Caterpillar Financial Australia Limited v Ovens Nominee Pty Ltd

Federal Court of Australia|2020-12-23|Before: McKerracher J

Pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) the liquidators of Substar Holdings Pty Ltd (in Liq) (ACN 154 916 711) (Company), Bryan Hughes and Daniel Bredenkamp, Pitcher Partners, Level 11, 12-14 The Esplanade Perth in the State of Western Australia be appointed as receivers and managers (Receivers) of the property of the Taurus Investments Trust and any other property held by the Company on trust (Trust Property).
The Receivers be authorised to take possession of, preserve, maintain and sell the assets comprising the Trust Property.
The Receivers have all the powers that a receiver has in respect of the business and property of a company under s 420 of the Corporations Act 2001 (Cth) (other than in subs 420(2)(s), (t), (u) and (w)) as if the reference in that section to 'the corporation' were a reference to the Taurus Investments Trust or the Taurua Investments Trust including, without limitation, the power to do all things necessary or convenient to: (a) investigate transactions made using funds derived from the Trust Property; (b) demand the books and records of the Taurus Investments Trust or the Taurua Investments Trust from any person; (c) determine and make payment of any claims against the Trust Property; (d) in accordance with the priorities set out in s 556 of the Corporations Act, distribute the proceeds of the sale of the assets of the Taurus Investment Trust or the Taurua Investments Trust (after payment of the costs, expenses and remuneration of the Receivers in their capacity as the Receivers and as liquidators of the Company) to any creditors of the Taurus Investments Trust or the Taurua Investments Trust; and (e) distribute any surplus thereafter to the beneficiaries of the Taurus Investments Trust or the Taurua Investments Trust.
The costs, expenses and remuneration of the Receivers in: (a) acting as the liquidator of the Company; and (b) acting as the Receivers of the assets and undertaking of the Trust; be paid from the Trust Property.
The Receivers be allowed remuneration for the work undertaken, over the period from 4 August 2020 to 25 November 2020, for and relevant to the purpose of the liquidation of the Company, in the sum of $74,676.50 (plus GST).

The Receivers are justified in treating: (a) all of the assets of the Taurus Investments Trust as assets beneficially held by the Company, as bare trustee, subject to any charge or lien that the Company has over the assets of the Taurus Investments Trust to secure the payment of any debts properly incurred by the Company as trustee; and (b) all liabilities incurred by the Company in the conduct of its business as liabilities of the Taurus Investments Trust.
The Receivers, in their capacities as liquidators of the Company and Receivers are justified in distributing the Trust Property as follows: (a) first, paying the amount of the applicants' costs of this application as determined in accordance with Order 7 above; (b) second, paying the amount of approximately $74,676.50 to the Receivers for their remuneration as determined in accordance with Order 5 above; (c) third, paying the Receivers further expenses and remuneration in their capacity as liquidators of the Company and in their capacity as the Receivers, from 26 November 2020 to the conclusion of the receivership and liquidation of the Company, on a time basis at a reasonable fee according to the hours for which they, or any employee of Pitcher Partners, engage or have engaged in work necessary for and relevant to the purpose of the receivership or liquidation after 4 August 2020, such remuneration to be calculated at the standard hourly rates of Pitcher Partners from time to time for work of that nature, together with all reasonable out of pocket expenses; and (d) fourth, distributing the balance, after payment of the amounts in (a) - (c) above, to the admitted creditors of the Company in accordance with the priority regime established by ss 555, 556, 560 and 561 of the Corporations Act and distribute any surplus thereafter to the beneficiaries of the Taurus Investments Trust.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

