Federal Court of Australia

Taylor, in the matter of Valteena Property Holdings Pty Ltd (In Liq) [2023] FCA 991

ORDERS

THE COURT ORDERS THAT:

1.    The Court file be corrected to refer to:

(a)    Mr Joshua Phillip Taylor, in his capacity as Liquidator of Valteena Property Holdings Pty Ltd (In Liq) (ACN 609 141 684), as the first plaintiff, rather than the applicant; and

(b)    Valteena Property Holdings Pty Ltd (In Liq) (ACN 609 141 684) as the second plaintiff, rather than the respondent.

2.    Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), being Schedule 2 of the Corporations Act 2001 (Cth) (Corporations Act), the first plaintiff (liquidator) is justified and acting reasonably in conducting the winding up of the second plaintiff (company) on the basis that:

(a)    the company holds its interest in the property situated at 6/140 Panorama Drive, Farmborough Heights, New South Wales being the land described in Lot 6 in Strata Plan 12763 being certificate of title folio 6/SP 12763 (Property) in its capacity as bare trustee for Greg’s Crumbs Pty Ltd (as trustee for The Greg’s Crumbs Superannuation Fund) (Trust); and

(b)    all assets of the company (including for the avoidance of any doubt, the company’s interests in the Property), are properly characterised as property held by the company in its capacity as trustee of the Trust (Trust property).

3.    Pursuant to s 81(1) of the Trustee Act 1925 (NSW), the following powers necessary to enable the liquidator to wind up the Trust are conferred on him:

(a)    the power to carry on the business of the Trust;

(b)    the power to sell the company’s property including its interest in the Property;

(c)    the power to compromise any claim made against the company in its capacity as trustee of the Trust or against the Property on any terms the liquidator sees fit; and

(d)    the power to execute any tax returns, financial statements or other documents relating to the Trust.

4.    Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), the liquidator is justified and otherwise acting reasonably in proceeding on the basis that he can deal with, hold, apply and/or distribute the Trust property in accordance with Parts 5.5 and 5.6 of the Corporations Act.

5.    Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), the liquidator is and was justified and otherwise acting reasonably in proceeding on the basis that:

(a)    the liquidator is and was entitled to be paid from the Trust property his remuneration, costs and expenses properly incurred in preserving, realising or getting in the Trust property, or in distributing the Trust property (once realised), or in conducting the winding up of the company (Remuneration and Expenses); and

(b)    the Remuneration and Expenses include the remuneration, costs and expenses of and incidental to this application and are to be paid in accordance with the priority specified in s 556(1) of the Corporations Act.

6.    There is liberty to apply to any person who can demonstrate sufficient interest to modify these directions and orders on not less than 48 hours’ notice.

7.    The liquidator is to serve a copy of this order on each of the persons served with a copy of the originating process.

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

REASONS FOR JUDGMENT

HALLEY J:

A.    Introduction

1    Mr Joshua Philip Taylor, in his capacity as the liquidator of Valteena Property Holdings Pty Ltd (In Liq) (Liquidator), has applied under s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 of the Corporations Act 2001 (Cth) (Corporations Act), and s 81(1) of the Trustee Act 1925 (NSW) (Trustee Act) for orders that he be empowered to deal with trust property of Valteena for the purpose of distribution so as to enable the completion of the winding up.

2    The application is supported by an affidavit from the Liquidator affirmed on 26 June 2023 and two affidavits of service of Tomislav Gajic sworn on 5 July 2023.

3    The application has been made on notice to both Ms Angela Sarantis Katrivesis and Mr Gregory Katrivesis. Mr and Mrs Katrivesis are the sole directors and shareholders of Valteena.

4    At the hearing, I made orders in more expansive terms than those sought by the Liquidator in order to better reflect the scope of the Liquidator’s application. These are my reasons for making those orders.

5    The present matter reflects what has been described as a standard context where orders have been made for the purpose of selling trust assets and distributing the proceeds among trust creditors by conferring on the liquidator of a corporate trustee of a bare trust the power to either deal with the assets of the trust or to have the liquidator appointed as a receiver: Rathner (liquidator), in the matter of Garrows Close Pty Ltd (in liq) [2021] FCA 505 at [5] (Beach J); Deppeler, in the matter of Old Port Road Pty Ltd (in liq) [2021] FCA 980 at [3] (O’Bryan J).

6    The Liquidator seek orders in this application conferring on him the power to deal with the assets of the trust, without also appointing him as a receiver.

7    Section 90-15(1) of the IPS confers power on the Court to make “such orders as it thinks fit in relation to the external administration of a company”. The power is broad and is at least as extensive as the powers formerly available under s 479(3) and s 511 of the Corporations Act: Rathner at [6]; Deepeler at [14].

8    Further, s 81(1) of the Trustee Act provides:

81    Advantageous dealings

(1)    Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument, if any, creating the trust, or by law, the Court–

(a)    may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries, as the Court may think fit, and

(b)    may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne as between capital and income.

9    Section 81(1) of the Trustee Act is relevantly in identical terms to s 63(1) of the Trustee Act 1958 (Vic). In Rathner, Beach J stated at [8]:

In my view s 63(1) not only permits the conferral of power on a corporate trustee but also its liquidators in such a capacity; that arises as a necessary implication from the terms of s 63(1) or is a necessary ancillary order, particularly as it is only the liquidators who control the insolvent corporate trustee and who must be the recipient of and exercise any relevant power in substance.

