Re William Timothy Cape v Redarb Pty Limited (Receiver and Manager Appointed); Robert John Yeomans; Robert George Maidment and Serendipity Investments Pty Ltd [1992] FCA 31; (1992) 6 Ascr 736 (6 February 1992)

FEDERAL COURT OF AUSTRALIA

Re: WILLIAM TIMOTHY CAPE
And: REDARB PTY. LIMITED (Receiver and Manager Appointed); ROBERT JOHN
YEOMANS; ROBERT GEORGE MAIDMENT and SERENDIPITY INVESTMENTS PTY. LTD.
No. ACT G25 of 1991
FED No. 39

[1992] FCA 31; (1992) 6 ASCR 736

COURT

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIAN DISTRICT REGISTRY
GENERAL DIVISION

HEARING

CANBERRA
6:2:1992 Gallop(1), Ryan(1) and Von Doussa(1) JJ.

Counsel for the applicant: Mr M.J. Neil, QC and Mr T. Johnstone

Solicitors for the applicant: Crossin Power Haslem

Counsel for the first and
second respondents: Mr P. Biscoe

Solicitors for the first and

second respondents: Gallens Crowley and Chamberlain

Counsel for the third and

fourth respondents: Mr M. Coper

Solicitors for the third and

fourth respondents: Sly and Weigall

ORDER

The order for costs provisionally made in paragraph 4 of the order of this Court made on 18 November 1991 is vacated.

In lieu thereof it is ordered that the costs of the first and second respondents be taxed on an indemnity basis and paid out of the assets of the first respondent under the control of the second respondent; and that the costs of the other parties to the appeal be taxed and paid out of the assets of the first respondent under the control ofthe second respondent at the end of the receivership and management subject to there being sufficient assets remaining under the control of the second respondent, and if such assets be insufficient, then on a pro rata basis.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

On 15 November 1991 the Court delivered judgment on this appeal. The Court varied orders made by Miles C.J. on 18 April 1991 in certain respects and otherwise dismissed the appeal. In its reasons for judgment the Court expressed the opinion, without the benefit of argument on the question, that the appropriate order was for the costs of all parties to be taxed and paid out of the assets under the control of the Receiver. However, liberty was reserved to any party, if so advised, to make written submissions contending for some further or other order as to costs. Submissions have been made by the applicant, by the first and second respondents, and by the third and fourth respondents, respectively. The parties have also filed supplementary submissions in reply to the primary submissions of the other parties.

2. The applicant contends that the Receiver should pay the applicant's costs of the notice of motion before Miles C.J. and of the appeal; that each of the respondents should pay their own costs of the notice of motion and of the appeal; and that the second respondent, the Receiver, should have no right of indemnity out of the trust assets for any of these costs.

3. The first and second respondents contend that in the particular circumstances of the administration of the receivership of the first respondent the orders for costs should be that:

(a) the costs on an indemnity basis of the Receiver be part of the
expenses of the receivership and paid out of the assets under the
control of the Receiver; and
(b) the costs of the other parties be taxed and paid out of the assets
under the control of the Receiver at the end of the receivership
subject to there being sufficient assets under the Receiver's
control and, if such assets be insufficient, then on a pro rata
basis.

4. The third and fourth respondents contend that the applicant should pay the costs of each of the respondents of the appeal. In the alternative it is contended that the respondents' costs should be paid out of the applicant's entitlement to the trust assets and should be borne by the respondents only after the applicant's entitlement to the trust assets is exhausted. In the further alternative, if the costs of all parties are to be paid out of the trust assets, the third and fourth respondents contend that the costs of the applicant and of the third and fourth respondents should be paid out of their respective entitlements rather than out of the corpus of the assets.

5. The respondents' contentions are confined to the costs of the appeal. Miles C.J. did not deal with the question of costs of the notice of motion when he delivered judgment on 18 April 1991. So far as we are aware, no party has sought to have those costs determined by the Chief Justice. This is understandable in view of the pending appeal. The history of the procedural steps that occurred leading up to the hearing before the Chief Justice on 18 April 1991 is not before us. Further, we did not invite submissions as to the orders for costs which should be made at first instance, and we have received submissions on that question only from the applicant. In these circumstances we consider we should confine our attention to orders for the costs of the appeal. It will be for one or other of the parties to bring the matter on for hearing before Miles C.J. to obtain an order for costs of the first instance proceedings.

6. The applicant contends that he should recover his costs of the appeal from the Receiver on the ground that he was substantially successful on the appeal in the sense that the orders as varied by the Full Court significantly improved the applicant's position. It is submitted that the effect of the orders of Miles C.J. was that (a) the Receiver had the right under the general law to withdraw and hold sums for his proper remuneration as and when he chose without prior authorisation of the Court; and (b) could fix the sums so withdrawn according to the scale of rates prescribed by the Insolvency Practitioners' Association of Australia (the "IPA rates"). In contrast, the effect of the orders of the Full Court is that the Receiver had no right under the general law to withdraw or withhold sums for his remuneration without authorisation of the Court, and that the rate of remuneration is no longer "set in concrete" at the IPA rates. The applicant takes issue with a statement appearing at p 34 of the reasons for judgment of this Court delivered on 15 November 1991 that the orders proposed by the Full Court would produce "substantially the same result as the order of Miles C.J.".