INTRODUCTION 1 On 4 August 2020, the first applicants were appointed as joint and several Liquidators of Substar Pty Ltd (or the Company), pursuant to an order of the Supreme Court of Western Australia. By a discretionary Trust Deed dated 5 June 2012, Substar appears to have become the trustee of the Taurus Investments Trust. By an amended originating application filed on 10 December 2020, the Liquidators apply in this Court for orders to effect the realisation of the Trust's assets by an appointment as receivers, to approve their remuneration, and directions that they are justified in taking certain steps in dealing with the Trust's assets. 2 Although there have clearly been difficulties in ascertaining the precise nature of the Company's financial position due to the non-cooperation of its sole director and an apparent lack of books or financial records, for the reasons that follow I am satisfied that orders should be made essentially in the terms sought by the Liquidators. 3 The relief sought by the Liquidators is in the following terms: Orders 1. Pursuant to section 57 of the Federal Court of Australia Act 1976 (Cth) the liquidators of Substar Holdings Pty Ltd (in Liq) (ACN 154 916 711) (Company), Bryan Hughes and Daniel Bredenkamp, Pitcher Partners, Level 11, 12-14 The Esplanade Perth in the State of Western Australia be appointed as receivers and managers (Receivers) of the property of the Taurus Investments Trust and any other property held by the Company on trust (Trust Property). 2. The Receivers be authorised to take possession of, preserve, maintain and sell the assets comprising the Trust Property. 3. The Receivers have all the powers that a receiver has in respect of the business and property of a company under section 420 of the Corporations Act 2001 (Cth) (other than in sections 420(2)(s), (t), (u) and (w)) as if the reference in that section to "the corporation" were a reference to the Taurus Investments Trust or the Taurua Investments Trust including, without limitation, the power to do all things necessary or convenient to: (a) investigate transactions made using funds derived from the Trust Property; (b) demand the books and records of the Taurus Investments Trust or the Taurua Investments Trust from any person; (c) determine and make payment of any claims against the Trust Property; (d) in accordance with the priorities set out in section 556 of the Corporations Act 2001 (Cth), distribute the proceeds of the sale of the assets of the Taurus Investment Trust or the Taurua Investments Trust after payment of the costs, expenses and remuneration of the Receivers in their capacity as the Receivers and as liquidators of the Company) to any creditors of the Taurus Investments Trust or the Taurua Investments Trust; and (e) distribute any surplus thereafter to the beneficiaries of the Taurus Investments Trust or the Taurua Investments Trust. 4. The costs, expenses and remuneration of the Receivers in: (a) acting as the liquidator of the Company; and (b) acting as the Receivers of the assets and undertaking of the Trust; and be paid from the Trust Property. 5. The Receivers be allowed remuneration for the work undertaken, over the period from 4 August 2020 to 25 November 2020, for and relevant to the purpose of the liquidation of the Company, in the sum of $74,676.50 (plus GST). 6. The need for the Receivers to file a guarantee under rule 14.21 and rule 14.22 of the Federal Court Rules 2011 (Cth) be dispensed with. 7. The First Applicants' costs of this application be paid out of the Trust Property. 8. Liberty be granted to any person affected by these orders, including any creditor of the Company or the Taurus Investments Trust, the Taurua Investments Trust or any beneficiary of the Taurus Investments Trust or the Taurua Investments Trust, to apply to vary or set aside these orders on 7 business days' notice to the Applicants and to the Court by sending an email to the Associate to the appropriate Judicial Officer of the Court. 9. Liberty be granted to the Applicants to apply to the Court for orders discharging and releasing the Receivers on 7 business days' notice by sending an email to the Associate to the appropriate Judicial Officer of the Court. Directions 10. The Receivers are justified in treating: (a) all of the assets of the Taurus Investments Trust as assets beneficially held by the Company, as bare trustee, subject to any charge or lien that the Company has over the assets of the Taurus Investments Trust to secure the payment of any debts properly incurred by the Company as trustee; and (b) all liabilities incurred by the Company in the conduct of its business as liabilities of the Taurus Investments Trust. 11. The Receivers, in their capacities as liquidators of the Company and Receivers are justified in distributing the Trust Property as follows: (a) first, paying the amount of the Applicants' costs of this application as determined in accordance with Order 7 above; (b) second, paying the amount of approximately $74,676.50 to the Receivers for their remuneration as determined in accordance with Order 5 above; (c) third, paying the Receivers further expenses and remuneration in their capacity as liquidators of the Company and in their capacity as the Receivers, from 26 November 2020 until to the conclusion of the receivership and liquidation of the Company, on a time basis at a reasonable fee according to the hours for which they, or any employee of Pitcher Partners, engage or have engaged in work necessary for and relevant to the purpose of the receivership or liquidation after 4 August 2020, such remuneration to be calculated at the standard hourly rates of Pitcher Partners from time to time for work of that nature, together with all reasonable out of pocket expenses; and (f)[sic] fourth, distributing the balance, after payment of the amounts in (a) - (c) above, to the admitted creditors of the Company in accordance with the priority regime established by sections 555, 556, 560 and 561 of the Corporations Act 2001 (Cth) and distribute any surplus thereafter to the beneficiaries of the Taurus Investments Trust. Further or alternative orders 12. Further or alternatively to the Orders and Directions above, the liquidators of the Company have the power to appoint a fresh trustee to the Taurus Investments Trust pursuant to section 7 of the Trustees Act 1962 (WA). 13. There be liberty to apply. 4 The application is supported by two affidavits, being the affidavit of Mr Daniel Johannes Bredenkamp of the Liquidators, sworn 28 October 2020 which establishes the core facts relied upon (primary affidavit), and an affidavit of Mr Michael Stulic, solicitor, sworn 27 November 2020 which details a number of factual matters that have been revealed since the filing of the primary affidavit (supplementary affidavit).

BACKGROUND 5 Substar was incorporated on 22 December 2011. As at 27 November 2020, the sole: (a) Director of Substar is Mr Andrew Kelvin Scala since 8 December 2017; and (b) Shareholder of Substar is Mr Leopold Jose Scala who is an undischarged bankrupt. Both individuals appear to reside at the same residential address in Waterford which is also listed as the Company's principal place of business (though not its registered office). 6 By items 6 and 7 of the Trust Deed, the beneficiaries of the Trust are: (a) The children of Leopold Scala as specified beneficiaries; and (b) Leopold Scala as the general beneficiary 7 Leopold Scala is also the appointor of the Trust and, by cl 7 of the Trust Deed, has the power to appoint and remove trustees subject to the conditions imposed therein. 8 Significantly for present purposes, cl 7.6 of the Trust Deed provides that the trustee of the Trust will be determined and vacated if, among other things, the trustee enters into liquidation or has a receiver appointed. Accordingly, on the date that the liquidation commenced, Substar ceased as trustee of the Trust and has, since that time, held all Trust assets as a bare trustee.

