Apostolou v VA Corporation of Aust Pty Ltd

1. Pursuant to s 57(1) of Federal Court of Australia Act 1976 (Cth), Mr Peter Paul Krejci (Receiver), an official liquidator, be appointed without security as receiver and manager over the business and assets of the Camporeale Property Trust (Trust).
2. The Receiver have, in respect of the business and assets of the Trust, the powers that a receiver has in respect of the business and property of a company under s 420 of the Corporations Act 2001 (Cth) (other than in s 420(2)(s), (t), (u) and (w)) as if the reference in that section to "the corporation" were a reference to the Trust.
3. The costs, expenses and remuneration incurred by Mr Krejci in acting as the Receiver of the Trust, including the costs of this application, be paid from the Second Plaintiff's rights of exoneration as trustee of the Trust.
4. The parties and any person with a sufficient interest under the Trust be granted liberty to apply on 3 days' notice.
5. The need for the Receiver to file a guarantee under r 14.21 and r 14.22 of the Federal Court Rules 2011 (Cth) be dispensed with. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLLIER J: 1 Before the Court is an urgent application by Mr Peter Krejci as liquidator of Camporeale Properties Pty Ltd (in liquidation) ACN 127 201 932 (the Company). Mr Krejci seeks the following orders: 5. Pursuant to section 57(1) of Federal Court of Australia Act 1976 (Cth), Mr Peter Paul Krejci (Receiver), an official liquidator, be appointed without security as receiver and manager over the business and assets of the Camporeale Property Trust (Trust). 6. The Receiver have, in respect of the business and assets of the Trust, the powers that a receiver has in respect of the business and property of a company under section 420 of the Corporations Act (other than in s 420(2)(s), (t), (u) and (w)) as if the reference in that section to "the corporation" were a reference to the Trust. 7. The costs, expenses and remuneration incurred by Mr Krejci in acting as the Receiver of the Trust, including the costs of this application, be paid from the Second Plaintiff's rights of exoneration as trustee of the Trust. 8. The parties and any person with a sufficient interest under the Trust be granted liberty to apply on 24 hours' notice. 9. The need for the Receiver to file a guarantee under rule 14.21 and rule 14.22 of the Federal Court Rules 2011 (Cth) be dispensed with.

Background 2 Relevant background are summarised in affidavits before the Court of Mr Krejci dated 20 December 2019 and 23 December 2019. 3 The Company was placed in liquidation on 4 December 2019 by order of the Federal Court. At that time the director of the Company was Ms Sandra Camporeale, who was appointed as a director on 26 February 2009. Mr Krecji is a director of BRI Ferrier NSW Pty Ltd (BRI Ferrier) which carries on business as a business recovery and insolvency firm. 4 Pursuant to the Camporeale Property Trust Deed dated 4 February 2009 (relevantly Trust and Trust Deed) the Company was appointed trustee of the Trust, with the primary beneficiaries of the Trust identified as Mr Michael Camporeale and Ms Sandra Camporeale. The Principal of the Trust was Mr Michael Camporeale. 5 The appointment and removal of a trustee under the Trust Deed is governed by cl 26 of the Trust Deed. In particular cl 26.3 provides: 26.3 Principal may appoint The Principal has the Right to appoint a Trustee: (a) As a replacement to any Trustee who resigns or is removed or whose office is vacated for any reason… 6 Further, cl 26.6 of the Trust Deed relevantly provides as follows: If a Trustee: … (g) being a corporation, has a receiver or receiver and manager appointed, or enters into official management, administration or liquidation; … then that Trustee will be automatically removed as a Trustee. 7 Mr Krejci arranged for a land title search to be conducted. The land title search revealed that the Company was the registered proprietor of two properties at Units 5 and 6, 78 Fearnley Street, Portsmith, Queensland (properties), and that the Company held the properties as trustee. 8 At material times a registered mortgage was held over the properties by Westpac Banking Corporation (Westpac). On 6 December 2019 an email was sent by Ms Yvonne Chan from Westpac to Mr Jack Li of BRI Ferrier setting out the amount owing by the Company being $604,000 and $3,631.92 which was secured by registered mortgages over the properties, as well as a general security agreement over the assets of the Company. 9 On 18 December 2019 Mr Krejci obtained an appraisal of the properties which valued them together as between $490,000 and $540,000. 10 Mr Krejci submits that it was not clear whether the Company traded in any capacity other than as trustee of the Trust, but in any event the properties were held beneficially for the Trust. 11 Mr Krejci gave evidence that he understood the properties were leased. Annexed to Mr Krejci's affidavit of 20 December 2019 was a copy of a lease between the Company and Distinct Group Pty Ltd in relation to the properties. 