defined in the scale by reference to an IPAA Schedule of Job Descriptions.

34. The qualifications applicable to various job descriptions are in general, designed to reflect the degree of insolvency experience made available to the task in question. I will set out the categories which are possibly applicable.

"Classification
Level of Insolvency Experience
Principal Appointee/Partners
The registered liquidator or his/her partner bringing special
skills to the insolvency task.
Managers
Normally 6 years. Answerable to the apointee (sic) but
otherwise responsible for all aspects of any administration.
Should be constantly alert to opportunities to meet clients'
needs and to improve the clients' future operation either by
revenue enhancement or by reducing costs and improving
efficiency.
Controls a number of staff.
Supervisors
4-6 years. PY complete. Will have had conduct of minor
administrations and experience in control of 1-3 staff. Assists
planning and control of medium to larger clients.
Seniors Grade 1
2-4 years. Professional year (or equivalent) would normally be
completed within this period. Assists planning and control of
small to medium sized jobs as well as performing some of the
more difficult work on larger jobs.
Seniors Grade 2
1-2 years. Professional year (or equivalent) would normally
commence during this period. Required to control the fieldwork
on small jobs and is responsible for assisting complete
fieldwork on medium to large jobs.
Intermediates Grade 1
0-2 years. Graduate with little or no professional experience.
Required to assist in day-to-day fieldwork under supervision of
more senior staff.
Intermediates Grade 2
0-1 years. Trainee undertaking a degree with an accountancy
major. Required to assist in day-to-day fieldwork under
supervision of more senior staff.
...
Clerks
Non-qualified but would have passed the HSC. Classification
will depend on experience, salary and complexity of work to be
conducted.
...
Juniors
HSC. Plans to undertake at least part time degree/diploma.
Required to assist in administration and day-to-day fieldwork
under supervision of more senior staff."

35. During 1989, Davis gained some insolvency experience. He was engaged on one assignment in July 1989 and then in relation to Redarb in early August 1989. He provided services as a consultant to Duesbury's being employed by Ritkit Pty Ltd as trustee for Octagon Management Services Trust.

36. He remained so employed until May 1990.

37. Duesburys was not his only consultancy in that time.

38. During the period June 1990-April 1991 he was employed by Duesburys as "Insolvency Manager".

39. I accept that the IPAA Schedule is a guide rather than an immutable constraint.

40. Notwithstanding his previous wide experience in business matters, Davis was, during 1989-90 relatively new to insolvency practice. Nevertheless, whilst he lacked a relevant tertiary qualification, I think the receiver would have been entitled to regard him, as a result of his prior experience and maturity, as being, for the first year of his engagement by Duesbury's as equivalent to a "Senior Grade 2", and commencing his "professional year". I take the term "professional year" to be a reference to the first year of insolvency practice undertaken by a person after academic qualifications are completed.

41. From July 1990 to July 1992, it seems to me that the receiver would have been entitled to regard Davis as a "Senior Grade 1". Given Davis' role and previous experience I consider he could have been regarded as a "Supervisor" as from July 1992.

42. From 1 July 1989, the recommended rate for a Senior Grade 2 was $69.00 per hour.

43. From July 1990, when Davis could be regarded as a Senior Grade 1, a rate of $80.00 per hour applied until 1 November 1990. The recommended rate was then raised to $107.00 for Sydney. No separate rate was struck for Canberra.

44. He remained an employee of Duesbury's until 10 May 1991. The rates were altered from 1 July 1991 to $114.00 for a Senior Grade 1. The sums shown, as from 11 May 1991, are for fees paid to Davis as a disbursement. He was, from then, an outside consultant.

45. I make no comment on whether, although paid $50.00 per hour from 11 May 1991 until 29 October 1991 and $60.00 per hour thereafter, Davis could have charged the receiver or the receiver have charged the Trust at a higher rate to reflect Davis' increased experience and status. It is enough to say that I am satisfied that the charges from 11 May 1991 are reasonable compared with the IPAA Scale.

46. I direct that the receiver's accounts be amended and allowed in accordance with these reasons.

2. Matters raised as per report of P.W. Fleming number 4, dated 8 August 1992.
47. I use below the reference numbering appearing in Mr Fleming's report.

