First Plaintiff v Defendant

1 Building Renovation & Design Pty Ltd (in liquidation) ACN 131 717 121 (the "Company") was a small scale construction business operated by its director, Mr Bradley Sproule, and his now estranged wife, Kira Sproule.

2 The Company was incorporated on 19 June 2008. From 1 July 2008, the Company has been the trustee of the Sproule Discretionary Trust (the "Trust") pursuant to a trust deed of that date (the "Trust Deed"). Mr Sproule is the Appointor under the Trust Deed.

3 On 31 July 2023, a creditor's petition was filed in this Court seeking that the Company be would up in insolvency. On 30 August 2023 ("Appointment Date"), the Company was wound up in insolvency by order of Judicial Registrar Woronczak and the first plaintiff, Mr Hogan, was appointed liquidator (the "Liquidator").

4 The Liquidator now makes application for certain orders and directions to regularise his work as the Liquidator of the Company, confirm his powers to realise the assets of the Trust and take all other steps incidental to the finalisation of the external administration of the Company and the winding up of the Trust. In support of the application the Liquidator relies upon:

(a) an affidavit of Mark Brereton sworn 5 August 2025;

(b) an affidavit of the Liquidator sworn 5 August 2025;

(c) an affidavit of service of Kenneth Ramshaw sworn 16 September 2025;

(d) a supplementary affidavit of the Liquidator sworn 18 September 2025;

(e) an affidavit of service of Jessie Woo, solicitor, affirmed 18 September 2025;

(f) an affidavit of attempted service of Jessie Woo, solicitor, affirmed 18 September 2025; and

(g) a further supplementary affidavit of the Liquidator sworn 22 September 2025.

5 Mr Sproule appeared at the hearing of the application, was provided with a copy of the application book and made oral submissions. By his submissions, Mr Sproule did not oppose the orders sought by the Liquidator or otherwise identify a matter which bears upon the appropriateness of the relief sought.

6 I have determined to make the orders in form attached as Annexure A to these reasons.

7 The matters relevant to the disposition of the application are as follows.

8 Following investigation, the Liquidator has determined that the Company has, from 1 July 2008, acted solely in its capacity as trustee of the Trust until the Appointment Date. The basis for the Liquidator's view, as demonstrated on the evidence, is as follows:

(a) the Liquidator obtained and reviewed a copy of the Trust Deed which established the Trust;

(b) the Liquidator has not identified that the Company maintained any separate accounts as distinct from the accounts of the Trust;

(c) the Liquidator has located the bank accounts, bank statements and financial reports of the Company as trustee of the Trust;

(d) the Liquidator has discerned to the best of his ability that invoices rendered by the Company were issued in its capacity as trustee of the Trust;

(e) the Liquidator has discerned to the best of his ability that the Company generally did not keep meeting minutes;

(f) the Liquidator has identified that expenses were accounted as receipts of the Company as trustee, and he has not identified any Company expenses in its own right;

(g) the Company only employed its employees and contractors in its capacity as trustee of the Trust; and

(h) the Company books and records contain no records of activities inconsistent with the operation of a trust.

9 The evidence discloses that between 30 June 2018 and 26 July 2023, Mr Sproule and Ms Sproule drew various payments from the Company's ANZ Business Classic Account in the sum of $635,547.71. Drawings by Mr Sproule and Ms Sproule were treated in the available financial statements as being current receivables of the Trust. The Liquidator intends to initiate proceedings for the recovery of those monies and a draft statement of claim was exhibited in evidence.

10 The claims received to date in the Company's liquidation total $329,731.44. Other than the receivables referred to in paragraph 9, the only other potential asset appears to be a chose in action in respect of a claim against a contractor in the Victorian Civil and Administrative Tribunal. The evidence disclosed that the estimated realisable value of that claim is not presently ascertainable.

11 The Trust Deed contains the following relevant provisions:

7 INVESTMENTS AND OTHER POWERS OF THE TRUSTEE

7.7 to pay out of the Trust Fund or the income thereof all costs charges and expenses incidental to the management of the Trust Fund or to the exercise of any power authority or discretion herein contained or in carrying out or performing the trusts hereof which the Trustee may at any time incur including all income tax or other taxes payable in respect of the Trust Fund costs in any way connected with the preparation and execution of these presents and all moneys which the Trustee may be required to pay as settlement gift probate estate stamp or revenue duties in respect of the Trust Fund or on this Deed;

...