10    By extension, given its relevantly identical wording, I am satisfied that s 81(1) of the Trustee Act also provides the Court with adequate power to authorise the necessary dealing with and application of trust assets by a liquidator of an insolvent corporate trustee.

11    In Cremin, in the matter of Brimson Pty Ltd (in liq) [2019] FCA 1023, Moshinsky J relevantly observed:

49    …It is now settled that the liquidator of an insolvent (former) corporate trustee cannot sell the trust’s property without order of the Court, or by appointment of a receiver over the trust assets … The rationale for this position is that, on a proper understanding, the trust assets are not the “property of the company”, but are instead trust property in which the corporate trustee has a proprietary interest by way of lien or charge to secure its right of exoneration: see [Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; 260 FCR 310; 124 ACSR 568] at [89]…

50    The courts are generally willing, upon an appropriate application, to make orders permitting the liquidator of a (former) corporate trustee to sell trust assets. In situations where the property of the trust will be exhausted following its sale and subsequent distribution to creditors, it may be appropriate merely to give the liquidator a power of sale…The more common course is, however, for the liquidator of the insolvent (former) corporate trustee to apply to be appointed a receiver for the purpose of selling the trust assets and distributing the proceeds among trust creditors…

12    I am satisfied, that in the present case, as in Rathner at [12] and Deppeler at [17]-[18], given the company has acted as a trustee of only one trust, all assets owned by the company were held by it as trustee save its right of indemnity which is a personal asset, all liabilities incurred by it were incurred in its capacity as trustee, and where there is no trading on, the preferable course is to confer suitable powers on the liquidator under trustee legislation instead of appointing the liquidator as the receiver.

B.    Background

13    On 16 September 2022, the Liquidator was appointed as the liquidator of Valteena on the application of The Owners-Strata Plan No. 12763.

14    The only asset of Valteena that the Liquidator has been able to identify is its interest in a property situated at 6/140 Panorama Drive, Farmborough Heights, New South Wales being the land described in Lot 6 in Strata Plan 12763 being certificate of title folio 6/SP 12763 (Property).

15    The Property is held by Valteena as a bare trustee for Greg’s Crumbs Pty Ltd (as a bare trustee for The Greg’s Crumbs Superannuation Fund).

16    Westpac Banking Corporation holds a registered mortgage over the Property as security for a home loan entered into by Greg’s Crumbs Pty Ltd as the trustee of The Greg’s Crumbs Superannuation Fund. As at 27 October 2022, the balance outstanding on the home loan was $216,746.25.

17    The following amounts are currently owing by Valteena with respect to the Property:

(a)    $1,719.60 to Sydney Water for outstanding water rates (as at 22 March 20230); and

(b)    $23,176.42 to the Owners Corporation on account of strata levies (as at 1 May 2023).

18    The Liquidator is not aware of any other creditors of Valteena, but is awaiting a response to enquiries that he has caused to be made of the Wollongong City Council as to whether there are any council rates outstanding on the Property.

19    The Liquidator has given evidence that there is no money in the liquidation to pay the outstanding water rates or strata levies and no asset of Valteena other than the Property.

C.    Consideration

20    I now address each of the orders that I have made.

21    First, I was satisfied that it was appropriate to make an order pursuant to s 90-15 of the IPS that the liquidator is both justified and acting reasonably in conducting the winding up of Valteena on the basis that its assets are held by it in its capacity as a bare trustee for Greg’s Crumbs Pty Ltd (as a bare trustee for The Greg’s Crumbs Superannuation Fund) as the only asset of Valteena, the Property, is properly characterised as being held in that capacity.

22    Second, I was satisfied that it was preferable to confer on the Liquidator the power, under s 81(1) of the Trustee Act, to deal with the trust assets rather than to appoint them as the receiver.

23    Third, I made an order pursuant to s 90-15 of the IPS that the liquidators were both justified and otherwise acting reasonably in proceeding on the basis that their possession, realisation and distribution of property of the trust is governed by rules analogous to Pt.5.5 and Pt. 5.6 of the Corporations Act. Such a direction accords with authority: see Carter Holt Harvey Woodproducts Australia Pty Limited v The Commonwealth of Australia and others (2019) 268 CLR 524; [2019] HCA 20 at [95]-[97] (Bell, Gageler and Nettle JJ), [153]-[172] (Gordon J). Here, Valteena has only acted as a corporate trustee for one trust.

24    Fourth, I was satisfied that it was appropriate to make an order to confirm the Liquidator’s entitlement to be indemnified out of the trust assets in respect of the costs and expenses that he has incurred. The sole activities of Valteena were as trustee. Other than its power of exoneration and the supporting lien, Valteena has no assets of its own. In these circumstances, it is appropriate that the Liquidator’s remuneration and expenses be paid out of trust assets. It is also appropriate that the costs of the present application be met from the Property held on trust.

D.    Disposition

25    For the foregoing reasons, I made orders substantially to the effect of the orders sought by the Liquidator and ordered that the Court’s orders be served on the persons who were served with a copy of the originating process. I also made an order granting liberty to any person who could demonstrate a sufficient interest to modify the orders to apply to the Court on not less than 48 hours’ notice.

Associate:

Dated:    21 August 2023