[2014] WASC 310
JURISDICTION
: SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION
: RE ARCABI PTY LTD (Receivers & Managers
Appointed) (in liq); EX PARTE THEOBALD &
HERBERT in their capacities as Receivers &
Managers of ARCABI PTY LTD (Receivers &
Managers Appointed) (in liq) [2014] WASC 310
CORAM
: MASTER SANDERSON
HEARD
: 15 MAY 2014
DELIVERED
: 15 MAY 2014
PUBLISHED
: 4 SEPTEMBER 2014
FILE NO/S
: COR 235 of 2013
MATTER
: IN THE MATTER OF ARCABI PTY LTD (Receivers
& Managers appointed) (in liq) (ACN 081 444 322)
EX PARTE
SIMON GUY THEOBALD and JEFFREY
LAURENCE HERBERT in their capacities as
Receivers & Managers of ARCABI PTY LTD
(Receivers & Managers Appointed) (in liq)
(ACN 081 444 322)
Plaintiffs
Catchwords:
Corporations law - Directions sought by receivers in relation to goods held by
corporation - Operation of Personal Property Securities Act 2009 (Cth) - Items
held by corporation on varying basis
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[2014] WASC 310
Legislation:
Nil
Result:
Direction given
Category: A
Representation:
Counsel:
Plaintiffs
:
Ms K Banks-Smith SC
:
Clayton Utz
Solicitors:
Plaintiffs
Case(s) referred to in judgment(s):
Access Cash International v Elliot Lake Inc & North Shore Corp for Business
Development (2000) Carswell Ont 2824
ATCO Controls Pty Ltd (in liq) v Stewart (in his capacity as liquidator of
Newtronics Pty Ltd) [2013] VSCA 132
Canadian Imperial Bank of Commerce v Westfield Industries Ltd (1990)
Carswell SASK 115 (QB)
Canadian Imperial Bank of Commerce v Williams (2007) Carswell ALTA 1482
Coad v Wellness Pursuit Pty Ltd (in liq) [2009] WASCA 68; (2009) 40 WAR 53
Community Futures Development v Spargo et al (2000) BSCS 809
Dixon v Wieselmann [2013] VSC 118
Hawke v Daniel Efrat Consulting Service Pty Ltd (1999) 17 ACLC 733
Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220
International Art Holdings Pty Ltd (Administrators Appointed) v Adams [2011]
NSWSC 164
Keene v Carter (1994) 12 WAR 20
North City Developments Pty Ltd; Re; Ex parte Walker (1990) 20 NSWLR 286
Pattison & Standby Force Pty Ltd (as Receiver & Manager of Quicknit Pty Ltd v
Lockwood (Unreported, FCA, 30 April 1998) BC 9801675
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[2014] WASC 310
Rabobank New Zealand Ltd v McAnulty [2011] NZCA 212
Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409
Re Carson; Hastie Group Ltd (No 3) [2012] FCA 719
Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services
Pty Ltd [2013] NSWSC 852
Re Morgan; Brighton Hall Securities Pty Ltd (in liq) (No 2) [2013] FCA 1228
Re Morgan; Brighton Hall Securities Pty Ltd (in liq) [2013] FCA 970
Re Odessa Promotions Pty Ltd (in liq); Pescod v Harrison (1979) CLC 40-523
Re One.Tel Networks Holding Pty Ltd (2001) 40 ACSR 83
Re Renovation Boys Pty Ltd (Administrators Appointed) [2014] NSWSC 340
Re S & D International Pty Ltd (in liq) (Receivers & Managers Appointed)
[2009] VSC 225
Re Stephanian's Persian Carpets Ltd (1980) 34 CBR (NS) 35
Royal Bank v Autotran Manufacturing Ltd (1991) 6WWR 238
Sachs v Miklos [1948] 1 All ER 67
Thackray v Gunns Plantations Ltd [2011] 85 ACSR 144
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[2014] WASC 310
MASTER SANDERSON
1
MASTER SANDERSON: On 17 December 2013 I gave certain
directions to the plaintiffs in relation to the conduct of the receivership of
Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq) (Arcabi). On
15 May 2014 the Receivers sought further directions. Based upon
detailed submissions made on behalf of the Receivers I made the orders as
sought. These reasons deal with why the orders were made. However to
fully explain why I made the orders it is necessary to not only provide
details of the factual background but to explain why I made the orders I
did in December. Accordingly these reasons are intended to explain both
the orders made in December 2013 and the orders made in May 2014.
2
In support of the orders made in December 2013 the plaintiffs relied
on two affidavits of Mr Simon Guy Theobold the first sworn on
22 November 2013 and the second sworn on 13 December 2013. The
Receivers were appointed to the assets and undertakings of Arcabi on or
about 17 July 2013 by the Westpac Banking Corporation (the Bank).
3
The business of Arcabi included storage and sale of rare coins and
bank notes (referred to generally as Goods). The Goods were stored on
premises at 12 Sanford Road, Albany (the Premises). The Premises are
not owned by Arcabi but by the directors of Arcabi, Robert and Barbara
Jackman. The Bank has security over the Premises and it has enforced its
security and taken possession.
4
Operating the business of Arcabi includes responding to requests for
return of Goods, dealing with Goods on consignment and storing and
selling items belonging to Arcabi. The Goods dealt with by Arcabi in the
course of its business are not all owned by Arcabi. Some items are the
property of Arcabi and those will no doubt in due course be realised by
the Receivers. Some items are property of third parties. These third
parties are referred to throughout the affidavit material as 'Investors'.
5
Since their appointment the Receivers have operated the business in
order to preserve it and have undertaken extensive investigations in order
to ascertain what inventory is owned by Arcabi and what is owned by
third parties. The operations and investigations are detailed exhaustively
in Mr Theobold's first affidavit.
6
Having undertaken these investigations the Receivers formed the
view that a substantial number of items are not the property of Arcabi or
subject to any security in its favour under the Personal Property
Securities Act 2009 (Cth) (PPSA) and so should be returned to the
Investors. Accordingly the Receivers proposed various steps for the
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MASTER SANDERSON
return of certain assets. They sought directions that their proposed course
was justified. The Receivers also sought directions as to the treatment of
the expenses and fees which they have incurred investigating and
preserving the business of Arcabi and bringing matters to the point where
they can identify which Goods are owned by Arcabi and which Goods are
owned by Investors and can be returned.
7
8
More particularly the Receivers sought directions as to whether in
their capacity as the Receivers and Managers of Arcabi they were justified
in:
(a)
returning to Investors certain Goods which were part of an
arrangement between Arcabi and an Investor whereby Arcabi
would store such Goods at the Premises (referred to as 'Mixed
Storage Goods');
(b)
returning to Investors certain Goods which were part of an
arrangement between Arcabi and an Investor whereby the Investor
requested Arcabi to sell the Goods on consignment, when these
Goods had not sold at the time of the appointment of liquidators to
Arcabi and remained at the Premises (referred to as 'Consignment
Only Goods');
(c)
taking out insurance for Goods stored at the Premises, including
Goods of the Investors; and
(d)
seeking to recover a proportional contribution towards those
insurance costs from Investors, except in the case of Investors who
informed the Receivers they did not wish them to take out
insurance for their Goods.
The Receivers also sought a direction that they were justified in
asserting an entitlement to an indemnity, secured by an equitable lien
upon the assets of Arcabi (including proceeds of the sale of company
owned items), for the repayment of their costs, expenses and remuneration
relating to the payment of insurance over the Goods (regardless of
ownership) and all enquiries and assessments necessary to ascertain the
ownership of the Goods, ascertain any other rights with respect to the
Goods and facilitate distribution of the Goods. The Receivers were not
asking the court to quantify the costs which might be protected by the
lien. They relied on the principle that in appropriate cases the entitlement
to a lien and the actual amount so secured can be determined separately:
see Dixon v Wieselmann [2013] VSC 118 [45]; Re Morgan; Brighton
Hall Securities Pty Ltd (in liq) [2013] FCA 970 [152] and for the orders
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in that case Re Morgan; Brighton Hall Securities Pty Ltd (in liq) (No 2)
[2013] FCA 1228. It was always anticipated by the Receivers the
December application would be the first stage of a process to deal with
simple Investor arrangements. Further applications particularly dealing
with more complex claims were anticipated.
9
The Receivers identified five legal issues which arose out of the
application. They can be summarised as follows:
(a)
whether the PPSA affects ownership of the Mixed Storage Goods
(ie do the relevant Investors retain title to those specified Goods or
has their interest vested in Arcabi);
(b)
whether the PPSA affects ownership of the Consignment Only
Goods (ie do the relevant Investors retain title to those specified
Goods or has their interest vested in Arcabi);
(c)
whether the out of court Receivers are entitled to an indemnity
supported by an equitable lien over Arcabi's assets in
circumstances where the costs incurred and which continue to be
incurred relate to Goods which are not solely the property of
Arcabi but also the property of Investors (ie does an indemnity and
lien extend to such work);
(d)
whether the Receivers' costs incurred in taking out insurance for
Goods stored at the Premises is a cost properly incurred in the
course of receivership in circumstances where investigations have
disclosed that not all Goods are Goods of Arcabi; and
(e)
whether it is appropriate to seek a contribution from Investors for
post-appointment insurance of Goods.
10
It is worth noting there was no contradictor to the plaintiffs'
application. No doubt, conscious of her obligations to the court, senior
counsel for the plaintiffs provided detailed and very helpful written
submissions. The submissions taken together with the comprehensive
affidavits made it plain all relevant facts had been put before the court.
The first question then is whether or not it was appropriate to make
directions under s 424(1) of the Corporations Act 2001 (Cth).
11
Section 424(1) of the Corporations Act is in the following terms:
A controller of property of a corporation may apply to the Court for
directions in relation to any matter arising in connection with the
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performance or exercise of any of the controller's functions and powers as
controller.