LACK OF RECORDS AND NON-COOPERATION OF DIRECTOR 9 A substantial portion of the primary and supplementary affidavits are directed to detailing the steps taken by the Liquidators to elicit information about the Company's affairs from its sole Director, and the actions that have had to be taken as a result of his alleged non-cooperation. (The relevant papers have been served on the director's legal representatives who have not contested any aspect of the account.) They reveal the following chronology of attempted conferral with the Company's Director and Shareholder in the months since the liquidation commenced: (a) on 4 August 2020, Mr Delaney of the Liquidators' staff attempted to contact the Director and the Shareholder via mobile numbers that had been provided to the Liquidators by Substar's petitioning creditor. Voice mail messages were left (where possible) but no response was forthcoming; (b) on 5 August 2020, Mr Delaney contacted accounting firm, Macri Partners, which a company search for Substar obtained via Equifax Inc. on 4 August 2020 disclosed to be the registered officeholder of Substar. In a telephone conversation with Mr Joseph Macri of Macri Partners, Mr Delaney was advised that the Shareholder had been made bankrupt effective 20 November 2017 and that a bankruptcy trustee was acting on his behalf. Mr Macri advised that following the Shareholder's incapacitation, his son had become Director of Substar. Mr Macri advised that Macri Partners held very little books and records for Substar and was not responsible for preparing its tax returns or financial statements. Mr Macri did not have any contact telephone number for the Director but was able to provide an additional mobile number for the Shareholder; (c) on 6 August 2020, Mr Bredenkamp of the Liquidators sent, by registered post, a letter to the Director enclosing a notice to deliver all accounting books and records of Substar and a request to complete a Report on Company Activities and Property (ROCAP). They did not receive a response; (d) on 6 August 2020, Mr Delaney had a telephone conversation with Mr Alex Cimetta of SV Partners who confirmed that Mr Field remained the bankruptcy trustee for the Shareholder, Leopold Scala. Mr Cimetta advised Mr Delaney words to the effect: Leopold was a difficult individual to get a hold of and he does not have an email address. The only time our office was able to get a hold of him was when members of our staff went to his house. Mr Cimetta confirmed the Shareholder's contact telephone number to be the same as the number provided by Mr Macri. Mr Cimetta also advised Mr Delaney that the bankruptcy trustee had been unable to locate any of the 20 motor vehicles that had been registered in Leopold Scala's name at the time of the bankruptcy trustee's appointment; (e) on 6 August 2020, Mr Pattinson of the Liquidators' staff received a call from the Shareholder requesting information about the liquidation. Mr Pattinson requested contact information for the Director and also requested that the Shareholder instruct the Director to contact the Liquidators to arrange an appropriate time to meet with them to discuss the business, property and affairs of Substar. The Shareholder advised Mr Pattinson with words to the effect that: he intended to pay out the creditors of the liquidation following receipt of proceeds from the sale of one of his other properties and that he would call Mr Pattinson back the following day to schedule a meeting with himself, the Director and the Liquidators. No subsequent meeting or response was forthcoming from the Shareholder; (f) on 11 August 2020, the Liquidators sent, by registered post, a letter to the Director enclosing a second notice to deliver all accounting books and records of Substar and a request to complete a ROCAP, by no later than 18 August 2020. The Liquidators did not receive a response; (g) on 13 August 2020, having received no engagement from the Director and no subsequent engagement from the Shareholder, Mr Pattinson, Mr Delaney and Mr Lobb of the Liquidators' staff attended upon each of the locations of Substar's three real properties (as detailed below) and also the Director's registered address in Waterford (the Scala Family Residence) with a view to determine if any assets or records were located at these properties. The Liquidators located five motor vehicles and were advised by a person at a neighbouring business that the Shareholder had last attended that property on 7 August 2020. The Liquidators did not meet either the Director or the Shareholder at any of these locations; (h) on 14 August 2020, Mr Pattinson made attempts to contact the Director and the Shareholder on the three telephone numbers previously provided to the Liquidators on 4 and 5 August 2020. Voice mail messages were left (where possible) but no response was forthcoming; (i) on that same date, Mr Pattinson attempted to contact the Director via Facebook messenger. The message which appears to have been sent to the Director's correct account based on available photographic images was not read by the Director; (j) on 19 August 2020, Mr Pattinson made further attempts to contact the Director and the Shareholder on the three telephone numbers. Voice mail messages were left on the answering service (where possible), but no response was forthcoming; (k) on 20 August 2020, having determined the Shareholder to be an officer of Substar, the Liquidators sent, by registered post, a letter to the Shareholder enclosing a notice to deliver all accounting books and records of Substar and a request to complete a ROCAP, by no later than 27 August 2020. The Liquidators did not receive a response; (l) on 24 August 2020, the Liquidators engaged repossession agents to attend upon and recover three vehicles registered in Substar's name that had been located at the Scala Family Residence. Mr Delaney received a further telephone call from the Shareholder advising that he was working on a plan which would have the effect of setting aside the liquidation and that his solicitor, Mr Joseph Cianfrini of JNC Legal, would be in contact with the Liquidators shortly; (m) on 25 August 2020, Mr Pattinson sent text messages to the Director and the Shareholder's two mobile numbers requesting they call the Liquidators and engage in the process; (n) on the same date, having not received any subsequent correspondence, Mr Pattinson contacted Mr Cianfrini to obtain an understanding of whether he was acting for the Director and further requested that he instruct his client to attend upon our offices for a meeting. Mr Pattinson also requested Mr Cianfrini remind his client of its outstanding requirements to provide certain information to assist the Liquidators with the progression of the liquidation, including the ROCAP and books and records. Mr Cianfrini advised Mr Pattinson with words to the effect that: he had not yet received instruction in this matter from the Director or [the Shareholder] but had acted for [the Shareholder] Leopold Scala in the past and would contact them and revert in due course; (o) on the same date, Mr Delaney sent an email to Mr Cianfrini setting out the Liquidators' understanding of the telephone conversation and information that had been requested, providing a deadline of 4 September 2020 for provision of a response from the Director; (p) on 3 September 2020, having not received any response from Mr Cianfrini or the Director, Mr Pattinson of my staff contacted Mr Cianfrini via telephone seeking an update. Mr Cianfrini advised Mr Pattinson words to the effect that 'his client required an additional week to furnish the information requested'. Mr Pattinson agreed to provide an extension to 11 September 2020; (q) on 4 September 2020, the Liquidators sent a letter to Mr Cianfrini which confirmed their acceptance of the extension request; (r) on 11 September 2020, Mr Cianfrini contacted the Liquidators and advised Mr Delaney words to the effect that 'the Director and [the Shareholder] were available to attend upon [the Liquidators'] offices later that same date'. Messrs Pattinson, Delaney and Lobb subsequently met with the Director, the Shareholder and Mr Cianfrini that same day. At the meeting, the Liquidators provided the Director with a copy of the documentation previously sent via registered mail on 6 August 2020 and obtained a contact email address from the Director. At the meeting, the parties discussed: (i) the history and financial position of Substar, including the Liquidators' findings from its enquiries to date; (ii) the importance of the Director's assistance with expeditious completion of the ROCAP and provision of any books and records that were in his possession. In this regard, it is noted that the Director advised that, prior to making further enquiries, that to the best of his knowledge the Company did not have any books and records; had never prepared any financial records given he did not believe it was required to do so; and, he could not recall the party or parties that had acted as settlement agent for the real properties registered in the name of Substar; (iii) the current and anticipated costs of the liquidation process. In this regard, it is noted that Mr Pattinson explained to the Director and Shareholder that the Liquidators had been required to commit more time and cost than what would typically have been incurred in a liquidation of this nature due to the lack of engagement and assistance provided by the Director and Shareholder to date. Mr Pattinson stressed that their assistance in the provision of timely information and responses to the Liquidators' requests would reduce any further time and cost; (iv) the Director's view that all assets registered in the name of Substar were assets of the Trust; (v) the possibility that Substar had been rendered a bare trustee by virtue of the commencement of the liquidation; and (vi) the information that the Liquidators required from the Director to enable the Liquidators to make a determination on how the liquidation of Substar could progress; (s) on 15 September 2020, Mr Pattinson sent Mr Cianfrini and the Director an email containing: (i) information requested by the Director at the meeting; and (ii) a summary of his understanding of the discussions at that meeting and the agreement reached with respect to a deadline for provision of a completed ROCAP, books and records and provision of the information pertaining to a proposal that would be made by the Director; (t) on 18 September 2020, Mr Pattinson called Mr Cianfrini to provide an update on a material change to the total claims received in the liquidation and also to request an update on the progress of his client's outstanding tasks. Mr Cianfrini discussed the proposal that his client was contemplating and also requested an extension for provision of the outstanding documentation. This extension request was granted to a new deadline of 25 September 2020; (u) on 24 September 2020, Mr Pattinson called Mr Cianfrini to provide a further update on the