Federal Court of Australia

Hayes (Deed Administrator), in the matter of The Cambria Management Corporation Pty Ltd (subject to Deed of Company Arrangement) (No 2) [2021] FCA 667

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiff be discharged as receiver and manager of the property of The Cambria Corporation Unit Trust.

2.    Pursuant to r 1.34 of the Federal Court Rules 2011 (Cth), the formal requirements of r 14.25 be dispensed with.

3.    The plaintiff’s costs of this application be costs in the deed administration of The Cambria Management Corporation Pty Ltd (subject to Deed of Company Arrangement).

4.    The plaintiff have liberty to apply.

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

REASONS FOR JUDGMENT

HALLEY J:

1    On 21 August 2020 the plaintiff was appointed without security as the receiver and manager of the property of The Cambria Corporation Unit Trust (Trust) pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth): Hayes (Deed Administrator), in the matter of The Cambria Management Corporation Pty Ltd (subject to Deed of Company Arrangement) [2020] FCA 1214 (Gleeson J).

2    The plaintiff now applies to the Court to be discharged as the receiver and manager of the property of the Trust on the basis that the object of his appointment has now been achieved: Lunn v Savage [2006] NSWSC 240 at [8] (Campbell J).

3    The plaintiff’s application is supported by an affidavit that he swore on 10 June 2021. The plaintiff has asked and I have agreed that the application be dealt with on the papers.

4    On 11 June 2021 I made the orders sought by the plaintiff. I now publish these reasons for making those orders.

5    Mr David Andrew Servi is the sole director, secretary and sole shareholder of The Cambria Management Corporation Pty Ltd (subject to Deed of Company Arrangement) (CMC).

6    Until the plaintiff’s appointment as voluntary administrator of CMC on 13 March 2020, CMC was the trustee of the Trust. Pursuant to the provisions of the Trust deed, CMC was automatically removed as a trustee of the Trust on the appointment of the plaintiff as voluntary administrator of CMC. It was for that reason, among others, that the plaintiff applied to this Court to be appointed as a receiver and manager of the property owned by the Trust.

7    The only business undertaking of CMC was as trustee of the Trust and each of its creditors are trust creditors.

8    The only substantial asset of CMC is a rent roll purchased by CMC as trustee of the Trust (CMC Rent Roll).

9    The CMC Rent Roll was managed by a related entity, The Cambria Corporation Pty Ltd ACN 620 449 541 trading as Spencer & Servi (CC). Additionally, CC owned its own rent roll and real estate agency business (CC Rent Roll). Mr Servi is the sole director of CC.

10    In late July 2020, a property owned by Mr Servi at 7 Agar Steps, Millers Point, NSW (7 Agar Steps) was sold. Mr Servi was required to bring about the sale pursuant to clause 3.3(c) of the deed of company arrangement made between the plaintiff, CMC and Mr Servi executed on 23 June 2020 (DOCA). The proceeds of sale of this property were used in accordance with the DOCA, inter alia, to reduce the debt owing to National Australia Bank (NAB) by CC and Mr Servi (NAB Debt).

11    In or about October 2020, Mr Servi approached the plaintiff in his capacity as the deed administrator of CMC and a secured creditor, Mr Terence Hartmann, in his capacity as trustee of the Estate of Enrico Servi, about alternative refinancing scenarios.

12    On 6 November 2020, the plaintiff finalised the audit of the CMC Rent Roll. The plaintiff considered that this audit was necessary because he believed there was ambiguity about whether certain property management agreements forming part of the CMC Rent Roll were owned by the Trust or by CC. The audit was also required by clause 6.8 of the DOCA.

13    On 11 November 2020, the receivers and managers of CC (Messrs Walley and Scott of PwC, appointed on 18 March 2020 by CC’s secured creditor, NAB) commenced marketing the CC Rent Roll for sale following Mr Servi’s unsuccessful efforts to refinance the NAB Debt.

14    On 13 November 2020, the plaintiff convened a meeting of creditors of CMC for 30 November 2020. The meeting of creditors was convened to enable creditors to consider a resolution varying the DOCA, by the insertion of a new clause 7.3 that provided “Notwithstanding any other provisions in this Deed or the contrary intention, the Trust Assets be sold by Alan Hayes as receiver and manager of the Trust” (Resolution).

15    In mid-November 2020, the plaintiff engaged MC Rent Roll Broking (who were also acting for the receivers and managers of CC) to include the CMC Rent Roll in the marketing campaign for the CC Rent Roll. the plaintiff took this step so that the CMC Rent Roll could be marketed together with the CC Rent Roll, in order to maximise the value on any sale and because the plaintiff considered that the CMC Rent Roll was not financially viable on its own; that is, without the efficiencies and economies of scale achieved by it operating alongside the CC Rent Roll.

16    On 30 November 2020, the creditors of CMC (excluding Mr Servi who abstained from voting) passed the Resolution.

17    On 2 December 2020, Mr Servi completed the sale of 421 Crown Street, Surry Hills, NSW (421 Crown Street). Mr Servi was required to bring about the sale pursuant to clause 3.3(b) of the DOCA. The proceeds of sale were applied in repayment of Westpac’s secured debt and discharge of its securities and Mr Hartmann’s secured debt through the DOCA.

18    On 4 December 2020, the plaintiff gave notice to the creditors of CMC of his intention to declare a first and final dividend to priority and non-priority creditors in the DOCA on 28 January 2021.

