Australian Securities and Investments Corporation v Letten

A. Introduction 1 By an originating process filed on 15 February 2024 (originating process), the first plaintiff, Andre Lakomy, in his capacity as the liquidator of Bennett Murada Pty Limited (in liquidation) (Company) applies to be appointed receiver and manager of the Bennett Family Trust (Trust). 2 The plaintiffs rely on the following: (a) an affidavit of Mr Lakomy, affirmed on 15 February 2024, and an exhibit to that affidavit; (b) a consent to act as receiver and manager filed on 15 February 2024; (c) four affidavits of service of Talysha Sabatino, affirmed on 25 February 2024; and (d) an affidavit of service of Kerissa Naicker, affirmed on 4 March 2024. 3 I am satisfied that the beneficiaries of the Trust have been served with the originating process and have been informed of the hearing of the application today. One of the beneficiaries has confirmed on behalf of the beneficiaries that they do not intend to appear at the hearing today.

B. Background 4 The Company was registered on 7 June 2012. Its sole director was Dominic Bennett. Mr Bennett and his wife, Jacqueline Bennett, each held 150 of the 300 issued ordinary shares in the Company. 5 The Trust was established by a discretionary trust deed created on 7 June 2012 (Trust Deed). The named beneficiaries of the Trust are Mr and Mrs Bennett and their two children, Lily Bennett and Annabel Bennett. 6 The Company was appointed and remained as trustee of the Trust until 31 October 2023. On that date, the Company was placed into liquidation. 7 The Trust Deed included provisions that the Company, as trustee of the Trust, was entitled to be indemnified "from the investments and property of the trust fund for liabilities incurred by the trustee in connection with exercising or failing to exercise its powers as trustee of the trust" (cl 60), and the Company, as trustee, was automatically removed as trustee upon entering liquidation (cl 74). 8 The Company operated a residential and commercial architectural firm in Sydney in its capacity as trustee of the Trust. 9 On or about 23 October 2023, the Company ceased trading, and entered into a sale agreement with Bennett Murada Architects Pty Limited. The assets which were sold pursuant to that sale agreement were Trust assets, and the proceeds of those sales are Trust assets. 10 On 31 October 2023, Mr Lakomy was appointed as the liquidator of the Company by way of a creditors' voluntary liquidation. 11 Since his appointment, Mr Lakomy and his staff have commenced investigations into the affairs of the Company. Those investigations have included the identification of a banking account held by the Company with St George Bank Limited, a subsidiary of Westpac Banking Corporation (Westpac). The Company's bank account with Westpac currently has a credit balance of $144,453.54. 12 On 14 November 2023, Mr Lakomy wrote to Westpac advising of his appointment and requesting that the funds be transferred to the liquidation account of the Company. 13 On 23 November 2023, a member of Mr Lakomy's staff was informed by Westpac that any funds in the Company's account would not be released without a Court order or a deed of variation. 14 Mr Lakomy has determined that at the time of his appointment as liquidator of the Company, the total assets of the Company were $297,073, and the total liabilities of the Company were $1,220,720. 15 As a result of his investigations to date, Mr Lakomy is satisfied that the Company has only ever operated in its capacity as trustee of the Trust, and therefore all assets and liabilities of the Company were derived from the Company's trading operations in its capacity as trustee of the Trust. 16 By this application, Mr Lakomy seeks to be appointed as receiver of the assets of the Trust, so that he can enforce the Company's right of indemnification against, and charge over, the assets of the Trust, pay Trust creditors and pay his remuneration and expenses for the winding up of the Company.

c. Relevant Principles 17 Section 57(1) of the Federal Court of Australia Act 1976 (Cth) provides: The Court may, at any stage of a proceeding 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. 18 The power in s 57 is not confined to any closed class of case or any particular categories of case and is made to protect and preserve the property of the trust for the benefit of those persons who are interested in the outcome of the proper administration of the assets and obligations in relation to them: Freeman, in the matter of Blue Oasis Holdings Pty Ltd (in liquidation) [2018] FCA 822 at [10]-[11] (Greenwood J). 19 The relevant principles with respect to the appointment of a liquidator of a trustee company as a receiver of the assets of a trust are usefully set forth by Moshinsky J in Cremin, in the matter of Brimson Pty Limited (in liquidation) [2019] FCA 1023 at [48]-[51], which I respectfully adopt. It is not necessary for these purposes to refer more specifically to those principles, other than to note that the more common course for a Court to adopt, rather than providing an express power of sale to a liquidator, is to appoint the liquidator as a receiver for the purpose of selling the trust assets and distributing the proceeds among trust creditors: Cremin at [50].

D. Consideration 20 Mr Lakomy has been notified by Westpac that it will not release the funds of $144,453.54 in the Company's bank account without a Court order or a deed of variation of the Trust Deed. 21 I am satisfied that it is just and convenient for Mr Lakomy to be appointed as receiver of the assets of the Trust to enable him to access the funds in the Company's Westpac bank account, because he is otherwise not able to deal with the assets and creditors of the Trust and will be frustrated in the performance of his statutory functions as liquidator of the Company: Priest, in the matter of Brikar Nominees Pty Limited (in liquidation) [2023] FCA 910 at [47] (Cheeseman J). 22 I am satisfied that the orders sought by the plaintiffs in the originating process are appropriate orders. The orders sought include an order in respect of the remuneration of Mr Lakomy. 23 It is well established that a lien arises in favour of a receiver under the principle stated by Dixon J in Re Universal Distributing Company Ltd (in liquidation) (1933) 48 CLR 171, which has subsequently been recognised as underpinning a broader principle to the effect that where a party has, by their efforts, brought into Court a fund in the administration of which various parties are interested, their costs and expenses should be the first claim upon the fund: Webster, in the matter of Willmott Forests Limited (Receivers and Managers Appointed) (Administrators Appointed) v Fernandez [2012] FCA 82 at [80] (Dodds-Streeton J), citing Shirlaw v Taylor (1991) 31 FCR 222 at 228 (Sheppard, Burchett and Gummow JJ). 24 Such a lien is not restricted to liquidators and may be asserted by receivers and administrators: Webster at [81], citing by way of example Australian Securities and Investments Corporation v Letten (No 13) [2011] FCA 1151 at [75] (Gordon J). 25 Finally, I note that the fifth order sought in the originating process proposes that liberty should be granted to (a) the receiver to apply for any further orders or directions in relation to the receiver's remuneration, and (b) any person who can demonstrate sufficient interest to seek to modify or discharge the orders 1 to 4, provided such liberty is to be exercised on no less than 48 hours' written notice to the first plaintiff.

E. Disposition 26 For these reasons, I am satisfied that orders substantially in the form of the orders sought by the plaintiffs in the originating process should be made. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.