Bastion v Gideon Investments Pty Ltd

YATES J: 1 The plaintiffs are the joint and several liquidators of PWG Holdings Pty Limited (in liquidation) (the company). Amongst other relief, they seek an order under s 57 of the Federal Court of Australia Act 1976 (Cth) that they be appointed as joint and several receivers and managers without security over the property, assets and undertaking of the 262 Pennant Hills Road Unit Trust, constituted by a Trust Deed dated 12 March 2013 (the Trust), with the powers provided by s 420 of the Corporations Act 2001 (Cth) (the Act), other than s 420(2)(s), (t), (u) and (w), as if the reference therein to "the corporation" were to the Trust. I am satisfied that this order should be made, for the following reasons. 2 The company was incorporated on 28 August 2014. On 24 November 2016, the plaintiffs were appointed as joint and several liquidators in a creditors' voluntary winding up. 3 The company was appointed as trustee of the Trust under a Deed of Removal and Appointment of New Trustee entered into on 11 December 2015. The previous trustee was a company called 262 Pennant Hills Road Pty Limited. That company was appointed as trustee from 12 March 2013, the date on which the Trust was established. The Trust is a unit trust. The sole unit holder is Dong Son Giang, also known as Patrick Giang. Mr Giang holds the unit as the trustee of the Giang Family Trust. 4 The present application is supported by an affidavit made by the firstnamed plaintiff, Bradley John Tonks. Mr Tonks has deposed that all the books and records of the company refer to the company in its capacity as trustee of the Trust. Mr Tonks says that there is no evidence to suggest to him that the company has ever traded in its own right. Further, according to the plaintiffs' investigations, the only known assets of the company are two properties, being Lots 18 and 19 in Deposited Plan 836230, located at Thornleigh in New South Wales. 5 The evidence before me shows that 262 Pennant Hills Road Pty Limited entered into a contract to purchase Lot 18 on 13 March 2013 and to purchase Lot 19 on 9 May 2013. Each contract refers to that company acting as trustee for the Trust. Following the completion of each sale, the properties were transferred to 262 Pennant Hills Road Pty Limited. As I have noted, on 11 December 2015, the company was appointed as the new trustee of the Trust, and applied to be registered as the new proprietor of Lots 18 and 19 in January 2016. For the purposes of this application, I am satisfied that Lots 18 and 19 are property of the Trust. 6 Clause 90 of the Trust Deed constituting the Trust provides that: The appointment of the trustee terminates automatically if the trustee enters into compulsory or voluntary liquidation except for the purposes of amalgamation or reconstruction. 7 The position is, therefore, that, upon the plaintiffs' appointment as liquidators on 24 November 2016, the company's appointment as trustee under the Trust was terminated. It now holds the assets of the Trust, being the two properties to which I have referred, as a bare trustee. I should add that I have been informed that no new trustee of the Trust has been appointed and that it is not intended that any new trustee be appointed. 8 The plaintiffs' investigations have revealed that a mortgage is registered on Lots 18 and 19 by Hyde Round Capital Pty Limited (Hyde Round). There are seven caveats noted on the titles. 9 The plaintiffs have not finalised processing all proofs of debt received by them. Nevertheless, their preliminary investigations indicate that the company's unsecured creditors are owed a total of approximately $6.348 million with additional contingent claims of approximately $4.797 million. Hyde Round is owed, or claims to be owed, approximately $8.6 million together with interest accruing monthly at approximately $145,000. 10 Mr Tonks has expressed the view that, on present information, he does not consider that there will be any return to unsecured creditors or to the unitholder on the winding up of the company. 11 The plaintiffs wish to cause the company to sell the two properties so as to satisfy, to the extent possible, the claims of the creditors. The present difficulty is that there is some doubt that a liquidator's power of sale under s 477(2) of the Act extends to the property of a trust of which the company in liquidation has been trustee but, because of the liquidation, has been disqualified from so acting: Re Stansfield DIY Wealth Pty Limited (in liq) (2014) 291 FLR 17; [2014] NSWSC 1484. Because of that doubt, liquidators in the position of the plaintiffs have adopted the course of seeking appointment as receivers and managers of the trust property so that, in that capacity, they can exercise power over the property, in particular, the power of sale: Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466; [2000] NSWSC 939; Stansfield; Hundy (Liquidator); In the matter of Enviro Friendly Products Pty Ltd (in liq) [2013] FCA 852; SMP Consolidated Pty Limited (in liquidation) v Posmot Pty Limited [2014] FCA 1382; QBE Insurance (Australia) Limited v WA Metal Recycling Pty Ltd, in the matter of WA Metal Recycling Pty Ltd (in liq) [2016] FCA 238; Kite v Mooney, in the matter of Mooney's Contractors Pty Ltd (in liq) [2016] FCA 886; and Hosking, in the matter of Business Aptitude Pty Ltd (in liquidation) [2016] FCA 1438. 12 I think that this is the appropriate course in the present case. The plaintiffs have advised Hyde Round of their intention to seek appointment as receivers and managers. They have also informed the creditors who have lodged caveats. Certainly at the time of the present application, none of these creditors has raised any objection to the appointment that is sought. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.