Focus: Recoverability of post-receivership costs
21 April 2011
In brief: A recent High Court of England and Wales decision has determined that costs incurred by a former court-appointed receiver after the receivership has ended can be recovered from receivership assets that are still subject to the former receiver's lien. Partner Michael Quinlan and Lawyer Mitch Riley report.
How does it affect you?
- The decision1 highlights that former court-appointed receivers can have recourse to assets that are subject to their lien, in order to meet costs incurred both during and after the receivership concludes.
- It also clarifies that court-appointed receivers can only recover their costs out of the receivership assets.
Following the making of a confiscation order, the court appointed Mr Heath Sinclair as receiver of Mr Louis Glatt's estate. The confiscation order was later quashed and the receiver consequently discharged.
Two years later, Mr Glatt brought an action against Mr Sinclair in relation to the receivership, which was dismissed as having no realistic prospect of success. Mr Sinclair applied for his costs of the application, and for a declaration that they could be recovered out of the receivership assets that were subject to his lien.
Justice Parker held that the former receiver's costs could be recovered out of the receivership assets that were subject to his lien. In the UK, a receiver's lien has been held to survive the retirement or discharge of the receiver.2 This also appears to be the position in Australia.3
His Honour held that the former receiver's costs could be recovered out of the receivership assets regardless of whether the receiver ought to have been appointed in the first place or the order appointing the receiver had been discharged. He reasoned that if the application had been brought before the receiver's discharge, the receiver's costs would have been receivership costs. He held that whether a receiver/former receiver should be entitled to costs out of the receivership assets should not depend on when an application is brought.
Justice Parker also confirmed that court-appointed receivers can only claim an indemnity out of the receivership assets.
While Australian courts have allowed post-receivership costs to be recovered in certain circumstances,4 they have not considered establishing a general principle that would allow former receivers to recover costs incurred after the receivership. This decision will provide helpful guidance when the issue arises in Australia.
- Glatt v Sinclair (The Former Court Appointed Receiver)  EWHC 3069 (Admin).
- Mellor v Mellor  1 WLR 1409.
- Re Jackgreen (International) Pty Ltd  NSWSC 817 at ; Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd (No 2)  WASC 318 at .
- For example, when the receiver retains a fund to meet the cost of future olitigation, see Korda v Silkchime Pty Ltd (2010) 78 ACSR 675; Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225.
- Clint HinchenPartner, Practice Group Leader, Corporate Insolvency & Restructuring,
Ph: +61 3 9613 8924
- Geoff RankinPartner,
Ph: +61 7 3334 3235
- Kim ReidPartner,
Ph: +61 2 9230 4037