Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd

Introduction 1 Nathan Lee Deppeler and Ivan Glavas (Liquidators) are together the first plaintiff and the liquidators of the second plaintiff, Old Port Road Pty Ltd ACN 102 704 343 (in liquidation) (the Company). Prior to its liquidation, the Company was the trustee of the Polldore Property Discretionary Trust (Trust). The Company ceased to be trustee on the appointment of the Liquidators and now holds Trust assets as bare trustee. The Company's sole asset is a property situated at 95 Old Port Road, Langsborough in the State of Victoria (Property). 2 By an originating process filed on 21 June 2021, the Liquidators seek orders under the Corporations Act 2001 (Cth) (Corporations Act) and the Trustee Act 1958 (Vic) (Trustee Act) for the purpose of facilitating their dealing with, and distribution of, assets of the Company, including to enable the winding up of the Company to be completed. The application is supported by two affidavits of Mr Deppeler sworn 18 June 2021 and 30 July 2021 respectively, and an affidavit of Mr Timothy Street sworn 30 July 2021. 3 The present matter reflects a standard context where orders have been made for the purpose of selling trust assets and distributing the proceeds among trust creditors by conferring on the liquidators of a corporate trustee of a bare trust the power to deal with assets of the trust or to have the liquidators appointed as receivers: Rathner (liquidator), in the matter of Garrows Close Pty Ltd (in liq) [2021] FCA 505 (Rathner) at [5] (Beach J). In the present context, the Liquidators seek an order conferring on them the power to deal with the assets of the trust, without also appointing them as receivers. Receivership is not sought as the Property is the Company's sole asset and no replacement trustee has been appointed. 4 At the hearing, I made orders largely in the form sought by the Liquidators. These are my reasons for making those orders.

Background 5 The Company was incorporated on 1 November 2002. Prior to its liquidation, the Company was trustee of the Trust pursuant to a Discretionary Trust Deed made on 11 November 2002 (Trust Deed). Since 15 February 2003, the Company has been the registered proprietor of the Property. Based on their investigations, the Liquidators' assessment is that the Company did not conduct any activities other than as trustee of the Trust and it existed exclusively to perform that role. 6 On 4 December 2020, Mr Deppeler and Mr Glavas were appointed as voluntary administrators pursuant to Part 5.3A of the Corporations Act, and on 20 January 2021, they were appointed as joint and several liquidators of the Company by resolution of creditors made under s 439C of the Corporations Act. 7 Clause 8(8)(c) of the Trust Deed provides: The office of Trustee shall ipso facto be determined and vacated if … (c) if the Trustee being a company shall enter into liquidation whether compulsory or voluntary (not being a voluntary liquidation for the purposes of amalgamation or reconstruction) or have a Receiver or Manager appointed; or make or enter into any composition or scheme of arrangement with its creditors. 8 No replacement trustee has been appointed. 9 Since their appointment, the Liquidators have taken steps to secure the Property and to appoint an agent and to market it for sale (with the consent of the secured creditor, National Australia Bank). As at the date of hearing, the Property has been sold. I am informed by the Liquidators that the executed contract of sale contains a special condition that the sale is subject to the Liquidators obtaining court orders that the Liquidators are authorised to sell the Property. 10 In response to an order of this Court, the Liquidators have taken all reasonable steps to provide notice of the originating process filed in the proceeding to all interested persons. The evidence shows that the following beneficiaries (who represent all beneficiaries of the Trust reasonably able to be identified by the Liquidators) were served with the originating process filed in the proceeding between June and July 2021: (a) Geoffrey John Janson; (b) Phillip John Craig Janson; (c) Elizabeth Anne Allen; (d) Garry Polldore; (e) Murray Polldore; and (f) Wendy Farrugia. 11 On 12 July 2021, the Australian Securities and Investments Commission and the creditors of the Company were also served with copies of the originating process. No party served with the originating process has written to the Liquidators to say that they intend to be heard on the application.