12
The power to make directions pursuant to the section is a broad
power intended to facilitate the work of receivers: see Re Odessa
Promotions Pty Ltd (in liq); Pescod v Harrison (1979) CLC 40-523, 32,
103. The section provides a statutory exception to the general rule that a
court will not give an advisory opinion: see North City Developments Pty
Ltd; Re; Ex parte Walker (1990) 20 NSWLR 286, 290. The generally
cited statement of the circumstances in which the court would make a
direction under s 447D(1) of the Corporations Act is what was said by
Goldberg J in Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409:
There must be something more than the making of a business or
commercial decision before a court will give directions in relation to, or
approving of, the decision. It may be a legal issue of substance or
procedure, it may be an issue of power, propriety or reasonableness, but
some issue of this nature is required to be raised [65].
13
If a receiver has made full and fair disclosure to the court of all
material facts a direction will protect the receiver from liability for any
alleged breach of duty as receiver to a creditor, a contributory of the
company or the company in respect of anything done by him in
accordance with that direction: see Hawke v Daniel Efrat Consulting
Service Pty Ltd (1999) 17 ACLC 733, 739.
14
The PPSA is recent legislation and there is virtually no relevant
Australian authority on the statute. In Re Maiden Civil (P&E) Pty Ltd;
Albarran v Queensland Excavation Services Pty Ltd [2013] NSWSC 852
Brereton J found the Commonwealth Parliament in enacting legislation
that was modelled on the New Zealand and Canadian legislation should be
taken to have intended a similar approach to that which is well established
in those jurisdictions. Accordingly the plaintiffs relied heavily on New
Zealand and Canadian decisions in relation to provisions of the PPSA
which were equivalent to the Australian provisions.
15
The relevance of the PPSA is this: the arrangements between the
Investors and Arcabi may be such that the Investors have a secured
interest in the Goods in the possession of Arcabi but have failed to perfect
it as required under the PPSA resulting in a vesting of their interest in
Arcabi so allowing for the Bank (as secured creditor with a perfected
charged over Arcabi's assets) to have priority to these Goods. That may
be the effect of s 267 of the PPSA. The Receivers were alive to that
possibility. However they determined the Investors remained entitled to
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the Goods the subject of the application. The Bank accepted that position
and consented to the application as made by the Receivers.
16
The Receivers undertook an extensive review of the claims made by
Investors for Goods and other items. The review included requesting
Investors to provide documents to support their claims to the Goods. The
initial application concerned only those Investors who provided sufficient
documentation and which the Receivers verified as matching the records
of Arcabi. The Receivers used the term 'Mixed Storage Goods' to include
Investors who entered into three types of arrangements with Arcabi to
store Goods at the Premises. They were 'Storage Only Goods', 'Investors'
Retailed Goods' and 'Personal Goods'. The reasons why this was done
were fully described in Mr Theobold's first affidavit at par 57 and in the
supplementary affidavit at par 28.
17
Investors with Storage Only Goods were usually charged a 'storage
fee' and were issued with an invoice. The files at the premises relating to
Storage Only Goods usually contained authenticity certificates, tax
invoices documenting the initial purchase of the Goods and 'numismatic
evaluations' in the Investors' files. Files relating to Investors' Retailed
Goods usually included only the tax invoices for the purchase of the coins
and bank notes. Personal Goods were usually Goods belonging to
Investors and stored at their request that were not purchased from Arcabi;
plus other such items as wills and duplicate certificates of title. In most
cases there were no hard copy records stored with the Personal Goods.
Where there were sufficient records for Goods they were covered by the
initial application. Other items such as wills and title deeds were not
covered by that application. Where Investors were able to provide only a
list of Goods which were stored with Arcabi the Receivers returned such
Goods where they corresponded to Arcabi's records.
18
The arrangement between Investors and Arcabi for Mixed Storage
Goods arose generally by way of an Investor directing Arcabi to store the
Goods and Arcabi issuing a storage invoice. This was arguably a
bailment arrangement. A bailment is where a bailor delivers the goods to
the bailee upon a promise, express or implied, that they will be delivered
the bailor or dealt with in a stipulated way: see Hobbs v Petersham
Transport Co Pty Ltd (1971) 124 CLR 220, 238. The question was
whether the arrangements were of such a nature as to be captured by the
security interest provisions of the PPSA which affect bailments.
19
Two types of bailment may comprise a security interest under the
PPSA. First, an 'in substance' security interest under s 12(1) of the PPSA
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but only if the bailment secures payment or performance of an obligation.
Second, if certain conditions are met the bailment is deemed to be a 'PPS
lease' under s 13 and so is a security interest under s 12(3)(c).
20
There are several factors accepted by overseas courts as indicia of
when bailment arrangements secure payment or performance of an
obligation. These include:
(a)
the bailment provides that the ownership of the goods will vest in
the bailee on expiry of the bailment agreement;
(b)
the bailee has an obligation to purchase the goods or an option to
purchase the goods or extend the term of the arrangement at a
'bargain' price such that it would be reasonable to expect the bailee
to exercise the option;
(c)
the term of the arrangement is for a major part of the economic life
of the goods; and
(d)
the minimum payments under the bailment amount to substantially
all the capital cost of the goods.
21
It was the Receivers' position the bailments created by the storage
arrangements between Investors and Arcabi did not secure payment or
performance of an obligation. They reached that conclusion for a number
of reasons. First, having considered the records and made due enquiry
there was no suggestions the Goods would vest in Arcabi on the expiry of
the bailment. Second, there was no suggestion that Arcabi would have an
obligation to purchase the Goods. Third, the term of the arrangement was
not likely to be for the major part of the economic life of the Goods as
those Goods had an indefinite life subject to storage conditions. Finally,
the nominal payment for the bailment - which was usually $240 - did not
equate to the capital cost of the Goods.
22
Clearly the Receivers reached the right decision for the right reasons.
On the facts this is not a case where the bailment was in substance a
security interest.
23
The next question is whether the bailments were PPS leases. The
interest of a bailor of goods under a PPS lease is a 'security interest' for
the purposes of the PPSA: see s 12(3)(c). The effect of s 13(1), (2) and
(3) of the PPSA is that if the bailment:
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(a)
is for a term of more than one year or is for an indefinite term or
for a term of up to one year that is automatically renewable or
renewable at the option of one of the parties;
(b)
the bailor is regularly engaged in the business of bailing goods;
and
(c)
the bailee provides value for possession of the underlying
collateral;
the bailment will be deemed to be a PPS lease.
24
It is a requirement of s 13(2)(b) that the bailor must be 'regularly'
engaged in 'the business of bailing goods' which on its face permits
differing views. Many bailment arrangements may be incidental aspects
of a particular type of contract but are nevertheless likely to be a regular
occurrence in the everyday course of business. There is no concept of a
PPS lease in the New Zealand or Canadian legislation. The equivalent
concept is a lease for more than one year. The Canadian versions of the
legislation do not refer to 'bailment' in the definition of a 'lease for more
than one year'. However the New Zealand equivalent does refer to the
concept. There is one relevant New Zealand case to which counsel
referred. That is the decision of the Court of Appeal in Rabobank New
Zealand Ltd v McAnulty [2011] NZCA 212. The facts in that case were
as follows. A syndicate put a race horse out to stud and entered into a
standing arrangement with a stud farm. The farm agreed to manage and
stable the horse. A bank had loaned money to the farm and had a
perfected secured interest in all the farms present and after acquired
personal property. The bank claimed the horse as part of its collateral.
The Court of Appeal said:
In our view, the words 'in the business of leasing goods' should be read as
importing a requirement that the owner actually be intending to profit from
the bailment or lease. This would exclude gratuitous bailments where the
bailor was not receiving any payment for the use of the goods and
bailments where the bailee is in the business of bailments, not the bailor.
We see this as best reflecting the Parliamentary intention of treating some
lease and bailment transactions as security interests, and requiring the
bailor to perfect its interest in order to ensure its interest defeats that of any
secured creditors of the bailee. The reason for the deeming provision is to
ensure that lease/bailment transactions that are not easily distinguishable
from finance leases are treated as if they are finance leases. Bailment
transactions that could not possibly be confused for finance leases do not
need to be drawn into that net, and there is nothing to indicate that
Parliament intended that they should be [40].
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25
The Court of Appeal found that the syndicate was not in the business
of bailing goods but was instead in the business of maintaining and
profiting from the horse. The cost of bailment of the horse was an
incidental expense to the business, not the business itself. Accordingly,
the bailment of the horse was not 'a lease of a term for more than one year'
as would have been required for the PPSA to deny the syndicate its
priority. The Court of Appeal also found this interpretation had the
practical effect of excluding bailments in respect of which the bailor did
not receive consideration with a view to profit. The court noted that the
Australian PPSA 'has express statutory language that yields that outcome'.
That was a reference to s 13(3) of the Australian PPSA.
26
Section 10 of the PPSA defines the term 'value'. It means
consideration that is sufficient to support a contract that includes an
antecedent debt or liability. There are at least two possible interpretations
of this requirement. One is that any bailment under a contract for which
the bailee provides consideration (including a promise to provide
particular services) is potentially a PPS lease, even though the bailment
aspect of the contract is incidental to its performance. The alternative is
that s 13(3) requires specific consideration to be given by the bailee for
the bailment. Any determination as to the meaning of 'value' in an
application of this type is difficult. For the purposes of this application I
need not resolve the question. It was the Receivers' position that the
question as to whether the arrangements comprise a PPS lease can be
determined on the basis there is no evidence the Investors 'regularly
engaged in the business of bailing Goods'. That is a submission that I
accepted for the following reasons.
