Federal Court of Australia
Kaso, in the matter of Balcombe Bulk Haulage Pty Ltd (Administrator Appointed) [2025] FCA 725
File number: | VID 807 of 2024 |
Judgment of: | MCEVOY J |
Date of judgment: | 30 June 2025 |
Date of publication of reasons: | 1 July 2025 |
Catchwords: | CORPORATIONS – administration – where administrators are appointed to the second plaintiff company – where the company acts solely as trustee of its trust on appointment of the administrator and holds property only in this capacity – application made by the administrator seeking orders relieving them from liability for past dealings with trust property – where a deed of company arrangement (DOCA) has been executed, and the administrator is made deed administrator – where the control of the company and the trust property has been returned to the director of the company – orders sought by administrator to deal with trust property in accordance with the DOCA – orders sought by administrator for remuneration and expenses to be paid out of the trust property – application granted |
Legislation: | Corporations Act 2001 (Cth) s 1318, Sch 2 ss 90-15 and 90-20 Trustee Act 1958 (Vic) s 67 |
Cases cited: | Anderson, in the matter of Allabay Pty Ltd (in liq) [2022] FCA 235 Amirbeaggi, in the matter of Simpkiss Pty Ltd (in liq) [2018] FCA 2121 Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 Cremin, in the matter of Brimson Pty Ltd (in liq) [2019] FCA 1023 Deppeler, in the matter of Old Port Road Pty Ltd (in liq) [2021] FCA 1243 Freelance Global v Bensted [2016] VSC 181 Jess, in the matter of Westside Group Pty Ltd (in liq) [2020] FCA 1586 Jones (liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40 In the matter of Houben Marine Pty Ltd (in liq) [2018] NSWSC 745 Kaso (administrator), in the matter of Sanitation Maintenance Services Pty Ltd (administrators appointed) [2023] FCA 418 Kite v Mooney, in the matter of Mooney’s Contractors Pty Ltd (in liq) (No 2) [2017] FCA 653 Kucianski (liquidator), in the matter of Johnson Roofing Pty ltd (in liq) [2021] FCA 1370 Lawrence (liquidator), in the matter of LXNDR Group Pty ltd (in liq) [2021] FCA 1243 Re Asten Holdings Pty Ltd (in liq) [2020] FCA 1107 Re JML Property Services Pty Ltd (in liq) [2018] NSWSC 1069 Re Mackie Group Pty Ltd (in liq) (in its capacity as trustee of the Jupelina Unit Trust) [2017] VSC 477 Re Matthew Forbes Pty Ltd (in liq) [2018] VSC 331 |
Division: | General Division |
Registry: | Victoria |
National Practice Area: | Commercial and Corporations |
Sub-area: | Corporations and Corporate Insolvency |
Number of paragraphs: | 35 |
Date of hearing: | 30 June 2025 |
Counsel for the plaintiffs: | R McCarthy |
Solicitor for the plaintiffs: | Frenkel Partners |
ORDERS
VID 807 of 2024 | |
IN THE MATTER OF BALCOMBE BULK HAULAGE PTY LTD (ADMINISTRATOR APPOINTED) SAM KASO in his capacity as Administrator of BALCOMBE BULK HAULAGE PTY LTD (ACN 627 475 227) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) First Plaintiff BALCOMBE BULK HAULAGE PTY LTD (ACN 627 475 227) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) Second Plaintiff |
order made by: | mcevoy j |
DATE OF ORDER: | 30 June 2025 |
THE COURT ORDERS THAT:
1. Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) in Sch 2 of the Corporations Act 2001 (Cth) the first plaintiff (the Administrator), in his capacity as administrator and deed administrator of the second plaintiff (the Company) is justified and acting reasonably in proceeding on the basis that:
(a) the Company carried on business as trustee of a trust, namely the Balcombe Family Trust (Trust); and
(b) all assets of the Company are properly characterised as property held by the Company in its capacity as trustee of the Trust (Trust Property).
