Bastion v Gideon Investments Pty Ltd

SDA2

1. SDA2 was incorporated on 25 February 2020, and the trust deed for the SDA2 Trust was executed on the same day. From the time of its incorporation, SDA2 has not conducted any business other than in its capacity as trustee of the SDA2 Trust. The SDA2 trust deed provides, relevantly, that the appointment of the trustee terminates automatically if the trustee enters liquidation.
2. On 29 November 2024, Mr Sampson was appointed as liquidator of SDA2 by a resolution of its creditors.
3. In its capacity as trustee of the SDA2 Trust, SDA2 operated a business developing property designed for the purposes of housing participants in the National Disability Insurance Scheme (NDIS). In particular, SDA2 purchased and developed a property in Loreburn Street, Mt Gravatt in Queensland for this purpose (the Mt Gravatt property). SDA2 continues to own the Mt Gravatt property, which is its only significant asset.
4. Since 25 March 2021, the Mount Gravatt property has been leased to Wesley Mission Queensland, which operates a residential care facility under the NDIS.
5. The creditors of SDA2 are largely comprised of persons who invested, via convertible notes, in the development of the Mt Gravatt property.
6. The Mt Gravatt property is subject to a mortgage held by SF Mortgage Pty Ltd. This mortgage secures a loan of $2,750,000 (plus costs and interest). This loan was made by SF Mortgage to SDA2 as trustee of the SDA2 Trust.
7. SF Mortgage has agreed that SDA2 can market and sell the Mt Gravatt property on terms and conditions including, relevantly, that SDA2 has, from 7 February 2025, a period of ninety days in which to do so.
8. Against that background, the Plaintiffs seek an order that Mr Sampson be appointed as receiver and manager over the property, assets and undertaking of the SDA2 Trust, so that he can commence the marketing process and complete the sale of the property within the required period.
9. Notice of this application has been given to the unitholders in the SDA2 Trust and to the secured lender, SF Mortgage. No person has appeared to oppose the relief sought, or has indicated opposition to that relief.

SDA4 AND SDA5

1. Each of SDA4 and SDA5 was incorporated on 26 October 2020.
2. The trust deed for the SDA4 Trust was executed on 1 November 2020, and the trust deed for the SDA5 Trust was executed on 19 November 2020.
3. Each of those trust deeds relevantly provides that if the trustee goes into liquidation, the trustee is deemed to have retired.
4. On 29 November 2024, Mr Sampson was appointed as the liquidator of each of SDA4 and SDA5.
5. From the time of their incorporation, each of SDA4 and SDA5 has not conducted any business other than in its capacity as trustee of its respective trust.
6. SDA4 and SDA5 are, in their capacity as trustees of their respective trusts, the registered owners of a property located at Uplands Drive, Parkwood in Queensland (the Parkwood property), which they own as tenants in common in equal shares. The Parkwood property was purchased in order to be developed as a NDIS accommodation facility. However, SDA4 and SDA5 entered liquidation before the building of this facility commenced.
7. The creditors of SDA4 and SDA5 are primarily persons who invested, via convertible notes, in this development project.
8. The Parkwood property is subject to a mortgage which was held by SF Mortgage, and which has been assigned to GAP Loans Australia Custodians Pty Ltd (GAP).
9. GAP has appointed receivers over the Parkwood property and over all of the present and after acquired assets, rights and interests of SDA4 and SDA5 (the GAP Receivers).
10. According to a letter of demand issued by GAP on 20 January 2025, the account balance as at 17 January 2025 was $1,668,559.11 (excluding enforcement costs).
11. According to a valuation of the Parkwood property as at 18 December 2024, which was obtained by Mr Sampson, the value of the property is between $6,500,000 and $7,100,000.
12. Accordingly, the Plaintiffs expect that there will be a significant surplus remaining after the secured debt is satisfied. In those circumstances, the Plaintiffs seek that Mr Sampson be appointed as receiver over the property, assets and undertakings of the SDA4 Trust and the SDA5 Trust, in addition to the GAP Receivers, in order to deal with the trust assets which are expected to remain after the GAP debt has been satisfied.
13. Mr Sampson indicated that he does not intend to deal with the assets of the SDA4 Trust and the SDA5 Trust until the GAP debt has been satisfied and the GAP Receivers have retired. The priority of the secured creditor is reflected in the form of orders sought on this application by the Plaintiffs.
14. Notice of this application has been given to GAP and the GAP Receivers. It was not necessary to give notice of the application to unitholders of the SDA4 Trust and the SDA5 Trust because in each case the sole unit holder of each trust is a corporation over which Mr Sampson has been appointed as liquidator.
15. Neither GAP nor the GAP Receivers have appeared to oppose the relief sought, or has communicated to the Liquidator any opposition to the relief sought.