27
The arrangements between Arcabi and the Investors with Mixed
Storage Goods appear to be for either an indefinite term or for a term of
up to one year that is automatically renewable or renewable at the option
of one of the parties. On their face then these arrangements fall within
s 13(1). However, even if the Investors with Mixed Storage Goods did
operate businesses - a doubtful prospect - by analogy with Rabobank
Investors were in the business from profiting from the exchange of rare
coins/bank notes rather than from the bailment itself. Moreover it appears
in many instances the exchange of coins/bank notes was a hobby for those
Investors with Mixed Storage Goods and they did not engage in a
business at all: see par 67 of Mr Theobold's first affidavit.
28
As the arrangements do not comprise a PPS lease the Investors do
not have a security interest in the Goods that is capable of being perfected.
Any failure to perfect is therefore irrelevant and there is no priority
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dispute with the Bank as secured creditor. The Investors own their Goods
and the bailment arrangements do not affect that ownership in any manner
which gives priority to the Bank under its perfected security. Accordingly
it is appropriate that the Goods be returned to the identified Investors.
29
Turning then to the Consignment Only Goods under the PPSA a
security interest includes 'a consignment (whether or not a commercial
consignment) if the transaction, in substance, secures payment or
performance of an obligation': s 12(2)(h). The security interest also
expressly includes the interest of a consignor who delivers goods to a
consignee under a commercial assignment: see s 12(3)(b). The context in
which the PPSA is to be considered with respect to consignments is that
the Investors (as consignors) may have a secured interest in the Goods in
the hands of Arcabi under s 12(2)(h) or under a commercial consignment
arrangement by reason of s 12(3)(b).
30
The Receivers contended the Investors remained entitled to the
Consignment Only Goods the subject of the application. The Bank
accepts that position. The Receivers put forward four reasons for their
decision. First having considered the terms upon which the Consignment
Only Goods were held they were of the opinion such Goods were not
assets of Arcabi but were held on consignment. Second, the consignments
do not secure payment or performance of an obligation. Third,
consignments were not 'commercial assignments'. Finally, even if the
consignments secured payment or performance of an obligation, the
transitional provisions of the PPSA would protect the Investors' interest
until 30 January 2014, such that there was no vesting of the security
interest in Arcabi.
31
It fell for determination on this application whether or not the
decision of the Receivers was correct. In determining that question there
is a threshold question as to the arrangements between Arcabi and the
Investors when a purported consignee in fact buys the Goods so acquiring
the property in them rather than a consignment. The term 'consignment' is
not defined in the Australian PPSA. However in Canada in the decision
of Re Stephanian's Persian Carpets Ltd (1980) 34 CBR (NS) 35
Saunders J put the position as follows:
In its simplest terms, a consignment is the sending of goods to another. An
arrangement whereby an owner sends goods to another on the
understanding that such other will sell the goods to a third party and remit
the proceeds to the owner after deducting his compensation for effecting
the sale is an example of a consignment agreement.
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32
In Access Cash International v Elliot Lake Inc & North Shore
Corp for Business Development (2000) Carswell Ont 2824 Molloy J
listed 15 indicia to characterise a consignment. These were:
(a)
the merchant is the agent of the supplier;
(b)
title to the goods remains in the supplier;
(c)
title passes directly from the supplier to the ultimate purchaser and
does not pass through the merchant;
(d)
the merchant has no obligation to pay for the goods until they are
sold to a third party;
(e)
the supplier has the right to demand the return of the goods at any
time;
(f)
the merchant has the right to return unsold goods to the supplier;
(g)
the merchant is required to segregate the supplier's goods from his
own;
(h)
the merchant is required to maintain separate records;
(i)
the merchant is required to hold sale proceeds on trust for the
supplier;
(j)
the goods are shown as an asset in the books and records of the
supplier and are not shown in the books and records of the
merchant as an asset; and
(k)
the supplier has the right to stipulate a fixed or floor price.
33
Usually Arcabi offered an Investor three methods by which they
could dispose of their Goods. They could be sold to a third party on a
consignment basis, either privately or at auction, or Arcabi could offer to
repurchase them. There is some difficulty in analysing the arrangements
between an Investor and Arcabi because different forms and terms were
used for 'consignments' over time. Mr Theobold has set out some of these
different terms in his summary of the forms and 'resale request forms' in
his first affidavit. The earliest version, used prior to July 2011, provided
that Arcabi would 'choose the most appropriate method of liquidation' of
the Goods. Later versions of the 'resale request forms' provided, in a
number of variations, that Arcabi would 'consign' the Goods for sale.
34
Some of the forms use the language of purchase by Arcabi but it is
generally as an alternative to a true consignment sale and without an
obligation on the part of Arcabi to purchase. What is consistent through
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the various forms is the language of consignment is present. The evidence
considered against the backdrop of the indicia referred to in the Access
Cash decision can be summarised as follows.
35
There is some evidence consistent with an agency arrangement
between Arcabi and Investors - references to selling 'at your request',
consigning 'on your behalf' and 'resale request' forms that were required to
be signed before an Investor put Goods on consignment.
36
There is considerable evidence that title was to stay with the
Investors. The 'resale request' forms post-July 2011 expressly provided
that the Goods would remain the property of the Investors until they were
sold. Earlier versions of the form refer to selling 'your' numismatic
investments. A document known as 'Arcabi's Guide' expressly referred to
rarities remaining the 'sole property of the Investor'.
37
There is no persuasive evidence that Arcabi ever had title to the
Goods which it sold on consignment. None of the materials provided to
Investors referred to Arcabi having title to the Goods. Consignment Only
Goods were separated in the accounting database and given a different
code. Whilst accounting records for the year ended 2011 noted Goods on
consignment as Arcabi purchases and assets those accounting entries do
not accurately reflect their status and were a product of the accounting
programme used. This is detailed in Mr Theobold's first affidavit at
par 75.
38
Arcabi had no obligation to pay for the Goods until they were sold to
a third party. In the case of each Investor the subject of the application
Arcabi was not under an obligation to pay until the consigned Goods had
been sold.
39
It appears that the Goods placed on consignment were capable of
being specifically identifiable in the vault at the Premises. It must be said
however there is no evidence that Arcabi was required in its agreement
with Investors to keep the Goods separate.
40
There does not appear to be any evidence that Arcabi was obliged to
keep proceeds of the sale of Investors' Goods separate from the sale of its
own Goods. Arcabi did not maintain a trust account but kept a record of
those Investors whose Goods had been sold on consignment and to whom
they belonged.
41
So-called 'Maximiser' notes for each Investor indicated which Goods
were on consignment and recorded them as an asset of the Investor until
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such time the Goods were sold. It appears from the Investor identification
form submitted by Investors who had Consignment Only Goods that they
considered they held such Goods as their asset.
42
The 'resale request' form used by Investors since at least December
2011 provided that the Investor could withdraw their Goods from
consignment with Arcabi at any time - provided the Goods had not
already been sold. The Investor could also complete a 'cancellation'
request form. The advertisements published by Arcabi since July 2011
referred to this as a feature of the arrangements. There is no evidence that
Arcabi had the right to return the Goods to Investors if they were not sold.
However the Canadian authorities do not regard the fact that a right to
return is not expressly provided for as being determinative.
43
At least from 2012 Investors would set the price point at which
Arcabi could sell their Goods.
44
Arcabi introduced a policy whereby the Investor who had Goods on
consignment would be required to pay storage fees (including an
allocation for insurance) until the date their Goods had been sold.
45
It is clear from the above that not all of the criteria to satisfy the
Canadian definition of consignment have been met. But it seems to me on
any reasonable interpretation of the arrangement between the parties there
was a consignment of the Goods. Title remained with the Investors. The
Receivers were justified in taking the approach they did.
46
The next step was to consider the nature of the consignment. Not all
consignments are subject to the PPSA. A 'consignment' will be a security
interest if it, in substance, secures payment or performance of an
obligation: s 12(2)(h). In assessing whether the consignment comprises a
security the Canadian courts have considered it permissible to look at the
substance of the transaction not its form. In my view this approach has
much to recommend it.
47
In Re Stephanian's Saunders J considered what was meant by
'intended to secure the payment or performance of an obligation'. The
case concerned Persian Carpets, a company that sold oriental rugs on a
retail basis, and Anglo, a company that sold rugs on a wholesale basis.
Anglo in the course of its business supplied rugs to Persian Carpets for
sale by Persian Carpets to third parties or for purchase on Persian Carpets
own account. The parties describe the arrangement as providing 'security'.
Saunders J found that there were other purposes to the consignment
arrangement - that is, other than security. His Honour reached that
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conclusion principally because Anglo was able to market through Persian
Carpets and Persian Carpets was not required to pay unless and until an
item had been purchased. There was, in effect, a 'mutual advantage' of the
arrangement. However the persuasive point was that as a matter of logic
the goods were not security for a debt as no monies were payable by
Persian Carpets unless it sold a rug.
48
The logic applied by Saunders J in Re Stephanian's is equally
applicable to this case. There is no logical reason the consignment would
have been intended to secure a debt due by Arcabi. If an item was sold on
consignment, an obligation on the part of Arcabi to pay the Investors
would follow but title would have passed to the third party purchaser. If
the item was not sold then title would remain with the Investor and there
is no obligation on the part of Arcabi to pay the Investor. The Investor
remained entitled to take back its consigned Goods - even in
circumstances where all that was involved was a change of mind on
behalf of the Investor.
49
Furthermore, Saunders J's analysis of 'mutual advantage' is also
applicable to Arcabi. Arcabi had the advantage of more stock to promote
and sell to other Investors without the need to purchase such goods itself.
The Investor would have the advantage of 'realising' their investment
through Arcabi with its client base and knowledge of the market for a
certain sum but without the risk of Arcabi's creditors having access to
their item. The effect of this mutual advantage suggests the arrangement
between the parties was intended for a purpose other than to secure the
performance of any obligation or payment. In my view the only
conclusion that can properly be drawn is that the consignment of the
Consignment Only Goods did not comprise security for a payment or for
performance. Accordingly it is not a security interest for the purposes of
s 12(2)(h) of the PPSA, and there is no room for the application of s 267
and no vesting of any interest in Arcabi.
