Deputy Commissioner of Taxation v Kate's Cooking Pty Ltd

KATE'S COOKING PTY LTD (IN LIQUIDATION) ACN 116 660 130

1. Pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth), the second plaintiff be appointed as receiver over the assets of the Spud's Trust for the purposes of:

(a) realising the assets and undertakings of the Spud's Trust;

(b) enforcing the defendant's right of indemnity from the assets of the Spud's Trust; and

(c) applying the proceeds of the receivership (after payment of the receiver's remuneration and proper costs and expenses) in payment of the liabilities of the Spud's Trust in accordance with the order of priorities set out in s 556 of the Corporations Act 2001 (Cth).

1. The second plaintiff be relieved of any obligation to file a guarantee in Form 30 in accordance with rules 14.21 and 14.22 of the Federal Court Rules 2011 (Cth).
2. The second plaintiff, in his capacity as receiver, be granted the following powers:

(a) each of the powers set out in s 420(2) of the Corporations Act, as if each reference in s 420(2) to "the corporation" were a reference to the Spud's Trust;

(b) the power to adjudicate on claims in respect of the creditors of the Spud's Trust as if the provisions of the Corporations Regulations 2001 (Cth) applied; and

(c) otherwise to do all things necessary or convenient to achieve the objectives set out in order 1 above.

1. The second plaintiff, in his capacity as receiver, be paid remuneration on a time-basis according to the hours for which he, or any employee of the firm BRI Ferrier (SA), is engaged in work that is reasonably necessary for and relevant to the purpose of the receivership, such remuneration to be calculated at the standard rates of BRI Ferrier from time to time for work of that nature, together with reasonable out-of-pocket expenses.
2. The reasonable costs and expenses incurred by the second plaintiff in relation to the receivership be paid out of the assets of the property of the Spud's Trust in priority to payment to creditors of the Spud's Trust.
3. The costs of and incidental to the interlocutory process filed by the second plaintiff on 20 March 2025 be costs and expenses in the receivership.
4. There be liberty to apply to the parties, and to any person who can demonstrate sufficient interest in the assets of the Spud's Trust.

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

Delivered ex tempore, revised from transcript

1. On 5 November 2024, pursuant to orders made by a registrar in these proceedings, the defendant company, Kate's Cooking Pty Ltd (Kate's Cooking) was wound up in insolvency under the Corporations Act 2001 (Cth) and the second plaintiff, Maris Andris Rudaks, was appointed as liquidator of Kate's Cooking.
2. Prior to the appointment of Mr Rudaks as liquidator, Kate's Cooking was the trustee of a trust called the Spud's Trust. In its capacity as the trustee of the Spud's Trust, Kate's Cooking carried on business in the hospitality and catering industries. It did not trade in any other capacity. All of the creditors of Kate's Cooking, including the first plaintiff, the Deputy Commissioner of Taxation, are creditors of the Spud's Trust.
3. The Spud's Trust was established by a trust deed dated 14 October 2005 (Trust Deed). Clause 11F of the Trust Deed relevantly provides that the office of trustee shall be determined and vacated if the trustee, being a corporation, has a petition for its winding up presented to the Court. By virtue of cl 11F, the office held by Kate's Cooking as trustee of the Spud's Trust was automatically vacated when the Deputy Commissioner of Taxation filed a petition for the winding up of Kate's Cooking in these proceedings.
4. Although the Trust Deed, in cl 11H(b), contemplates the appointment of one or more replacement trustees or interim trustees in the event that the trustee vacates their office, Mr Rudaks has deposed that he is not aware of any replacement trustee having been appointed over the Spud's Trust.
5. As the former trustee, Kate's Cooking has a right of indemnity out of the property of the Spud's Trust. However, the right of indemnity in favour of Kate's Cooking as the former trustee does not itself confer a power of sale in relation to trust assets. If the sale of property of the trust is required, the external administrator of the corporate trustee must seek orders for the sale of the property or orders appointing them as the receiver of the trust property: Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) (2018) 260 FCR 310; [2018] FCAFC 40 at 323 [44].
6. By interlocutory process filed on 20 March 2025, Mr Rudaks seeks orders appointing him as receiver of the property held by Kate's Cooking in its capacity as trustee of the Spud's Trust, with the powers of the receiver of the property of a corporation under s 420 of the Corporations Act. The Court has power to make the appointment under s 57(1) of the Federal Court of Australia Act 1976 (Cth), if it appears to the Court that it would be just or convenient to do so. The general ground upon which the Court appoints a receiver under s 57(1) is "the protection or preservation of property for the benefit of persons who have an interest in it": Hosking; Re Business Aptitude Pty Ltd (in liq) [2016] FCA 1438 at [17]; Krejci; Re Camporeale Properties Pty Ltd (in liq) [2019] FCA 2199 at [31].
7. Mr Rudaks' investigations indicate that the Spud's Trust may have assets with value such that, if they were sold, the proceeds of the sale would be sufficient to pay the secured creditors with security interests in those assets.
8. I accept Mr Rudaks' submissions that it would be just and convenient that he be appointed as receiver with the powers set out in s 420 of the Corporations Act because:

(a) it will avoid unnecessary duplication of work, which will reduce costs in the overall administration of Kate's Cooking;

(b) Mr Rudaks is an experienced liquidator, and has specific experience in realising assets;

(c) the orders sought would enable Mr Rudaks to take such steps in respect of the liquidation of Kate's Cooking that would be available to him as liquidator pursuant to the relevant provisions of the Corporations Act as if Kate's Cooking had traded in its own right, and not as trustee of the Spud's Trust; and

(d) it would ensure that the trust assets are distributed in accordance with the usual priorities set out in the Corporations Act.

1. If the orders sought are not made, there is no prospect of any recovery of assets for the benefit of unsecured creditors.
2. The Deputy Commissioner of Taxation is the primary unsecured creditor of Kate's Cooking and has not sought to be heard in opposition to the orders sought by Mr Rudaks. The director of Kate's Cooking, Gregory Hobby, is legally represented and has confirmed through his solicitor that he also does not oppose the orders sought by Mr Rudaks.
3. While rules 14.21 and 14.22 of the Federal Court Rules 2011 (Cth) would ordinarily require that a receiver appointed by the Court provide security by way of a guarantee, it is common for the Court to order that that requirement be dispensed with when the person to be appointed as receiver is a registered liquidator who is subject to the supervisory and disciplinary provisions of the Corporations Act: see Vines; Re the Bankrupt Estate of Mitchell [2024] FCA 1276 at [67]. I am satisfied that it is appropriate in this case to appoint Mr Rudaks as receiver without security.
4. If appointed, Mr Rudaks proposes to charge his firm's standard hourly rates. This reflects the remuneration to which Mr Rudaks would ordinarily have been entitled had the assets of the trust been assets held beneficially by Kate's Cooking and were thus to be dealt with by him in his capacity as liquidator of the company. The rates appear to me to be appropriate and, in any event, as Mr Rudaks acknowledges, the reasonableness of his remuneration as receiver will remain within the supervision of the Court.
5. I am satisfied that it is appropriate that Mr Rudaks be appointed receiver of the property of the Spud's Trust, and that the proposed terms of the appointment are appropriate.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McDonald.