Relevant Principles

1. I summarised the relevant principles in In the matter of VSH Investment Pty Ltd [2023] NSWSC 1590 at [38]-[41]. The summary below is largely drawn from that decision, as well as from Black J's decision in In the matter of Cheema Investing Pty Ltd (in liq) and Cheema Trading Pty Ltd (in liq) [2024] NSWSC 1145 at [13]-[14], upon which the Plaintiffs relied.
2. It is well established that a trustee has a right to be indemnified out of, and exonerated from, the assets of the trust in respect of all liabilities that it has incurred as trustee of the trust; that its right to indemnity and exoneration constitutes a proprietary interest in the assets of the trust, and gives the trustee a charge or right of lien over those assets; and that its right to indemnity and exoneration survives, and is not otherwise affected by, its removal as trustee: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 and 370; Chief Commissioner of Stamp Duties for New South Wales v Buckle (1998) 192 CLR 226 at [47]-[50]; [1998] HCA 4; Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of Taxation (2009) 239 CLR 346 at [43]; [2009] HCA 32; Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524; [2019] HCA 20 at [32]-[33].
3. The effect of the removal of SDA2 as trustee of the SDA2 Trust, by operation of the ipso facto clause, is that it now holds the Mt Gravatt Property as a bare trustee, with the limited duty of protecting that asset: Federal Commissioner of Taxation v Bruton Holdings Pty Ltd (in liq) and Others (2008) 173 FCR 472 at [79]; [2008] FCAFC 184.
4. The same applies in respect of SDA4, SDA5 and the Parkwood Property.
5. In Re Stansfield DIY Wealth Pty Ltd (in liq) [2014] NSWSC 1484 at [31], Brereton J reviewed the relevant authorities and held that it is open to a liquidator of a corporate trustee (or former trustee) to seek appointment as a receiver of the trust, by way of enforcement of the lien over the trust's assets for liabilities incurred by a corporate trustee in that capacity.
6. In Hosking, in the matter of Business Aptitude Pty Ltd (in liq) [2016] FCA 1438 at [17]-[19] and [21], Gleeson J observed that the general ground upon which the Court appoints a receiver is the protection or preservation of property for the benefit of persons who have an interest in such property; that, where a trustee is removed, the trustee retains a right of indemnity from the trust assets secured by an equitable charge over them for its liabilities incurred by reason of acting as trustee; and that it is well-established that a receiver and manager can be appointed over trust property to secure the trustee's right of indemnity out of the assets of the trust.
7. The view taken by Brereton J in Re Stansfield DIY Wealth Pty Ltd (in liq) above has since been taken by the Full Court of the Federal Court in Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310 at [44] , [89] and [196]; see also Re Taylor, Re CJ & KL Bond Pty Ltd (in liq) [2018] FCA 1430 at [16(c)].
8. In Cremin, Re Brimson Pty Ltd (in liq) [2019] FCA 1023, Moshinsky J observed (at [50]) that: "The courts are generally willing, upon an appropriate application, to make orders permitting the liquidator of a (former) corporate trustee to sell trust assets. In situations where the property of the trust will be exhausted following its sale and subsequent distribution to creditors, it may be appropriate merely to give the liquidator a power of sale… . The more common course is, however, for the liquidator of the insolvent (former) corporate trustee to apply to be appointed a receiver for the purpose of selling the trust assets and distributing the proceeds among trust creditors … [citations omitted]."
9. In Re Parkway One Pty Limited (No 2) [2020] NSWSC 191, Rees J referred to Hosking, in the matter of Business Aptitude Pty Ltd (in liq) and several of the other cases cited above and observed (at [14]-[17]) that: "It seems to me that, as submitted by the liquidator, the relief sought is necessary and appropriate as his appointment as receiver will enable the liabilities of the company to be met to the extent possible, with proper recourse to the trust assets. This is necessary to enable Mr Scott to fulfil his statutory function and 'get in' the assets of the company. Those assets include its right of exoneration and lien with respect to debts incurred in the proper administration of the trust. Further, uncertainty persists regarding the office of the trustee. To the extent that the company may have been removed and replaced, it is proper and necessary that Mr Scott be appointed receiver, as the company's powers under the trust deed will have been extinguished. … To remove uncertainty as to the liquidator's powers and to enable the liquidator to bring in the assets and pay the debts of the company in an orderly fashion, the liquidator should be appointed as receiver and manager to all the assets of the Parkway One Trust Unit. The interests of creditors will likely be best served by the appointment of Mr Scott as receiver of the trust assets, such that creditor claims can be paid in an orderly fashion, thereby facilitating the proper winding up of the affairs of the company."

