Bid for fees from project and retention trusts rebuffed

A decision in the Supreme Court of Queensland has done nothing to clear the fog around the question of external administrators’ entitlements to fees and costs from trusts established pursuant to Queensland’s Building Industry Fairness (Security of Payment) Act 2017 (BIF Act).

“It is not appropriate for the Court, in the context of making directions, to make directions which effectively determine questions of entitlement of the applicants to be paid or to an indemnity or lien in the absence of any evidence of the amounts incurred and which may affect the rights of subcontractor beneficiaries where the affected parties have not been served.” Justice Susan Brown.

On Monday Justice Susan Brown delivered judgment in the matter of PBS Building (Qld) Pty Ltd [2024] QSC 108, effectively refusing an application for directions brought last year by RSM’s Mitchell Herrett, Jonathan Colbran and Richard Stone in their capacities as the liquidators of PBS Building (QLD) Pty Ltd (PBS).

The RSM trio, appointed voluntary administrators (VAs) of PBS on March 7, 2023, wanted the courts to say it’s okay to apply funds held in the company’s project and retention trust accounts to cover the fees and costs they will incur administering those funds.

Her honour, mindful of the presence of the Queensland Building and Construction Commissioner (QBCC) as contradictor and opposing the application in the form sought, refused.

Much was made of the liquidators’ decision to seek directions, rather than declarations, and how it didn’t cure the issues, which included that subcontractor beneficiaries hadn’t been served ahead of the application.

“The applicant (liquidators) narrowed the scope of what was sought before the Court and sought directions as to whether or not the applicants are entitled to be remunerated or paid costs and expenses out of the trust accounts,” the judge said.

“The QBCC originally submitted it would not be appropriate to grant relief by way of a declaration in paragraph 1B, and submitted at the hearing a number of the problems it identified remained even if the terms of relief as framed sought ‘directions’ rather than a declaration.

“There is weight in that criticism,” her honour concluded.

“It is not appropriate for the Court, in the context of making directions, to make directions which effectively determine questions of entitlement of the applicants to be paid or to an indemnity or lien in the absence of any evidence of the amounts incurred and which may affect the rights of subcontractor beneficiaries where the affected parties have not been served.

“The Court cannot determine any entitlement of the applicants at this stage to orders under the principles of Universal Distributing or Berkeley Applegate, which will need to be the subject of evidence and submissions as to the application of the relevant principles,” the judge said.

This leaves the liquidators likely facing a more expensive application in respect of their wider amended originating application and no little time pressure, given her honour also ordered that “the parties are to request to relist the matter within seven days if they seek any direction from the Court in light of the reasons for judgment”.