Apostolou (as trustee of the Vasiliou Family Trust) v VA Corporation of Australia Pty Ltd

MOSHINSKY J: 1 Mr Mathew Gollant, the liquidator of Aced Kang Investments Pty Ltd (in liq) (the Company), which was previously but is no longer the trustee of the Kang Family Trust (the Trust), applies to the Court for an order that he be appointed as receiver and manager of the business and assets of the Trust, in order to effect a sale of two properties in Queensland and to distribute the proceeds of sale of those properties and another property that has already been sold. 2 The background facts, in brief terms, are as follows. 3 On 27 May 2006, the trust deed of the Trust was executed. Pursuant to that instrument, the Company was appointed as the trustee of the Trust. The primary beneficiaries are Eang Kang and Chantha Kang. The additional specified beneficiaries are the children of the primary beneficiaries. Clause 11.4 of the trust deed provides that "[t]he office of a trustee shall be ipso facto determined and vacated … if such trustee being a company shall enter into liquidation whether compulsory or voluntary (not being merely a voluntary liquidation for the purposes of amalgamation or reconstruction)". 4 The Company in its capacity as trustee of the Trust operated as a property holding and investment entity. The Company did not otherwise engage in trading or investment activities. In the period between 1 July 2013 and 30 June 2016, the Company sold a number of the properties it owned. 5 On 5 July 2016, Mr Gollant was appointed as the liquidator of the Company following a members' voluntary winding up. Upon the winding up, the Company ceased to be trustee of the Trust, pursuant to the provision of the trust deed referred to above. It did, however, remain a bare trustee of property of the Trust registered in its name. These properties included properties located at: (a) 26 William Street, Waterford West, Queensland; (b) 28 William Street, Waterford West, Queensland; and (c) 33 Wharf Street, Waterford West, Queensland. 6 The third property referred to above was the subject of a contract of sale to an arm's length purchaser at the time Mr Gollant was appointed as the liquidator. 7 Mr Gollant obtained a valuation of the Wharf Street property and satisfied himself that the terms of the contract of sale were commercial. Having done so, he engaged lawyers to effect settlement. This took place on or about 11 August 2016. The proceeds of sale of this property are held by Mr Gollant. 8 The other two properties referred to above remain registered in the name of the Company. They are unencumbered. Each property is valued at $60,000. 9 Apart from these properties and the proceeds of sale of the Wharf Street property, the Trust has no substantial assets. 10 The debts owed to creditors of the Trust total approximately $12 million. Plainly, the Trust is hopelessly insolvent. 11 No other person has been appointed as trustee of the Trust and there is no realistic prospect of this occurring. 12 In circumstances where a company that is the trustee of a trust goes into liquidation, and thereupon ceases to be the trustee of the trust, does the liquidator's power of sale of the property of the company in s 477(2)(c) of the Corporations Act 2001 (Cth) extend to trust assets that remain registered in the company's name? The answer is uncertain on the present state of the authorities. There is no issue that, in such cases, the company holds the real property registered in its name as a bare trustee. Nor is there any issue that the company, as a former trustee, has a right of indemnity from the trust assets, secured by an equitable charge over those assets. However, a difference of opinion has emerged as to whether the power of sale of the property of the company in s 477(2)(c) extends to trust assets in such circumstances: see Apostolou (as trustee of the Vasiliou Family Trust) v VA Corporation of Australia Pty Ltd (2010) 77 ACSR 84 at [48]-[50] per Finkelstein J; Re South West Kitchens (WA) Pty Ltd (2014) 224 FCR 408 at [30]-[31] per McKerracher J; Re Stansfield DIY Wealth Pty Ltd (in liq) (2014) 291 FLR 17; 103 ACSR 401 at [28]-[30] per Brereton J. 13 Given the state of the authorities, in a number of cases in the category described above liquidators have applied for appointment as receiver and manager of the trust property: see, eg, Kite v Mooney, in the matter of Mooney's Contractors Pty Ltd (in liq) [2016] FCA 886. 14 Adopting this course, Mr Gollant applies pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth) for appointment as receiver and manager over the business and assets of the Trust, with a view to sale of the two William Street properties referred to above and distribution of the proceeds of sale of those properties and the Wharf Street property. I note that Mr Gollant is an official liquidator and consents to the appointment as receiver and manager. The application is made ex parte, but the court documents were served on the director of the Company and, at a case management hearing in the proceeding, orders were made for substituted service to occur to bring the proceeding to the attention of the beneficiaries. Neither the director nor the beneficiaries has sought to appear to oppose the application. 15 In the circumstances described above, it is in my view appropriate to make an order that Mr Gollant be appointed without security as receiver and manager over the business and assets of the Trust. It is also appropriate to make an order specifying the powers of the receiver and manager, and that the costs, expenses and remuneration incurred by Mr Gollant in acting as the receiver and manager be paid in priority from the property of the Trust. 16 Further, in the circumstances, it is appropriate to make an order pursuant to s 1318 of the Corporations Act that Mr Gollant in his capacity as liquidator of the Company acted honestly and ought fairly to be excused from any breaches, failures or omissions relating to the administration of the Company in dealing with the property of the Trust, including the Wharf Street property. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.