Calabretta & Anor v Wiltshire [2020] QSC 103

What happened

This was an interlocutory application in the Supreme Court of Queensland in which the liquidator of Wiltshire Lawyers Pty Ltd (in liquidation) sought orders that he be appointed, without security, as receiver and manager of the Wiltshire Lawyers Trust (the Trust), that he be granted the powers in s 420 of the Corporations Act 2001 (Cth) as if the Trust were the corporation, and that his reasonable costs and remuneration (and the costs of the application) be paid from the assets of the Trust. The application was listed and decided on the papers on 1 May 2020, and was determined by Williams J on 7 May 2020 ([2], [31]).

Key factual background adduced in the liquidator's affidavit (Domenic Calabretta) was:

• the company (second applicant) had carried on a law practice trading as Wiltshire Family Lawyers as trustee for the Trust (16-(c));
• the Trust operated as a trading trust with assets and expenses recorded in the Trust's records (16);
• the company had been placed into a creditors' voluntary winding up, and the liquidator had been appointed on 13 March 2020 ([21]);
• the liquidator believed a clause in the trust deed removed the company as trustee, leaving him unable to deal with trust assets ([20]); and
• the Queensland Law Society had appointed receivers to deal with regulated property under the Legal Profession Act, leaving outstanding trust assets that the liquidator needed to realise to satisfy the trustee's right of indemnity (see [22]-[24]).

Service and procedure: The applicants served the respondent by email; the respondent did not file a Form 50 requesting an oral hearing, nor file any response or evidence. The applicants sought the matter be determined on the papers pursuant to UCPR r 489, relying in part on the COVID practice direction to encourage paper determination where feasible ([1], [8]-[12]).

Williams J concluded it was appropriate to determine the application without an oral hearing ([13]), and made the following primary orders: appointment of the first applicant as receiver and manager of the Trust; grant of s 420 Corporations Act powers as if the Trust were a corporation; payment of the receiver's reasonable costs and remuneration, the liquidator's remuneration to 1 May 2020, and the costs of the application from Trust assets; and liberty to apply ([31]).

Why the court decided this way

Two questions drove the decision: (A) whether the application could properly be decided on the papers; and (B) whether the appointment and ancillary orders were appropriate in the circumstances.

A. Deciding the application on the papers

• UCPR r 489 provides that where an applicant proposes an application be decided without an oral hearing the court must so decide unless a listed exception applies, including if the court considers it inappropriate under r 491; if the respondent requires an oral hearing under r 494; if the applicant abandons the request under r 495; or the Chief Justice suspends the rule ([5]-[7]).
• Here the respondent did not file a Form 50 nor lodge any material; service by email was effected and the originating application put the respondent on notice that orders could be made without further notice. The applicants also relied on COVID directions and argued the application was relatively straightforward ([8]-[12]).
• On that basis the judge found that none of the exceptions operated and it was appropriate to decide the application without an oral hearing ([13]).

B. Appointment of receiver and orders about remuneration

• The court recited the established equitable principles that ground an appointment of a receiver: the core objective is protection or preservation of property for the benefit of persons with an interest in it; a trustee who has been removed retains a right of indemnity against trust assets, effectively an equitable charge; and courts have been willing to appoint receivers over trust property to secure the trustee's right of indemnity ([28]-[29]).
• The liquidator’s evidence established that trust assets existed (including property, plant and equipment in the financial statements), that the company had acted as corporate trustee and was no longer trustee, and that the Queensland Law Society receivers would first deal with regulated property leaving outstanding assets to be realised ([16]-[24]). In those circumstances a practical problem arises: the liquidator, as liquidator of a company that has ceased to be trustee, often lacks clear power to sell trust assets; appointment of a receiver and manager is a recognised mechanism to overcome that problem and protect the trustee's right of indemnity ([15], [25]-[29]).
• The court accepted the applicants' submissions and the authorities cited (including Federal Court authorities) that support appointment of a receiver and manager over trust property in such circumstances ([28]-[29]). The judge therefore appointed the liquidator as receiver and manager and granted the requested ancillary orders, including payment of remuneration and costs from trust assets and grant of s 420 powers by analogy ([31]).

Before and after state of the law

Before this decision:

• There existed some tension in the authorities about whether the liquidator of a corporate trustee that has ceased to be trustee has power to sell trust assets to enforce the trustee's right of indemnity; the judgment explicitly recognises this conflict of authority ([28]).
• Federal Court authorities had supported the proposition that a receiver and manager could be appointed over trust property to secure a trustee's right of indemnity; the applicants relied upon those authorities (see citations discussed at [28]-[29] and in footnotes).

After this decision:

• The decision conforms with and applies that line of authority in the Supreme Court of Queensland. Williams J endorsed the orthodox approach that where the trusteeship has effectively been removed and the liquidator lacks a mechanism to realise trust assets, the court may appoint the liquidator as receiver and manager and grant s 420-like powers by analogy to enable realisation for the trustee's indemnity and distribution ([25]-[31]). The decision therefore reinforces the availability of this remedy in comparable circumstances in Queensland jurisdiction.

