FEDERAL COURT OF AUSTRALIA

Morgan, in the matter of Brighton Hall Securities Pty Ltd (in liq) (No 2) [2013] FCA 1228

IN THE MATTER OF BRIGHTON HALL SECURITIES PTY LTD (IN LIQUIDATION) (ACN 096 576 868)

THE COURT DECLARES AND ORDERS THAT:

1.    The answers to the questions in the Plaintiff's application are as follows:

1.1    Ignoring clauses 4.4 and 14.2 of professional indemnity insurance policy number 74 0019312 PLP (Policy) held by Brighton Hall Securities Pty Ltd (in liquidation) ACN 096 576 868 (Brighton Hall) with Allianz Australia Insurance Limited ACN 004 133 046 (Allianz), are claims made in Federal Court of Australia proceedings WAD 174 of 2009 (Lawrence Proceeding) one 'claim' or multiple 'claims' within the meaning of the Policy? Multiple claims.

1.2    If the answer to 1.1 is multiple 'claims', are the claims made in the Lawrence Proceeding ‘claims that arise [or claims arising] from any one act, error or omission, or series of related acts, errors or omissions’ for the purposes of either clause 4.4 or clause 14.2 of the Policy? No.

1.3    Ignoring clauses 4.4 and 14.2 of the Policy, are claims made in Federal Court of Australia proceedings VID 162 of 2008 (Casey Proceeding) one 'claim' or multiple 'claims' within the meaning of the Policy? Multiple claims.

1.4    If the answer to 1.3 is multiple 'claims', are the claims made in the Casey Proceeding ‘claims that arise [or claims arising] from any one act, error or omission, or series of related acts, errors or omissions’ for the purposes of either clause 4.4 or clause 14.2 of the Policy? No.

1.5    If the answer to 1.1 and 1.3 is multiple 'claims', are the claims made in the Lawrence Proceeding and the Casey Proceeding ‘claims that arise [or claims arising] from any one act, error or omission, or series of related acts, errors or omissions’ for the purposes of either clause 4.4 or clause 14.2 of the Policy? No.

1.6    Is the Plaintiff required to call for informal proofs of debt and make decisions (whether final or preliminary) admitting (or rejecting) the claims made in the Lawrence Proceeding and the Casey Proceeding, prior to seeking directions? No. Further, the Plaintiff is justified, and it is otherwise reasonable for the Plaintiff, to:

(a)    proceed on the assumption that for the purposes of each of the Lawrence Proceeding and the Casey Proceeding, there may be liability to the respective group members in the case of the Lawrence Proceeding and liability to State Trustees Limited in the Casey Proceeding, subject to the Plaintiff being satisfied as to the entitlement of each particular claimant; and

(b)    give written notification to other potential claimants on the sum of $2,000,000.00 paid by Allianz to Brighton Hall pursuant to the Policy and accrued interest (Insurance Proceeds), who were excluded from the Lawrence Proceeding and were not included in the Casey Proceeding, to give them the opportunity to lodge claims they may have with respect to the Insurance Proceeds, and determine the entitlement of any such claimants.

1.7    Does section 562 of the Corporations Act 2001 (Cth) entitle the Plaintiff to deduct, from the Insurance Proceeds, the Plaintiff's fees and expenses (including remuneration) incurred in determining the validity of claims in connection with the distribution of the Insurance Proceeds (including calling for and adjudicating on proofs of debts) and incurred in distributing the Insurance Proceeds to the rightful claimants? The Plaintiff is justified, and otherwise acting reasonably, in asserting an entitlement to an indemnity, secured by an equitable lien upon the Insurance Proceeds, for his fees and expenses (including remuneration) relating to the getting in of the Insurance Proceeds and all inquiries and assessments necessary to ascertain the parties to whom payment is to be made and distributing the Insurance Proceeds. It is appropriate for the Plaintiff to make an application to the Court for approval of the remuneration paid to him. The Court also finds, although it is unnecessary to do so, that the Plaintiff is entitled pursuant to s 562 of the Corporations Act to deduct from the Insurance Proceeds the Plaintiff’s fees and expenses (including remuneration) relating to the getting in of the Insurance Proceeds and all inquiries and assessments necessary to ascertain the parties to whom payment is to be made and distributing the Insurance Proceeds.

2.    The Plaintiff’s fees and expenses (excluding remuneration to be paid to the Plaintiff) relating to the getting in of the Insurance Proceeds and all inquiries and assessments necessary to ascertain the parties to whom payment is to be made and distributing the Insurance Proceeds be paid from the Insurance Proceeds.