50
Turning then to commercial consignments the PPSA definition
provides that a consignment will be a 'commercial consignment' if:
(a)
the consignor retains an interest in goods that the consignor
delivers to the consignee; and
(b)
the consignor delivers the goods to the consignee for the purposes
of sale, lease or other disposal; and
(c)
the consignor and the consignee both deal in goods of that kind in
the ordinary course of business;
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but does not include an agreement under which the goods are delivered to:
(d)
an auctioneer for the purpose of sale; or
(e)
a consignee for sale, lease or other disposal if the consignee is
generally known to creditors of the consignee to be selling or
leasing goods for others.
51
Clearly elements (a) and (b) are made out. As to 'delivery' the Goods
generally remained at Arcabi's Premises when purchased by an Investor
and held under consignment arrangements. So it may be there was a
notional delivery. But it cannot be doubted that there was a 'delivery' as
required by the section.
52
Under element (c) a 'commercial consignment' requires that the
consignor and consignee both deal in goods of that kind in the ordinary
course of business. The effect of this limitation is that consignments by
consumers of their property to a commercial consignee are not caught by
the PPSA. A similar limitation exists in both the Canadian and
New Zealand Acts. The intention of this requirement appears to be to
limit the automatic application of the statute to situations in which
consignment is used as a means of financing the acquisition of trading
stock.
53
The Receivers sent all consignment creditors of Arcabi a
questionnaire. The term 'consignment creditor' refers to those Investors
who had put Goods on consignment but whose Goods had been sold and
no proceeds remitted to the Investor. The consignment creditors make up
the majority of Arcabi's creditors.
54
The Receivers asked whether those consignment creditors regularly
dealt with rare coins and/or bank notes in the course of their business.
Thirteen consignment creditors responded in the affirmative. It appears
however that all but seven of those consignment creditors (who are also
Investors) have since responded that they do not regularly deal in rare
coins/bank notes. Save and except for those seven it does not appear the
majority of Investors regularly dealt with rare coins and/or bank notes in
the course of their business and therefore the definition of 'commercial
consignment' is not satisfied. There is no direct evidence of whether the
Investors with Consignment Only Goods regularly dealt with rare coins
and/or bank notes. However I am prepared to infer that the small rate of
response is representative of the Investors across the board - that is,
including those the subject of this application. Where the Receivers have
identified an Investor who appears to 'deal' it has been noted. Further
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based on his knowledge and involvement in the business of Arcabi
Mr Theobold is of the opinion that the coin/bank notes were a hobby for
those Investors with Mixed Storage Goods and they did not engage in
business at all. I am prepared to accept that opinion from an experienced
insolvency practitioner who has had day to day involvement with the
running of Arcabi's business.
55
The New Zealand PPSA version of the definition of 'commercial
consignment' does not include a provision excluding those persons who
are generally known to be selling or leasing goods of others. The
Canadian Provinces versions of the PPSA (there is a different version in
each Province) generally does not include such a provision. The Supreme
Court of British Columbia in Community Futures Development v Spargo
et al (2000) BSCS 809 cited the following passage from Roland Cumming
& Roderick Wood, British Columbia Personal Property Securities
Handbook (Carswell, 4th ed, 1998):
The legislative purpose for including non-security consignments within the
scope of the Act is to provide public disclosure of the existence of interest
in goods in the possession of persons other than holders of those interests.
There is no need to require public disclosure of consignors interests in
goods in possession of consignees who are known to be selling or leasing
goods belonging to other persons. The Act does not define what
constitutes general knowledge of a consignee's business sufficient to
exclude a transaction from the scope of the Act. Knowledge or lack of
knowledge of the existence of particular consignment contract is not
determinative. The definition of 'commercial consignment' in section 1(1)
refers to general knowledge concerning the consignees relationship with
her suppliers not specific knowledge concerning a particular consignment
arrangement. The general knowledge to which the section refers is
knowledge on the part of persons who might be expected to deal with the
consignees creditors. This is the case of people for whose benefit the
public disclosure system of the Act was created. It is, of course, not
enough that the consignee has the requisite knowledge (pages 62 - 63).
56
In Canadian Imperial Bank of Commerce v Williams (2007)
Carswell ALTA 1482 the Alberta Court of Appeal found that there was no
reason why consignors cannot furnish evidence as to what was generally
known by the creditors of a consignee. Canadian case law suggests that
the knowledge is not limited to the knowledge of a particular creditor but
the persons who may be expected to deal with the consignee as creditors:
see Canadian Imperial Bank of Commerce v Westfield Industries Ltd
(1990) Carswell SASK 115 (QB). Saskatchewan courts have concluded
that this may be established through objective evidence including signage
at the consignee's premises or proof of a general understanding of this in
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the community in which the consignee carries on business: see Royal
Bank v Autotran Manufacturing Ltd (1991) 6WWR 238.
57
In this present case Arcabi advertised the option of Investors putting
Goods on consignment in its advertising materials. It is clear from the
significant number of items (over 700) in the Consignment Only Goods
category that consignments were a large part of the business of Arcabi. In
the questionnaire to which I have referred above the Receivers asked the
consignment creditors whether they believed Arcabi sold coins/bank notes
on behalf of others. Over 84% of consignment creditors who responded
indicated they did believe that Arcabi sold coins/bank notes on behalf of
others.
58
The Receivers also wrote to 27 known valuers, auctioneers and other
businesses associated with numismatics. Of the nine responses, six
indicated they believed that Arcabi sold coins/bank notes on behalf of
others. The remaining two valuers were unsure whether Arcabi sold
coins/bank notes on behalf of others. While this evidence is of interest,
little weight can be attached to it. There were few responses and they
were not creditors of Arcabi.
59
The best evidence as to the general knowledge of Arcabi's creditors
is the large response rate from the consignment creditors. This evidence
is telling and it can properly be said Arcabi was generally known to its
creditors as being in the business of selling the goods of others. On this
basis none of the consignments between Arcabi and the Investors should
be considered as 'commercial consignments'. Accordingly the PPSA does
not apply to the Investors' assets. No security interest vests in Arcabi
pursuant to s 267 of the PPSA on the basis of any commercial
consignment. The Consignment Only Goods should be returned to the
Investors.
60
As an alternative the Receivers relied upon the transitional
provisions in the PPSA. Strictly speaking it is not necessary for me to
deal with this aspect of the submissions. However for the sake of
completeness I will deal briefly with this question.
61
If it were the case that arrangement between Arcabi and Investors
were 'security interests' such arrangements which were entered into prior
to 30 January 2012 are 'transitional security interests' which are afforded
'temporary perfection' for 24 months from the commencement of the Act that is until 30 January 2014: see PPSA s 322(1). For Investors who
supplied Goods to Arcabi after 30 January 2012 the transitional provisions
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do not apply and there is no 'temporary perfection'. For those Investors
who supplied Goods to Arcabi after 30 January 2012 but had a
pre-existing supply relationship it is possible that supplies from Investors
to Arcabi made after that date may be subject to the PPSA in the same
way as supplies made under a new relationship. Accordingly, even if the
PPSA did apply to those storage and consignment arrangements for post
30 January 2012 arrangements it would not operate to vest any security
interest in the Consignment Only Goods in Arcabi as the security interest
would only be taken to be perfected. Arcabi would not acquire an interest
in the Consignment Only Goods and the relevant Goods can be returned
to those Investors who requested Arcabi to put such Goods on
consignment. The Receivers have been unable to determine precisely
which arrangements are clearly pre or post January 2012. They therefore
have not been in a position to rely solely on the transitional provisions in
order to resolve these issues. It would appear there are a number of pre 30
January 2012 arrangements in place.
62
It is clear placing reliance on the transitional provisions alone would
produce different outcomes for different groups of Investors. That would
be an unfortunate result. Fortunately the Goods can be dealt with other
than by relying on the transitional provisions.
63
To this point when dealing with Consignment Only Goods in each
case the Goods were acquired by an Investor from Arcabi but then
retained by Arcabi on consignment. There were some external suppliers
who deposited Goods with Arcabi on consignment. One of these persons
was a Mr Scheer. The December application dealt with only one
transaction involving Mr Scheer. This related to 21 Australian specimen
notes. That transaction is evidenced in a tax invoice dated 18 August
2011 and a document marked 'consignment' dated 20 August 2011. These
documents appear as attachment SGT18 to the second affidavit of
Mr Theobold.
64
In my view Mr Scheer is in no different position to other Investors
with Consignment Only Goods. The title to the Goods remained with
Mr Scheer the person who supplied the Goods. Arcabi had no obligation
to pay Mr Scheer for the Goods until they were sold to a third party. The
consigned inventory was identifiably Mr Scheer's. Mr Scheer set a price
for the Goods. Although it is not clear from the documentation there is no
reason to believe Mr Scheer did not have a right to resume possession of
the Goods. Accordingly Arcabi does not have an interest in the Goods
which are the subject of the arrangement between Arcabi and Mr Scheer.
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65
Next there is the question of whether the Receivers have an
indemnity and lien for work relating to the Goods. It is clear when the
Receivers took possession they had to undertake a significant task in
ascertaining whether any of the Goods were owned by Arcabi and so the
subject of the Bank's security. As indicated above the Receivers'
concluded the Goods the subject of this application are not the property of
Arcabi. It can be assumed the Receivers have a contractual indemnity
from their appointor. That is not the point. A receiver has a right of
indemnity against the assets over which they are appointed and is
generally entitled to an equitable lien over the company property under his
or her control. The Receivers' concern in light of the nature and status of
the business and the Goods is that significant work has been undertaken
with respect to the Goods that are not Arcabi assets. Such work had to be
undertaken and will continue to be undertaken in order to run Arcabi's
business since the time of their appointment and in order to isolate and
preserve those assets which are in fact the assets of Arcabi. By the
December application the Receivers sought directions from the court to
give them some comfort as to the scope of their indemnity and lien.
