GREENWOOD J:
1 This is an application by Samuel Freeman and Michael Slaven as joint and several liquidators of a company called Blue Oasis Holdings Pty Ltd (in liquidation) (the "company"). That company prior to the liquidation was the trustee of the Ellis Coniglio Family Trust. The company was the subject of an order in the Supreme Court of Queensland on 9 February 2018 by which the company was ordered to be wound up in insolvency pursuant to s 459A of the Corporations Act 2001 (Cth) (the "Act"). The second order provided that Samuel Freeman and Michael Slaven of Ernst and Young be appointed as joint and several liquidators to the company for the purposes of the winding up.
2 The application made to the Court today by the joint and several liquidators is an application for an order pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) that the joint and several liquidators be appointed as receivers without security over the property, assets and undertaking of the Ellis Coniglio Family Trust. The second order sought by the joint and several liquidators is that they be appointed with powers provided by s 420 of the Act as if the references in that section to "property of the corporation" were relevantly a reference to "property of the trust" and those powers so conferred be in addition to the powers conferred upon the applicant under s 477(2) of the Act. I will return to aspects of that order in a moment.
3 There are a number of other orders which do not need to be recited in full today but they are concerned with aspects of the work that would be likely to be done in meeting the claims of creditors, marshalling the assets and taking steps necessary in the administration of the trust. There is also an order sought at para 7 of the application for liberty to apply so that any person who has an interest in the outcome of the steps taken by the joint and several liquidators in their capacity as receivers of the assets of the trust exercising powers conferred upon them, can come to the Court and raise any question they may wish to raise with the Court about any of those matters.
4 The Ellis Coniglio Family Trust was established by a trust deed dated 9 April 2013. The settlor of the trust was Mr Purich. The trustee of the trust was Andrew James Ellis and Kylie Susan Coniglio of 46 Amherst Road Canning Vale, Western Australia. The sum settled to constitute the trust was $10. The specified beneficiaries were the children of Andrew James Ellis and Kylie Susan Coniglio and by Item 5 recited in the trust deed there were additional members of the class of general beneficiaries identified. The next thing chronologically that happened was that on 18 October 2015 Andrew James Ellis and Kylie Susan Coniglio retired as trustee of the trust, and in their place Blue Oasis Holdings Pty Ltd was appointed as the new trustee.
5 That company was the trustee of the trust on 9 February 2018 when the winding-up order was made. The consequence of the winding-up order was that the corporate trustee of the trust ceased to be the trustee. That consequence was brought about because the trust deed provides that the trustee shall cease to hold office when, being a company, the trustee is placed in liquidation, or receivership or under official management, among other things. Of course, that is precisely what happened on 9 February 2018 by force of the winding-up order, that is, the company was placed in liquidation. Since then there has been no fresh appointment of a trustee of the trust in place of the company.
6 The application to appoint the joint and several liquidators as receivers of the trust assets and to confer upon them powers to deal with those assets is supported by a number of affidavits, but most recently the affidavit of Mr Freeman of 7 March 2018. In that affidavit, Mr Freeman identifies that the joint and several liquidators have conducted a series of steps to examine and investigate the affairs of the company and isolate trust assets. They have sought to identify the debtors, the plant and equipment, the creditors identified in the books of account and they have also tried to identify the total value of creditor claims concerning the trust. Those claims amount to $102,150.84. The trust assets are constituted by outstanding debtors totalling $105,936.23 and other assets valued at $110,786.00. Now, in relation to the present application, Ms Kylie Susan Coniglio has appeared from Western Australia via video-link.
7 Ms Coniglio has raised a range of matters in relation to her engagement with Ernst & Young and her engagement with the solicitors for the joint and several liquidators. Ms Coniglio raises issues about the extent to which Blue Oasis Holdings Pty Ltd owed debts to particular parties and whether the true position is that debts were owed by entities other than the company. I have attempted to explain this afternoon to Ms Coniglio some of the difficulties that those submissions present as no step has been taken by either of the directors to raise before the Supreme Court of Queensland any question of a stay of the winding up or any question of setting aside the winding-up order on whatever ground might be advanced by either of them in support of such an application.
8 The Court therefore has to proceed on the footing that the company is being wound up in insolvency, as earlier described, and that the joint and several liquidators are continuing to administer the company in insolvency with a view to winding the company up. The position that emerges by reason of the displacement of the trustee and the analysis conducted by the joint and several liquidators concerning the trust status and trust capacity of Blue Oasis Holdings Pty Ltd is that steps need to be taken to secure the trust assets in a proper administrative and management sense, and then deal with them with a view to realising the assets so that the money value of the assets can be applied in satisfaction of the claims against the company in its trustee capacity.
9 Of course, it has been long recognised, as early as 1900, in Jennings v Mather [1901] 1 QB 108 that a trustee has a right of indemnity out of the trust assets. So, that is to say, the company has a right of indemnity out of the trust assets in respect of debts incurred by the trustee when properly acting in its role as trustee of a trust and discharging its trading trust obligations. And it has long been recognised that that right of indemnity is secured by way of an equitable lien or charge over the assets of the trust in order to perfect the right of indemnity.
10 Section 57 of the Federal Court of Australia Act contemplates and provides that 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 and convenient to do so. The power conferred upon the Court by s 57 is enlivened in a wide range of circumstances and, as the authorities have shown over time, that the power is not confined to any closed class of case or any particular categories of case.