3.    Within 28 days after the Plaintiff has adjudicated on claims and prior to distributing the Insurance Proceeds in the liquidation of Brighton Hall, the Plaintiff shall file and serve on the Australian Securities and Investments Commission an application to the Court for approval of the remuneration to be paid to the Plaintiff.

4.    The Plaintiff's costs of and incidental to this application be paid from the Insurance Proceeds.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF BRIGHTON HALL SECURITIES PTY LTD (IN LIQUIDATION) (ACN 096 576 868)

REASONS FOR JUDGMENT

introduction

1    In Morgan, in the matter of Brighton Hall Securities Pty Ltd (in liq) [2013] FCA 970 (the Substantive Judgment) I gave reasons for answers given to various questions raised by the liquidator (Mr Morgan) pursuant to s 511 of the Corporations Act 2001 (Cth) (CA).

2    Mr Morgan has prepared a minute of proposed orders reflecting the answers given (the Minute). The parties are mostly agreed on the terms of the Minute. There remains debate about two issues.

3    The first debated issue is whether the words ‘although it is unnecessary to do so’ should appear in paragraph 1.7 of the proposed minute and the orders which I propose making.

4    Mr Morgan opposes the inclusion of those words. Nevertheless, it seems to me that there is force in the submission made for the Australian Securities and Investments Commission (ASIC) that those words should appear in paragraph 1.7. I say this principally because I expressly used those words in the reasons for arriving at my decision and intended to do so. I accept Mr Morgan’s submission that such words would not ordinarily appear in orders made by the Court but, in my view, s 511 CA falls into a different category. It is an unusual provision under which the Court, in effect, gives advice by force of statute. It is a more accurate account of the advice given, as indicated in the Substantive Judgment, to include those words.

5    The second area of dispute concerns paragraph 2 of the Minute in which Mr Morgan seeks orders that ‘the Plaintiff’s fees and expenses (excluding remuneration to be paid to the Plaintiff) be paid from the Insurance Proceeds’. In relation to this, ASIC submits that the appropriate wording should be ‘the Plaintiff’s expenses of or incidental to getting any Insurance Proceeds (excluding remuneration to be paid to the Plaintiff) be paid from the Insurance Proceeds’. ASIC argues that such wording reflects the terms of s 562 CA. The order is only provided in order to cover the unlikely situation that Mr Morgan makes no application for wider relief pursuant to his entitlements under the equitable lien as contemplated by proposed paragraph 1.7.

6    The fees and expenses which may be deducted from the Insurance Proceeds without further approval expressly exclude Mr Morgan’s remuneration. That payment from the Insurance Proceeds requires approval of the Court. It was the Court’s approval to which Mr Morgan expressly agreed which was one of the underlying reasons for finding in his favour on the remuneration point. The fees are not at large. Accordingly, considering those matters, it is appropriate to include a reference to ‘fees’ on the basis that fees do not require the approval of the Court in any event. It is not the intention that Mr Morgan would need to apply for Court approval every time he is required to pay a Court filing fee in relation to this application for example. (No fees have been paid so far as there are no funds but the payment of fees has been deferred by this Court until 3 January 2014.)

7    Further, it does not appear to me to be necessary to limit the fees and expenses to those ‘of and incidental to getting in of the Insurance Proceeds’. This order is intended to cater for fees and expenses which Mr Morgan is entitled to deduct from the Insurance Proceeds without further approval of the Court in accordance with the answer given as reflected in order 1.7 which, in turn, is ‘fees and expenses … relating to the getting in of the Insurance Proceeds and all inquiries and assessments necessary to ascertain the parties to whom the payment is to be made and distributing the Insurance Proceeds’. This, in turn, follows from [139] and [143] of the Substantive Judgment.

8    In order to remove any doubt about this, the order I will make as, indeed, proposed for Mr Morgan in reply, will be in the following terms by adopting those additional words from answer 1.7 in order 2 so that it will now read as follows:

The Plaintiff’s fees and expenses (excluding remuneration to be paid to the Plaintiff) relating to the getting in of the Insurance Proceeds and all inquiries and assessments necessary to ascertain the parties to whom payment is to be made and distributing the Insurance Proceeds be paid from the Insurance Proceeds.