66
It is clear principles relating to established liens where expense has
been incurred in calling in, caring for, preserving and realising assets
extend to an out of court receiver. Any doubt on that question was
resolved by the decision in Thackray v Gunns Plantations Ltd [2011] 85
ACSR 144. The right to an indemnity for costs and expenses including
remuneration secured by an equitable lien is well recognised. In Coad v
Wellness Pursuit Pty Ltd (in liq) [2009] WASCA 68; (2009) 40 WAR 53,
Buss JA said:
It is well-established that a receiver, receiver and manager, provisional
liquidator or liquidator appointed by the court in respect of a company has
a right of indemnity out of the company's property for, relevantly, his or
her remuneration, costs and expenses. Further, the right of indemnity is
secured by an equitable lien on the company's property [46].
67
The basis upon which a lien is conferred and the fact it extends
priority over the claims of others to a fund has been examined recently by
the Victorian Court of Appeal in ATCO Controls Pty Ltd (in liq) v
Stewart (in his capacity as liquidator of Newtronics Pty Ltd) [2013]
VSCA 132. It is not possible to make a comprehensive statement of the
circumstances that are essential in order for a lien to arise by implication
nor is it easy to reconcile all of the case law. However drawing upon
what was said in the ATCO and Coad decisions counsel summarised the
relevant principles in three points as follows:
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(a)
'The equitable lien is a right against property which arises
automatically by implication of equity to secure the discharge of an
actual or potential indebtedness. The lien arises by operation of
law, under a doctrine of equity "as part of a scheme of equitable
adjustment of mutual rights and obligations", and arises
"independently of any express or implied promise to grant it". It is
essentially a positive right to obtain an order for the sale of the
subject property or for actual payment from the subject fund.': per
Redlich JA in Atco at [158] ... ;
(b)
The most recognised equitable lien is that classically described by
Dixon J in Re Universal Distributing Co Ltd (In liq) (Universal
Distributing) (1993) 48 CLR 171:
'... In the present case the liquidator has employed a material part of
his time and energies in recovering moneys, both uncalled capital
and debts, which enure for the debenture-holder, and in so far as
these services increase the remuneration which he receives, I see no
reason why the burden should not be thrown upon the proceeds.
The question is not whether moneys available for unsecured
creditors should be relieved at the expense of the security. In such
a case it may be said that the service of collecting enough to
discharge the debenture must in any event be performed in order
that a surplus may then arise in which the unsecured creditors may
participate.
The question in the present case is whether the liquidator can
charge against the fund passing through his hands as between
himself and the person to whom it is payable, so much of the
remuneration fixed for work done in the winding up as is referable
to the calling in and conversion of the assets producing the fund. I
see no reason why remuneration for work done for the exclusive
purpose of raising the fund should not be charged upon it.'
Universal Distributing at 174.
(c)
A lien may be conferred on a broader basis than that articulated by
Dixon J ... . It is not critical that applicants bring themselves within
the circumstances analogous to Universal Distributing to establish
a lien ... .
68
In my view these principles accurately reflect the present state of the
law. They were the principles that I applied in determining this
application.
69
As to the scope of the lien the relevant principles were summarised
by Robson J in Re S & D International Pty Ltd (in liq) (Receivers &
Managers Appointed) [2009] VSC 225. His Honour stated the principles
as follows:
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70
71
(a)
At equity, an equitable lien arises in favour of a liquidator over the
funds realised from the sale of company property for the costs he
incurs for the care, preservation and realisation of the property in
priority to those otherwise interested in the fund. ...
(b)
The costs include those that the liquidator fairly incurs in the
discharge of his duty to care, preserve and realise the property. ...
(c)
The lien may arise whether or not the ultimate sale is affected by
the liquidator and entitles the liquidator to be paid in priority out of
the fund whether or not he is in possession of the fund. ...
(d)
The costs and expenses secured by the lien must be incurred
exclusively for the care, preservation or realisation of the property
and not otherwise expended in the general administration of the
mortgagor. ...
(e)
The costs and expenses include the liquidator's reasonable
remuneration. ... [273].
Three further statements of principle have emerged from the recent
decisions in Thackray v Gunns Plantations and Dixon & Wieselmann.
They are:
(a)
There is no requirement that the work done and expense incurred
add value or benefit the person's interest in the property or the
fund. The relevant question is 'whether the work done and
expense incurred was necessary to the salvage connection';
(b)
The notion of 'salvage' is broadly interpreted; and
(c)
'The expression "care, preservation and realisation" is to be
understood widely as it includes identifying or attempting to
identify the assets; recovering or attempting to recover the assets;
realising or attempting to realise the assets; protecting or
attempting to protect the assets; and distributing the assets to the
persons beneficially entitled to them'.
Most of the reported cases dealing with liens seem to concern a lien
over a fund. However a lien is not limited in its application to proceeds in
fact realised by the applicant. In Pattison & Standby Force Pty Ltd (as
Receiver & Manager of Quicknit Pty Ltd v Lockwood (Unreported, FCA,
30 April
1998)
BC 9801675,
Finn J
upheld
a
Universal
Distributing-based lien over assets despite the fact the fund had not
arisen. Finn J noted that what was necessary was that there be property
that can properly be subject to a lien. It now appears that view is
generally accepted. In Thackray v Gunns Plantations, Davies J said:
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It is uncontroversial that these equitable principles can entitle the receivers
to recover their remuneration and expenses out of the lienable property [4].
72
His Honour also made it plain that 'lienable property' may include
assets and the future proceeds of sale. This extension is logically
consistent.
73
In this case the Receivers asserted an indemnity and lien under the
'salvage' principles adopting the broad interpretation of that term as
endorsed in Thackray v Gunns Plantations.
74
The Receivers pointed out they took possession of a wide range of
Goods and in order to identify or attempt to identify the assets of Arcabi
they had no real option but to collate information, investigate the many
claims of Investors and preserve and protect the Goods whilst the
enquiries were undertaken. Without these steps they were not in a
position to carve out and return the Goods the subject of the application.
They were continuing their enquiries with respect to the remaining Goods
in their possession and were attempting to establish title. The work, it was
submitted, related to salvage in that the company items could not be
separated and identified without ownership of all assets being considered.
75
As at the date of the application it was unknown whether there would
be a return to unsecured creditors. If there is the unsecured creditors will
benefit from the work undertaken by the Receivers. But even if there is
ultimately no benefit to unsecured creditors a lien is not denied. The
Receivers are acting appropriately in putting in place a collection regime
so that the expenses of taking delivery of Goods now identified as
belonging to Investors are borne in the main by those Investors and not
the Receivers. The work of responding to Investor enquiries and locating
Goods about which enquiries were made necessarily involved the running
of the storage business.
76
In the circumstances it could in my view properly be said the costs
and expenses incurred and the associated remuneration of the Receivers
which relate to the work undertaken in identifying and returning stock
which was at the Premises at the time of the plaintiff's appointment was
work properly forming part of the care and preservation of the property of
Arcabi. As such the Receivers are entitled to be indemnified for such
work and are entitled to assert a lien to secure such indemnity.
77
The Receivers also claimed an indemnity for insurance payments
they have made. The Receivers determined it was not feasible at the time
of their appointment to arrange Arcabi's insurance position so as to ensure
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only Goods the property of Arcabi were insured. The task of identifying
the Arcabi owned Goods took months. Investors who actually owned the
Goods benefited from that course - their assets were preserved and
protected by insurance and in the case of Goods the property of a
self-managed superannuation fund there was compliance with statutory
obligations to insure collectables. The Receivers' conduct also protected
the company from claims against it should Goods have been lost or
destroyed. It was a reasonable and prudent course of action.
78
Furthermore the Receivers acted appropriately in relying on
valuation information they had to hand to top up the insurance cover. It
would not have been reasonable to incur the cost of obtaining a separate
valuation for each of the Goods. When specifically requested by an
Investor to cease insurance cover for an identified item the Receivers did
so and premiums were reduced accordingly. The Receivers also reduced
their liability for insurance premiums by allocating a proportion of the
post-receivership top up premiums to those Investors who were identified
as owning the Goods and did not inform the Receivers to cease cover.
The Receivers had a prima facie case for requesting such payments on a
contractual basis where Investors expressly asked for insurance to
continue and otherwise on a restitutionary basis.
79
Based upon all the available evidence I was satisfied the Receivers
established a prima facie entitlement to an indemnity secured by an
equitable lien for the insurance costs. I should also add in reaching this
conclusion I relied upon the decision in Thackray v Gunns Plantations
[87] - [92] where insurance premiums were recognised as a proper
expense in preserving assets.
80
For these reasons I made the following orders:
1.
Each of the goods identified in Annexures SGT4 and SGT7 of the
supplementary affidavit of Simon Guy Theobald sworn
13 December 2013 are the property of the person who is listed as
the 'owner' of the goods in that annexure (Mixed Storage Goods)
and that the Mixed Storage Goods are able to be collected from the
plaintiffs by the owner of the Mixed Storage Goods (being the
person listed in either of Annexures SGT4 and SGT7) or their
authorised representative of the owner by the method outlined in
these directions.
2.
Each of the goods identified in Annexure SGT13 of the
supplementary affidavit of Simon Guy Theobald sworn
13 December 2013 are the property of the person listed as the
'owner' of the goods in that annexure (Consignment Only Goods)
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and that the Consignment Only Goods are able to be collected from
the plaintiffs by the owner of the Consignment Only Goods (being
the persons listed in Annexure SGT13) or their authorised
representative by the method outlined in these orders.
3.
