Porter v Miller Street Pty Ltd [2008] FCAFC 77 (14 May 2008)

CORPORATIONS – winding up – company acting solely as trustee – appointment of new trustee – duties of liquidator in relation to trust assets – assets encumbered by secured loans – liquidator’s refusal to transfer assets to new trustee without protection against claims from creditors and in respect of his costs and expenses – whether unreasonable conduct by liquidator.

TRUSTS – equitable compensation for breach of duty by liquidator in winding up trustee company – loss of rent due to liquidator’s failure to seek new tenant of premises – penalty interest payable to company consequent upon liquidator’s failure to transfer encumbered property to new trustee – whether liquidator personally liable.

TRUSTS – trustee company wound up – liquidator appointed – new trustee appointed – company remaining registered as proprietor of trust land – whether liquidator’s obligations in respect of trust property terminates on being advised of appointment of new trustee.

Corporations Act 2001 (Cth)

Re Crest Realty Pty Ltd (In Liq) and the Companies Act (1977) 1 NSWLR 664 cited
Re GB Nathan & Co Pty Ltd (In Liq) (1991) 24 NSWLR 674 cited
Irvine v Australian Sharetrading and Underwriting Ltd (in liq) [1996] 22 ACSR 765 cited
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 cited

RICHARD JAMES PORTER AS OFFICIAL LIQUIDATOR OF TAYCORP THREE PTY LIMITED (IN LIQUIDATION) (ACN 071 753 734) v MILLER STREET PTY LIMITED (AS TRUSTEE FOR THE TAYLES DISCRETIONARY TRUST NO 3) (ACN 113 155 178)

VID 1193 OF 2007

SUNDBERG, JACOBSON AND GORDON JJ
14 MAY 2008
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1193 OF 2007

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

RICHARD JAMES PORTER AS OFFICIAL LIQUIDATOR OF TAYCORP THREE PTY LIMITED (IN LIQUIDATION) (ACN 071 753 734)
Appellant

AND:

MILLER STREET PTY LIMITED (AS TRUSTEE FOR THE TAYLES DISCRETIONARY TRUST NO 3) (ACN 113 155 178)
Respondent

JUDGES:	SUNDBERG, JACOBSON AND GORDON JJ
DATE OF ORDER:	14 MAY 2008
WHERE MADE:	MELBOURNE

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1193 OF 2007

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

RICHARD JAMES PORTER AS OFFICIAL LIQUIDATOR OF TAYCORP THREE PTY LIMITED (IN LIQUIDATION) (ACN 071 753 734)
Appellant

AND:

MILLER STREET PTY LIMITED (AS TRUSTEE FOR THE TAYLES DISCRETIONARY TRUST NO 3) (ACN 113 155 178)
Respondent

JUDGES:	SUNDBERG, JACOBSON AND GORDON JJ
DATE:	14 MAY 2008
PLACE:	MELBOURNE

1 In August 2005 a company known as Taycorp Three Pty Limited ("Taycorp") was the trustee of the Tayles Discretionary Trust No 3 ("the Trust"). The Trust was the beneficial owner of two valuable strata title floors of a commercial building at North Sydney ("the Trust property"). Taycorp was the registered proprietor of the Trust property.

2 The Trust had a substantial surplus of assets over liabilities. The Trust property was worth in the order of $5m and there were very few creditors. The principal creditor was the Commonwealth Bank of Australia ("the CBA") which held a mortgage over the Trust property to secure an advance of $1.5 million.

3 Notwithstanding the healthy balance sheet position of the Trust, Taycorp was wound up by an order of the Court on 27 August 2004 for failure to pay a debt of approximately $69,000 for land tax due to the Chief Commissioner of State Revenue (NSW). Mr Richard James Porter was appointed as liquidator of Taycorp.

4 The essential question which arises on this appeal is whether the primary judge (Finkelstein J) erred in finding that the liquidator failed in his duty to take reasonable steps to protect the Trust property.