2. Pursuant to s 90-15 of the Insolvency Practice Schedule, the Administrator is justified and otherwise acting reasonably in proceeding on the basis that, to the extent that he is dealing with and distributing property of the Trust (in his capacity as deed administrator of the deed of company arrangement executed on 16 October 2024 by the Company, the Administrator and the director of the company, Mr Mathew Balcombe (DOCA)) he may do so in accordance with the provisions of the DOCA.
3. Pursuant to s 1318 of the Corporations Act and, or alternatively, s 67 of the Trustee Act 1958 (Vic), the Administrator is relieved from any liability arising from any dealing with the Trust Property between the date of his appointment and the date of this order.
4. Pursuant to s 90-15 of the Insolvency Practice Schedule, the Administrator is and was justified and otherwise acting reasonably in proceeding on the basis that:
(a) the Administrator is 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 administration of the Company and in acting as the deed administrator of the DOCA (Remuneration and Expenses); and
(b) the Remuneration and Expenses include the remuneration, costs and expenses of and incidental to this application.
5. The plaintiffs must take all reasonable steps to provide notice of these orders to potentially interested parties, including:
(a) Mr Mathew Balcombe;
(b) the Australian Securities and Investments Commission; and
(c) the creditors of the Company.
6. There be liberty to apply by any person who can demonstrate sufficient interest to vary these orders on not less than 48 hours’ notice to the Administrator and the Associate to the Commercial and Corporations Duty Judge.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
REASONS FOR JUDGMENT
MCEVOY J:
1 By an originating process filed on 16 August 2024, the first plaintiff (the Administrator), who is the deed administrator of the second plaintiff (the Company), sought orders under the Corporations Act 2001 (Cth) and the Trustee Act 1958 (Vic) concerning the Administrator's dealing with, and proposed distribution of, property that was held by the Company. In the period following the commencement of the proceeding the Company executed a deed of company arrangement (DOCA). This has affected the form of the relief which has been sought.
2 The application was made in circumstances where:
(a) the Company was rendered the bare trustee of the Balcombe Family Trust (the Trust), having ceased to be the trustee of the Trust following the appointment of the Administrator on 19 June 2024;
(b) the property held by the Company, at the time of the Administrator's appointment, was held as trustee of the Trust, rather than by the Company in its own right; and
(c) by reason of the execution of the DOCA, which was approved by the Company's creditors, the property of the Trust has either been returned to the control of Mr Mathew Balcombe, the director of the Company (along with control of the Company), or is reflected in the pool of assets that comprises the "Deed Fund" and is to be distributed to the Company's creditors in accordance with the terms of the DOCA.
3 In support of the application, the plaintiffs relied on two affidavits of the Administrator dated 15 August 2024 (First Kaso Affidavit) and 16 May 2025 (Second Kaso Affidavit), together with three affidavits of service dated 13 September 2024, 29 May 2025 and 26 June 2025. They also relied on written submissions dated 6 June 2025.
4 The plaintiffs have sought relief similar to that granted upon application by liquidators and administrators of bare corporate trustees in such recent cases as Kaso (administrator), in the matter of Sanitation Maintenance Services Pty Ltd (administrators appointed) [2023] FCA 418 (McEvoy J) (Sanitation), Anderson, in the matter of Allabay Pty Ltd (in liq) [2022] FCA 235 (O’Callaghan J) (Allabay), Kucianski (liquidator), in the matter of Johnson Roofing Pty ltd (in liq) [2021] FCA 1370 (Anderson J) (Johnson Roofing), Lawrence (liquidator), in the matter of LXNDR Group Pty ltd (in liq) [2021] FCA 1243 (Anderson J) (LXNDR Group), Deppeler, in the matter of Old Port Road Pty Ltd (in liq) [2021] FCA 1243 (O’Bryan J) (Old Port Road), Re Asten Holdings Pty Ltd (in liq) [2020] FCA 1107 (Anderson J) (Asten) and Jess, in the matter of Westside Group Pty Ltd (in liq) [2020] FCA 1586 (O’Bryan) (Westside).