Liquidators' estimated claims and to seek an update in respect of the Director's response to the Liquidators' requests. Mr Cianfrini discussed his client's difficulties with completing the ROCAP and books and records listing and Mr Pattinson suggested that he get his client, the Director, to arrange a time to meet with the Liquidators' staff at their offices, where they could assist him with its completion by answering any queries that were forthcoming. Mr Cianfrini also explained the high-level proposal his client was intending to put forward to the Liquidators to address Substar's claims and liquidation costs. Mr Pattinson requested that Mr Cianfrini make the proposal in writing and noted that the proposal would only be capable of acceptance if the Director was able to address his outstanding administrative requirement (i.e. ROCAP, books and records listing) and provide information to satisfy the Liquidators that the assets registered in the name of Substar were assets of the Trust; (v) on 25 September 2020, Mr Cianfrini sent a letter addressed to Mr Pattinson via email setting out the proposal discussed in the telephone call the previous day. The letter also included the Director's request for a meeting with the Liquidators on 30 September 2020, to assist him with addressing his outstanding administrative tasks; (w) on the same date, Mr Pattinson sent an email to Mr Cianfrini and the Director advising that the Liquidators were willing to accommodate the Director's meeting request and would respond more formally to the Director's proposal, following completion of the Director's outstanding administrative tasks; (x) on 29 September 2020, the Director attended upon the offices of the Liquidators where he completed the ROCAP and books and records listing, with the assistance of Mr Delaney and Mr Lobb. The Liquidators noted that the Director has acknowledged that he is not in possession of any books and records; (y) on 30 September 2020, Mr Bredenkamp sent a letter to Mr Cianfrini and the Director which explained that the proposal that they had submitted on 25 September 2020 was not in a form that enabled the Liquidators to make a determination on whether the Liquidators could accept same. In his request, Mr Bredenkamp set out further information that the Liquidators required and requested the Director submit a revised proposal by no later than close of business on 7 October 2020. No response has been forthcoming to date; (z) on 15 October 2020, Mr Pattinson called Mr Cianfrini for an update on the status of his client's revised proposal that addressed the outstanding matters set out in Mr Bredenkamp's letter dated 30 September 2020. Mr Cianfrini advised Mr Pattinson with words to the effect that: he had not read the letter but that it was his understanding the Director was progressing his efforts to gather funding to satisfy Substar's debts and that he would revert once he had considered the letter and received instruction from his client; (aa) later that same date, Mr Lobb sent the Director an email which referred to the discussion with Mr Cianfrini earlier that same date and noted the deadline to respond to the Liquidators' letter dated 30 September 2020 had passed. The email requested that the Director address the outstanding matters in this letter by no later than 21 October 2020; (bb) on 20 October 2020, Mr Pattinson received a telephone call from Mr Cianfrini during which Mr Cianfrini advised Mr Pattinson words to the effect that: the Director was unable to address all the matters in the Liquidators' letter of 30 September 2020 and that the Director had been unable to secure the requisite finance to meet the Substar's debts and liquidation costs. Mr Cianfrini further advised Mr Pattinson in words to the effect that his client understood an application would likely be required to progress the matter and that his client was supportive of this approach. Mr Cianfrini requested that given the quantum of Substar's outstanding debts and liquidation costs were substantially less than what the assets were likely to be realised for, his client had requested that the Liquidators engage with the Director during the course of their realisation process (if the orders sought were received) and prioritise the realisation of certain assets that the Director deems to be non-core when seeking to generate proceeds required to satisfy the outstanding claims and liquidation costs. Mr Cianfrini advised Mr Pattinson in words to the effect that: following satisfaction of the debt, his client would like to have the liquidation set aside and legal title in any residual assets that the Liquidators were not required to realise upon should remain in the name of the Company. Mr Pattinson advised Mr Cianfrini that in first instance, the Liquidators would likely proceed by marketing all assets for sale concurrently but would engage with the Director during the realisation process given his apparent interest in the residual equity. Mr Pattinson acknowledged the Director's desire with respect to maintenance of Substar and noted the Liquidators would need to consider, with the assistance of its legal counsel, the legal mechanism by which this goal could be achieved. Mr Pattinson noted that a determination of whether the assets were beneficially owned by the Trust was still yet to be made and that the Liquidators were continuing to make enquiries into this matter in the absence of books and records that confirmed the same. Mr Cianfrini noted that his client had recovered a recent rate notice from the City of Canning which he believed would assist in the Liquidators' determination and noted that he would send this to the Liquidators later that day; (cc) on 21 October 2020, Mr Pattinson received a telephone call from Mr Cianfrini during which Mr Cianfrini advised in words to the effect: that following their discussion of 20 October 2020, he had sought instructions from his client who had now advised him that he did not require Substar to remain as corporate trustee of the Trust and that he now had the belief that he would be able to secure sufficient external funding to satisfy [Substar's] debts and liquidation costs in full. Mr Cianfrini advised that as a consequence, the Liquidators would not need to realise upon the assets registered in the name of Substar and would only need to clarify what amount was required to satisfy [Substar's] debts and liquidation costs'. Mr Pattinson advised Mr Cianfrini that the Liquidators intended to proceed with filing this application, but would include the content of their discussion in the affidavit to be submitted to the Court. Mr Pattinson enquired as to the timing of receipt of funding. Mr Cianfrini advised that his client was yet to receive confirmation but anticipated that it would be obtained prior to completion of a formal dividend distribution process by the Liquidators, which he understood would take approximately two months to complete; (dd) on 22 October 2020, Mr Saul Davies of Taylor Smart Lawyers (TSL), a law firm that had assisted Substar with real property and settlement advice, telephoned Mr Pattinson to respond to his earlier requests of 15 October 2020 and 20 October 2020 for documentation pertaining to settlement of the three real properties registered in the name of Substar. Mr Davies advised Mr Pattinson in words to the effect that: TSL had located the requested settlement documentation and it was his view that this documentation clearly shows that at the time of each acquisition, there was intent that these properties were to be beneficially held by multiple trusts. Mr Davies advised that given his view the documentation pertained to Trust assets, it was his preference that prior to providing the settlement documentation to the Liquidators, TSL first receive consent from the Director and/or the Shareholder to release the information requested by the Liquidators. Later that same date, Mr Pattinson sent an email to Mr Cianfrini, copying the Director and Mr Davies to the email correspondence, setting out his understanding of his discussion with Mr Davies earlier that date and requesting Mr Cianfrini instruct TSL to release the information sought by the Liquidators; and (ee) on 27 October 2020, Mr Cianfrini returned Mr Pattinson's telephone call from earlier that same date and advised in words to the effect that 'he was still awaiting instruction from his client.' Mr Pattinson advised Mr Cianfrini that it was incumbent for the Liquidators to expeditiously proceed with the application they had previously discussed and accordingly the Liquidators intended to file the following day, being 28 October 2020. Mr Pattinson noted that were the Liquidators to subsequently receive the information requested from TSL prior to the hearing date, they would file this documentation with the Court, as was in fact done on 27 November 2020 when the supplementary affidavit was filed. 10 The supplementary affidavit details the further conferral and steps taken in the lead up to, and since filing this application as follows: (a) by email dated 28 October 2020, and prior to the Liquidators commencing this action, Mr Stulic of the Liquidators sent a letter to Mr Cianfrini. That letter enclosed a draft version of the originating application and advised Mr Cianfrini that he and another solicitor, Mr McDonald, would call Mr Cianfrini the following day to confer about this action prior to the Liquidators filing the originating application with the Court. As at 27 November 2020, Mr Cianfrini had not responded to that correspondence; (b) on or around 29 October 2020, Mr McDonald and Mr Stulic telephoned JNC Legal in order to confer with Mr Cianfrini about this action prior to the Liquidators filing the originating application with the Court. A receptionist at JNC Legal advised them that Mr Cianfrini was not available to take their call, and a message was left with Mr Cianfrini to call them back as soon as possible. Mr Cianfrini did not return their call; and (c) given Mr Cianfrini's failure to confer with the Liquidators' solicitors with respect to this action, on 30 October 2020, Mr Stulic filed the originating application and primary affidavit with the Court, and served Court-sealed copies of those documents on the Director by sending an email enclosing the documents to Mr Cianfrini. As at 27 November 2020, neither Mr Cianfrini or the Director had contacted the Liquidators' solicitors acknowledging receipt of the originating application and primary affidavit. 11 Due to the lack of cooperation by the Director and Shareholder, the Liquidators have been unable to thoroughly or properly assess the financial position of Substar or the Trust. They are yet to receive any books or records of the Company which would allow them to properly determine whether the assets that they have identified as being registered in the name of Substar are in fact assets of the Trust. They doubt whether such books and records exist and this doubt appears to be confirmed by the representations made by the Director.