(i) 3. "Sale deposit not accounted for"
48. It was suggested that the deposit paid for Lot 47 Fernleigh Park, land sold by the Redarb Trust, was omitted from the accounts. The receiver says it was banked on 16 November 1989. It is referred to in accounts, volume 1, par.7.8. This objection (or query) lacks any substance. I dismiss it.

(i) 4. Refund of vehicle insurance
49. It was suggested that the Mercedes, leased by Redarb and sold on 12 January 1990, had 10 months insurance on it when sold. No refund of insurance was shown on the accounts.

50. In fact the vehicle was sold complete with that insurance. If this objection or question was intended to suggest that the receiver was wrong to do so, then, in my opinion, that decision is no longer amenable to challenge. The sale of the Mercedes was in issue in proceedings taken before me by Cape against the receiver.

51. There is, accordingly, no error in the accounts. I dismiss this objection.

(i) 6. Alsai Pty Limited administration fee
52. The receiver did not collect the fees referred to. They are not, therefore, accidentally omitted from the accounts. The decision of the receiver not to collect these fees is not now open to challenge. The Alsai loan was an issue in the claim raised by Cape against the receiver and determined already by me. This related issue should have been raised then. It was not. I dismiss the objection.

(i) 8. Natwest loan
53. The accounts presented by the receiver referred to a debt to Natwest. It was paid out by Maidment during the 1983/84 year. The accounts give Maidment credit for doing so. It was referred to in the accounts dated 7 September 1990. It was item 11 in the matters referred to the referee for report. Cape withdrew his objection to it and the referee made no amendment to references to it in the accounts as a result of that concession.

54. In my view, that issue is res judicata. Even if not, it would be unconscionable now to permit Cape to raise that issue. I dismiss this objection.

(i) 9. CAM Investments Pty Limited loan
55. On 30 March 1990, the receiver paid $40,000.00 shown as a loan from the above company. Cape suggested that the loan was inadequately evidenced and that the receiver should not have made the payment to the company.

56. The payment was itemised in the accounts circulated on 23 January 1990. An objection to it was raised by Cape on 16 July 1990. It was one of the issues referred to Sir Laurence Street. The referee reported that the payment had been correctly made. In my opinion, that ends the matter. The issue became res judicata when the referee's report was accepted. In any event, it should not be raised now. I dismiss that objection.

(i) 10. Melrose Investments - costs paid by Redarb
57. The receiver stated that the costs referred to were paid because Melrose was a wholly owned subsidiary of Redarb and needed the funds.

58. The decision to pay these expenses, there being no material error (save as to a description of one of the payments) is not now open to challenge. I dismiss that objection.

(i) 11. Payments without supporting documentation
59. A number of such payments were identified by Cape. However, there is no doubt they were made.

60. The receiver has provided to Cape a detailed response explaining each of these eight payments so identified. I will not repeat those explanations.

61. It suffices to say that the payments seem to have been correctly recorded. The decision to make them is not now open to challenge for the reasons I have already adverted to. I dismiss this objection.

(iv) Melrose Investments Pty Ltd - Sale of Woden Property
62. Cape raised a query as to what had happened to outstanding rents unpaid as at the date of sale. The receiver provided an explanation in his response of 18 September 1992. That explanation is apparently satisfactory. It has not been factually challenged. Accordingly, no challenge is now open save as to the original decision to accept the sums paid in discharge of any claim for unpaid rents as therein recorded. No basis for any such challenge has been shown. In any event, it would not now be open to Cape to do so. Insofar as this was an objection to the accounts rather than a mere request for information, I dismiss it.

(v) Car payments
63. This referred to a sum of $30,000.00 shown as a credit to Maidment in respect of the lease of a Porsche. Cape contended it should have been treated, not as a loan by Maidment to be repaid to him, but as a payment by him towards the car.

64. The entry in question appeared in the accounts approved by Sir Laurence Street as "Deposit by RGM". It is shown as repaid on 31 March 1990, being noted as "Repayment to RGM by REC".