Determination of application

1. Having regard to those principles, the evidence before the Court which I have summarised above, and the helpful submissions of counsel for the Plaintiffs, I am satisfied that the orders sought in respect of Mr Sampson's appointment as receiver of the assets of each of the SDA2 Trust, the SD4A Trust and the SDA5 Trust should be made.
2. Each of SDA2, SDA4 and SDA5 has conducted business only in its capacity as a corporate trustee. Each does not hold any assets other than those which it holds in its capacity as trustee. The orders sought by the Plaintiffs will secure the rights of indemnity of each of those entities out of the assets of their respective trusts, and will enable Mr Sampson to realise those assets for the benefit of trust creditors.
3. Mr Sampson also sought orders allowing him to have access to the assets of each respective trust in order to meet the costs and fees incurred in the winding up of their respective corporate trustees. Counsel for the Plaintiffs acknowledged that it will be necessary for a separate application to be made if Mr Sampson is to seek that his remuneration be paid from such assets.
4. It is well established that a liquidator of a corporate trustee has a right to access trust assets for the purpose of meeting his or her costs and disbursements. In circumstances where all of the company's assets are trust assets, this extends to the right to recover the costs of the winding up as well as the costs of the receivership: see, for example, Bastion v Gideon Investments Pty Ltd (in liq) [2000] NSWSC 939 at [71] per Austin J; Re North Food Catering Pty Ltd [2014] NSWSC 77 at [9]-[17], Brereton J .
5. For those reasons, I will grant the relief sought by the Plaintiffs.
6. Accordingly, I make the following orders. The Court orders: 1. Pursuant to s 67 of the Supreme Court Act 1970 (NSW) that David Henry Sampson be appointed, without security, as the receiver and manager (Receiver) of all the property, assets and undertakings of the SDA Propertys No2 Trust including the proceeds of any such property (Assets). 2. That the need for the Receiver to file a guarantee under rule 26.3 of the Uniform Civil Procedure Rules 2005 (NSW) be dispensed with. 3. That, in respect of the property of the SDA Propertys No2 Trust, the Receiver be conferred with the powers: 1. recited in s 420 of the Corporations Act 2001 (Cth), as if the references in that provision to "property of the corporation" was a reference to property of the SDA Propertys No2 Trust; and 2. that a liquidator has in respect of property of a company by s 477(2) of the Corporations Act 2001 (Cth). 1. That the Receiver may have recourse to: 1. the assets of the SDA Propertys No2 Trust for his costs and expenses in respect of work undertaken, including the reasonable costs and expenses of and incidental to this application, to render those assets available to meet the claims of creditors whose debts were incurred by SDA Propertys No 2 Pty Ltd as trustee of the SDA Propertys No2 Trust; and 2. the assets of the SDA Propertys No2 Trust for his costs and expenses properly incurred in the winding up of SDA Propertys No 2 Pty Ltd generally. 1. Pursuant to s 67 of the Supreme Court Act 1970 (NSW) that David Henry Sampson be appointed, without security, as the receiver and manager (SDA 4 Receiver) of all the property, assets and undertakings of the SDA Property's No 4 Trust including the proceeds of any such property (SDA 4 Assets). 2. That the need for the SDA 4 Receiver to file a guarantee under rule 26.3 of the Uniform Civil Procedure Rules 2005 (NSW) be dispensed with. 3. That, in respect of the property of the SDA Property's No 4 Trust, the SDA 4 Receiver be conferred with the powers: 1. recited in s 420 of the Corporations Act 2001 (Cth), as if the references in that provision to "property of the corporation" was a reference to property of the SDA Property's No 4 Trust; and 2. that a liquidator has in respect of property of a company by s 477(2) of the Corporations Act 2001 (Cth). 1. That the SDA 4 Receiver may, subject to any priority rights of any secured creditor, have recourse to: 1. the assets of the SDA Property's No 4 Trust for his costs and expenses in respect of work undertaken, including the reasonable costs and expenses of and incidental to this application, to render those assets available to meet the claims of creditors whose debts were incurred by SDA Property's No 4 Pty Ltd as trustee of the SDA Property's No 4 Trust; and 2. the assets of the SDA Property's No 4 Trust for his costs and expenses properly incurred in the winding up of SDA Property's No 4 Pty Ltd generally. 1. Pursuant to s 67 of the Supreme Court Act 1970 (NSW) that David Henry Sampson be appointed, without security, as the receiver and manager (SDA 5 Receiver) of all the property, assets and undertakings of the SDA Property's No 5 Trust including the proceeds of any such property (SDA 5 Assets). 2. That the need for the SDA 5 Receiver to file a guarantee under rule 26.3 of the Uniform Civil Procedure Rules 2005 (NSW) be dispensed with. 3. That, in respect of the property of the SDA Property's No 5 Trust, the SDA 5 Receiver be conferred with the powers: 1. recited in s 420 of the Corporations Act 2001 (Cth), as if the references in that provision to "property of the corporation" was a reference to property of the SDA Property's No 5 Trust; and 2. that a liquidator has in respect of property of a company by s 477(2) of the Corporations Act 2001 (Cth). 1. That the SDA 5 Receiver may, subject to any priority rights of any secured creditor, have recourse to: 1. the assets of the SDA Property's No 5 Trust for his costs and expenses in respect of work undertaken, including the reasonable costs and expenses of and incidental to this application, to render those assets available to meet the claims of creditors whose debts were incurred by SDA Property's No 5 Pty Ltd as trustee of the SDA Property's No 5 Trust; and 2. the assets of the SDA Property's No 5 Trust for his costs and expenses properly incurred in the winding up of SDA Property's No 5 Pty Ltd generally. 1. That David Henry Sampson have liberty to apply to the Court for further orders, directions and/or advice including in relation to the Receiver's remuneration.

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