7. It is true that the Full Court was of opinion that Miles C.J. had fallen into error of law in concluding that a Receiver was entitled to draw his remuneration from time to time without prior order of the Court. However, the Court observed that had an application been made in respect of the Receiver's remuneration at the commencement of the receivership it is likely that the Court would have ordered that the Receiver be entitled to appropriate moneys on a monthly basis for his fees. The Court held that in the circumstances of the case it was appropriate to authorise retrospectively the appropriation of trust moneys which the Receiver had made each month through the administration of the receivership on account of his fees. The retrospective authorisation of the Receiver's action by this Court had the practical effect that, in this respect, the orders of the Full Court did produce substantially the same result as the orders of Miles C.J.

8. As to the rate of remuneration which the Receiver may charge, it is contended on the applicant's behalf that under the terms of the order as varied by this Court, it is now open to the applicant to seek to vary the rate of remuneration by agreement or application to the Supreme Court. The applicant's submission implies that it is open to the applicant to seek to re-agitate the rate or rates which should apply from the commencement of the receivership, but in particular for the period from 1 January 1991 to the termination of the receivership. This submission is premised on a misunderstanding of the reasons for judgment and order of this Court.

9. Pursuant to the orders made by Miles C.J., it was directed that the proper remuneration of the Receiver "was and is to be fixed at the rates prescribed by the Insolvency Practitioners' Association of Australia". Under that order the IPA rates would apply from the commencement of the receivership up to the date of the order, 18 April 1991, and would continue to apply unless and until otherwise ordered.

10. This Court varied the order of Miles C.J. by substituting, relevantly, the following order:

"That the remuneration of the Receiver and Manager of Redarb Pty.
Limited and Redarb Unit Trust be calculated as from 1st August
1989 until further order, or until otherwise agreed between the
parties and the Receiver and Manager, in accordance with the scale
of rates prescribed by the Insolvency Practitioners' Association
of Australia."

It will be noted that the order of the Full Court operates "until further order or until otherwise agreed...". The order finally fixes the remuneration of the Receiver from the commencement of the receivership "until" by further order or agreement a new rate is put in place. Neither the orders of Miles C.J., nor the orders as varied by this Court, would prevent any party from applying to vary the rate of remuneration prospectively. Any further order of the Court would operate prospectively from, at the earliest, the date of the application to vary the present order. Presumably any agreement reached between the parties would operate prospectively from the date of the agreement. The effect of the order of this Court is not to permit the applicant to again argue the Receiver's rates of remuneration for work already performed. The substantial ground of the applicant's application for costs against the Receiver therefore fails.

11. In the reasons for judgment delivered on 15 November 1991 we expressed the view that it was unfortunate that in the early orders of the Supreme Court directions were not given as to the passing of accounts and the making of drawings on account of remuneration by the Receiver. We pointed out that it was not the Receiver who took out those orders, and we expressed the opinion that he should not be criticised for the shortcomings. At any time after the Receiver was appointed, either the applicant or the third and fourth respondents could have applied for directions as to accounts and the remuneration of the Receiver. They did not do so. Finally, the Receiver himself applied to the Court for directions to enable the receivership to be completed in accordance with law, and in the meantime he had periodically filed accounts of receipts and payments. In the peculiar circumstances of this receivership we do not think that the Receiver should be deprived of any part of his proper remuneration on the ground that he failed to obtain prior authorisation from the Court to make periodic deductions on account of his fees. In our opinion the Receiver is entitled to be paid on an indemnity basis in respect of his costs of the appeal from the assets of the first respondent under his control.

12. The submission of the third and fourth respondents does not dispute that the Receiver is entitled to recover his costs on an indemnity basis in the first instance from the assets of the first respondent. However, the third and fourth respondents contend that the applicant should be ordered to pay not only their costs but to indemnify the first respondent against the Receiver's costs. This contention is made on the ground that the applicant in substance lost the appeal. In a practical sense it can be argued that as the order of this Court has substantially the same effect as the orders of Miles C.J., that the applicant failed on the appeal. However, there was a substantial point of law involved in the appeal, and on that point of law the applicant succeeded. For this reason we do not think the applicant should be ordered to pay the costs of any other party. Whether the applicant should receive the benefit of an order that his own costs be paid out of the assets of the receivership is a borderline question. Not without some hesitation we have reached the conclusion that such an order should be made. The point of law on which he succeeded before this Court was central to the orders made by Miles C.J. We do not think he acted unreasonably in bringing the appeal. Even though the decision on the point of law in his favour did not alter the practical effect of the orders of Miles C.J. we think the point of law was one of sufficient importance in the administration of the receivership to justify an order for costs out of the assets of the receivership in the applicant's favour, subject however to there being sufficient assets to meet the order.

13. The submission from the first and second respondents seeks a variation of the order for costs provisionally made on 15 November 1991 as it is presently anticipated that the assets of the first respondent still held by the Receiver may not be sufficient to cover outstanding administration costs, including legal costs. In these circumstances it is appropriate that the order provisionally made be varied in the manner contended for by the first and second respondents. Subject to this variation, we remain of the opinion that the appropriate order is for the costs of all parties to be taxed and paid out of the assets under the control of the Receiver.

14. For these reasons, the order for costs provisionally made in para.4 of the order of this Court made on 18 November 1991 is vacated, and in lieu thereof it is ordered that the costs of the first and second respondents be taxed on an indemnity basis and paid out of the assets of the first respondent under the control of the second respondent; and that the costs of the other parties to the appeal be taxed and paid out of the assets of the first respondent under the control of the second respondent at the end of the receivership and management subject to there being sufficient assets remaining under the control of the second respondent, and if such assets be insufficient, then on a pro rata basis.