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.