19    In mid-December 2020, Mr Servi and Mr Hartmann entered into an arrangement which resulted in NAB’s remaining secured debt (owed by CC and Mr Servi) being repaid and its securities discharged. The plaintiff understands that the purpose of this arrangement was to cease the marketing campaign for the CC Rent Roll and the CMC Rent Roll and to end the receivership of CC. The arrangement included that Mr Hartmann enter into a contract to acquire 44 Bennett Street, Surrey Hills, NSW (44 Bennett Street) which was owned by a party related to Mr Servi. It was ultimately not necessary in those circumstances for the plaintiff, as receiver and manager of the Trust, to proceed with the sale of the CMC Rent Roll.

20    On 24 December 2020, the receivers and managers of CC retired, and control of CC was returned to Mr Servi.

21    On 28 January 2021, the plaintiff paid the previously notified first and final dividend to non-priority unsecured creditors at a rate of 100 cents on the dollar.

22    On 9 March 2021, Mr Hartmann’s acquisition of 44 Bennett Street was completed, resulting in his secured debt reducing to a figure of approximately $260,000.

23    On 27 April 2021, the plaintiff published a report to creditors of CMC.

24    In May 2021, Mr Servi and Mr Hartmann reached an arrangement regarding the method and timing of the repayment of Mr Hartmann’s debt. The arrangement was documented and signed by Mr Servi and Mr Hartmann subsequently Mr Hartmann’s debt was repaid and his security over the assets of CMC was discharged.

25    As at 10 June 2021, the DOCA remained on foot and had not been effectuated although its purpose had been achieved in that:

(a)    the secured NAB Debt of CC and Mr Servi had been repaid;

(b)    Westpac’s secured debt had been repaid;

(c)    Mr Servi’s properties at 7 Agar Steps and 421 Crown Street had been sold;

(d)    the creditors of CMC had been paid in full;

(e)    Mr Hartmann’s secured debt had been repaid; and

(f)    the businesses of CC and the CMC had been preserved and continued to operate.

26    The plaintiff now considers that his appointment as receiver and manager of the property of the Trust has no further purpose given that he has declared and paid a first and final dividend to creditors, as the deed administrator he has facilitated the repayment of Mr Hartmann’s debt and there are no further assets to be realised in the receivership of the DOCA.

27    The plaintiff has confirmed that if he is discharged as receiver and manager of the property of the Trust, he will promptly take steps to effectuate the DOCA by:

(a)    applying the balance of the funds remaining in the DOCA in satisfaction of his unpaid disbursements and legal fees, including the costs of this application; and

(b)    giving the certification and notice required by clause 14.4 of the DOCA.

28    The plaintiff proposes to take those steps as soon as possible and in any event prior to 30 June 2021 because, if the DOCA continues past that date, then additional fees and disbursements will be unnecessarily incurred. Additionally, as the DOCA has achieved its purpose its effectuation is awaiting, for practical purposes, the plaintiff’s retirement as receiver and manager of the property of the Trust.

29    Both Mr Hartmann and Mr Servi have provided written confirmation of their support for the plaintiff’s application.

30    The plaintiff has not given notice to the other creditors of CMC of his intention to make this application because they have received 100 cents on the dollar of their respective claims.

31    By reason of the explanations provided in the plaintiff’s affidavit, as outlined above, I am satisfied that the objects of the receivership have been achieved and it is appropriate that an order be made that the plaintiff be discharged from his appointment as receiver and manager of the property of the Trust.

32    There is one additional matter that I need to address. The plaintiff also applies to be relieved from the formal requirements of r 14.25 of the Federal Court Rules 2011 (Cth). That rule provides that a receiver must file accounts at the times ordered by the Court. As explained by Yates J in Hutchins, in the matter of Ardenberg Pty Ltd (in liq) (Administrators Appointed) (No 3) [2021] FCA 519 (Ardenberg) at [9], the purpose of filing accounts is to “achieve the object of passing accounts, so as to verify that all amounts received in the course of the receivership are accounted for and that all payments made in the course of the receivership have been properly made and are evidenced”. Courts have, however, readily made orders dispensing with this requirement: Sprowles in the matter of Triumph N Triumph Pty Ltd (in liq) (No 2) [2021] FCA 405 at [13]-[15] (Yates J). This would be appropriate when the benefit obtained by adhering to the standard procedure passing accounts is outweighed by the significant cost and time that might be involved in undertaking the task: Ardenberg at [9]-[10].

33    The appointment orders on 21 August 2020 did not require the plaintiff to file accounts, and no order has subsequently been made for the filing of accounts.

34    The plaintiff nonetheless seeks dispensation with any requirement to file accounts in connection with his appointment as receiver and manager of the property of the Trust because:

(a)    the plaintiff considers that the time required to prepare such accounts and the consequential expense that would follow would be unduly burdensome;

(b)    the preparation of accounts may delay the finalisation of the receivership, which would in turn delay finalisation of the DOCA;

(c)    following payment of the dividend in the DOCA of CMC, and payment of the plaintiff’s unpaid disbursements and legal fees, there will be no further funds remaining in the DOCA;

(d)    the plaintiff has, in any event, prepared and provided to creditors a summary of his actual and anticipated receipts and payments in the DOCA as at 25 April 2021, which appeared at page 4 of his report to creditors dated 27 April 2021; and

(e)    the plaintiff will submit to ASIC following effectuation of the DOCA an end of administration return (Form 5603) which will include final receipts and payments for the DOCA.

35    I am satisfied by reason of the matters outlined above that it is appropriate that an order be made dispensing with the requirement for the plaintiff to file and pass accounts in relation to the receivership.

36    The plaintiff does not seek remuneration for any work performed by him in his capacity as receiver in accordance with the appointment order. The plaintiff has sought from creditors, and obtained, approval for his remuneration in the course of the DOCA, including most recently on 12 May 2021, which includes all work to the finalisation of the receivership and the DOCA.

Associate:    

Dated:    18 June 2021