This judgment does not purport to resolve the theoretical conflict of authority identified; rather it applies the established remedial approach on the facts before the court ([28]-[29]).

Key passages with plain-English translation

1. Passage (UCPR r 489) ([5])
   Original: "If the applicant proposes the application be decided without an oral hearing, the court must decide the application without an oral hearing unless..."
   Plain-English: The rule says the court will decide the case on the paperwork unless a specific listed reason prevents it.

2. Passage (decision on papers) ([13])
   Original: "In these circumstances, I consider that it is appropriate to determine the application without an oral hearing."
   Plain-English: Because the respondent did not take procedural steps and the matter was suitable, the judge dealt with the application without a hearing.

3. Passage (equitable principles) ([28])
   Original: "The general ground upon which the court appoints a receiver is for protection or preservation of property for the benefit of persons who have an interest in it. Where a trustee is removed, it retains a right of indemnity from the trust assets..."
   Plain-English: The court can appoint a receiver to protect assets for those with an interest. When a trustee has been removed, it still has a claim against trust assets for its costs and liabilities; a receiver can be appointed to protect and realise assets to meet that claim.

4. Passage (disposition of orders) ([31])
   Original: "In the circumstances, I am satisfied that it is appropriate to make the orders sought and accordingly the court orders as follows: [orders]"
   Plain-English: The judge accepted the applicants' case and made the orders requested: appointing the liquidator as receiver, giving him s 420 powers by analogy, and authorising payment of remuneration and costs from the trust.

What fact patterns trigger this precedent

The decision is directly engaged where:

• A company that has acted as corporate trustee for a trading trust has been placed into liquidation and the liquidator needs to realise trust assets to satisfy the company's indemnity or liabilities incurred in the course of trusteeship ([16], [20]-[21]); and
• The corporate trustee has ceased (or is alleged to have ceased) to be trustee under the trust deed, leaving the liquidator without a clear power to sell or deal with trust assets ([20], [27]); and
• There exist trust assets of sufficient substance to justify appointment and orders for remuneration to be paid from trust assets (financial statements or evidence of assets, such as property, plant and equipment) ([17]-[19]); and
• The matter can be suitably determined on the papers (respondent does not require an oral hearing and procedural rules permit on-the-papers decision) ([5], [9]-[13]).

If that constellation of facts is present, this decision supports an application to appoint the liquidator as receiver and manager, to grant s 420 powers by analogy and to order payment from trust assets.

How later courts have treated it

This judgment itself refers to and applies prior Federal Court authorities (for example Hosking, Kite v Mooney, Re Hundy, QBE) in support of the remedial approach ([28]-[29]). The present judgment does not discuss subsequent treatments of this decision by later courts, because it is a contemporaneous interlocutory decision (7 May 2020) and contains no subsequent-court analysis. Any assessment of how later courts have treated Calabretta v Wiltshire would require a search of subsequent authorities and is not contained within the text of this judgment.

Still-open questions

The judgment expressly notes that there is "a conflict of authority as to whether the liquidator of a corporate trustee, which has ceased to be trustee, has power to sell assets to enforce the (former) trustee's right of indemnity" ([28]). Williams J resolved the issue on the remedial footing that appointment of a receiver is available and appropriate in the circumstances, but the judgment does not purport to settle the doctrinal conflict in all cases. Open issues include:

• The precise boundaries of the conflict of authority: the judgment cites Federal Court decisions supportive of appointment of a receiver ([28]-[29]), but does not comprehensively resolve the competing lines of authority; the theoretical question whether a liquidator, absent appointment as receiver, can exercise sale powers over trust assets in all circumstances remains a point of doctrinal uncertainty in some authorities ([28]).
• The scope of powers that may be granted by analogy to s 420 when appointing a receiver over trust assets: Williams J granted all powers provided by s 420 "as if the reference therein to 'the corporation' were a reference to the Trust" ([31]). Whether and how those powers might be restricted in other factual matrices, for example where competing beneficiary interests or third-party claims are more contentious, may be a live question.
• The appropriate standard and process for fixing the receiver's and liquidator's remuneration when paid from trust assets: the order leaves remuneration to be proved reasonable and for approval ([30]-[31]), but factual disputes over what amounts are 'reasonable' or the priority of competing entitlements to trust assets may produce contested proceedings in future.
• Interaction with regulated-property receivers: the judgment recognises that the Queensland Law Society appointed receivers to deal with regulated property under s 498 of the Legal Profession Act and those receivers would take priority with respect to regulated property; distinguishing regulated from unregulated trust assets and coordinating multiple receivers' roles may raise practical and doctrinal issues ([22]-[24]).

Practitioners seeking to rely on this decision should assess the particular facts of their matter against the features that guided the judge here: existence and nature of trust assets, the status of the corporate trustee under the trust deed, any regulatory receivership over regulated property, and procedural posture (ability to decide on the papers). If contested factual issues or complex competing interests exist, parties should expect that a court may require fuller oral evidence or restrict relief.