CONCLUSION

9    Accordingly, the following declarations and orders are made:

1.    The answers to the questions in the Plaintiff's application are as follows:

1.1    Ignoring clauses 4.4 and 14.2 of professional indemnity insurance policy number 74 0019312 PLP (Policy) held by Brighton Hall Securities Pty Ltd (in liquidation) ACN 096 576 868 (Brighton Hall) with Allianz Australia Insurance Limited ACN 004 133 046 (Allianz), are claims made in Federal Court of Australia proceedings WAD 174 of 2009 (Lawrence Proceeding) one 'claim' or multiple 'claims' within the meaning of the Policy? Multiple claims.

1.2    If the answer to 1.1 is multiple 'claims', are the claims made in the Lawrence Proceeding ‘claims that arise [or claims arising] from any one act, error or omission, or series of related acts, errors or omissions’ for the purposes of either clause 4.4 or clause 14.2 of the Policy? No.

1.3    Ignoring clauses 4.4 and 14.2 of the Policy, are claims made in Federal Court of Australia proceedings VID 162 of 2008 (Casey Proceeding) one 'claim' or multiple 'claims' within the meaning of the Policy? Multiple claims.

1.4    If the answer to 1.3 is multiple 'claims', are the claims made in the Casey Proceeding ‘claims that arise [or claims arising] from any one act, error or omission, or series of related acts, errors or omissions’ for the purposes of either clause 4.4 or clause 14.2 of the Policy? No.

1.5    If the answer to 1.1 and 1.3 is multiple 'claims', are the claims made in the Lawrence Proceeding and the Casey Proceeding ‘claims that arise [or claims arising] from any one act, error or omission, or series of related acts, errors or omissions’ for the purposes of either clause 4.4 or clause 14.2 of the Policy? No.

1.6    Is the Plaintiff required to call for informal proofs of debt and make decisions (whether final or preliminary) admitting (or rejecting) the claims made in the Lawrence Proceeding and the Casey Proceeding, prior to seeking directions? No. Further, the Plaintiff is justified, and it is otherwise reasonable for the Plaintiff, to:

(a)    proceed on the assumption that for the purposes of each of the Lawrence Proceeding and the Casey Proceeding, there may be liability to the respective group members in the case of the Lawrence Proceeding and liability to State Trustees Limited in the Casey Proceeding, subject to the Plaintiff being satisfied as to the entitlement of each particular claimant; and

(b)    give written notification to other potential claimants on the sum of $2,000,000.00 paid by Allianz to Brighton Hall pursuant to the Policy and accrued interest (Insurance Proceeds), who were excluded from the Lawrence Proceeding and were not included in the Casey Proceeding, to give them the opportunity to lodge claims they may have with respect to the Insurance Proceeds, and determine the entitlement of any such claimants.

1.7    Does section 562 of the Corporations Act 2001 (Cth) entitle the Plaintiff to deduct, from the Insurance Proceeds, the Plaintiff's fees and expenses (including remuneration) incurred in determining the validity of claims in connection with the distribution of the Insurance Proceeds (including calling for and adjudicating on proofs of debts) and incurred in distributing the Insurance Proceeds to the rightful claimants? The Plaintiff is justified, and otherwise acting reasonably, in asserting an entitlement to an indemnity, secured by an equitable lien upon the Insurance Proceeds, for his fees and expenses (including remuneration) relating to the getting in of the Insurance Proceeds and all inquiries and assessments necessary to ascertain the parties to whom payment is to be made and distributing the Insurance Proceeds. It is appropriate for the Plaintiff to make an application to the Court for approval of the remuneration paid to him. The Court also finds, although it is unnecessary to do so, that the Plaintiff is entitled pursuant to s 562 of the Corporations Act to deduct from the Insurance Proceeds the Plaintiff’s fees and expenses (including remuneration) relating to the getting in of the Insurance Proceeds and all inquiries and assessments necessary to ascertain the parties to whom payment is to be made and distributing the Insurance Proceeds.

2.    The Plaintiff’s fees and expenses (excluding remuneration to be paid to the Plaintiff) relating to the getting in of the Insurance Proceeds and all inquiries and assessments necessary to ascertain the parties to whom payment is to be made and distributing the Insurance Proceeds be paid from the Insurance Proceeds.

3.    Within 28 days after the Plaintiff has adjudicated on claims and prior to distributing the Insurance Proceeds in the liquidation of Brighton Hall, the Plaintiff shall file and serve on the Australian Securities and Investments Commission an application to the Court for approval of the remuneration to be paid to the Plaintiff.

4.    The Plaintiff's costs of and incidental to this application be paid from the Insurance Proceeds.

Associate:

Dated:    20 November 2013