White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) v Robertson [2018] FCAFC 63

In December 2017 administrators were appointed to Mossgreen Pty Ltd, a well-known Australian auction house and gallery. The administrators sought to recover over $1 million in costs from consignors by charging $353.20 per lot for the return of goods. In some instances this meant that the total value of a consigners property was exceeded by the collection charge, and so many consigners opposed the directions.

Subsequently the administrators applied to the court in March this year, seeking approval for their nominated course of action. They argued that they held an equitable lien over the consigned items and were therefore entitled to recover costs by imposing a levy for the release of items.

At first instance, Perram J dismissed the directions sought, concluding the stocktake did not relate to Mossgreen’s property and subsequently did not fall within the administration of their affairs.

On appeal, the court opposed this view, finding that it was within the statutory functions of the administrators to continue to perform the function of holding the consigned items, and as part of doing so, take steps to manage and return the items. It concluded that in certain circumstances, a lien could arise in favour of administrators for costs incurred dealing with claims for the return of items, even where there was no ownership claim by the company under administration.

Despite this, the court ultimately rejected the appeal, arguing that there was no basis for an equitable lien of the kind sought here because:

  1. Many of the costs incurred related to items which the administrators knew had been abandoned and were of little value;
  2. If a stocktake were needed, this need arose from a breach of Mossgreen’s obligations as a bailee, being the failure to maintain an adequate inventory system for consigned items; and
  3. Much of the costs had been incurred for the benefit of the general body of creditors, including in relation to the sale of a part of Mossgreen’s business. The owners of the consigned items had no interest in this, as they would not benefit from such a sale.