PARTIES:	NATIONAL BANK OF AUSTRALIA (ACN 004 044 937)

v

VERDI CLUB INCORPORATED AND
THE ATTORNEY-GENERAL FOR THE NORTHERN TERRITORY

TITLE OF COURT:	SUPREME COURT OF THE NORTHERN TERRITORY AT ALICE SPRINGS

JURISDICTION:	SUPREME COURT  OF  THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION

FILE NO:	AS 29 of 1996

DELIVERED:	30 January 1998

HEARING DATES:	23 and 27 January 1998

JUDGMENT OF:	Kearney J

REPRESENTATION:

Counsel:

Plaintiff:	J. Stirk
First Defendant:	No appearance Receiver of First Defendant:	J. Stirk
Second Defendant:	D. Lisson

Solicitors:

Plaintiff:	McBride & Stirk
First Defendant:	No representation Receiver of First Defendant:	McBride & Stirk
Second Defendant:	Solicitor for the Northern Territory

Judgment category classification:
Judgment ID Number:	kea98005
Number of pages:	8

kea98005

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY OF AUSTRALIA
AT DARWIN

No. AS 29 of 1996

BETWEEN:

NATIONAL AUSTRALIA BANK LIMITED (ACN 004 044 937)
Plaintiff AND:
VERDI CLUB INCORPORATED
First Defendant AND:
THE ATTORNEY-GENERAL FOR THE NORTHERN TERRITORY
Second Defendant

CORAM:	KEARNEY J

REASONS FOR DECISION

(Delivered 30  January 1998)

I rule today on the oral application made on 23 January 1998 by Mr Stirk of counsel both for the plaintiff and the Receiver of the first defendant,
pursuant to the plaintiff’s originating motion of 1 May 1996, for relief in the form of the orders set out in annexure “A” to the reasons published on
27 January, with which these reasons are to be read.

Stemming from what was stated in the reasons of 27 January the matter to be clarified was the precise nature and standing in these proceedings of the
plaintiff’s Memorandum of Mortgage of 20 June 1988. I heard the parties on that aspect later on 27 January.

The plaintiff rests its claim for all monies due to it, on the terms of that Mortgage. On its face, the Mortgage is stamped to secure $510,000, and is in substitution for “primary document 844565 of 3/6/85 stamped to secure
$500,000”. I note that at the time of the plaintiff’s Notice of Demand to the first defendant of 28 November 1995, it claimed $601,955.07 as the total amount then due, plus interest accruing at 11.9% per annum.
The plaintiff’s claim as an unpreferred creditor was admitted by the Receiver at $852,387.13.

The validity of the Mortgage had earlier been in dispute.  That is why, in  its originating motion of 1 May 1996, the plaintiff had sought inter alia a declaration that the Mortgage was valid and effective; however, that relief was not pursued.  Mr Stirk informed me  on 23  January 1998 that the dispute as to its validity was later settled, as far as the immediate parties to this litigation were concerned, by the plaintiff agreeing to prove as an unpreferred creditor
for the monies owed to it by the first defendant, rather than as a preferred creditor under its Mortgage. There is nothing on the Court file which records this arrangement, but I accept Mr Stirk’s assurance that it was agreed, and has occurred.	I understand that there is no dispute that the Mortgage is a valid

document in the form of a contract for loan, insofar as it sets out the terms on which the plaintiff has advanced monies to the first defendant.

I was informed by Mr Lisson of counsel for the second defendant that the sum of $852,387.13 claimed by the plaintiff comprises the following 3 items: monies lent to the first defendant by the plaintiff and not repaid; interest thereon at the rate specified in the Mortgage; and all expenses incurred by the plaintiff in seeking to recover the monies it lent to the first defendant.  It  claims to have been entitled under the Mortgage to recover these latter expenses.

As to item (1), Mr Lisson took no point on the claim for repayment of monies lent. As to item (2), he noted that, unlike the plaintiff, the other unsecured creditors could not include a claim for interest on the monies owing to them; however, as the Mortgage is a binding contract for the terms of the loan made by the plaintiff, and provides for interest, I  consider that the  plaintiff may prove for that interest.  See also Clause 35 of  the Mortgage.  As  to item (3), Mr Lisson informed me that the expenses claimed included the
fees and expenses of a former receiver, Mr Kershaw, whom the plaintiff had appointed on 16 January 1996 pursuant to clauses 9(h) and 10 of the Mortgage, on the basis that the first defendant had defaulted in complying with its terms; and also the legal expenses incurred in connection therewith. Mr Lisson suggested that a distinction might be drawn between a claim to recover
principal and interest on the one hand, and “mortgage – enforcement” expenses on the other. I turn to examine that possibility.

It is accepted that the first defendant defaulted under the Mortgage. The covenants therein are expressed to be entered into by the first defendant in
consideration of “all loans and/or advances and/or banking accommodation”

provided or to be provided to it by the plaintiff, and “all liabilities incurred or  to be incurred” by the plaintiff at its request.	These covenants are in the usual extensive and comprehensive form found in mortgages. Clause 9(h) provides, as far as material:
“9. … if default shall be made in payment of the moneys hereby secured or any part thereof when demanded or in the performance or observance of any covenant or agreement contained or implied herein the [plaintiff] may at any time thereafter … do all or any of the following:

…

(h)	by writing appoint a Receiver …  of  the income of  the mortgaged property and any Receiver shall be the agent of the Mortgagor and the Mortgagor shall be solely responsible for the acts or defaults of the Receiver.”