ASSETS AND LIABILITIES OF THE COMPANY 12 In light of the difficulties occasioned in ascertaining information about the Company's affairs from the Director, the Liquidators' investigations into the assets of Substar have been limited to that which is publicly available information. 13 On 5 August 2020, title searches revealed Substar to be the registered proprietor of the properties at: (a) 4 Coolgardie street, Bentley (Coolgardie Street Property); (b) Unit 1, 9 Capel Court, Bentley (Capel Court Property); (c) Unit 403, 30 The Circus, Burswood (Burswood Property) (jointly, the Properties). 14 Those searches also revealed that 67 Ewer Street Pty Ltd had lodged a caveat over all of the above Properties on or around 18 October 2017, and that TSL had also lodged a caveat over the Coolgardie Street Property on or around 25 July 2019. 15 The Liquidators also ascertained that the Coolgardie Street Property was previously marketed for sale by Colliers International Pty Ltd (Colliers), and that Colliers now claims unpaid commission from the Company related to the sale of the Coolgardie Street Property on or about November 2017, which sale did not settle as a result of Substar's failure to address certain completion requirements including the removal of the Ewer Street caveat. 16 Using the historical prices at which Substar purchased each of the above properties which were obtained via internet searches, the Liquidators estimate the combined value of the Company's real property to be approximately $1,352,500. They are yet to commission formal valuations. 17 Enquiries made of the Department of Transport indicate that the Company owns the following 11 motor vehicles: Plate Year Make Model Dutiable Value 1CRG919 1999 BMW 3 Series E46 $3,500 1EFW959 2001 BMW 530i $750 1DI889 2004 Ducati Unknown $2,000 IEH549 2008 Triumph Unknown $3,500 1CXE903 2001 Mitsubishi Evolution $8,000 1GEL028 2009 BMW Mini $7,000 1EIF500 2013 Mercedes ML500 $25,000 1DKV048 2007 BMW Mini $6,000 1ERS054 2004 Bentley Continental $50,000 1EM987 2010 BMW Unknown $4,500 1HAH854 2007 BMW E90 3-Series $8,500 Total (estimated) Value $118,750