16 INDEMNITY FOR THE TRUSTEE

The Trustee shall be entitled to be indemnified out of the assets for the time being comprising the Trust Fund against liabilities incurred by the Trustee in the execution or attempted execution or as a consequence of the failure to exercise any of the trusts authorities powers and discretions hereof or by virtue of being the Trustee hereof but

16.1 the Trustee shall not be entitled to be indemnified by any beneficiary personally in respect of any liabilities or other matters aforesaid other than in respect of any duty or tax which the Trustee is entitled to recover from the beneficiary by law.

16.2 no director officer or member of any body corporate that is a Trustee or of any related body corporate is liable personally to indemnify the Trustee for any liability merely because in acting as Trustee the body corporate incurred that liability on the authority or at the request of that person or by reason of the relationship of that person with the Trustee.

...

21 EVENTS IN WHICH TRUSTEE CEASES TO HOLD OFFICE

The Trustee shall be disqualified from holding office if such Trustee being an individual shall be found to be a lunatic or of unsound mind or if he shall become subject to any bankruptcy law or if such Trustee being a company shall enter into liquidation whether compulsory or voluntary (not being merely a voluntary liquidation for the purposes of amalgamation or reconstruction).

22 REMOVAL AND APPOINTMENT OF TRUSTEE

22.1 The Appointor has the power to

22.1.1 remove any Trustee;

22.1.2 appoint any additional trustee or trustees;

22.1.3 appoint a new trustee in the place of any trustee who is removed, resigns as trustee or ceases to be a trustee by operation of law or the provisions of this Deed.

12 The effect of clause 21 of the Trust Deed was that on and from the Appointment Date, the Company was a 'bare trustee' of the Trust. In CGU Insurance Limited v OneTel Limited (In Liquidation)[1] the High Court held that:[2]

[t]he trustee of a bare trust has no interests in the trust assets other than those which exist by reason of the office of trustee and the holding of legal title. Further, the trustee of a bare trust has no active duties to perform other than those which exist by virtue of the office of the trustee, with the result that the property awaits transfer to the beneficiaries or awaits some other disposition at their direction. One obligation of a trustee which exists by virtue of the very office is the obligation to get the trust property in, protect it, and vindicate the rights attaching to it.

13 The appointment of the Liquidator and the identification of the foreshadowed claims against, inter alios, Mr Sproule created a risk that whilst this application remained under consideration, Mr Sproule may exercise his power as Appointor under the Trust Deed to replace the Company as trustee of the Trust, with the potential that if such a right was exercised, the ability of the Company to take possession of and realise the assets of the trust assets (including the choses in action against Mr and Mrs Sproule) would be adversely affected.

14 On that basis and upon the usual undertaking as to damages, so as to preserve the status quo pending determination of this application and in circumstances where the order was not opposed, on 19 September 2025 I made an interim order restraining Mr Sproule from exercising his powers of appointment under cl 22.1 of the Trust Deed (the "Interim Injunction").

15 The application gives rise to the following questions:

(a) Is the Liquidator justified in concluding that the Company carried on business solely in its capacity as trustee of the Trust?

(b) Should the Liquidator be appointed Receiver and Manager?

(c) Should any such appointment be made nunc pro tunc?

(d) What is the appropriate order with respect to the Liquidator's costs and remuneration?

(e) Should the Interim Injunction now be dissolved?

Is the Liquidator justified in concluding that the Company carried on business solely in its capacity as trustee of the Trust?

16 Section 90-20 of the Insolvency Practice Schedule (Corporations) ("IPSC") (being Schedule 2 to the Corporations Act 2001 (Cth) (the "Act") permits the Liquidator to apply for orders under s 90-15 in relation to the external administration of a company. Section 90-15 of the IPSC empowers the Court to make such orders as it thinks fit in relation to the external administration of a company.