12 Mr Krejci also gave evidence that during his investigations he had identified other assets registered in the name of the Company, including two excavators and a Mazda car, which were subject to finance and security interests registered on the Personal Property Securities Register (PPSR). The evidence of Mr Krejci was, however, that these assets could not presently be located. 13 In his affidavit dated 23 December 2019 Mr Krejci deposed that the Company in its own capacity and as trustee of the Trust had entered into the following three security deeds: Finance agreement commencing 21 August 2017 in relation to an E50 Excavator (E50 Excavator) for a total amount of $49,706.40 (E50 Excavator Agreement); Finance agreement commencing 14 August 2017 in relation to an E35t Excavator (E35t Excavator) for a total amount of $49,531.86 (E35t Excavator Agreement); and Finance agreement commencing 24 July 2018 in relation to a Mazda MX5 (MX5) for a total amount of $50,119.20 (MX5 Agreement). 14 As Mr Krejci could not locate these assets he had obtained a desktop valuation for each of the them as follows: In relation to the E50 Excavator Agreement: $30,000 to $35,000 In relation the E35t Excavator Agreement: $30,000 to $35,000 In relation to the MX5 Agreement: $30,000 to $32,000 15 Mr Krejci deposed that on 16 December 2019 Capital Finance sent emails to Mr Li, providing the payout figures for each of the finance agreements as follows: In relation to the E50 Excavator Agreement: $26,808.76 In relation the E35t Excavator Agreement: $18,689.52 In relation to the MX5 Agreement: $36,475.49 16 In his affidavit dated 23 December 2019 Mr Krejci deposed: Based on the above valuations and payout figures it appears to me that I may need to disclaim at least the MX5 Agreement and possibly the E50 Excavator Agreement. I have concerns that I may not be able to disclaim the finance agreements, or any other unprofitable contracts which may arise, if I am not appointed as receiver of the Trust. 17 Mr Krejci gave detailed evidence in his affidavit of 20 December 2019 that he had attempted to contact Ms Camporeale by letter, telephone and through third parties between 5 December 2019 and 19 December 2019. Mr Krejci gave evidence that he had conversations with Ms Camporeale on 19 December 2019 in which he informed her that Westpac had given approval for him to appointed as receiver over the Trust and to sell the properties. Mr Krejci deposed that Ms Camporeale had said it was "not a good time to sell the properties in the current market", that she proposed alternative strategies to selling the properties, and that she did not currently have a land address for contact. 18 Evidence of Mr Krejci was that Mr Michael Camporeale died on 30 March 2019. Item 7 of the Schedule to the Trust Deed identifies Mr Michael Camporeale as Principal of the Trust, and no Alternative Principal is identified. During the hearing Counsel for Mr Krejci directed my attention to cll 17.1 and 27.3 of the Trust Deed which relevantly provided: 17.1 On the death of a sole Principal Where a sole Principal dies and there is no Alternative Principal, the Principal's personal representative has the Right to appoint any other person or persons to be the Principal. … 27.3 Removal of Principal (a) If a Principal or an Alternative Principal: (i) dies; … then that Principal, or Alternative Principal, will be automatically removed as a Principal or Alternative Principal… 19 I note that the effect of these clauses is that Mr Camporeale was removed as Principal of the Trust by his death, however because the evidence is that he was the only Principal appointed and no Alternative Principal named, cl 17.1 operates. During the hearing I asked Counsel for the liquidator whether there was any evidence as to the identity of the personal representative of Mr Camporeale's deceased estate, and whether there had been any subsequent appointment of a trustee of the Trust by such person. Counsel submitted that there was no evidence of this of which they were aware. 20 On 19 December 2019 Ms Yvonne Chan wrote to Mr Jack Li of BRI Ferriers in the following terms: Jack, We refer to the letter from the Liquidator dated 19/12/2019 and confirm that the Bank is agreeable to cover from the sale proceeds, for the Liquidator fees and other associated costs incurred in relation to realisation of the Company's properties located at Unit 5 & 6, 78 Fearnley Street, Portsmouth NSW [sic] 4870. 21 Materially in his affidavit Mr Krejci deposed as follows: 43. The Properties, which are property of the Trust, are presently leased to Distinct Group Pty [sic] and which are being managed by a property agent. I seek to be appointed as receiver of the Trust so that I am able to preserve, manage and realise the Trust property. Should the Court be minded to grant the relief sought in the originating process I propose to immediately engage an agent to take steps to market and sell the property in the earliest time next year. 44. Given the terms of the Trust Deed I have concerns as to whether I would have the power as a bare trustee to recover, realise or deal with the assets of the Trust including taking steps to sell the Properties. To the extent that any issues arise in relation to the tenant I also have concerns that I may not be able to take any steps to secure the Properties and issue any notices. In addition should the excavator and motor vehicle be located, and/or other assets of the Company be found I would need to be able to take steps to take possession of and sell those assets. 