A recent decision has clarified that receivers are entitled to be indemnified and have a lien for their costs in dealing with goods even where the goods belong to third parties.

The Supreme Court of Western Australia delivered the relevant decision, which dealt with an application made by the receivers of a company for directions pursuant to section 424(1) of the Corporations Act 2001 (Cth), in relation to the way they had dealt with certain bailment and consignment arrangements of the company.

In Re Arcabi Pty Ltd (Receivers & Managers Appointed) (In Liq); Ex parte Theobald & Herbert in their capacities as receivers and managers of Arcabi Pty Ltd (Receivers and Managers Appointed) (In Liq) [2014] WASC 310 the receivers sought directions from the court that they were justified in:

  1. returning goods to third parties which were stored on the company's premises (Mixed Storage Goods);
  2. returning goods to third parties which the company had agreed to sell on consignments, but which were not sold at the time of the liquidators appointment (Consignment Only Goods);
  3. insuring goods stored on the company's premises; and
  4. seeking to recover a contribution from the third parties for insuring their goods.

The court found, in relation to both Mixed Storage Goods and the Consignment Only Goods, that the arrangements did not create a security interest under thePersonal Property Securities Act 2009 (PPSA) and that no security interest vested in the company under section 267 of the PPSA. The receivers were entitled to be indemnified for their work in identifying and returning the goods which were at the company's premises and preserving the value of those goods, and could assert a lien to secure that indemnity. The fact that not all of the goods belonged to the company was not relevant because the work undertaken by the receivers had to be done in order to run the company's business and to identify and preserve the value of the goods which did belong to the company. The court also found that it was appropriate for the receivers to seek a contribution from the third parties who had benefited from the insurance of their goods.

The court's decision clarifies that receivers are entitled to be indemnified and have a lien for their costs in dealing with goods even where the goods belong to third parties.