11 Ultimately, the ground upon which the Court acts in making an appointment of this kind is 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.
12 If there need be any authority cited for that proposition, I simply mention two cases. One is a case from 2011 in this Court in which Besanko J so held, Sapphire (SA) Pty Ltd v Ewens Glen Pty Ltd [2011] FCA 600 at [15], and more recently in 2016 the same position was taken based on a line of earlier authorities, in Bendigo and Adelaide Bank Limited, in the matter of Reborn Enterprises Pty Ltd (Trustee) v Reborn Enterprises Pty Ltd (Trustee) [2016] FCA 1197, per White J at [6].
13 One of the features of administering a company in insolvency is that the joint and several liquidators may exercise any of the powers conferred upon them by s 477 of the Act. And one of those powers is a power in s 477(2)(c) which provides that:
…a liquidator of a company may sell or otherwise dispose of, in any manner, all or any part of the property of the company.
14 The phrase of particular moment in that section is the phrase "property of the company". There is a line of authority which suggests that that power conferred by s 477(2)(c) is confined to the liquidators realising property of the company in which the company is the legal and beneficial owner of the property and, should it come to pass, that the company has assets which are held on trust, that power would not enable the liquidators to realise that property because it is beneficially held for others.
15 The phrase "property of the company" in that section conferring the power of sale has been construed, in a line of authorities, quite narrowly. It is worth noting that the term "property", in s 9 of the Act, means any legal or equitable estate or interest in real or personal property of any description, and includes things in action which, of course, we understand to be choses in action. So that is a very broadly-based definition of the term "property" in s 9 of the Act. And when one applies it to the phrase "property of the company", it seems to mean, on its face, any legal or equitable estate, or interest in real personal property of the company of any description and includes things in action.
16 That may, on its face, suggest that the power of sale, given the broad definition of the term "property", extends to selling assets which the trustee holds as the legal title holder, but not necessarily the beneficial owner of the assets. In other words, it might be that the section contemplates that the assets of the property which are held on trust can be sold because the company has the legal title, and so the liquidators can convert the assets into cash, in effect, and that cash is held on trust subject to the company's right of indemnity out of the assets in respect of liabilities of the trust, secured as it is by the lien or charge in support of the right of indemnity.
17 However, there is very considerable doubt in the authorities about whether that construction is to be preferred, although I pause to note that in most of the authorities the question of the definition of "property" in s 9 has not been considered in terms of its intersection with the power in s 477(2). But having said that, there is a line of cases which suggest that the power to sell assets by reference to the phrase "property of the company" does not include assets which are held, as to the legal title, by the company on trust for the various classes of beneficiaries. The most notable example of that is a case called Re Stansfield DIY Wealth Pty Limited (in liq) (2014) 291 FLR 17 at [30] and [33], Brereton J.
18 Whatever view one might take about the contest between that view and the view that the liquidators can sell assets held on trust, there is clearly a difference of opinion between various judges about that matter. That leads me to this observation. There is another line of authority which says that in circumstances where there is a lack of clarity about whether a company, such as this company, can sell trust assets under s 477(2)(c), the most sensible course to adopt is to preserve the position, and remove any ambiguity by appointing the liquidators as the receivers of the trust property, and conferring upon them a power expressly to sell the trust assets, to convert them into cash, or deal with them as may be appropriate in all the circumstances, and thus avoid any doubt about whether there is a power to sell: Bastion v Gideon Investment Pty Limited (in liq) (2000) 35 ACSR 466; [2000] NSWSC 936 at [66], Austin J; QBE Insurance (Australia) Limited v WA Metal Recycling Pty Ltd, in the matter of WA Metal Recycling Pty Ltd (in liq) [2016] FCA 238 at [16], Farrell J.
19 This, of course, becomes a very important matter from the perspective of the buyer of the assets because any person wishing to deal with the liquidators who believes that there is some doubt about their lawful capacity to pass title to the assets, would not likely wish to engage in the transactions. So it follows that the appointment of the joint and several liquidators as receivers with a view to preserving the assets and resolving any ambiguity about the power of sale is a desirable thing. This question of resolving any possible ambiguity in this way was the basis for the order made by Austin J in Bastion.
20 That view was followed in a number of other cases including Sapphire, which I mentioned a moment ago, and In the matter of Enviro Friendly Products Pty Ltd (in liq) [2013] FCA 852 which is a decision of Foster J, and in SMP Consolidated Pty Limited (in liq) v Posmot Pty Ltd [2014] FCA 1382, which is a decision of Yates J. Therefore, there seems to me to be real merit in taking away, in effect, the difficulties created by any ambiguity about the conferral of the power, and in making orders that the joint and several liquidators be appointed as receivers of the assets and given specific powers to deal with the assets.
21 The order that ought to be made about those things, I think, are those orders contained in paras 1, 3, 4, 5, 6, 7 and 8 of the application.
22 In relation to the powers, it seems to me that the appropriate order is this. The applicant be appointed as receivers with the powers recited in s 420 of the Act as if the reference in s 420 to "property of the corporation" were a reference to "property of the trust". Those powers, so conferred, are to be in addition to the powers conferred upon the applicant by s 477(2) of the Act. Subject to that reformulation, they will be the orders that are made.
23 I emphasise again that those orders contemplate a liberty to apply provision with the result that should a party wish to agitate any question about any of these matters as the administration unfolds, both in relation to winding up but also the administration as receiver of the trust assets, then the matter can be brought back before this Court.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.