81
The Mixed Storage Goods and Consignment Only Goods shall be
collected from the premises at 12 Sanford Road, Albany occupied
by Arcabi (Premises) at a time and date authorised by the
plaintiffs, by:
(a)
the persons identified in Annexures SGT4, SGT7 and
SGT13 (as appropriate) of the supplementary affidavit of
Simon Guy Theobald sworn 13 December 2013, who
show appropriate identification to the plaintiffs' staff; or
(b)
the authorised representative of the person described in
paragraph 4(a)
above,
who
shows
appropriate
identification and written proof of authority to the
plaintiffs' staff.
4.
The plaintiffs are justified in requesting at the time of delivery of
goods under paragraph 4 of these orders that those investors who
indicated that they wished Arcabi to arrange for insurance of their
Mixed Storage Goods or Consignment Only Goods, are to provide
payment to the plaintiffs for the insurance costs in the amount of
their proportion of the premium, as calculated in accordance with
annexure SGT1 of the supplementary affidavit of Simon Guy
Theobald sworn 13 December 2013.
5.
The plaintiffs are justified, and otherwise acting reasonably, in
asserting an entitlement to an indemnity secured by an equitable
lien against the assets of Arcabi (including proceeds of the sale of
company-owned items), for the payment of their costs, expenses
and remuneration relating to the payment of insurance over all the
coins or bank notes stored at the Premises (Goods) (regardless of
ownership) and all inquiries and assessments necessary to ascertain
the ownership of the Goods, ascertain any other rights with respect
to the Goods and facilitate distribution of the Goods.
6.
The plaintiffs' costs of this proceeding be paid out of the assets of
Arcabi as an expense of the realisation of the assets of Arcabi.
7.
There be liberty to apply, including by any person affected by these
Orders.
At the hearing in May I made the following orders:
1.
The Plaintiffs acted reasonably and were justified in returning in
January 2014 each of the goods identified in Annexure SGT2 of the
April Affidavit to the persons listed in that annexure.
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2.
Each of the goods identified in Annexures SGT1 and SGT2 of the
affidavit of Simon Guy Theobald sworn 13 May 2014 (Mixed
Storage Goods) is the property of the person listed as the 'owner'
of the goods in that annexure and can be collected from the
plaintiffs by its owner (as listed in either of those annexures) or
their authorised representative by the method outlined in these
directions.
3.
Each of the goods identified in Annexure SGT3 of the affidavit of
Simon Guy Theobald sworn 13 May 2014 (Consignment Only
Goods) is the property of the person listed as the 'owner' of the
goods in that annexure and can be collected from the plaintiffs by
its owner (as listed in Annexure SGT3) or their authorised
representative by the method outlined in these directions.
4.
Each of the goods identified in Annexure SGT8 of the affidavit of
Simon Guy Theobald sworn 24 April 2014 is the property of the
person listed as the 'owner' of the goods in that annexure (Income
Goods) and can be collected from the plaintiffs by its owner (being
the persons listed in Annexure SGT8) or their authorised
representative by the method outlined in these directions.
5.
Each of the goods identified in Annexure SGT6 of the affidavit of
Simon Guy Theobald sworn 24 April 2014 is the property of
Mr Scheer (Scheer Goods) and can be collected from the plaintiffs
by Mr Scheer or his authorised representative by the method
outlined in these directions.
6.
Each of the items identified in Annexures SGT10 to SGT13 of the
affidavit of Simon Guy Theobald sworn 24 April 2014 is the
property of the investors who have supplied statutory declarations
to that effect (Statutory Declaration Items) and is able to be
collected from the plaintiffs by those persons named in the
statutory declarations, or their authorised representatives by the
method outlined in these directions.
7.
The plaintiffs are justified, and are otherwise acting reasonably in
considering that the Goods (as identified in Annexure SGT16 of the
affidavit of Simon Guy Theobald sworn 24 April 2014 and
Annexure SGT4 of the affidavit of Simon Guy Theobald sworn
13 May 2014) (Goods Without Sufficient Documentation) are
the property of the investors named in those annexures and can be
collected from the plaintiffs by those persons or their authorised
representative by the method outlined in these directions in
circumstances where:
(a)
those investors have contacted the plaintiffs and stated that
they have Goods or items stored with Arcabi; and
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(b)
8.
the plaintiffs have confirmed that the records of Arcabi
document that such investors have Goods or items stored
with Arcabi.
The Mixed Storage Goods, Consignment Only Goods, Income
Goods, Scheer Goods, Statutory Declaration Items and Goods
without Sufficient Documentation shall be collected from the
premises at 8 Sanford Road, Albany (Albany Premises) at a time
and date authorised by the plaintiffs, by:
(a)
the persons identified in Annexures SGT1 to SGT4 of the
affidavit of Simon Guy Theobald sworn 13 May 2014 and
Annexures SGT8, SGT6, SGT16 and the statutory
declarations in Annexures SGT10 to SGT13 of the
affidavit of Simon Guy Theobald sworn 24 April 2014 (as
appropriate), who show appropriate identification to the
plaintiffs' staff; or
(b)
the authorised representative of the person described in
8(a) above, who shows appropriate identification and
written proof of authority to the plaintiffs' staff.
9.
The plaintiffs are justified in requesting at the time of delivery of
goods under paragraph 8 of these directions that those investors
who indicated that they wished Arcabi to arrange for insurance of
their Mixed Storage Goods, Consignment Only Goods, Income
Goods, Statutory Declaration Items or Goods without Sufficient
Documentation, are to provide payment to the plaintiffs for the
insurance costs in the amount of their proportion of the premium,
as calculated in accordance with annexure SGT1 of the affidavit of
Simon Guy Theobald sworn 24 April 2014.
10.
The plaintiffs are justified in treating those goods of third parties
that remain on the Albany Premises and remain unclaimed as
described in Annexure SGT5 of the affidavit of Simon Guy
Theobald sworn 13 May 2014 (Unclaimed Goods) as the property
of Arcabi in circumstances where the plaintiffs have:
(a)
caused advertisements to be published advising of the
intended sale of Unclaimed Goods and have received no
relevant response from any person claiming an interest in
such Unclaimed Goods by the date of these orders;
(b)
written to those investors who are listed in Arcabi's
records as the owner of the Unclaimed Goods including by
letter by registered post (at the address recorded in
Arcabi's records and the address recorded with the
Australian Electoral Commission) and have received no
relevant response by the date of these orders; and
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(c)
11.
82
received notification from the Albany Police that the
Unclaimed Goods have not been reported lost or stolen.
Subject to order 10 above, the plaintiffs are justified in:
(a)
selling the Unclaimed Goods by way of auction;
(b)
following such sale, issuing a notice to those persons listed
in the records of Arcabi as the owner of the Unclaimed
Goods, advising them of the intended sale of the
Unclaimed Goods and the terms upon which the net sale
proceeds are to be held by the plaintiffs;
(c)
holding the sale proceeds in a separate account and
applying them:
(i)
towards the payment of the plaintiffs' costs
incurred in connection with identifying,
attempting to locate the owner of and realising
the Unclaimed Goods;
(ii)
towards any claim in respect of the Unclaimed
Goods which, in the opinion of the plaintiffs, is a
valid claim; and
(iii)
after a period of six months from the sale,
distributing the balance of the Sale Proceeds in
the ordinary course of the receivership.
12.
The plaintiffs' costs of this proceeding be paid out of the assets of
Arcabi as an expense of the realisation of the assets of Arcabi.
13.
There be liberty to apply, including by any person affected by these
Orders (on 48 hours' notice).
It can be seen the orders made in May 2014 in many ways rounded
out the orders made in December 2013. However the orders sought did
give rise to their own problems. In broad terms the Receivers sought
directions with respect to:
(a)
the remainder of reconciled Mixed Storage Goods and
Consignment Only Goods;
(b)
insurance contributions;
(c)
Goods belonging to Mr Scheer;
(d)
the return of goods where there is little supporting evidence as to
ownership; and
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(e)
Unclaimed Goods.
83
The May 2014 application was supported by two further affidavits of
Mr Theobold one sworn 24 April 2014 and the other sworn 13 May 2014.
I will refer to these affidavits as the 'April affidavit' and the 'May
affidavit'.
84
At pars 12 - 21 of the April affidavit there is a list of Investors who
the Receivers were satisfied were entitled to Mixed Storage Goods.
Appearing as annexures SGT1 and SGT2 to the May affidavit is a list of
those Investors. It was appropriate orders be made their Goods be
available for collection by the identified Investors and I ordered
accordingly.
85
There were two Investors who had unusual arrangements and whose
inclusion in the schedules requires further explanation. First it appears
that one Investor's Goods were substituted for another in or about
November 2011. The Arcabi records correspond to the recollection of the
Investor, Mr Harry Capararo.
Mr Capararo prepared a statutory
declaration which appears as annexure SGT9 to the April affidavit. While
his situation was slightly unusual the Receivers took the view no separate
direction was required in his case. His Goods was included in SGT1 of
the May affidavit as a Storage Only Goods.
86
Second there was one Investor, Mr Andrew Smithson, whose 'Maxi'
sheet could not be located by the Receivers. The Receivers sought
directions that they were justified in returning the Goods belonging to
Mr Smithson however they indicated they would rely on the liberty to
apply should those items not in fact be at Arcabi's Premises.
Mr Smithson's Goods were included in SGT2 of the May affidavit.
87
At pars 22 - 25 of the April affidavit Mr Theobold describes further
Investors who had Consignment Only Goods. The same analysis applies
to them as to other Investors who had Consignment Only Goods.
Accordingly it was appropriate to make orders in the same terms.
88
So far as Mr Scheer is concerned in the December application I dealt
with a transaction between him and Arcabi which occurred on or around
19 - 20 August 2011. A previous transaction has occurred between
2 - 7 February 2010. This transaction involved six bank notes ranging in
face value from 10 schillings up to £100. These notes are described in the
evidence as 'an almost complete set'. What was missing was a £10 note.