Clauses 10(b), (d) and (f) provide:

“10. The following provisions shall apply to any Receiver appointed by the Bank hereunder:

…

(b)	In relation to the exercise of any of the Receiver’s powers the [plaintiff] may at the request of a Receiver advance and pay to him such moneys as it thinks fit and all moneys so advanced or paid shall be deemed moneys advanced on account of the [first defendant] and form part of the moneys hereby secured;

…

(d) a Receiver shall be entitled to retain out of any moneys received by him such remuneration as may be fixed and approved by the [plaintiff];

…

(f)	a Receiver shall out of the moneys received by him in exercise of his powers pay and discharge all moneys costs charges expenses and liabilities paid or incurred in the management of the mortgage property (including the remuneration (if any) of the Receiver) or in relation to the
performance or exercise or attempted performance or exercise of the Receiver’s powers and duties …”

The first defendant is an association incorporated under the Associations Incorporations Act (NT). I understand that it is not as yet being wound up under s20 of the Act, or dissolved under s23A.

It was not clear to me on 23 January whether the appointment of
Mr Kershaw, which related to the mortgaged property, could be regarded as valid for the purposes of this litigation, since I understood that it was common ground that the Mortgage was not to be treated as constituting a security over that property. Later on 27 January Mr Stirk made it clear that the plaintiff’s contention is that although for present purposes the Mortgage has no status as    a security over that property, it remains a valid document evidencing the terms of a  contract between the plaintiff and the first defendant for the loan of monies. Mr Kershaw was appointed under the express provisions of that valid contract for the appointment of a receiver. I consider that a general creditor, which is what the plaintiff now is for the purposes of this litigation, may have   a receiver of the property of its debtor appointed, provided it has a strong
case.	That was the case here. I consider that the plaintiff’s submissions are

correct, and the plaintiff was entitled to exercise its contractual right to   appoint Mr Kershaw as receiver. The mortgage document qua contract defines Mr Kershaw’s rights, duties and obligations in that regard, and the parties’ obligations which flow therefrom.

It follows that I consider that the Receiver Mr Garraway was correct in allowing as part of the claim of the plaintiff, the expenses it had incurred (including proper legal expenses) in and about appointing Mr Kershaw as receiver. Mr Kershaw’s proper fees for his work are allowable in accordance with the Court scales then current for an official liquidator’s remuneration; see p74 of the Law Almanac 1998 (NT).

It follows that it was proper for the Receiver Mr Garraway when

assessing the plaintiff’s claim as a creditor, to take into account the 3 items mentioned by Mr Lisson at p3. I do not consider that the possible distinction suggested by Mr Lisson at p3 holds good. The fact that Mr  Kershaw  apparently did not realize any assets and therefore there was no scope in practice for the operation of Clauses 10(d) and (f) does not affect the position, in light of Clause 10(b). See also in support of this approach the wide
definition of “the moneys hereby secured” in  Clause 34,  particularly par(e)(iii). Whether the amounts claimed for expenses are apposite is a matter for ultimate determination by the Registrar, when Mr Garraway passes his accounts.

I note that pars6 and 7 of the Court order of 3 May 1996 provide that: “6.	The Receiver is to get in, collect and receive the assets and
undertaking of the first defendant.

7.	The Receiver realise the assets and undertaking referred to in paragraph 3 [the whole of the assets and undertaking of the first defendant] and for that purpose and for the attainment of the other purposes for which the Receiver was appointed the Receiver may exercise such powers as are conferred by Section 420 of the
Corporations Law.”

Section 420 of the Corporations Law provides generally for the powers of a receiver of a property of a corporation.
I turn to another aspect.

On 27 January I ruled that Mr Garraway should submit and pass his accounts before the Registrar of  this Court.  The Registrar should then report  to the Court. That is a  proper and essential requirement, in my view,  particularly since the procedure is unusual. In proposed order (2) Mr Stirk had sought to  have such a  requirement dispensed with.  Later, after the ruling on   27 January, Mr Stirk informed me that the Receiver would bear any costs involved in complying therewith, in the sense that any costs he incurred in submitting and passing his accounts would not diminish the payout to the creditors he had proposed in his affidavit of 23 January. In other words, he
will pay to the creditors the respective dividends set out in annexure “A” to

that affidavit, in any event. I note that these must also pass the Registrar’s scrutiny.
As to the Receiver’s costs, it is  proper that they be charged and allowed  at the scale for an official liquidator’s remuneration; see p74 of the 1998 Law
Almanac (NT). Those costs will be included in his accounts to be submitted to the Registrar, and will be dealt with as part of the Registrar’s subsequent  report. To avoid unnecessary expense and time, that report may not only deal with the reasonableness of the Receiver’s costs to date, but also with his additional cost to finalise his receivership, if that course proves practicable.
The submission of the Registrar’s report to the Court and the making of consequent orders, should effectively finalise this receivership.
In the result, as regards proposed orders nos. 1 – 6 annexed to the reasons of 27 January, the following orders are made: proposed nos. 1, 2, 5 and 6 are refused; consideration of proposed orders 3 and 4 must await the Registrar’s
report on the Receiver’s accounts.

The parties are at liberty to apply at any time. Orders accordingly.

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