17 In Re Amerind Pty Ltd (receivers and managers apptd in liq) ("Re Amerind"),[3] Robson J stated that:[4]

Whether a company trades in its own right or as trustee of a trust largely depends on factors which are specific to the circumstances at hand. There is no one determinative factor or set criteria. Courts have, however, taken into account the following matters:

(a) the existence of constituent trust documents which establish a trust, including any draft trust documents which cross-reference one another;

(b) whether accounts were maintained separately to the company's operational expenditure accounts and/or the company's own property;

(c) whether the company's name in its capacity as trustee was noted on key employment documents, such as letters of employment and tax file declarations;

(d) whether invoices rendered by the company in question were issued by the company in its capacity as trustee of the trust;

(e) whether company meeting minutes disclosed the existence of a trust, or disclosed that the company was operating as a trust;

(f) whether expenses were accounted as receipts of the company as trustee; and

(g) whether records, contained in the general ledger of the company, recorded activity consistent with the operation of a trust, such as the issue of units.

18 Applying the decision in Re Amerind to the present circumstances and in particular the facts set out at paragraph 8 above, I am satisfied that the Liquidator is acting reasonably and is justified in proceeding on the basis that:

(a) the Company carried on business solely in its capacity as trustee of the Trust;

(b) all assets of the Company are properly characterised as property held by the Company in its capacity as trustee of the Trust.

Should the Liquidator be appointed as Receiver and Manager?

19 In Re Waratah Group Pty Ltd (in liq) ("Re Waratah"),[5] Delany J identified that in order to enable a company in liquidation that is a bare trustee, acting through its liquidator, to deal with the assets of the trust, it is necessary either that orders be made:[6]

(a) pursuant to s 63(1) of the Trustee Act 1958 (Vic) (the Trustee Act); or

(b) pursuant to s 37(1) of the Supreme Court Act 1986 (Vic) (the Supreme Court Act) that the liquidators be appointed receivers and managers to the assets and undertaking of the trust.

20 The form of order submitted by the Liquidator suggests that his preference is that the Court should appoint him as receiver and manager and that relief under s 63 of the Trustee Act is only sought in the alternative.

21 The application by the Liquidator is not opposed. I recognise, as Delany J did in Re Waratah,[7] that the making of an order appointing the Liquidator as a receiver and manager has significance for creditors of the Company and the Trust, for the beneficiaries of the Trust and for Mr Sproule as the sole director of the Company.

22 In determining that it is appropriate to appoint the Liquidator as receiver and manager of the Trust pursuant to s 37 of the Supreme Court Act, I have taken into account the considered review of authority by Delany J in Re Waratah.[8] Recognising that there is 'no bright line'[9] between the two forms of relief, I consider that an appointment as receiver and manager is warranted for reasons similar to those espoused by Delany J in Re Waratah,[10] namely:

(a) first, the appointment addresses any difficulty which may arise if a replacement trustee were to be appointed to the Trust. Mr Sproule, as appointor, is the target of foreshadowed recovery actions by the Liquidator. It is conceivable that he may be motivated in the future to take steps to appoint a new trustee;

(b) second, the appointment of a new trustee, if it occurred, would place the Liquidator in the position that he would be unable to retain trust property against the new trustee in order to enforce his right to be indemnified. The prevailing authority in this Court is that a former trustee does not have the right to retain possession of trust assets as against a new trustee in order to secure his right of indemnity;[11]

(c) third, if no appointment as receivers and managers is made and a new trustee is appointed, the trust property will not have been preserved for the benefit of the Liquidator and Trust creditors; and

(d) fourth, the evidence reveals that there is a real prospect that there may be insufficient resources to meet the Liquidator's remuneration and expenses - particularly given the uncertainty about the realisable value of the choses in action. These orders are just and convenient because they will facilitate the minimisation of future costs and disputes.

Should the appointment be made nunc pro tunc?

