FEDERAL COURT OF AUSTRALIA

SMP Consolidated Pty Limited (in liquidation) v Posmot Pty Limited [2014] FCA 1382

THE COURT ORDERS THAT:

1.    Pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth) the second plaintiff be appointed without security as receiver and manager (Receiver) of the assets of the SMP Trust, being the property located at 45/5-7 Anella Avenue Castle Hill, until further order.

2.    The Receiver have the powers in the Schedule of Powers, together with the powers that a liquidator has in respect of property of a company pursuant to s 477(2) of the Corporations Act 2001 (Cth).

3.    The plaintiffs’ costs of these proceedings be costs and expenses in the winding up of the first plaintiff.

4.    Pursuant to r 14.24 of the Federal Court Rules 2011 (Cth), the Receiver’s remuneration be fixed in the sum of $10,000 plus GST.

SCHEDULE OF POWERS

1    Power to do all things necessary or convenient to be done for or in connection with or as incidental to the attainment of the Objective noted below.

2    Power to sell and convert into cash any asset of the SMP Trust.

OBJECTIVE

The objective of the appointment of the Receiver is to:

1     enable the second plaintiff, as receiver, to realise trust assets to enforce the first plaintiff's indemnity, and apply the proceeds to discharge the liabilities of the first plaintiff (all of which were incurred by it in its capacity as trustee) in accordance with the priorities as set out in s 556 of the Corporations Act 2001 (Cth);

2     enable the second plaintiff to recover the costs of the receivership and, because the first plaintiff's sole function was to act as trustee of the SMP Trust, the general costs of the liquidation; and

3    distribute any surplus to the defendant.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

1    This is an application under s 57(1) of the Federal Court of Australia Act 1976 (Cth) for the appointment of a receiver and manager.

Background

2    On 30 June 2010, the first plaintiff, SMP Consolidated Pty Ltd (in liquidation) (SMP), entered into a deed with the defendant, Posmot Pty Ltd (Posmot), under which it agreed to hold the property located at 45/5-7 Anella Avenue, Castle Hill (the property) on trust for Posmot. Posmot entered into the deed as trustee of a self-managed superannuation fund that was regulated under the Superannuation Industry (Supervision) Act 1993 (SIS Act). The stated purpose of SMP’s appointment was to assist the members of the superannuation fund to acquire the property in a manner that was compliant with s 67(4A) of the SIS Act. SMP’s sole function was to act as trustee of the property under the deed.

3    On 24 April 2014, the second plaintiff, Mr Hosking, was appointed as liquidator of SMP by order of the Supreme Court of New South Wales. On 14 November 2014, Mr Hosking caused SMP to enter into a contract to sell the property for $450,000 plus GST. The contract was entered into after a marketing campaign of four weeks, during which only one formal offer to purchase the property was received. An independent valuation of the property undertaken in October 2014 valued the property at $362,500 exclusive of GST. Advice from the real estate agent acting on the sale of the property was that any offers by other potential purchasers would be around $350,000.

4    Settlement of the sale is due to take place on 29 December 2014. At the present time, there is an amount of $226,000 owing to St George Bank as mortgagee of the property. Proofs of debt totalling $13,106.24 have been received, representing council rates and strata levies.

5    Recently, Mr Hosking has become aware of the provisions of s 126K of the SIS Act and, more particularly, of the fact that SMP is a disqualified person under s 120(2)(e) of the SIS Act because it is a body corporate that has begun to be wound up. Section 126K of the SIS Act provides that the body corporate commits an offence if it is a disqualified person, and knows that it is a disqualified person, and acts as a trustee, investment manager or custodian, of a superannuation entity. Section 10 of the SIS Act defines a custodian, in relation to a superannuation entity, as a person, other than a trustee of the entity, who, under a contract with a trustee or an investment manager of the entity, performs custodial functions in relation to any of the assets of the entity.

Application for appointment of receiver and manager

6    Mr Hosking wishes to remedy the present situation of apparent contravention of s 126K of the SIS Act and to proceed to complete the sale of the property. This is the reason for seeking the appointment of a receiver and manager of the property. Mr Hosking is willing to act in that role.

7    Four reasons have been advanced as to why a receiver and manager should be appointed in the present case. First, the appointment would be consistent with established authority that a receiver and manager can be appointed over trust property to secure the trustee’s right of indemnity out of the assets of the trust: Re Indopal Pty Ltd (1987) 12 ACLR 54 at 57; Kerr, in the matter of Angel’s Castle Pre-School Pty Ltd (In Liq) [2010] FCA 786 at [25]; In the matter of Gramarker Pty Ltd [2014] NSWSC 243 at [6]-[7]. Secondly, by dint of s 127K(1) of the SIS Act, SMP will commit an offence by continuing to act as custodian of the property. Thirdly, the appointment would enable a receiver and manager to proceed to complete the sale of the property. A court-appointed receiver and manager is an officer of the Court, not an agent of the company. Therefore, SMP will no longer be the custodian of the property. Fourthly, if Mr Hosking is appointed, the appointment will not add to the expenses of the liquidation beyond the costs incurred in making the present application.

8    In Re Stansfield DIY Wealth Pty Ltd (in liq) [2014] NSWSC 1484, a similar situation confronted Brereton J in the Supreme Court of New South Wales. In that case, an order winding up a corporate trustee had been made. The only function of the company was to act as trustee of a self-managed superannuation fund regulated under the SIS Act.

9    At [36], his Honour said:

36.    …[B]y continuing to be and act as trustee while a disqualified person, the company contravenes section 126K and thereby commits an offence. Moreover, it must notify the regulator that it has become disqualified under subsection 126K(7). If the company in liquidation were to exercise any of the trustee’s powers under the trust deed – including the power of sale – it would be acting as trustee, in contravention of section 126K. The liquidator would probably be liable as an accessory.

10    At [45], his Honour said that the liquidator:

45.    ...would be justified in applying to be appointed receiver and manager of the trust assets. This would enable the liquidator, as receiver, to realise trust assets to enforce the (former) trustee’s indemnity, and apply the proceeds to discharge the liabilities of the company (all of which were incurred in the capacity of trustee). In addition, he would be entitled to recover the costs of the receivership and, because the company’s sole function was to act as trustee of the super fund, the general costs of liquidation.

Consideration

11    In the present case, it is possible for SMP to resign its office as trustee of the property. It is not clear, however, that there is any person who would be willing to take on the role as trustee of the property at the present time. Even if there was a suitable replacement trustee, there would be costs associated with conveying the property to that new trustee, and inevitable delay which may jeopardise the timely completion of the present sale.

12     I am satisfied that the present case is one where it is appropriate to appoint a receiver and manager of the property and that Mr Hosking would be an appropriate appointee, particularly having regard to Brereton J’s observations in Re Stansfield quoted above.

13    I am also satisfied that it is appropriate to fix Mr Hosking’s remuneration as receiver and manager. Mr Hosking has estimated his remuneration to be $10,000 plus GST based on a summary of the work which he anticipates it will be necessary to carry out. This work includes the post-contractual work associated with the sale of the property, liaising and corresponding with St George Bank as secured creditor, attending to regulatory requirements with the Australian Securities and Investments Commission, the lodging of controller’s accounts under s 432 of the Corporations Act 2001 (Cth) and general administration of the receivership. It is convenient to fix that remuneration now to avoid the additional costs involved in making a separate application for remuneration at a later time.

Disposition

14    For these reasons, the orders substantially as sought in the originating application, will be made.

Associate:

Dated:    9 December 2014