Apostolou v VA Corporation of Aust Pty Ltd

YATES J: 1 The plaintiff, Mr Condon, is the liquidator of Nicolas Criniti Pty Ltd (in liquidation) (the company). By an originating process filed on 16 September 2020 he seeks, amongst other relief, an order pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) that he be appointed as receiver and manager of the property of the Bridge Road Unit Trust, which is presently held by the company as a bare trustee. 2 On 22 November 2019, Mr Condon was appointed as administrator of the company. On 3 December 2019, receivers and managers of the company's property were appointed by a secured creditor, AMAL Trustees Pty Ltd (AMAL). On 24 February 2020, the company's creditors resolved that the company be wound up and that Mr Condon be appointed as liquidator. On 3 September 2020, Mr Condon was informed by the receivers and managers that their receivership had been finalised and that they intended to distribute/transfer the surplus assets of the receivership to him as the company's liquidator. Mr Condon is now in receipt of cash in the sum of $818,804.94 and a home unit property with an estimated value of $425,000. 3 Based on his investigations, first as administrator and then as liquidator, Mr Condon has come to the view that the company's only business has been to act as trustee of the Bridge Road Unit Trust. Its business, in this capacity, included developing land in Bridge Road at Westmead, New South Wales into a home unit complex comprising 27 home units. The company's financial difficulties appear to have arisen from a dispute between the company and the builder it had engaged to carry out that project. The home unit property to which I have referred is part of that complex. 4 The deed creating the Bridge Road Unit Trust was executed on 19 December 2014. It contains a provision to the effect that if the trustee goes into liquidation (except for the purposes of amalgamation or reconstruction) or if a receiver is appointed, the trustee will cease to hold its office. The deed also creates particular rights of indemnity in favour of the trustee. 5 As a consequence of the appointment of the receivers and managers by AMAL, the company's office as trustee of the Bridge Road Unit Trust has ceased. No new trustee has been appointed. Therefore, the company now holds the property of the trust as a bare trustee. Although its rights of indemnity - its rights of reimbursement and exoneration - out of the property of the trust is secured by an equitable lien or charge, that lien or charge in respect of non-cash property does not confer a right of sale. The company's right of indemnity in respect of that property is only enforceable by a court order for sale or by the appointment of a receiver with a power of sale: Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103 at [45]; Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liquidation) [2018] FCAFC 40; 260 FCR 310 at [44]. It is to be noted in this connection that the trust property held by the company as a bare trustee does not constitute "property of the company" within the meaning of s 477(2)(c) of the Corporations Act 2001 (Cth), which confers a general power of sale on a liquidator. 6 Mr Condon seeks his appointment as receiver and manager of the property of the Bridge Road Unit Trust to enable him to sell the home unit and distribute the sale proceeds, along with the other (cash) trust property. It has not been necessary for him to deal with the realisation of the trust property before now because of the appointment of the receivers and managers by AMAL on 3 December 2019. As control of the company's property had been assumed by the receivers and managers, Mr Condon formed the view that it was prudent to await the outcome of that receivership to determine if any residual assets remained, over which his appointment as receiver might be necessary. As I have noted, the receivership commenced by AMAL only came to an end recently. 7 I am satisfied that it is appropriate that Mr Condon be appointed as receiver and manager of the property of the Bridge Road Unit Trust, with the power of sale. I am also satisfied that it is appropriate that the ancillary relief set out in the originating process be granted. Orders have been made accordingly. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.