5 The parties to the appeal do not dispute the principle of law stated in cases such as
Re Crest Realty Pty Ltd (In Liq) and the Companies Act (1977) 1 NSWLR 664 at 672 (Crest Realty) and Re GB Nathan & Co Pty Ltd (In Liq) (1991) 24 NSWLR 674 at 688 (Nathan). The principle is that the liquidator has a duty to act in a reasonable way, though what steps this will involve in any particular case depends upon all the circumstances existing at the relevant time.

6 The primary judge found that the liquidator had failed in his duty because of what he described as "inordinate and inexcusable delay" in finalising the liquidation: [2007] FCA 1830 at [19].

7 The plaintiff, Miller Street Pty Ltd, was appointed as new trustee of the Trust on 28 February 2005. Miller Street claimed that the Trust suffered two heads of loss arising from the liquidator’s breach of duty. The first was "penalty" interest that was paid on the loan to the CBA. This was said to have been caused by the failure of the liquidator to transfer the title of the Trust property to Miller Street as the new trustee.

8 The second head of loss was a claim for loss of rental arising from the liquidator’s failure to take steps to appoint a real estate agent to arrange the reletting of one of the floors of the Trust property. The lease of the floor was due to expire in June 2005. The liquidator did nothing to appoint an agent even though the liquidator remained in office until well after the expiry of the lease. Ultimately, Mr Tayles, the sole director of Taycorp and Miller Street approached an agent in May 2005. The agent secured tenants for the floor with two leases commencing on 15 September 2005 and 31 October 2005.

9 The primary judge dismissed the claim for loss arising from the payment of penalty interest. This was because his Honour found at [19] that the liquidator’s delay did not cause any loss to the Trust. The effect of his Honour’s finding was that the delay in rearranging the loan securities with the CBA was attributable to the actions of Mr Tayles and the CBA. This came about because the CBA required, inter alia, financial information from Mr Tayles which was not supplied in a timely fashion.

10 However, the primary judge found at [25]-[26] that the liquidator’s failure to perform his duty to retain a real estate agent in a timely way resulted in a loss to the Trust of two months’ rent. His Honour did not make a finding of the point of time at which the liquidator should have retained an agent. His Honour’s critical finding was:-

The context in which his Honour made this finding shows that "well before 19 May 2005" means "January 2005".

11 The liquidator appeals against the primary judge’s finding that he was liable to the Trust for the loss of rent. The substance of the argument of Senior Counsel for the liquidator is that, upon notification from Miller Street on 1 March 2005 that it had been appointed as new trustee, the liquidator was absolved from any further duty to seek to obtain a tenant.

12 Miller Street cross appeals against the finding of the primary judge that the liquidator was not liable for the penalty interest.

13 The gravamen of Miller Street’s argument is that the liquidator acted unreasonably in rejecting an offer from Miller Street in March 2005 proposing terms and conditions for the termination of the winding up of Taycorp.

14 The Trust was established by a trust deed dated 12 December 1995. The trust deed conferred a power upon the appointor to remove the trustee and appoint a new trustee in its place. Ms Sandra Lacey Daly was the appointor. (See Finkelstein J at [4]).

15 On or about 5 April 2004, the Commissioner for State Revenue issued a statutory demand to Taycorp under the Corporations Act 2001 (Cth) ("the Corporations Act") for
non-payment of land tax and other charges. The amount of the demand was $69,132.13.

16 As we have said above, on 27 August 2004 Taycorp was wound up by an order of the Court for failure to pay the amount that was the subject of the demand.

17 Less than one week later, on 1 September 2004, Mr Tayles paid the amount of the demand to the Commissioner.

18 From about that time Mr Tayles informed the liquidator that he intended to make an application to the Court to terminate the winding up on the ground that Taycorp was solvent. However, no such application was ever made. (Finkelstein J at [13]).

19 On 17 September 2004 the liquidator prepared a report to the petitioning creditor. The report stated that the liquidator had been informed by Mr Tayles that Taycorp was the trustee of the Trust. The report referred to Mr Tayles’ stated intention to have the winding up terminated, but the liquidator noted that a difficulty arose from the failure of Taycorp to produce its books and records.

20 Indeed, as the primary judge observed at [13], most of the books and records of Taycorp were never handed over, apparently because they were said to have been lost.

