Apostolou v VA Corporation of Aust Pty Ltd

YATES J: 1 The plaintiffs are the joint and several administrators of PWUO Trading Pty Ltd (administrators appointed) (the company). They were appointed on 12 November 2020. 2 The company's financial records for the year ended June 2019 signify that it is the trustee of the PWUO Trading Unit Trust (the Unit Trust). The Unit Trust was established by a deed dated 5 March 2018 (the Deed). In the Deed, the company is named as the trustee of the Unit Trust. PWUO Investments Pty Ltd, as trustee of the PWUO Investments Discretionary Trust, is named as the "Initial Unit Holder". In the course of submissions today, I was informed that PWUO Investments Pty Ltd has been deregistered. The current unit holder(s) of the Unit Trust are not presently known. 3 The company's financial statements and the Deed only came to the plaintiffs' attention on or about 18 November 2020. At the time of their appointment, they were not aware of the fact that the company was, apparently, acting as a trustee. As a result of further investigations, the plaintiffs now believe that the only business activities undertaken by the company, prior to their appointment, were in its capacity as trustee of the Unit Trust. 4 These activities are the retailing of sports apparel and footwear under the name "Paul's Warehouse USA Outlet" from premises at 1 Market Street, Rockdale, New South Wales. The company also has administrative and warehouse facilities at leased premises at 125-127 Parramatta Road, Homebush, New South Wales. 5 The plaintiffs are of the view that it is in the best interests of creditors that the company continue to trade with a view to the business being sold as a going concern. However, clause 17.11(b) of the Deed provides: The office of trustee is determined and vacated: … (b) if the Trustee, being a company, enters into liquidation, whether compulsory or voluntary (not being a voluntary liquidation for the purposes of amalgamation or reconstruction), or have an administrator, receiver or official manager or receiver and manager appointed. 6 This clause has been triggered by the plaintiffs' appointment as administrators. As no other person has been appointed as trustee of the Unit Trust since the plaintiffs' appointment, the consequence is that the company now holds the property of the Unit Trust as a bare trustee, with limited powers in respect of that property. 7 It is doubtful that, in their role as administrators, the plaintiffs' powers under s 437A of the Corporations Act 2001 (Cth) (the Act) extends to that property. Further, although the company will have rights of indemnity (reimbursement and exoneration) out of the trust property, those rights of indemnity in respect of non-cash property do not confer on the company any right of sale. The company's rights of indemnity out of the trust property are 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 liq) [2018] FCAFC 40; 260 FCR 310 at [44]. 8 Given the apparent limitations on their present powers, the plaintiffs seek their own appointment as receivers of the assets and undertaking of the Unit Trust, with the powers conferred on an administrator by s 437A of the Act. I am satisfied that this is an appropriate course. It will facilitate the administration of the company and protect its proprietary interest in the trust property arising from its rights of indemnity. 9 Two claimed creditors of the company - Rita Stephan and Wade Richardson - each gave notice to the plaintiffs on 25 November 2020 that they wished to be heard on this application. Although invited to appear today, they have not appeared. Their concerns about the present application were variously expressed but, I think, boil down to questioning, in the interests of avoiding unnecessary expenditure of scarce resources, whether the present application is necessary. I am satisfied that the present application is necessary, for the reasons I have given. 10 For these reasons, I will grant the relief sought in prayers 1, 2, 4, 6, 7, 8 and 9 of the originating process dated 25 November 2020. The balance of the relief claimed will stand over for later determination, if necessary. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.