18 The Director also disclosed in the ROCAP the following motor vehicles had been disposed of, sold, or otherwise transferred within the last four years: Plate Year Make Model Valuation 1CXE903 2001 Mitsubishi Evolution $8,000 1EFW959 2001 BMW 530i $750 1DI889 2004 Ducati Unknown $2,000 1EIF500 2013 Mercedes MLS00 $25,000 Total (estimated) Value $35,750

19 The Liquidators note however that the Director has been unable to provide any documentation to verify the accuracy of the assertions made in the ROCAP, including the purported disposal of the above vehicles. 20 Subject to commissioning formal valuation of the real property, the Liquidators depose to their belief that Substar's assets could be worth approximately $1,435,500. 21 The Liquidators have identified liabilities of the Company as follows: (a) on 6 August 2020, the Liquidators received correspondence from TSL attaching two outstanding tax invoices totalling $14,900.89 in respect of which a caveat is registered against the Coolgardie Street Property; (b) on 24 August 2020, the Liquidators received correspondence from solicitors acting for Ewer Street setting out the basis and quantum of their claim in the sum of $34,557.19 in respect of which a caveat is registered against all three Properties; (c) as at 14 October 2020, the Company owed strata levies in respect of the Burswood Property in the sum of $34,920.97; (d) on the basis of a series of correspondence between the Liquidators and the City of Canning in mid-September 2020, the Liquidators believe that Substar owes $31,897.90 in unpaid council rates and taxes with further rates and charges continuing to accrue; (e) on the basis of similar correspondence during the same period with the Town of Victoria Park, the Liquidators believe that Substar owes $19,130.56 in unpaid council rates and taxes. The Town of Victoria Park has indicated that it will not be submitting a proof of debt in the liquidation; (f) on the basis of similar correspondence during the same period with the Water Corporation, the Liquidators believe that Substar owes $31,998.24 in unpaid water rates in respect of all three Properties, with further rates and charges continuing to accrue; and (g) on 29 September 2020, the Liquidators received a letter from the Department of Finance, Office of State Revenue which attached a land tax assessment indicating a liability of $3,778.50 which includes increases due to penalties and the accrual of nominal interest. 22 Having regard to the fact that the Liquidators have not yet received any accounting books or records of Substar, and based on the information above, the Liquidators believe Substar's liabilities are approximately $205,197. 23 Their current view of the Company's financial position is as set out below: Assets Estimated Value Cash and cash equivalents Nil Real Property $1,352,500 Vehicles $83,000 Estimated Total $1,435,500 Liabilities Estimated Value Mortgage finance $34,557 Legal fees $14,901 Strata levies $49,171 Council rates $51,028 Water rates $31,998 Land tax $3,778 Other creditors $19,763 Estimated Total $205,197 Estimated equity available for distribution (before satisfaction of liquidation costs) $1,230,303

24 In the supplementary affidavit, Mr Stulic details correspondence received on 5 November from TSL, who previously acted for Substar enclosing REIWA contracts of sale and associated documents for each of the three Properties. According to the contracts for sale, the buyers of the Properties were: (a) Coolgardie Street Property: Substar Holdings Pty Ltd as the trustee for the Taurua Investments Trust; (b) Burswood Property: Substar Holdings Pty Ltd as the trustee for the Taurus Investments Trust; and (c) Capel Court Property: Substar Holdings Pty Ltd as the trustee for the Taurua Investments Trust. 25 It is unclear to the Liquidators whether the reference in the contracts for sale to the 'Taurua Investments Trust' are intended to be references to the Trust, or instead a reference to a separate Trust. In the event of the latter, the Liquidators have been unable to locate any evidence of a trust deed in respect of a 'Taurua Investments Trust.'

