How $1.8 m of
letting income was distributed by the receiver of a serviced
Ruby Apartments held the management rights to 242
serviced apartments in Ruby One Tower, Surfers Paradise,
when Receivers were appointed on 1 August 2019. The
Receivers were appointed by a secured creditor one day after
Ruby Apartments had appointed an administrator.
The Receivers carried on the business of a serviced
apartment manager until 30 September 2019, when they sold
the business as a going concern to a third party purchaser.
The Receivers had of over $1.8 million in trust funds
from rentals and service charges. The trust funds belonged
to the apartment owners. The Receivers wanted to charge
Management Expenses for carrying on the business in August
and September of $734,108.00 and the Administration and
Distribution Expenses for reconciling the trust account so
as to ascertain the respective interests of each owner, and
for obtaining judicial advice of $644,453.50.
In September 2021, a ‘compromise’ was entered into
between the Receivers and most of the apartment owners,
following a mediation held before a Judicial Registrar of
the Court. In reaching the compromise, the Receivers reduced
their charges by almost half.
The Receivers approached the Federal Court of Australia
for directions twice for directions.
#1 Directions as to service
of originating process
The first time the Receivers approached the court was to
apply for deemed service of process on the owners, tenants
and paid guests of the apartments.
The Receivers effected service on the owners by sending
an email containing a hyperlink to the originating
documents. The emails were sent to the email addresses
recorded for owners of the apartments in the Surfers
Paradise property, and also to email addresses for guests
and tenants. Delivery confirmation was received in most
The Receiver’s application was for deemed service in
instances where a ‘failed delivery notification’ was
The Court was satisfied that the emails were delivered to
email addresses previously used by each of those owners and
that the delivery confirmation ‘evidences that the Receivers
have taken reasonable steps to bring the originating
documents to the attention of those’ owners.
See Heenan (Receiver), in the matter of Ruby
Apartments Pty Ltd (in liq) v Ralan Paradise No. 1 Pty Ltd
(in liq)  FCA 1878 (Reeves J)
#2 Directions as to
distribution of funds available
The second time the Receivers approached the Court was
for judicial advice under s 424 Corporations Act 2001
(Cth) in relation to the proposed distribution of the funds
under the compromise. The Court said that it was appropriate
for the Receivers to ‘to look to the trust assets for their
The approach to the Court was necessary because ‘not all
of the claimants on the fund’ had agreed to the compromise
and ‘there is therefore a real and practical threat that one
or more’ of them ‘could seek to challenge it at a future
The Court was satisfied that it was appropriate for the
Receivers to apply for the directions pursuant to s 424 of
the Act. It was appropriate because this is ‘not a case
where privately appointed. Receivers are seeking directions
concerning the commercial merits of a proposed settlement’.
In this case, assertions were made that the compromise was
not lawful, and the Receivers were justified in obtaining
‘judicial advice’ to distribute the fund in a particular
The Court noted that: The Receiver’s management of the
letting pool during August and September benefitted the
apartment owners by generating rent and benefitted the
secured creditor by preserving the value of the Business to
be sold and the property secured.
The compromise was approved by the Court.
The Court resolved two contentious claims made by the
Receivers for expenses:
- Letting income
When the Receivers were appointed on 1 August, the July
letting and sundry income had not been distributed.
The gross lettings balance for July 2019 was
$747,593.62. The Receivers were allowed to retain
$314,960.67 for Administration and Letting Expenses, and
to pay the balance of $432,632.95 to the apartment
- Sundries income
Sundries amounting to $175,832.46 were collected in July
2019 from guests for food, beverage or room service. The
sundries were to be accounted to the Ruby Management,
which supplied the sundries, and not to the apartment
owners, after deduction of the Receivers’ Administration
and Distribution Expenses.
Sundries amounting to $119,585.38 were collected in
August and September 2019 from guests for food, beverage
or room service. The Receivers were able to deduct
$41,198.61 for a pro rata share of the Administration
and Distribution Expenses, with the balance of
$78,386.77 paid to the apartment owners.
How was the letting income
The fund of $1,880,089.85 was distributed as follows:
- Receivers - $758,549.68 for Expenses, less $210,000
for the legal costs of the apartment owners*;
- apartment owners in the Ruby One Tower - $794,819.76
for rents for July, August and September;
- service providers - $136,509.47;
- some former guests - $13,078.33;
- some former tenants (bond refunds) - $3,487.20; and
- the liquidator of the other Ralan Group companies -
*The apartment owners were paid their legal costs out of
the fund because the proceedings were needed to resolve
questions relating to the administration of the fund.
See Heenan, in the matter of Ruby Apartments Pty Ltd
(in liq) v Ralan Paradise No. 1 Pty Ltd (in liq) (No 2)
 FCA 1314 (Downes J) (27 October 2021)
Apartments in the Ruby Apartments, a 30-level serviced
apartment complex at 9 Norfolk Avenue, Surfers Paradise,
were sold by the developer, the Ralan Group, to investors
with an attractive rental guarantee for the first two years.
The return was to be achieved by having the apartments
managed as serviced apartments.
This case illustrates that if a receiver is appointed to
the manager of a serviced apartment complex, the letting
income and sundries received from guests are subject to a
deduction for administration expenses incurred by the
In this instance, 29.17% of the fund was paid to the
Receivers, 42.27% to the apartment owners and 28.56% to
Fortunately for the investors in this case, the
Receiver’s management (and therefore the administration
expenses) ended relatively quickly when the management
rights were sold quickly to a new manager.