22 Mr Krejci also deposed that on 23 December 2019 he sent a circular to creditors of the Company to inform them of his application in these proceedings. 23 In her affidavit dated 23 December 2019 Ms Megan Scott, an employed solicitor of Hall & Wilcox who act on behalf of Mr Krejci, deposed that on 20 December 2019 at approximately 4.34 pm she had emailed a copy of the originating process in these proceedings and Mr Krejci's affidavit of 20 December 2019 to Ms Camporeale. Ms Scott also deposed that at approximately 4.35 pm she had sent a text message to a telephone number stating that the Federal Court had made orders for substituted service of the originating process and affidavit on Ms Camporeale. 24 On 20 December 2019 Justice Farrell ordered, materially, as follows: 1. Service in accordance with r 8.06 of the Federal Court Rules 2011 (Cth) requiring service of this originating process on Sandra Camporeale be dispensed with. 2. Service of the originating process be abridged to 5:30 pm on 20 December 2019. 3. A sealed copy of the originating process be served on Sandra Camporeale, together with a copy of this order bv: (a) sending by email a copy to Sandra Camporeale at [redacted]; and (b) sending a short message service to the mobile number [redacted] being "On 20 December 2019, the Federal Court of Australia made orders for substituted service of an originating process and affidavit on you. Please contact Megan Scott of Hall & Wilcox [redacted]". 4. The originating process shall be deemed to be served on Sandra Camporeale two (2) days after service in accordance with order 3.

Consideration 25 At today's hearing, there was no appearance by Ms Sandra Camporeale. Counsel for the Plaintiffs informed me that Ms Sandra Camporeale had been notified of the hearing today and referred me to Ms Scott's affidavit. Counsel also informed me of his instructions that no further communications had been received by Mr Krejci or his staff from Ms Sandra Camporeale concerning today's matter. 26 The Court has not been contacted by either Ms Sandra Camporeale or any lawyers acting on her behalf in relation to this matter. I am satisfied that Ms Sandra Camporeale was aware of today's hearing, and chose not to participate. 27 The Court has power pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth) to, at any stage of a proceeding and on such terms and conditions as the Court thinks fit, appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient so to do. Section 57(3) further provides: When in any cause pending in the Court a receiver appointed by the Court is in possession of property, the receiver shall manage and deal with the property according to the requirements of the laws of the State or Territory in which the property is situated, in the same manner as that in which the owner or possessor of the property would be bound to do if in possession of the property. 28 Rule 14.21 of the Federal Court Rules 2011 (Cth) further provides: A party may apply to the Court for an order: (a) appointing a receiver to have the powers of a receiver and manager; and (b) requiring the person appointed as receiver to file a guarantee; and (c) providing that the person's appointment does not take effect until the guarantee is filed. 29 The power to appoint a receiver is to be broadly construed: Burrup Fertilisers Pty Ltd v Oswal (No 4) [2011] FCA 1503 at [5], Porter v Australian Prudential Regulation Authority (2010) 265 ALR 322; [2010] FCA 125 at [27]-[28], Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Limited [2013] FCA 882 at [107]-[108]. 30 In this case the Company is - or was until the liquidator was appointed - the legal owner as trustee of the properties as well as the personal property the subject of the security interest. Notwithstanding that it appears the Company was automatically removed as trustee on the appointment of the liquidator, nonetheless the Company remained the bare legal owner of those assets. 31 Counsel for Mr Krejci has directed my attention to a discussion by Justice Gleeson of relevant legal principles in Hosking, Re Business Aptitude Pty Ltd (in liq) [2016] FCA 1438. In that case her Honour observed: 17. The general ground upon which the Court appoints a receiver is the protection or preservation of property for the benefit of persons who have an interest in it: QBE Insurance (Australia) Ltd v WA Metal Recycling Pty Ltd, in the matter of WA Metal Recycling Pty Ltd (in Liq) [2016] FCA 238 ("QBE Insurance") at [13], citing Sapphire (SA) Pty Ltd v Ewens Glen Pty Ltd [2011] FCA 600 at [15]. 18. Where a trustee is removed, it retains a right of indemnity from the trust assets secured by an equitable charge over them for its liabilities incurred by reason of acting as trustee: In the matter of Stansfield DIY Wealth Pty Ltd (in liquidation) [2014] NSWSC 1484; (2014) 291 FLR 17 ("Re Stansfield") at [10]. 