65. The issue as to whether Maidment was entitled to be repaid this "Deposit" was raised by Cape in his affidavit of 2 November 1990 (pars. 12-16). That dispute has been decided. It is not open to Cape now to seek to re-litigate that issue before the Registrar. I dismiss this objection.

(vi) Income distribution
66. This is the contention that losses for the 1986 and 1987 financial years to which I have previously referred should be distributed 25% to Cape and 75% to Maidment.

67. Lockhart J, as early as 8 August 1989, found that, save for the 1985 year, all years in question were to be split equally.

68. Even if Sir Laurence Street had been in error in refusing to allow Cape to raise this issue before him on 25 October 1990, that issue could have been raised before Miles CJ. It is, in any event, a matter covered, at least implicitly, by his Honour's order of 1 March 1991.

69. It follows that Cape cannot re-litigate that question before the Registrar. I dismiss that objection.

(viii) Imbalance re in specie distribution
70. No issue was raised as to this matter. It was decided by the Registrar on 23 November 1992.

(ix) Costs in regard to removal of tractor
71. This was a claim for payment by Cape for moving a tractor, allegedly loaned by him to Redarb for use in connection with the Fernleigh Park project. The receiver rejected that claim.

72. The claim was made on 14 May 1992 in a letter from Cape's solicitors. It related to the retaking of possession of the tractor by Cape in September/October 1991. There was no agreement by the receiver to pay the cost of removal of the tractor from Queanbeyan to Moss Vale. There is no material from which it is possible to conclude that the Redarb Trust should pay for such an expense, even accepting the facts to be as asserted in the claim.

73. However, it is not a matter Cape is estopped from raising before the Registrar. I do note, however, that the matter is capable of resolution by agreement as foreshadowed in the hearing before me. Only $300.00 is involved.

(x) Hold-up Money
74. On 27 August 1987, Cape was held up by armed bandits. They demanded money from him. It seems they were after Cape's book-making float. Cape called for $15,000.00 of Redarb's money to be brought to him to satisfy the bandits' demands. That was done. Cape was holding $50,000.00 of Redarb's funds in his safe at the time. His actions, probably, prevented those funds falling into the bandits' hands.

75. He argued, not unreasonably, that it was Redarb's money that was stolen; that he was protecting Redarb's property. However, Redarb's insurer declined to accept that characterisation of the transaction. It characterised the matter as a theft of Cape's money, even if it had been advanced to him by Redarb.

76. It was arguable that the transaction could be characterised as an advance of money from Redarb to Cape, albeit to satisfy the unlawful demands of the hold-up men. It was also arguable that it was Redarb's money extorted from Cape by the armed bandits.

77. The accounts, as from 12 June 1990, have reflected the transaction as if it was of the former character. It was open to Cape at all relevant times to argue that it should have been shown in the accounts as if it was of the latter character. It had also been open to the receiver to challenge the insurer's opinion of the transaction and gain indemnity for Redarb and for Cape to press for the receiver to do that.

78. Given the history of the matter, I am of the opinion that it is not now open to Cape to seek to object to that item as it has been shown in the accounts. The objection must be dismissed.

(xi) Receiver's vouchers
79. This was a query. The receiver has answered it in his statement of 18 September 1992.

80. That explanation refers to a cheque which has been replaced. That explanation was not challenged before me.

81. The objection is dismissed insofar as has been persisted in.

(xii) Cash float
82. The "cash float" was, effectively, Videoville's petty cash and change holding in respect of the Erindale outlet. It was sold with the business and allowed for on settlement, as the receiver explained in his statement of 18 September 1992. That explanation is not challenged factually. Accordingly, there is no substance in the objection, even if it was now open to raise it. In any event, in my view, it is not now open to Cape to do so. The absence of such an entry from the accounts has always been apparent. This objection is also dismissed.

(xiii) Promotion expense
83. An explanation for this item was requested. It was answered by the receiver in his statement of 18 September 1992. There does not seem to be any claim pursued about it. In any event, the objection, if it be one, clearly has no substance, although it is not clear whether it would now be barred as res judicata or on the Anshun principle. It would be excluded for one reason or the other.

84. I remit the matter back to the Registrar to continue the passing of accounts in accordance with these reasons.

85. I will hear the parties as to costs.