21 The liquidator’s report of 17 September 2004 set out the asset position of Taycorp. It recorded the value of the Trust property as $6m. It also recorded Taycorp’s liabilities, which were shown as $1.5m owing to the CBA and approximately $200,000 to other creditors who were unsecured. This left a surplus of over $4.3 million.

22 At about that time, that is to say September 2004, the liquidator was notified by the Australian Taxation Office that income tax returns for Taycorp for the period 1996 to 2004 had not been lodged and that business activity statements for the period from 1 July 2000 to the date of liquidation were outstanding. As the liquidator observed in his affidavit, Taycorp had never lodged a tax return or a business activity statement.

23 On 16 February 2005 the CBA sent to the liquidator a copy of a letter of 13 January 2005 from the CBA to Mr Tayles. The letter expressed disappointment in Mr Tayles’ continuing failure to provide information to the CBA. The letter stated that "as a last measure" the CBA was prepared to consider an application from Mr Tayles’ companies to restructure their loan facilities. The conditions included the retirement of the liquidator and the provision of certain financial information by Mr Tayles.

24 On 1 March 2005 Miller Street wrote to the liquidator stating that it had been appointed as the new trustee of the Trust. A copy of the minute of exercise of the power of appointment signed by Ms Daly was attached. The minute was dated 28 February 2005.

25 The letter of 1 March 2005 went on to say that Mr Tayles would be in touch with the liquidator regarding the execution of a transfer of the Trust property from Taycorp to Miller Street.

26 In the last paragraph of the letter of 1 March 2005, Mr Tayles asserted that Taycorp ceased to be the trustee of the Trust on 27 August 2004, that is to say, the date of the winding up order.

27 The liquidator replied on 2 March 2005. He stated that he would be seeking legal advice about the ability to appoint Miller Street as trustee of the Trust. He also pointed out that Mr Tayles had failed to comply with his statutory obligations to provide to the liquidator a report as to affairs, the books and records of Taycorp and financial statements for that company.

28 The liquidator’s letter of 2 March 2005 attached a summary of receipts and payments which showed that the liquidator was holding $240,213 comprised largely of rental payments received on the Trust property.

29 On 8 March 2005 Mr Tayles sent a report as to the affairs of Taycorp to the liquidator. There is some evidence to suggest that Mr Tayles had provided the report at an earlier date but, if he did, Mr Tayles did not say so in his letter of 8 March 2005.

30 Also on 8 March 2005, the barrister then acting for Mr Tayles sent an email to the liquidator setting out a proposal on behalf of Miller Street. The proposal contained terms and conditions for the execution by the liquidator of a transfer of the Trust property to Miller Street. The principal condition proposed in the email was that the liquidator retain in his trust account an amount of "say $100,000" to protect the liquidator’s right of indemnity.

31 The email of 8 March 2005 noted that the CBA was charging penalty interest rates on the loan to the Trust.

32 The proposal contained in the email was not accepted by the liquidator. There was continuing correspondence between the parties for many months. No mention was made of the impending vacancy of one of the floors of the Trust property, on which the lease to the existing tenant was due to expire in mid-June 2005.

33 On 5 May 2005 Mr Tayles approached a real estate agent to find a tenant of that floor. The primary judge observed at [24] that Mr Tayles did not have authority to do so. This was because the liquidator remained in office and title remained in the name of Taycorp. Nevertheless, on 19 May 2005, Mr Tayles retained a real estate agent.

34 During May 2005 Mr Tayles’ barrister provided copy minutes and other information to the liquidator in order to confirm that Taycorp held the properties on trust. At about the same time, that is May 2005, the liquidator seems to have been provided with the trust deed. (Finkelstein J at [23]).

35 On 2 June 2005 the liquidator’s solicitor put a proposal to Mr Tayles’ barrister for the finalisation of the liquidation, including the transfer of the Trust property to Miller Street.

36 Mr Tayles’ barrister replied to the proposal on 7 June 2005. He agreed with some of the proposed terms, but there was continuing dispute as to the conditions of the indemnity sought by the liquidator.

37 It was not until 18 August 2005 that the CBA agreed to "restructure" Mr Tayles’ loans. (Finkelstein J at [10]). The restructure was not confined to the advance of $1.5 million to the Trust. It included an advance of $975,000 to another of Mr Tayles’ companies and provided for an additional cash contribution by Mr Tayles.

