This week’s TGIF looks at a recent Federal Court decision which offers guidance on when receivers may be released from claims arising out of their appointment and relieved from filing and serving formal accounts.
- The Court has the power to grant a receiver a release and discharge from all liability for acts done in the course of the appointment.
- Factors likely to be persuasive include where the receivership has been on foot for some time, adequate notice is provided and no opposition is raised by interested parties.
- Moreover, the requirement to file and serve accounts on interested parties can be dispensed with by the Court if there is evidence that the cost of compliance would be disproportionate to the benefit.
In March 2018, the plaintiffs were appointed as joint and several liquidators of Ardenberg Pty Ltd, following events of default under a DOCA. Ardenberg was the corporate trustee of the RB Trust and its principal activity was conducting a supermarket business. The Liquidators were later appointed (by the Court) as joint and several receivers of the property, assets and undertaking of the RB Trust.
Over the following years, the Receivers sold the supermarket business, along with real property and stock, so that all assets of the RB Trust were realised. However, the net proceeds did not exceed an outstanding claim by the RB Trust’s sole secured creditor, meaning there was no money available for distribution to other creditors, beneficiaries or shareholders.
In early 2021, the Receivers approached the Court seeking:
- a discharge from their appointment;
- a release from claims arising in connection with their appointment; and
- dispensation from the requirement in rule 14.25 of the Federal Court Rules 2011 (the Rules) to file accounts.
On the basis that all the assets of the RB Trust had been realised and the only tasks remaining for the Receivers was paying the balance of the proceeds to the sole secured creditor, and their costs of the application, the Court was satisfied the objects of the receivership had been achieved. It was therefore appropriate the Receivers be discharged.
Release from claims connected with receivership
The Receivers’ evidence was that, apart from the sole secured creditor’s claim to be paid the net proceeds, they were not aware of any other claims or circumstances which may give rise to claims against them in connection with the receivership.
The Court raised the possibility that the appropriate course might be to grant a release, subject to the Court permitting a claim to be raised with the Court’s leave, in other words - a conditional release. But, after some reflection, the Court decided against that course, for the following reasons:
- the receivership had been on foot for some time, with the principal assets of the RB Trust having been realised for many months, without further claims being made upon the Receivers;
- notice of the application had been given to the 18 defendants to the proceeding who raised no opposition and did not appear;
- one defendant who had, some two years prior to the hearing of the application, raised with the Court a number of complaints or concerns about the conduct of receivership, did not ultimately make any formal application to the Court and, in any case, those complaints had been addressed in correspondence from the Receivers.
Accordingly, the Court granted the Receivers the unconditional release that they sought, taking effect on the date of their discharge.
Filing of accounts
The purpose of filing accounts is to verify that all amounts received in the course of the receivership are accounted for and that all payments made in the course of the receivership have been properly made and are evidenced. However, this requirement of the Rules may be dispensed with where the benefit obtained is outweighed by the costs and time involved undertaking that task.
The Receivers’ evidence was that, in their belief, the cost of preparing and passing formal accounts would be disproportionate to the benefit that might accrue. As such, the Court was satisfied it was appropriate to dispense with the requirement.
This decision is a welcome reminder of the Court’s willingness to relieve receivers of some of the burdens of their appointment, including a release from future claims, so as long as there is evidence to support the request and appropriate notice provided to those who may be affected by orders made.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.