5 For the reasons that follow I granted the relief sought by the plaintiffs at the return of the application on 30 June 2025.
BACKGROUND
6 The background and circumstances giving rise to the present application are set out in the First and Second Kaso Affidavits.
7 The Administrator was appointed to the Company on 19 June 2024 in accordance with Part 5.3A of the Corporations Act. At that time, the Company was the trustee of the Trust.
8 The Company as trustee of the Trust operated a freight transport and logistics business in western Victoria. As at the date of the Administrator's appointment, the Company had six employees, including Mr Balcombe. In the period following his appointment, the Administrator continued to operate the business of the Company.
9 The Administrator's assessment is that the Company only conducted activities as trustee of the Trust and existed exclusively to perform its role as trustee of the Trust. The Administrator deposes that his assessment is based upon a review of the corporate records which have been recovered (including financial statements, employee payslips, bank statements, and tax records) and that his assessment also aligns with advice provided by Mr Balcombe. The Administrator's belief is that the Company at all times held such property as it held on trust in its capacity as trustee of the Trust.
10 Relevantly for present purposes, the Trust was at all relevant times subject to a trust deed (the Trust Deed). Clause 12.2.2(b)(iii) of the Trust Deed provides that "[t]he office of Trustee or of one of the parties comprising the Trustee will immediately be determined and vacated if: the Trustee, being a company, has a receiver, receiver and manager or administrator appointed appointed [sic] to any part of its assets". As has been mentioned, the Administrator was appointed to the Company on 19 June 2024. The Administrator submits that he is not aware, and that there is no suggestion that, a replacement trustee has been appointed.
11 The Administrator submits and I accept that as a consequence of the operation of cl 12.2.2(b)(iii) of the Trust Deed, the Company appears to have been a bare trustee of the Trust since 19 June 2024: see Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 at [6]-[9] (Gordon J) (Caterpillar Financial).
12 Based on the Administrator's investigations, the property of the Trust apparently comprised plant and equipment associated with the business conducted by the Company (including trucks and trailers), amounts payable by debtors and loan accounts due to the Company. In continuing to operate the business of the Company, the Administrator necessarily deployed the trust property at least to some extent.
13 On 25 September 2024 (after this proceeding was commenced), creditors of the Company approved the entry of the Company into the DOCA. The DOCA was duly executed by the Company, Mr Balcombe and the Administrator on 16 October 2024. Under the DOCA, Mr Balcombe was obliged to pay $340,000 to the Deed Fund. This has now occurred.
14 The Administrator submits and I accept that in the absence of an order made by the court, the ability of a bare trustee (or its officers) to deal with trust property, including to satisfy claims of trust creditors, is limited. For this reason the Administrator seeks relief relating to the manner in which he has dealt with property of the Trust (including by the trading of the Company's business in the post-appointment period) and his proposed future dealing (in accordance with the terms of the DOCA) with cash reserves referable to trust property.
15 In accordance with orders made in this proceeding on 26 August 2024 and 1 April 2025, the Administrator gave notice of this application and hearing date to the following possibly interested parties:
(a) the "Specified Beneficiaries" of the Trust listed in the Trust Deed, being Mr Mathew Balcombe and Ms Kim Maree Balcombe. (The Administrator notes in this regard that by way of Deed of Relinquishment of Interest in the Balcombe Family Trust made on 19 October 2022, Ms Balcombe declared that from 1 July 2022, she would cease to be a beneficiary under the Trust on a permanent basis.) Mr Balcombe has been provided with notice;
(b) known creditors of the Company, by way of circulars; and
(c) the Australian Securities and Investment Commission (ASIC).