38 At the time when the CBA agreed to the extension of the loans to Mr Tayles’ companies, Miller Street and the liquidator were still in dispute as to the terms for the finalisation of the winding up of Taycorp.

39 On 31 August 2005, Miller Street filed an originating process in the Court seeking, inter alia, an order that the liquidator execute forms of transfer of the Trust property on condition that Miller Street indemnify the liquidator out of the assets of the Trust for all claims properly made against the liquidator "as the former trustee of the Trust".

40 The originating process also sought an order that the liquidator pay to Miller Street the amount of any loss to the Trust caused by the liquidator’s conduct. This was the claim for equitable damages or compensation for the two heads of loss that are the subject of the appeal.

41 The matter came before the Court on 15 September 2005 when an order was made permitting Mr Tayles to execute a transfer of the Trust property on behalf of Taycorp. However, there was a continuing dispute between the parties as to the terms of a bank guarantee to be given by Miller Street to cover the liquidator’s costs and expenses and to meet any outstanding liabilities of Taycorp. (Finkelstein J at [15]).

42 The matter came back before the primary judge on 13 December 2005. His Honour made orders approving the transfer of the Trust property to Miller Street upon that company undertaking to provide to the liquidator an unconditional bank guarantee for the sum of $225,000. (Finkelstein J at [16]).

43 The claim for equitable damages or compensation came before the primary judge on 10 and 11 September 2007. His Honour gave judgment on 23 November 2007.
His Honour’s reasons for judgment also dealt with a claim, apparently made orally during the hearing, that the liquidator’s failure to protect the trust property should deprive him of his entitlement to costs and expenses of the liquidation. His Honour, at [27], rejected that claim.

44 In a winding up, the duty of the liquidator is to identify the assets of the company, and in that process to ascertain whether particular assets under the control of the company are beneficially owned by the company or by others: Nathan at 688. The liquidator must do all "other things as are necessary for the winding up of the affairs of the company and distributing its property": s 477(2)(m) of the Corporations Act.

45 In fulfilling those tasks, the liquidator cannot disregard the fact that the company holds property in trust for others. And to the extent that the company does hold property in trust for others, the liquidator must "act in a responsible way in the administration of the trust in the name of the company": Crest Realty at 672. As we have said, what the duty to "act in a responsible way" will involve, and what degree of "administration" of the trust will be necessary, depends upon the particular circumstances: Re Crest Realty at 672.

46 As McLelland J said in Nathan at 688, in some cases there may need to be an application to the court for the appointment of a new trustee or an application for the appointment of a receiver and manager of the trust assets. In other cases, where for example, the company holds property as bare trustee for other persons, there may be no reason why the liquidator should not cause the company to comply with any demand by the beneficial owners to transfer the assets to them, thus giving effect to, and terminating, the trusts. Each of these steps (which are by no means exhaustive) is a step taken by the liquidator in the "winding up the affairs of the company" for the purpose of divesting from the company the trust assets and any continuing obligations in relation to them.

47 From the time of his appointment as liquidator on 27 August 2004, Taycorp remained the registered proprietor of the Trust property, properties which the liquidator knew were not assets beneficially owned by Taycorp. In addition, the liquidator knew that the lease of one of the properties (level 4) was due to expire on 15 June 2005. However, although the liquidator secured payment to him of at least part of the rent from both properties, he took no step to find a tenant for level 4. It was not until 5 May 2005 that Mr Tayles approached an agent to find a tenant. That agent leased level 4 in two parts, the first lease commenced on 15 September 2005 and the other on 31 October 2005. As a result, the Trust did not derive rent for level 4 from 15 June 2005 until the commencement of those leases. A real estate agent who gave evidence for Miller Street said that if she had been retained in January 2005, some 4 months earlier, there was an extremely good chance that a new tenant would have taken possession on 15 June 2005.

48 The liquidator contended he should not be held personally liable to make good the loss of rent to the Trust for a period of two months because when Mr Tayles informed him on 1 March 2005 that a new trustee had been appointed with effect from 28 February 2005, his duties in respect of the Trust property came to an end.