That led to a unique arrangement between Mr Scheer and Arcabi.
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89
The Receivers have in their possession a document marked
'Consignment' dated 7 February 2010. This document evidences a mixed
exchange and 'profit sharing' arrangement whereby the almost complete
set belonging to Mr Scheer was to be held on consignment to be offered
for sale together with a £10 note the property of a director of Arcabi.
90
The Receivers took the view the arrangement with Mr Scheer
comprised a consignment. The title to the Goods remained with
Mr Scheer the person who supplied them. Arcabi had no obligation to
pay Mr Scheer for the Goods until they were sold to a third party.
Mr Scheer set a price for the Goods. Although there is no evidence as to
whether Mr Scheer had a right to resume possession of the Goods there is
no suggestions that he could not. The position of Mr Scheer is therefore
no different to other Investors with Consignment Only Goods.
Accordingly Arcabi does not have an interest in the Goods the subject of
the arrangement and accordingly the Receivers were justified in returning
the Goods to Mr Scheer.
91
In his first affidavit Mr Theobold refers to 'Income Goods'. He says
this involved Investors who had entered into an arrangement with Arcabi
whereby they would receive a certain sum linked to the projected increase
in value of the Goods each month: see par 47(g). Income Goods are a
subset of the Mixed Storage Goods. Without going into detail it would
seem some Investors have received what Mr Theobold describes as an
'overpayment': see par 36 of the April affidavit. Where there was no such
overpayment the same reasoning applied to Income Goods as applied to
other Mixed Storage Goods. Accordingly the Receivers acted properly in
returning to Investors the Income Goods described in SGT8 of the April
affidavit. No steps have yet been taken in relation to Goods where there
appears to be an overpayment.
92
Further directions were sought with respect to Goods where in the
Receivers' view there was insufficient information about ownership. In
relation to certain of the Goods, Investors supplied the Receivers with
limited information which substantially conformed with information
recorded in Arcabi's records. Those records in these cases did not
positively identify the Goods belonging to the Investors. In Re One.Tel
Networks Holding Pty Ltd (2001) 40 ACSR 83, Austin J made an order
which was largely in the same terms as the order proposed by the
Receivers in this case. By way of background in the One.Tel case the
receiver and manager sought an order that he would be justified in
compromising disputes with the liquidator and entering into an agreement
to settle the dispute when there was some uncertainty as to the ownership
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of certain property. Austin J was not prepared to make the order sought.
His Honour was prepared to make an narrower order to the effect the
controller was justified in making a decision to enter into the agreement
on the basis of information obtained and enquiries made. His Honour said
In my opinion it is appropriate to give a direction in these terms. To do so
does not require the court to participate in the plaintiff's commercial
decision to enter into the agreement. It does require the court to form the
view that it would not be reasonable to require the plaintiff to take further
steps, by way of investigation and inquiry, to clarify the nature of the
assets and liabilities of the One.Tel Network Group companies, the
ownership of disputed assets, the prospect of the joint liquidators
recovering any assets on unfair preference grounds ... [41].
93
In this case the Receivers were not requesting the court to assess the
commercial merit of returning Goods to Investors who had not supplied
sufficient information. The Receivers had made multiple attempts and
sought on numerous occasions to obtain further information from
Investors. They had determined there was nothing more they could
reasonably do. They did not want to continue to store the Goods for an
indefinite period. They reached the view most of the Investors concerned
had simply misplaced or forgotten information or were never provided
with information at the time of purchase.
94
Accordingly it was appropriate to make directions that the Receivers
were justified and acting reasonably in returning Goods to those Investors
who had supplied the Receivers with limited information.
95
The May application dealt with a new category of Goods referred to
as the 'Unclaimed Goods'. These Goods were defined as Goods where
despite the best efforts of the Receivers and their staff to locate the owner
of each and every item left in the custody of Arcabi they had been unable
to contact the owners of certain Goods that remained unclaimed. These
remained in the possession of the Receivers. The purpose of seeking
directions with respect to the Unclaimed Goods was to protect the
Receivers from potential future legal action by the owners of the
Unclaimed Goods.
96
It would appear there are no decided cases where orders have been
made similar to those orders sought by and made in favour of the
Receivers in this case.
97
What was unique about this case was the directions for the disposal
of Unclaimed Goods was sought by Receivers. There are cases where
administrators have made such applications.
One such case is
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International Art Holdings Pty Ltd (Administrators Appointed) v Adams
[2011] NSWSC 164. This was a case concerning unclaimed art work.
The application was made by the administrator. Ward J said:
However, Mr Arnautovic, not unreasonably, has expressed the concern
that if he were to sell a piece of artwork where no claim is currently made
then he may later be sued by an investor who can establish ownership to
that piece of artwork. He has deposed to the belief that if such artwork is
not sold by him then he will have no alternative but to disclaim interest in
the artwork and that this may also give rise to claims by investors with
costs incurred to the detriment of the creditors of the company.
It cannot be in the interest of creditors for the unclaimed artworks to be
disclaimed (if there is no person asserting a better title to them than the
administrator) or stored indefinitely at a cost to the company pending any
such claim being made. Whether the point has been reached at which an
investor may be said to have abandoned any such claim is not, however,
clear [117] - [118].
98
Her Honour went on to make directions to facilitate the administrator
as court appointed receiver of the art works taking such steps as would be
appropriate so as to satisfy himself that an owner had abandoned any
claim to the art work. Her Honour said:
It seems to me that, provided there is adequate publication of the intention
of Mr Arnautovic to sell the unclaimed artwork (such that the court can be
confident that all reasonable steps have been taken to draw to the attention
of persons who may consider they have a claim to the artwork in question
the need to articulate such a claim), the view could properly be taken that
there is no other person with better title than the company (or any such
person has abandoned any such claim) [121].
99
In Re Carson; Hastie Group Ltd (No 3) [2012] FCA 719 the
administrators of a group of companies were left with 3,684 items of
'unclaimed' plant and equipment. There were 995 registrations noted
against the companies in the Personal Properties Securities Register
(PPSR). The administrators in the Hastie Group formed the view that
given the ongoing costs and the efforts undertaken by the administrators
to establish the existence of all claimants in relation to plant and
equipment it was in the best interests of the companies and their creditors
the administrators should seek a direction pursuant to s 447D of the
Corporations Act that the unclaimed plant and equipment be sold and the
proceeds from sale be placed in an escrow account for a period of time.
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Yates J noted that the administrators:
100
(a)
wrote to all creditors who had an interest recorded against the
companies in the PPSR and each creditor was requested to provide
notification to the administrators of its interest as a matter of
urgency;
(b)
wrote to financiers who appeared from the companies' records to
have a secured claim in respect of plant and equipment. Each
financier was asked to consent to the sale of plant and equipment
referrable to their interest. The administrators also stated in the
letter that if no response was received prior to a certain date the
administrators would assume the financier's rights did not include
any interest in the plant and equipment in the administrators'
possession' and
(c)
caused an advertisement to appear in The Australian which:
(i)
requested that the creditors notify the administrators of
claims to items in possession of the Hastie entities before a
specified time; and
(ii)
provided that if they did not contact the administrators
within that time the administrators would assume that the
rights in relation to the plant and equipment in the
administrators' possession were abandoned or waived.
In the application before Yates J the administrators proposed to:
101
(a)
place a further advertisement in The Australian advising of the
proposed auction of the unclaimed plant and equipment, together
with the notification that appeared in the previous newspaper;
(b)
instruct an auctioneer to conduct auction sales;
(c)
hold the net proceeds of sale in a separate escrow account for a
period of three months following the completion of each sale;
(d)
immediately upon the completion of the sale process write to all
known creditors advising them of the realisation of assets and the
three month time period during which proceeds would be held in
escrow; and
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(e)
after the three month period the administrators would then apply
the proceeds of sale in the ordinary course of the administration of
the companies.
102
Yates J was satisfied the administrators had faced genuine and
substantial difficulties in identifying those items of plant and equipment
that might be subject to a security interest and other claims and the
administrators had taken a number of steps to attempt to clarify that
question as best they could. Yates J granted the directions the
administrators sought.
103
In Re Renovation Boys Pty Ltd (Administrators Appointed) [2014]
NSWSC 340 the administrators sought leave under s 442C(2)(c) of the
Corporations Act to dispose of property of the company which:
(a)
was not collected by some customers (even if the court made
orders for such stock to be made available to them); and
(b)
was subject to a security interest under the PPSA,
after 14 days of the date of the directions. The orders were to be
conditional on the proceeds of sale being subject to the provisions of
pt 5.3A of the Corporations Act.
104
The administrators in Renovation Boys relied on s 442C(1) of the
Corporations Act which provides that an administrator must not dispose
of property of the company that is subject to a security interest subject to
the qualification that such a disposal may be made with leave of the court.
105
Black J was satisfied that such arrangements were appropriate. He
pointed out there were limited funds available to the administrators and
the costs of the company continuing to occupy premises and employ staff
to deal with the relevant property beyond the two week period was
unreasonable. He was further satisfied it was appropriate to deal with the
proceeds in accordance with pt 5.3A of the Corporations Act.
106
Renovation Boys is an example of the application of s 442C and can
perhaps be confined to administrators. But in neither International Art
Holdings nor in Hastie Group was reliance placed upon that section. In
International Art Holdings Ward J was not satisfied on the evidence
before her that if a third party was in fact the owner their interests were
protected. Her Honour instead appointed the administrator as receiver of
the unclaimed property and put in place a regime so that he could
undertake further enquiries and satisfy himself as to the goods being
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abandoned before selling them for the benefit of the company's creditors.