GENERAL PRINCIPLES 26 The liquidator of a corporate trustee is entitled to apply assets of the trust to satisfy debts properly incurred by the company in performance of its duties as trustee. The company as trustee has a right of indemnity or exoneration out of trust assets secured by an equitable lien or charge over those assets: Caterpillar Financial Australia Limited v Ovens Nominee Pty Ltd [2011] FCA 677 per Gordon J (at [14] and the authorities cited therein). 27 Where a corporate trustee is removed by operation of a disqualification clause in the trust deed (here, cl 7.6), the company assumes the position of a bare trustee. Its powers are limited to protecting the trust assets. The right of indemnity or exoneration persists, albeit that the company's lien does not confer a power of sale to realise that right: Brereton, in the matter of MyHouse (Aust) Pty Limited (administrators appointed) [2020] FCA 610 per Farrell J (at [30]). In Cremin, in the matter of Brimson Pty Ltd (in liq) [2019] FCA 1023, Moshinsky J summarised the current state of the law (at [49]): There has, until recently, been a difference of opinion as to whether, in such circumstances, the liquidator's power to sell the "property of the company" in s 477(2)(c) of the Corporations Act permits him or her to sell trust assets: see Aced Kang Investments Pty Ltd (in liq), in the matter of Aced Kang Investments Pty Ltd (in liq) [2017] FCA 476 at [12]. It is now settled that the liquidator of an insolvent (former) corporate trustee cannot sell the trust's property without order of the Court, or by appointment of a receiver over the trust assets: see Jones & Matrix at [44] per Allsop CJ (Farrell J agreeing at [196]); Re Stansfield DIY Wealth Pty Ltd (in liq) (2014) 291 FLR 17 at [10]; Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103 at [45]. The rationale for this position is that, on a proper understanding, the trust assets are not the "property of the company", but are instead trust property in which the corporate trustee has a proprietary interest by way of lien or charge to secure its right of exoneration: see Jones & Matrix at [89]. Thus, to the extent that the subject of a sale is the whole of a trust asset, rather than merely the company's lien or charge in respect of that asset, it is not authorised by the power of sale in s 477(2)(c). (Emphasis added.) 28 In Amirbeaggi, in the matter of Simpkiss Pty Ltd (in liq) [2018] FCA 2121, Markovic J encountered similar facts to those in the present case and, consistent with the above passages from Cremin, considered the specific position with respect to the appointment of receivers (at [27]-[30]): 27 Upon the appointment of Ms Amirbeaggi as administrator, Simpkiss was removed as trustee of the Trust by operation of cl 11(e) of the Trust Deed and became a bare trustee. While it may have still held the assets, Simpkiss' powers in that capacity were limited to protecting the trust assets. It retained its right of indemnity or exoneration and its lien over the assets of the Trust and had the right to hold the assets but not to sell them: Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 at [22]-[28] .... 28 In those circumstances, that is where upon the appointment of a liquidator or administrator the company becomes a bare trustee, if a sale is necessary the liquidator or administrator must obtain a court order to sell or an order for the appointment of a receiver: Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil and Concrete Contractors Pty Ltd (in liq) (2018) 354 ALR 436 at [44]; [2018] FCAFC 40 at [44] per Allsop CJ (Jones). 29 Section 57(1) of the Federal Court of Australia Act 1976 (Cth) empowers the Court at any stage of a proceeding and on such terms and conditions as it thinks fit to appoint a receiver by interlocutory order in any case in which it appears to be just or convenient to do so. In Hosking, in the matter of Business Aptitude Pty Ltd (in liq) [2016] FCA 1438, a case similar to the present case, Gleeson J noted that the "general ground upon which the Court appoints a receiver is the protection or preservation of property for the benefit of those who have an interest in it": at [17]. 30 Here, as noted above, the office of trustee of the Trust became vacant as a result of Ms Amirbeaggi's appointment as administrator. There was no suggestion that a new trustee would be appointed. It was thus necessary to appoint Ms Amirbeaggi as receiver and manager to permit her to further deal with any remaining Trust assets, bring certainty to the process of finalising the liquidation and secure Simpkiss' right of indemnity out of the assets of the Trust for the benefit of Simpkiss' (and the Trust's) creditors. 29 Although in certain circumstances, particularly where all the trust property will be exhausted by the liabilities, it is appropriate for the liquidator to be given a discrete power of sale, the common course is to appoint the liquidators as receivers over all trust property for the purpose of realising the assets for the benefit of creditors: Cremin (at [50]) citing Amirbeaggi; Jones v Matrix Partners Pty Ltd (2018) 260 FCR 310 per Siopis J (at [142]); Taylor (Liquidator) v CJ & KL Bond Super Pty Ltd (Trustee), in the matter of CJ & KL Bond Pty Ltd (in liq) [2018] FCA 1430; Staatz v Berry, in the matter of Wollumbin Horizons Pty Ltd (in liq) (No 3) [2019] FCA 924.