49 That contention proceeded on a misconception of the duties of the liquidator in the circumstances. Not having divested Taycorp of its legal title to the Trust property, the liquidator was obliged to preserve and protect that property: Irvine v Australian Sharetrading and Underwriting Ltd (in liq) [1996] 22 ACSR 765 at 783. This he did not do.

50 The fact that the liquidator received notification in March of the replacement of Taycorp as trustee with effect from 28 February 2005 does not absolve the liquidator of his obligation to preserve and protect the Trust property. As noted earlier, the critical finding of the trial judge was that if an agent had been retained in January 2005, there was an extremely good chance that there would have been no loss of rent. And in January 2005, the company remained trustee of the Trust property.

51 In any event, even after receiving notification that the trustee had been replaced, Taycorp remained the registered proprietor of the Trust property. The liquidator’s contention that he bore "no responsibilities" in relation to Trust property at and after that date is erroneous. So long as Taycorp remained legal owner of the Trust property, the liquidator was bound to preserve and protect the Trust property by taking the step which Mr Tayles ultimately took. Such a step, if it had incurred a cost or expense, would have been a cost or expense in the liquidation recoverable from the assets under administration.

53 Miller Street’s second head of loss is the difference between the normal interest payable on the CBA loan and the default interest it had charged between 1 March 2005 and April 2006. It amounted to $190,396.02. The basis of the claim is that the liquidator had acted unreasonably in refusing to transfer the Trust property to Miller Street on or about 8 March, thus delaying the restructure of the loan. It is said that, had this delay not occurred, Miller Street would not have incurred the penalty interest. The primary judge disposed of this claim at [19] as follows:

• in Mr Tayles’ letter of 1 March 2005, in which he informed the liquidator of the change in trustee, he said that solicitors were preparing documentation for the transfer of the Trust property from Taycorp to Miller Street

• for practical reasons the liquidator could not transfer the Trust property: it was mortgaged to the CBA to secure loans totalling approximately $2.5 million, the winding up order was an event of default under the loans, so that the debts to the CBA were due and payable

• the CBA had agreed to restructure the facilities conditional on removal of the liquidator, provision of financial information about the borrowers, satisfactory valuations of the Trust property, and copies of the leases

• in these circumstances the liquidator could hardly give up the Trust property without seeing the CBA paid out

• it was not until about 18 August 2005 that the CBA decided to restructure the loans, and not until 26 August 2005 that it informed the liquidator that it consented to the transfer of the Trust property to Miller Street

• it was only at that point (ie 26 August) that the liquidator could consider a transfer of the Trust property

• on 15 September 2005 an order was made permitting Mr Tayles to execute transfers of the Trust property on behalf of Taycorp

• the order was made in anticipation of the provision by Miller Street of a bank guarantee in favour of the liquidator covering his costs and expenses and any liabilities of Taycorp

• in October and November 2005 there were negotiations between the liquidator and Mr Tayles about the terms of the bank guarantee

• on 13 December 2005 orders were made approving the transfer of the Trust property upon Miller Street undertaking to provide the liquidator with a bank guarantee of $225,000

• the bank guarantee was provided on 12 January 2006, but the transfers could still not be made because the CBA had not finalised the restructure of the loans

• it was not until May or June 2006 that the new facilities were in place and the transfers could be, and were, effected.

55 Although Miller Street disagreed with the primary judge’s ultimate conclusion set out at [53], the above findings were not challenged.

56 Miller Street contends that the primary judge did not give any reasons for his conclusion that the liquidator’s conduct did not delay the restructure of the loans. We do not agree. Although the passage from his Honour’s reasons we have set out at [53] is brief, it is preceded by ten paragraphs from which we have taken the presently relevant factual findings. These findings provide the basis for the conclusion that the delay in the restructuring of the loans was not due to the liquidator’s conduct.

57 Although Miller Street did not challenge the findings set out at [54] it contended that the evidence to which it drew our attention showed that it was the liquidator’s refusal to transfer the Trust property which delayed the restructure of the loans. Although this will involve some repetition of matters already recorded, it is convenient to summarise that evidence:

(a) On 13 January 2005 the CBA wrote to Mr Tayles advising that it was "prepared to consider" an application by his companies to restructure the facilities. The offer was conditional on the removal of the liquidator, the provision of financial statements and fresh valuations of various properties. This letter was provided to the liquidator.