23 No application was made for a relieving order under s 1318 of the Act. That was properly so as there is no evidence before me to suggest that the preconditions for the exercise of such a power presently exist.[12]

24 The appointment of the Liquidator as receiver and manager can however be made nunc pro tun_c._[13] I have determined that this is an appropriate course given the effluxion of time since the Appointment Date. The Liquidator's counsel submitted that since that time the Liquidator 'has conducted creditors' meetings, given two creditors' reports, identified assets, accepted proofs of debt, traced bank accounts, secured trust property and taken steps to pursue a claim in relation to Trust assets'. Noting that the Liquidator has acted in good faith, I consider that if any of those steps were taken without power, uncertainty in the conduct of the liquidation would arise with attendant cost. As stated above, given the financial status of the Company and the Trust, a nunc pro tunc order is warranted.

The Court declares or directs that the First Plaintiff as liquidator of the Company and receiver of the Trust is entitled to be paid his costs, expenses and remuneration in the external administration of the Company and Trust, from the Trust property and/or any proceeds of sale of Trust property.

The First Plaintiff's legal costs of the application be paid out of the assets of the Trust on an indemnity basis.

26 In Re Mandeville Group Pty Ltd (In Liq),[14] Sloss J stated:[15]

When addressing the liquidator's claim for remuneration and recovery of costs and expenses, counsel for the plaintiffs referred the Court to the decisions of Brereton J in Re Stansfield and of Riordan J in Re Matthew Forbes Pty Ltd (in liq), and the later observations made by Gordon J in Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth as confirming that a liquidator's entitlement to recover remuneration, costs and expenses in cases of this kind are regulated by the priority regime established by s 556(1) of the Corporations Act. Counsel submitted that orders for the liquidator's costs and remuneration are now routinely made pursuant to s 556(1) even though the relevant property is trust property.

In the circumstances, I am satisfied that it is appropriate to order that the liquidator is entitled to be paid his remuneration, costs and expenses properly incurred in preserving, realising or getting in the assets of the Trust, including the Property, and of and incidental to this application (including the costs of the contradictor), and that such remuneration, costs and expenses are to be paid in accordance with the priority specified in s 556(1) of the Corporations Act.

27 The sole function of the Company was as trustee of the Trust. It follows that the costs of the receivership and of the liquidation are and will be costs and expenses incurred in the course of the Liquidator discharging the Company's duties as trustee. It is therefore appropriate to order that the costs, expenses and remuneration, whether they be incurred by Mr Hogan in his capacity as liquidator or receiver, be payable from Trust property with such costs to be paid in accordance with the statutory priorities contained in s 556 of the Act.[16]

28 As in Re Pires Consulting Holding Pty Ltd (In Liquidation),[17] I will order that such costs, expenses and remuneration are to be approved by the Court. As the evidence presently discloses that following a report to creditors on 20 September 2023, remuneration of $23,238 (excluding GST) and internal disbursements of $1,000 (excluding GST) were approved by creditors on 20 October 2023, I will specifically order now that such remuneration and expenses are approved.

29 My present view is that the potential risk created by Mr Sproule's power of appointment and the underlying justification for the Interim Injunction is eradicated by the appointment of the Liquidator as receiver and manager. However, the dissolution of the Interim Injunction should only occur once the Liquidator has had the opportunity to consider these reasons and make any application he is advised to properly make.

30 I will therefore order that the Liquidator make any application to extend the Interim Injunction by 4:00pm on 24 October 2025, failing which the Interim Injunction will be dissolved.

IN THE MATTER OF BUILDING RENOVATION & DESIGN PTY LTD (IN LIQUIDATION) ACN 131 717 121 & ORS

MICHAEL ANDREW HOGAN IN HIS CAPACITY AS LIQUIDATOR OF BUILDING RENOVATION & DESIGN PTY LTD (IN LIQUIDATION) ACN 131 717 121

BUILDING RENOVATION & DESIGN PTY LTD (IN LIQUIDATION) ACN 131 717 121 IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE SPROULE DISCRETIONARY TRUST

​​At the hearing of the originating process filed 19 August 2025​

On 22 September 2025, the plaintiffs filled an affidavit of Michael Andrew Hogan detailing his consent to be appointed by the Court and act as the receiver of the Trust.