THE RELIEF SOUGHT
16 Having regard to the prevalence of trading trusts, the Administrator submits and I accept that the circumstances that give rise to the need for the relief sought are relatively common. The matters that arise in this application are similar to those that featured in Caterpillar Financial. In that case, Gordon J summarised the rights and powers of a bare trustee (which had arisen following an equivalent disqualification clause in a trust deed) and its liquidator. Her Honour noted (at [26]) that although a bare trustee may still hold the assets of a trust, its duties, powers and rights are limited to protecting the Trust assets. See also Old Port Road at [16] and Cremin, in the matter of Brimson Pty Ltd (in liq) [2019] FCA 1023 at [49]-[50] (Moshinsky J) (Cremin).
The Administrator is justified and acting reasonably in proceeding on the basis that the Company was the trustee and held assets as trustee
17 The Administrator has sought orders that he is justified and acting reasonably in proceeding on the basis that the Company carried on business as trustee of the Trust, and held the assets of the Company as trustee. The orders sought are in an equivalent form to those made in Allabay, Johnson Roofing, LXNDR Group, Asten, Westside and Sanitation.
18 Pursuant to s 90-20(1) of the Insolvency Practice Schedule (Corporations) of the Corporations Act, the Administrator is able to apply to the court for orders under s 90-15 of the Practice Schedule in relation to the external administration of the Company. Section 90-15(1) of the Practice Schedule confers power on the court to make "such orders as it thinks fit in relation to the external administration of a company". It may be accepted that this is a broad power.
19 Having regard to the outcome of the Administrator's enquiries, which aligns with Mr Balcombe's stated position, and in circumstances where there is no evidence that the Company traded or held assets other than in its capacity as trustee of the Trust, the Administrator submits and I accept that it is appropriate for the court to make an order in the terms sought.
Power of the Administrator to carry on the business of the Trust and act as trustee
20 In the originating process the Administrator sought an order pursuant to s 63 of the Trustee Act that the Company has the power to carry on the business of the Trust and act as trustee of the Trust. Having regard to the execution and part-performance of the DOCA, and in circumstances where the Company has been returned to the control of Mr Balcombe, together with the remaining Trust Property that does not form part of the Deed Fund, the Administrator no longer presses an order to this effect.
Power for the Administrator to deal with Trust Property
21 In the originating process the Administrator sought an order pursuant to s 90-15 of the Practice Schedule that he was justified and otherwise acting reasonably in proceeding on the basis that he could deal with, hold, apply and or distribute the Trust Property in accordance with Pt 5.5 and 5.6 of the Corporations Act.
22 As has been mentioned, having regard to the execution of the DOCA, the Administrator sought to vary the proposed form of order. He sought an order pursuant to s 90-15 of the Practice Schedule that he is justified and otherwise acting reasonably in proceeding on the basis that, to the extent that he is dealing with and distributing property of the Trust (as Deed Administrator of the DOCA), he may do so in accordance with the provisions of the DOCA.
23 I am satisfied, as the Administrator submits, that the amended form of order proposed is the appropriate order in proceedings of this kind: see, for example, Sanitation at [25].
Potential liability of the Administrator
24 In the originating process the Administrator sought an order pursuant to s 1318 of the Corporations Act and or section 67 of the Trustee Act, that he be relieved from any liability arising from any dealing with the Trust Property between the date of his appointment and the date of the orders.
25 I accept, as the Administrator, submits that in the period following his appointment he dealt with trust property in the course of discharging his role as Administrator. I accept also that this conduct involved, relevantly, the trading of the business conducted by the Company, which necessarily involved the use of Trust Property and entailed the realisation of assets (such as pre-appointment debt collection) and application of funds to meet trading costs (such as wages and running costs, including lease payments of equipment and vehicles). Further, as the Administrator submits, his dealing with Trust Property has involved the transaction effected by the DOCA, which has given rise to an entitlement to receive the amounts payable by Mr Balcombe under the terms of the DOCA.