(b) On 8 March 2005 Mr Tayles’ barrister proposed to the liquidator that the transfers be executed, with the liquidator retaining "a sufficient amount of trust receipts (say $100,000) to protect all creditors’ claims".

(c) On 24 March 2005 the CBA informed Mr Tayles that it would not consider transferring Taycorp’s trust debts to Miller Street until an updated valuation of various properties was completed, the liquidator confirmed that the assets and income of the Trust would be transferred to Miller Street, and current leases of the Trust property were provided.

(d) On 20 May 2005 updated valuations of the Trust property were provided: $1.9 million for each of the two levels.

(e) On 25 May 2005 the liquidator was provided with formal evidence that the Trust property had been acquired by Taycorp as trustee for the Trust.

(f) On 7 June 2005 Mr Tayles’ barrister requested the liquidator to execute transfers immediately so as not to cause Miller Street further loss. (The liquidator declined to do so on the ground that Taycorp’s indemnity depended on a release from Mr Tayles in respect of debts he had paid on its behalf.)

(g) On 6 July 2005 the CBA informed Mr Tayles that it was waiting for the liquidator to transfer the Trust property before it could complete Mr Tayles’ application for a loan to Miller Street to repay the debt of Taycorp and another company.

(h) On 11 August 2005 the CBA told the liquidator that Mr Tayles had sought a restructure of the loans and that it was waiting for advice from the liquidator that title to the Trust property had been transferred to Miller Street.

(i) On 17 August 2005 Mr Tayles’ barrister made a further request that the liquidator transfer the Trust property forthwith, and offered a charge "over the assets of the Tayles Discretionary Trust No 3 (including the 2 floors of the North Sydney building)" in favour of Taycorp and the liquidator, "to better secure the company’s and the liquidator’s right of indemnity" against the Trust’s assets.

(j) On 18 August 2005 the CBA informed Mr Tayles’ barrister that it consented to the transfer of the Trust property to Miller Street.

(k) On 24 August 2005 the liquidator informed Mr Tayles’ barrister that he intended to seek directions from the Supreme Court of New South Wales as to whether he was obliged to transfer the Trust property.

(l) On 26 August 2005 the CBA informed the liquidator that it consented to the transfers to Miller Street.

(m) A CBA file note of 18 October 2005 of a meeting between its officers and Mr Tayles, his accountant and legal adviser records that:

• "the Court" had determined that Miller Street needed to provide a bank guarantee of $150,000 to the liquidator "so that his position was not diminished". The $150,000 was "to ensure there are sufficient funds to meet all the liquidator’s costs"

(n) On 10 January 2006 the CBA provided Taycorp with a bank guarantee for $225,000 pursuant to an order made by the primary judge on 13 December 2005 approving the execution by Mr Tayles of transfers of the Trust property to Miller Street.

58 In its written submissions Miller Street claimed that the liquidator acted unreasonably in refusing to transfer the Trust property on or about 8 March 2005. In oral submissions counsel proposed two alternative dates in June and August 2005.

59 In order to deal with Miller Street’s submissions, we have reviewed the evidence to make up our own minds about the facts, nevertheless according proper weight to the primary judge’s views. See Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424. Although there is some overlap between the facts found by the primary judge and those recorded at [57], Miller Street draws attention to some that were not referred to by his Honour. Our consideration of the whole of the evidence, and in particular Miller Street’s additional facts, does not disclose error on the primary judge’s part in concluding that the liquidator’s refusal to execute the transfers by, or soon after, any of the dates propounded by Miller Street did not delay the restructure of the loans.