1. Pursuant to section 37(1) of the Supreme Court Act 1986 (Vic), Michael Andrew Hogan be appointed nunc pro tunc as the receiver and manager (Receiver) of the property, assets and undertakings of the Sproule Discretionary Trust dated 1 July 2008 (the Trust).
2. The requirements of rule 39.05 of the Supreme Court (General Civil Procedure Rules) 2025 (Vic) be dispensed with.
3. The Receiver shall have, in respect of the assets of the Trust:

(a) 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) as if a reference in that section to 'the corporation' were a reference to the Sproule Discretionary Trust, including without limitation the power to do all things necessary or convenient to:

(i) take control of and manage the Trust assets, including but not limited to recovering any debts owed to the Trust;

(ii) demand the books and records of the Trust from any person;

(iii) investigate transactions made using funds derived from the assets of the Trust;

(iv) sell any assets of the Trust;

(v) distribute or apply the Trust assets in accordance with the terms of the Deed of Trust dated 1 July 2008 and any applicable legal requirements;

(vi) take any further action required to ensure the proper administration and management of the Trust assets;

(vii) determine and make payment of claims against the assets of the Trust;

(viii) apply the Trust property to discharge the liabilities of Building Renovation & Design Pty Ltd (in liquidation) (all of which were incurred by it in its capacity as trustee) in accordance with the priorities set out in section 556 of the Corporations Act 2001 (Cth);

(b) the power to do all things necessary or convenient to effect the sale or realisation of the Trust property, with the powers that a liquidator has in respect of property of a company pursuant to section 477(2) of the Corporations Act 2001 (Cth).

1. The costs, expenses and remuneration incurred by the first plaintiff in relation to the Trust property, whether incurred as a liquidator of Building Renovation & Design Pty Ltd (in liquidation) or as receiver of the Trust property pursuant to Order 1 above (including the costs of this application) be paid in accordance with Order 3(a)(viii) above from the assets of the Trust, with the quantum of such costs, expenses and remuneration to be approved by the Court.
2. The remuneration of $23,238 (excluding GST) and disbursements of $1,000 (excluding GST) approved by creditors be paid from the assets of the Trust in accordance with Orders 3(a)(viii) and 4 of the above.
3. By 4:00pm on 24 October 2025, the plaintiffs are to file and serve any application to continue the interim injunction granted by the Honourable Justice Craig on 19 September 2025 (the Interim Injunction).
4. If no application is filed to continue the Interim Injunction pursuant to Order 6, the Interim Injunction shall be dissolved forthwith.
5. Pursuant to section 90-15 of the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Corporations Act 2001 (Cth), the first plaintiff is justified and acting reasonably in proceeding on the basis that:

(a) Building Renovation & Design Pty Ltd (in liquidation) carried on business solely in its capacity as trustee for the Trust;

(b) all assets of Building Renovation & Design Pty Ltd (in liquidation) are properly characterised as property held by Building Renovation & Design Pty Ltd (in liquidation) in its capacity as trustee of the Trust.

1. The first plaintiff has liberty to apply to the Court for any orders discharging any releasing themselves of the Trust property or seeking any other directions or relief from the Court on seven business days' notice.
2. There is liberty to apply to any other person who can demonstrate a sufficient interest to modify or discharge any of these orders, on not less than seven business days' notice to the first plaintiff.
3. There is liberty to apply to the parties generally.

[1] (2010) 242 CLR 174; [2010] HCA 26.

[2] Ibid 182, [36] (French CJ, Heydon, Crennan, Kiefel and Bell JJ).

[3] (2017) 320 FLR 118; [2017] VSC 127.

[5] [2020] VSC 523.

[11] Pitard Consortium Pty Ltd atf the Pitard Trust v Les Denny Pty Ltd [2019] VSC 614; (2019) 58 VR 524, 534 [38]; [2019] VSC 614, (McDonald J) applying Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344; (2008) 74 NSWLR 550, 561 [50].

[12] See Re Civil Construction Network Services Pty Ltd (in liq) [2020] VSC 474, [33]-[35].

[13] Re Waratah Group Pty Ltd (in liq) [2020] VSC 523, [60].

[14] [2020] VSC 293.

[16] See, for example, Re Pires Consulting Holding Pty Ltd (In Liquidation) [2019] VSC 384, [53]-[54].

[17] [2019] VSC 384.