19. There is a conflict of authority as to whether the liquidator of a corporate trustee, which has ceased to be trustee, has the power to sell trust assets to enforce the (former) trustee's right of indemnity. In Apostolou v VA Corporation of Aust Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84, Finkelstein J held, at [48]-[50], that the liquidator of a corporate trustee which held legal title to trust property in which it also had an equitable interest could sell the subject property pursuant to the power of sale conferred by s 477 of the Act and that this survived the removal of the corporate trustee. 20. However, in Re Stansfield, Brereton J disagreed with the decision of Finkelstein J and held (at [10],[16]-[20],[30],[33]) that, if a trustee company ceases to be trustee of a trust it can no longer exercise the trustee's power of sale under the trust instrument or general law and that s 477(2)(c) of the Act does not empower the liquidator to sell property held by the trustee company on trust, even if the trustee company has an equitable charge over it, because the property is not in itself "property of the company". 21. Notwithstanding this conflict of authority, it is well-established 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: SMP Consolidated Pty Ltd (in liquidation) v Posmot Pty Limited [2014] FCA 1382 ("SMP Consolidated") at [7] citing Re Indopal Pty Ltd (1987) 12 ACLR 54 at 57; Kerr, in the matter of Angel's Castle Pre-School Pty Ltd (In Liquidation) [2010] FCA 786 ("Angel's Castle Pre-School") at [25]; In the matter of Gramarker Pty Ltd; Clifford Sanderson (as liquidator of Gramarker Pty Ltd) v Kerr [2014] NSWSC 243 at [6]-[7]; Re Stansfield at [31], [33], [45]. 22. This Court has exercised its power under s 57(1) of the FCA Act for the purpose of appointing a liquidator of a former trustee company as receiver and manager of the trust, for example, in QBE Insurance and in Kite v Mooney, in the matter of Mooney's Contractors Pty Ltd (in liq) [2016] FCA 886. 32 I respectfully adopt this statement of principle by her Honour in this case. 33 I note in passing the recent decision of the High Court in Carter Holt Harvey Wood Products Australia Pty Ltd v Commonwealth [2019] HCA 20 which recognises issues arising where a company trading as the trustee of a trading trust becomes insolvent. However, Carter Holt Harvey Wood is of limited relevance in the case before me where the Company was removed as trustee on the appointment of the liquidator and retains only a bare legal interest in the relevant assets. 34 In this case it is clear that the Company, as trustee, is registered proprietor of the properties, as well as the legal owner of the two excavators and a Mazda car. The properties are the subject of mortgages to Westpac, and I understand that Westpac has a general security interest under the Personal Property Securities Act 2009 (Cth) over assets of the Company including the excavators and the car. On the evidence before the Court it also appears that the amounts currently outstanding to Westpac under the mortgages over the properties exceeds the combined value of the properties. The liquidator has not been able to locate the excavators and the Mazda car to date. 35 Counsel for Mr Krejci submits that the relief he seeks is necessary and appropriate for the following reasons: Westpac - which is the largest known secured creditor - does not oppose the appointment of Mr Krejci as Receiver; No other trustee has been appointed to the Trust, notwithstanding the automatic removal of the Company as Trustee under the Trust Deed; The appointment of the Liquidator as receiver of the property of the Trust will enable the property to be dealt with efficiently and without adding significantly to the expense of the liquidation. This may not be the case if a replacement trustee is appointed, noting the ostensible costs of transferring title in the Properties to a new trustee; and The appointment of Mr Krejci as receiver will enable the liabilities of the Company to be met to the extent possible, with proper recourse to the property of the Trust. 36 In my view these arguments strongly support the appointment of Mr Krejci as receiver. 37 Ms Sandra Camporeale, as the surviving primary beneficiary of the Trust, clearly has an interest in the disposal of trust assets. I also note from such material as is before the Court that Ms Camporeale was not in favour of the liquidator selling the properties at this point of time. However, that in itself is not a reason not to appoint Mr Krejci as a receiver to assist in the progress of the liquidation of the Company. Further, no interest has been demonstrated by Ms Sandra Camporeale in today's proceedings. 38 I also note the heavy burden of the statutory duties of Court-appointed liquidators and receivers, including in relation to sale of property.

Conclusion 39 In my view it is appropriate to make the orders sought by the liquidator Mr Krejci. In view of the time of year however, I consider it also appropriate that any liberty to apply be made on 3 days' notice. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.