60 The file note referred to in [57](m), recording the proceedings at the meeting on 18 October 2005, deserves particular mention. On 16 October, two days before that meeting, the liquidator’s solicitor informed Mr Tayles’ barrister that he had prepared a brief for counsel to seek directions from the Supreme Court of New South Wales as to whether the liquidator was obliged to transfer the Trust property to Miller Street. He said the application would be filed "early next week", and the duty judge would be asked to deal with it as a matter of urgency. With this background, we have inferred that the order in [57](m) was made by the Supreme Court of New South Wales, which was the Court that appointed the liquidator. There is no order of this Court that fits the description given at the meeting by Mr Tayles’ barrister. The only other Court that is at all likely to have been approached is the Supreme Court of Victoria, which is referred to in the letter of 16 October 2005 as the Court to which an application by Miller Street might be made. Nothing turns on whether the order was that of the New South Wales or the Victorian Court.

61 Although our attention was not drawn to a formal court order, the file note was of a meeting at which Mr Tayles, his accountant and barrister were present, the barrister reported that "they had been to Court" and described the order made, Miller Street’s counsel relied on the file note before us, and did not suggest that any part of it was incorrect or unreliable. Accordingly we accept the summary of the Court order it contains. In our view it vindicates the liquidator’s stand that he was entitled to the protection of the Court’s directions, (whether the Supreme Court of New South Wales or the Supreme Court of Victoria), before being obliged to transfer the Trust property.

62 Once the position is reached that as at the end of August 2005 the liquidator was not, in a Supreme Court’s view, required to transfer the Trust property without a bank guarantee, the claim that he was in default as at 8 March, June or August 2005 must fail. Thereafter, as the primary judge pointed out, there were negotiations about the terms of the bank guarantee (October and November 2005) which culminated in the order of 13 December 2005. That order approving the transfer upon Miller Street’s undertaking to provide the liquidator with the protection of a bank guarantee is a further indication that he was not obliged at any earlier date to transfer the Trust property without such protection. The primary judge found that the liquidator did not act unreasonably while negotiating the terms of the guarantee. Miller Street has not attacked this finding. In any event, the provision of the bank guarantee in January 2006 was not the end of the story, because the Bank had not finalised the restructure of the loans. That did not happen until May or June 2006.

63 Miller Street’s cross-appeal to recover the penalty interest must be dismissed.

64 The primary judge rejected at [27] Miller Street’s claim that the liquidator’s failure to protect the Trust property should deprive him of the costs and expenses to which he would otherwise be entitled. His Honour said that once the loss of rent was made good, there was no reason to deprive the liquidator of his costs for the work he had done. Miller Street cross-appeals against that conclusion. It contends that because of the primary judge’s opinion that the liquidator was responsible for inordinate and inexcusable delay, he should not be entitled to recover or retain any remuneration beyond 8 March 2005. The proceeding before the primary judge was not a general review of the conduct of the administration of the winding up. There were two distinct issues raised: the loss of rent and the penalty interest. As we have said, the liquidator was under no obligation to transfer the Trust property on 8 March 2005 (or on either of the later dates suggested by Miller Street). Although we have dismissed the rent appeal, we agree with the reasons the primary judge gave for rejecting Miller Street’s claim to deny the liquidator part of his remuneration.

65 The liquidator’s appeal having failed, he should pay Miller Street’s costs of the appeal. Miller Street’s cross-appeal having failed, it should pay the liquidator’s costs of the cross-appeal.

66 As we have said, the proceeding before the primary judge was confined to the two main issues the subject of the appeal and cross-appeal. There was extensive, lengthy and detailed correspondence passing between the liquidator and his solicitors on the one hand and Taycorp, its solicitors, barrister and Mr Tayles himself on the other. In our view the primary judge’s observation that the liquidator’s delay in finalising the liquidation was both inordinate and inexcusable not only ignored the badgering and harassing demands in the correspondence emanating from Mr Tayles, but was outside the ambit of the proceeding before him. That observation would have been better left unsaid.

I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Sundberg, Jacobson and Gordon.

Counsel for the Appellant:	G T Bigmore QC

Solicitor for the Appellant:	Access Business Lawyers

Counsel for the Respondent:	M Sifris SC

Solicitor for the Respondent:	Zindilis Barristers & Solicitors

Date of Hearing:	6 May 2008

Date of Judgment:	14 May 2008

Federal Court of Australia - Full Court

Porter v Miller Street Pty Ltd [2008] FCAFC 77 (14 May 2008)