26 In circumstances where the Administrator has had dealings with the Trust Property at a time when the Company had ceased to hold office as Trustee, the Administrator seeks an order for relief from any potential liability arising from such dealings with the Trust Property. It may be accepted that the courts have recognised that the purpose of s 1318 of the Corporations Act is to excuse company officers from liability in situations where it would be unjust and oppressive not to do so, recognising that such officers are business persons who act in the environment involving risk in commercial decision-making: see Re Matthew Forbes Pty Ltd (in liq) [2018] VSC 331 at [24] (Riordan J); LXNDR Group at [28]; Asten at [31]; Johnson Roofing at [26]. Further, and in referring to s 67 of the Trustee Act, Gordon J observed (at [33]) in Caterpillar Financial that the section "empowers the court to excuse a breach of trust by a trustee who has acted honestly and reasonably."
27 The conditions required to grant relief from personal liability under s 67 of the Trustee Act and s 1318 of the Corporations Act were outlined by O’Bryan J In Westside at [32]-[33]. See also Amirbeaggi, in the matter of Simpkiss Pty Ltd (in liq) [2018] FCA 2121 at [47] (Markovic J) (Simpkiss).
28 With respect to the first limb of both provisions, the Administrator has kept creditors of the Company informed during the course of the administration and the present application, and no question or concern has been raised concerning the Administrator's powers to realise the trust property. However, as O’Byran J observed in Westside (at [36]), "in circumstances where the sale of assets has occurred in possible breach of trust (due to an absence of power), the prospect of a future claim by a beneficiary of the Trust cannot be ruled out", citing Simpkiss at [50]. Accordingly, and having regard to the purposes of the power conferred by s 1318 of the Corporations Act and s 67 of the Trustee Act, there is sufficient reason and an objective basis for the Administrator to apprehend that a claim may or might be made against him arising out of the circumstances of the case.
29 Insofar as second limb of both provisions is concerned, I accept that the Administrator's conduct in connection with the Trust Property has been honest and reasonable. As the Administrator submits, he has carried on the business for the purpose of seeking expressions of interest for the recapitalisation and/or sale of the business and/or assets and informed creditors that the business of the Company would be traded, and has acted to advance the interests of the company's creditors. I accept also that creditors of the Company voted in favour of the execution of the DOCA.
30 In these circumstances I accept that it is appropriate to make an order in the terms sought by the Administrator. Such an order is in similar terms to the orders made in Asten, LXNDR Group and Sanitation.
Administrator’s remuneration and expenses
31 The First Kaso Affidavit and the Second Kaso Affidavit contain details of the tasks undertaken by the Administrator and the anticipated further work required to conclude his role as Deed Administrator of the DOCA.
32 The DOCA provides for payment of the costs of the administration, including the administration of the DOCA, which are to be paid in priority to other claims. To the extent that those costs are being met from property that is properly characterised as Trust Property, the Administrator seeks an order to confirm his entitlement to be indemnified out of that property.
33 As has been mentioned, the Company only conducted activities as trustee of the Trust and existed exclusively to perform its role as trustee of the Trust. It may be accepted that other than its right of exoneration and the supporting lien, the Company has no assets of its own. In the circumstances I accept the Administrator’s submission that it is appropriate that his remuneration and expenses be paid out of Trust Property: see Jones (liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40 at [105]-[106] (Allsop CJ, Farrell J agreeing); Re Mackie Group Pty Ltd (in liq) (in its capacity as trustee of the Jupelina Unit Trust) [2017] VSC 477 at [48]-[62] (Kennedy J); Freelance Global v Bensted [2016] VSC 181 at [58] (Riordan J); Kite v Mooney, in the matter of Mooney’s Contractors Pty Ltd (in liq) (No 2) [2017] FCA 653 at [149] (Markovic J); In the matter of Houben Marine Pty Ltd (in liq) [2018] NSWSC 745 at [17] (Gleeson JA); Re JML Property Services Pty Ltd (in liq) [2018] NSWSC 1069 at [10] (Black J).
34 I accept that in the circumstances is also appropriate that the costs of this application be met from the property held on trust.
CONCLUSION
35 Orders substantially in the terms sought by the Administrator are set out at the commencement of these reasons.
I certify that the preceding thirty-five- (35) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McEvoy. |
Associate:
Dated: 1 July 2025