Powers of the Company as trustee 12 The orders sought by the Liquidators are to facilitate their dealing with and distributing assets of the Company to enable the winding up of the Company, without taking the step of appointing the Liquidators as receivers over the Trust property. 13 Orders are sought under s 90-15 of the Insolvency Practice Schedule (Corporations) and s 63 of the Trustee Act. As noted in the introduction, the applicable legal principles have been considered in a number of cases: see for example Re Simpkiss Pty Ltd (in liq) [2018] FCA 2121; Re Matthew Forbes Pty Ltd (in liq) [2018] VSC 331; Re St George's Development Company Pty Ltd (in liq) [2018] VSC 595; Re Asten Holdings Pty Ltd (in liq) [2020] FCA 1107; Re Pako Supermarkets Pty Ltd (in liq) [2020] VSC 487; Jess, in the matter of Westside Group Pty Ltd (in liq) [2020] FCA 1586 (Jess). 14 Section 90-15(1) of the Insolvency Practice Schedule (Corporations) provides that the Court may make "such orders as it thinks fit in relation to the external administration of a company". The power is broad and is at least as extensive as the powers formerly available under ss 479(3) and 511 of the Corporations Act: Rathner at [6]; In the matter of Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481; 125 ACSR 355 at [8]. 15 Similarly, the power under s 63 of the Trustee Act is also broad. It enables the Court to confer upon a corporate trustee the power to deal with trust assets including to meet claims under the Corporations Act in the course of the winding up of the company: Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 (Caterpillar) at [30] (Gordon J). It has been accepted by this Court that by necessary implication, s 63(1) not only permits the conferral of power on a corporate trustee but also its liquidators in such a capacity: Rathner at [8] (Beach J). 16 Applications of this kind are necessary when, by virtue of an "ipso facto" clause in the relevant deed of trust, a trustee company is automatically removed from office on the occurrence of a particular event, such as the appointment of a liquidator. In this situation, the Company holds the assets as bare trustee of the Trust. In Re Cremin (in his capacity as liquidator of Brimson Pty Ltd in (ACN 621 156 643) (in liq) and others) [2019] FCA 1023; 136 ACSR 649 Moshinsky J observed (at [49] and [50]): …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 … 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 (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; 260 FCR 310; 124 ACSR 568] at [89]. … 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 … 17 There is no "bright line" that provides assistance to the Court to determine whether, in cases such as this, the preferable course is to make orders permitting the former corporate trustee to sell assets or to appoint a receiver: Re Waratah Group Pty Ltd [2020] VSC 523 at [41] (Delany J). In Mutton (liquidator), Re Balsub Pty Ltd (in liq) [2020] FCA 741; 145 ACSR 342, Anastassiou J said (at [25], citing Gordon J in Caterpillar at [35]-[36]) that relief under s 63(1) of the Trustee Act would be appropriate where: (a) the company has become a bare trustee of the assets of the trust upon the appointment of the liquidator; (b) the company had acted only as trustee of the trust and in no other capacity; (c) all assets owned by the company were held by it as trustee and all liabilities incurred by it were incurred in its capacity as trustee; and (d) no new trustee had been appointed. 18 The present circumstances fall within those contemplated above. I am therefore satisfied that the preferable course is to confer on the Liquidators under s 63(1) of the Trustee Act the power to deal with the trust assets.

Orders sought 19 I will now deal with the specific orders sought. 20 First, the Liquidators seek an order pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) that they are justified and acting reasonably in proceeding on the basis that the Company carried on business in its capacity as trustee of the Trust and that all assets of the Company are properly characterised as Trust property. Having regard to the evidence of investigations undertaken by the Liquidators, it is appropriate to make this order. 21 Second, the Liquidators seek an order pursuant to s 63(1) of the Trustee Act that the Company shall have the power to carry on the business of the Trust and to deal with, hold, apply and/or distribute the Trust property in accordance with Parts 5.5 and 5.6 of the Corporations Act. As stated above, I accept that it is appropriate for orders to be made under s 63(1), rather than for the Liquidators to be appointed as receivers of the Trust property. 22 Third, the Liquidators seek an order pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) that they are justified and otherwise acting reasonably in proceeding on the basis that they can deal with, hold, apply and/or distribute the Trust Property in accordance with Parts 5.5 and 5.6 of the Corporations Act. Such a direction is consistent with the conclusion of the Full Court in Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) (2018) 260 FCR 310 (Jones v Matrix) at [102] and [108] (Allsop CJ). I am satisfied that it is appropriate to make such an order in this case. 23 Fourth, the Liquidators seek an order pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) that they are justified and otherwise acting reasonably in proceeding on the basis that they are entitled to be paid from the Trust property their remuneration, costs and expenses properly incurred in the liquidation, including the remuneration of and incidental to this application. The sole activities of the Company were as trustee of the Trust. It follows that, save for its right of exoneration and the supporting lien, the Company has no assets of its own. In these circumstances, it is appropriate that the Liquidators' remuneration and expenses be paid out of Trust assets: Jones v Matrix at [105]-[106]; Jess at [39]; Rathner at [31].

Conclusion 24 For the foregoing reasons, I made orders largely in the form sought by the Liquidators. I also ordered that a copy of the Court's orders be served on the persons who were served with a copy of the originating process. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.