Her Honour clearly anticipated that provided such steps were taken the
administrator could treat the goods as abandoned and proceed on the basis
that no party had better rights to them than the company.
107
Perhaps surprisingly in Hastie Group Yates J did not refer to s 442C.
That does tend to suggest relief was granted and directions made pursuant
to the general power of controllers to seek directions from the court under
the Corporations Act.
108
I can see no reason why in principle s 424 cannot be utilised to
provide an out of court receiver with appropriate protection in their
dealings with goods in their custody. Of course steps need to be taken to
ensure the interests of any owner are protected - steps similar to those
taken in International Art Holdings and in Hastie Group. But subject to
that qualification there would seem to be no reason why the general power
conferred by s 424 should not be utilised.
109
The Receivers had gone to great lengths to contact the Investors who
were recorded in the records of Arcabi as owners of the Goods. They had
sent approximately nine letters to the addresses recorded in Arcabi's books
and records requesting that the Investors contact the Receivers with
information to support the claims to the Goods held by Arcabi. They had
also published advertisements in The West Australian and The Australian
requesting that persons with potential interests in the Goods contact the
Receivers. The letters warned the Investors if they did not respond the
Receivers would assume they had no interest in the Goods or that they had
abandoned any interest in the Goods. The Receivers also contacted the
Commissioner of Police to enquire whether the Unclaimed Goods had
been reported lost or stolen. Despite all their efforts no claim for these
Goods had been made.
110
The regime put in place by Ward J in International Art Holdings
was directed at establishing facts from which it could be inferred there
was an intention to abandon property. As that was essentially what the
Receivers were attempting to do in this case some consideration of what is
meant by 'abandonment' at common law is necessary.
111
Abandonment is a 'giving up, a total desertion, an absolute
relinquishment' of private goods by the former owner. This definition of
the term was adopted by Ipp J in Keene v Carter (1994) 12 WAR 20. In
that case a person was charged with receiving stolen property by
purchasing a gold nugget from an adolescent girl who claimed that she
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had found it at a train station. The magistrate found that there was no case
to answer as there was no evidence that the accused knew the nugget had
been obtained by way of an indictable offence. Ipp J considered that the
accused had an arguable defence that the nugget had been abandoned,
substantially by reason of the lack of evidence that the original owner had
attempted to ascertain its whereabouts and absence of evidence regarding
the nature and value of the nugget.
112
In Sachs v Miklos [1948] 1 All ER 67 a bailee gratuitously stored
furniture in her house for a bailor who did not collect the furniture after
written requests to do so. The bailee sold the goods. The bailor returned
and finding the goods were gone issued an action for detinue and
conversion. The English Court of Appeal found the claim made out. In
the course of his reasons Lord Goddard CJ said:
If a gratuitous bailee writes to the bailor and says: 'I am no longer willing
to hold your property. Please remove it,' and the bailor makes no answer
and takes no step, and if that letter is followed up by another, which he
receives, saying in effect: 'As you have not answered my letter and taken
any steps to remove your property, please understand that I shall sell it if
you do not remove it or tell me what to do with it,' and again there is no
answer, it might be that a court could infer that the owner of the property
was so disinterested in it that he was impliedly assenting to the sale. There
are, of course, certain difficulties in the way of finding that because of the
doctrine that silence does not give consent, but, for the reasons which I
shall develop in a moment, the question of receipt or non-receipt of these
letters has a much more important bearing on the question of the measure
of damages in this case (68 - 69).
113
While acknowledging the difficulties presented by the decision in
Sachs counsel sought to distinguish it on the facts of this case. She
pointed out that in Sachs little effort was made to contact the owner. In
this case numerous attempts were made to contact the Investors. What
more, it might be asked, could the Receivers have reasonably been
expected to do to find the owners of the Unclaimed Goods. The answer is
in my view nothing. Considerable time and cost has been expended in
attempting to locate the owners of the Unclaimed Goods. Enough is
enough. The Receivers were entitled to regard the Goods as abandoned
and take the steps they proposed.
114
As an alternative to directions under s 424 the Receivers sought to
rely on the Disposal of Uncollected Goods Act 1971 (WA) (DUGA).
Given that I made directions under s 424 of the Corporations Act it is not
strictly speaking necessary for me to deal with this aspect of the
application. However for the sake of completeness I should deal with the
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matter. It may perhaps be suggested given the availability of the DUGA it
may be thought reliance upon its provisions was preferable to making
directions. In my view, in this case at least, that was not so.
115
The DUGA applies to all cases of bailment except those bailments,
possession or other custody to which an Act in the schedule to the DUGA
apply. The only potentially relevant Act contained in the schedule is the
Warehousemen's Liens Act 1952 (WA) (WLA). The term 'warehouseman'
is defined in the WLA as 'a person lawfully engaged in the business of
storing goods as a bailee for hire or reward'. Arcabi satisfies that
requirement. The central premise of the WLA is the creation of a
'warehouseman's lien'. There is no evidence that Arcabi ever had a
warehouseman's lien for the purposes of the WLA as Arcabi did not give
notice of a warehouseman's lien within three months after the bailors
theoretically or in fact 'deposited' the Goods. Under the WLA if no such
notice is given any warehousemen's lien is void on and from the
expiration of three months from the date of deposit of the goods. That
time has long since passed in relation to Arcabi. Therefore Arcabi does
not have a warehouseman's lien over the Investors' Goods stored by it.
116
But that is not the end of the matter. Equivalent legislation regarding
unclaimed goods exists in various States across Australia with limited
differences which are of no relevance for present purposes. The Victorian
and Northern Territory versions of the legislation employ the word
'receiver' to denote a person who takes possession of goods under a
bailment. This is not a receiver as defined in the Corporations Act. It is
worthy of note equivalent legislation was not referred to in Hastie Group,
Renovation Boys or in International Art Holdings.
117
The DUGA itself provides that it shall not be construed as derogating
from the rights or powers of any person other than a bailor of goods to
which the Act applies conferred by another statute or common law and all
such rights and powers may continue to be exercised in the same manner
as if the Act had not been passed. It is clear then the Receivers were not
obliged to comply with the DUGA. They could seek to utilise it but they
were not obliged to do so. There can be no suggestion they were not able
to apply for directions under the Corporations Act and their right to do so
was not limited by the DUGA.
118
In any event the Receivers have acted in a manner largely consistent
with the DUGA. The DUGA provides that in relation to a bailment of
goods other than proscribed goods of a value exceeding $300 by the
bailee in the course of business for storage or custody and the bailor fails
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to take redelivery of the goods the bailor may make an application to the
court for an order to sell or otherwise dispose of the goods: see s 18 and
a 19(1). The DUGA proscribes that prior to the bailee making such an
application the bailee must give a notice in writing to the bailor that the
goods are ready for redelivery as proscribed. Then six months after the
first notice and not less than one month before an application notice must
be given to the bailor, every other person known to the bailee as having a
claim to interest in the goods and the Commissioner of Police of the
bailee's intention to make an application. Then at least one month before
the bailee makes the application it must cause to be published in a daily
newspaper in Perth and circulating throughout the State and in the
Government Gazette a notice of the bailee's intention to make application.
These matters are covered in s 19(2)(a) and s 26 of the DUGA.
119
Once notices have been issued and an application is made to a court
an order for sale or other disposal may be granted. In making an order the
court is to specify the amount it considers reasonable in respect of the
bailee's outstanding charges and may specify a rate of storage charge for
the goods which may be incurred in respect of costs of or in connection
with the sale or other disposal of the goods. Once the goods are sold a
record must be prepared including the date and place of sale and the gross
proceeds. This is filed with the court. Where the gross proceeds of sale
are less than the cost specified by the order and any subsidiary charges
and costs the excess is recoverable by the bailor as a debt due to him by
the seller. If the amount is not recovered by the bailor within 28 days the
seller must deposit the sum with the Treasurer of the State. The Treasurer
may pay any sum deposited with him to a person who appears to be
entitled to it.
120
The Receivers took the view that following the process outlined
under the DUGA was unnecessarily burdensome. Clearly they are right.
In spirit at least they have followed the procedure outlined in the DUGA.
Accordingly I made the directions sought.
121
In relation to the insurance the approach is consistent with the orders
made in December. Nothing more need be said.
122
The Receivers also sought an indemnity supported by an equitable
lien for the balance of premiums paid after deducting all contributions
from Investors. This ran up against a problem in relation to the
Superannuation Industry (Supervision) Regulations 1994 (Cth)
(SIS Regulations). These regulations require trustees of regulated
superannuation funds not to give any charges over or in relation to fund
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[2014] WASC 310
MASTER SANDERSON
assets. In International Art Holdings Ward J considered this regulation
in relation to a proposed order that an equitable lien be granted over
certain art works. One interested participant argued that if she, as trustee
of a superannuation fund, allowed an equitable lien to be imposed over the
superannuation fund assets she would not satisfy this requirement. Ward
J considered that the particular regulation applied only to the imposition
of a charge or lien by the trustee of a superannuation fund and is
distinguishable from the court imposition of an equitable lien. In my view
that decision is not to be doubted. I see no reason to refuse to make
directions in relation to the lien based upon the SIS Regulations.
123
On or about 5 May 2014 the Receivers made a commercial decision
to move the Goods from the Premises at 12 Sanford Road, Albany to
8 Sanford Road, Albany, the premises of South Coast Security. This was
done to reduce the storage and security costs incurred in holding the
Goods. The SIS Regulations provide that that trustee commits an offence
if they make a decision relating to the storage of the item without a
written record of the reasons for that decision.
124
The Receivers took the view that such movement ought not be
considered a breach of the proscribed superannuation rules for
collectables by reason of the same analysis with respect to a lien - that is,
it was not the decision of the investors or trustees themselves to move the
goods. Once again I am satisfied that is the proper interpretation of the
SIS Regulations.
125
For these reasons I made the orders sought by the Receivers.
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