CONSIDERATION 30 In addition to orders appointing themselves as receivers of the Trust assets, the Liquidators seek a series of directions from the Court pursuant to s 90-15 of Insolvency Practice Schedule (Corporations) (being Sch 2 to the Corporations Act 2001 (Cth)) which would have the effect of justifying their proposed approach to dealing with the Trust assets. The application for directions is brought under s 90-20 of the Insolvency Practice Schedule which calls into operation r 2.8 of the Federal Court (Corporations) Rules 2000 (Cth). Rule 2.8 requires the applicant on such applications to serve the relevant materials on the Australian Securities and Investments Commission (ASIC) a reasonable time before the hearing of the application. 31 Upon the filing of their amended originating application on 10 December 2020 which was required to regularise and correct a number of technical errors with the application, the Liquidators served the relevant materials on ASIC. On 16 December 2020, the Liquidators forwarded to the Court an email of the same date from ASIC advising that it does not propose to intervene and considers the matter should be properly left for determination by the Court. 32 Although they have been hampered by what appears to have been somewhat evasive or, at the very least, unhelpful conduct of the Director and Shareholder of Substar, the Liquidators' enquiries indicate that the Company's assets are more than sufficient to satisfy its current liabilities. 33 The investigations have also led the Liquidators to form the preliminary view that all of the Company's assets and liabilities are held and owed in its capacity as trustee of the Trust and that it did not trade in its own right. The Director appears to have confirmed this view in conference with the Liquidators on 11 September 2020. 34 Against this view, the settlement documents provided by TSL in respect of the three Properties raise the question of the existence of the 'Taurua Investment Trust' in addition to the Trust (the Taurus Investment Trust). Mr Davies of TSL has conveyed his view to the Liquidators that the 'this documentation clearly shows that at the time of each acquisition, there was intent that these properties were to be beneficially held by multiple trusts.' The Liquidators have found no evidence of any additional trusts. 35 Given the apparent non-existence of any books, records or financial statements for the Company, I consider it unlikely that further investigations by the Liquidators would uncover any definitive documentary evidence to confirm that the Company holds all assets as Trust assets. The settlement documents do confirm however, that the Properties were intended to be held by the Company on Trust, and it is clearly a distinct possibility that the references to the 'Taurua Investment Trust' are the result of a typographical error. 36 Having regard to this fact, and that all of the identified liabilities have been incurred through the Company's ownership of the Properties, I am satisfied that the identified liabilities have been incurred by the Company in its capacity as trustee. There is therefore no risk, on the current evidence, of trust assets being applied to general creditors as there are none: Cremin (at [51] and the authorities cited therein). 37 Section 57(1) of the Federal Court of Australia Act 1976 (Cth) permits the appointment of receivers in any case in which it appears to the Court to be just or convenient so to do. The authorities cited above make it plain that enabling a liquidator to access trust assets in the exercise of a corporate trustee's right of indemnity or exoneration is an appropriate case for the exercise of the power. I am unable to identify prejudice to creditors that would be occasioned by permitting the Liquidators to realise trust assets to satisfy their claims. 38 Section 90-15 of the Insolvency Practice Schedule provides that the Court 'may make such orders as it thinks fit in relation to the external administration of a company'. An example of which includes, at sub-s (3)(a), 'an order determining any question arising in the external administration of the company.' As recently discussed by Stewart J in Krejci, in the matter of Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111 (at [7]-[11]), s 90-15 permits the giving of judicial directions to an administrator to confer a level of protection against any potential claim of unreasonableness or breach of duty, having made a full and fair disclosure to the Court of the material facts. 39 The Shareholder, Leopold Scala, is also the specified beneficiary of the Trust. He is currently an undischarged bankrupt, whose trustee has indicated to the Liquidators that he does not wish to be heard on this application provided that the Company's assets are all treated as Trust assets. In the supplementary affidavit, Mr Stulic confirms that no information indicating to the contrary has been forthcoming. Again, in circumstances where there will be quite significant residual equity after the satisfaction of liabilities, it is difficult to identify prejudice to the Shareholder or Director. This is particularly so where both individuals have been extremely selective in the extent to which they have engaged with the Liquidators. They have not sought to be heard on this application. 40 The Director has however expressed a desire to be consulted by the Liquidators in their realisation of the Trust assets, presumably with a view to preserving certain property after the Company's debts have been satisfied. There have also been indications that the Director may seek to have the liquidation set aside following satisfaction of the debts. That does not require consideration at present. 41 The removal of Substar as the Trustee of the Trust is preventing the Liquidators from carrying out their statutory obligations. In these circumstances, it is appropriate that the Liquidators be appointed receivers of the Trust property, with the powers specified in s 420 of the Corporations Act other than at sub-ss 420(2)(s), (t), (u), and (w). There will be liberty to anyone affected by the appointment to apply on seven business days' notice. 42 For the same reasons that it is appropriate to appoint the Liquidators as receivers of the Trust assets, it is appropriate in the circumstances of this case that they be justified in treating all assets of the Company as Trust assets and all liabilities of the Company as liabilities of the Trust.

Liquidators' Remuneration and Expenses 43 The Liquidators seek orders for their remuneration and expenses to be paid out of the Trust property and the costs of this application. They also seek remuneration in a fixed sum of $74,676.50 for work completed from their appointment on 4 August 2020 to 25 November 2020. 44 The Liquidators depose to the fact that, much of the costs incurred, and work undertaken in this matter has been as a result of the failure of the Director and Shareholder to engage with the Liquidators. Mr Bredenkamp of the Liquidators notes that Messrs Andrew and Leopold Scala failed to respond to numerous attempts to contact them via telephone calls, text messages, social media messages and formal letters over the course of the first month of the liquidation. In circumstances where officers of liquidated companies are elusive or difficult to contact, positive steps are required to preserve any identified assets so as to avoid any conduct designed to defeat claims from potential creditors. 45 For these reasons, the Liquidators have had to take the following courses of action to preserve the various assets of Substar in fulfilling their statutory obligations: (a) registering securities over all of the identified motor vehicles on the Personal Property Securities Register on 13 August 2020; (b) registering caveats over the three Properties on or around 21 August 2020; (c) directing the property manager for the Burswood Property on 13 August 2020 to arrange for the locks at that premises to be changed and access cards cancelled; (d) engaging repossession agents and tow-trucks to attend upon the Scala Family Residence and the Burswood Property on 24 August 2020, and the Capel Court Property on or around 8 September to repossess a number of vehicles which are registered to Substar and transport them to an auction house; and (e) engaging locksmiths to attend the Capel Court Property on or around 24 August 2020 to change the locks at that premises. It is noted that subsequent to changing the locks at the Capel Court Property, it was brought to the Liquidators attention that the physical unit descriptors at the Capel Court Property had been updated but that no corresponding update had been made with Landgate. Accordingly, the Liquidators had initially changed the locks on the wrong residence. As a consequence, the Liquidators re-engaged the locksmiths to attend the Capel Court Property to change the locks on 8 September 2020. 46 In circumstances where such additional work and expense has had to be incurred, the Liquidators' remuneration is reasonable and has been properly incurred. Orders will be made in the terms sought, including an order that the costs of this application be paid out of the Trust property. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.

Corporations Act 2001(Cth)ss 420, 420(2)(s), 420(2)(t), 420(2)(u), 420(2)(w), 555, 556, 560, 561, Sch

Federal Court Rules 2011(Cth)rr 14.21, 14.22

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