Grain Technology Australia Ltd v Rosewood Research Pty Ltd

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

(Delivered ex tempore, revised from transcript)

1. I have before me an application by the First and Second Plaintiffs, Nathan Lee Deppeler and Paul Andrew Burness (the Liquidators or the Plaintiffs), in their capacity as Liquidators of the Third Plaintiff, ACN 085 483 923 Limited (In Liquidation) (the Company or LSCA). The Liquidators seek judicial guidance about the characterisation and proposed treatment of cash reserves held by the Company at the date of the Liquidators' appointment. The Company has deductible gift recipient status - or had at all relevant times - deductible gift recipient status.
2. By originating process dated 20 February 2025, the Liquidators seek:

(1) An order under pursuant to s 90-15 of Schedule 2 Insolvency Practice Schedule (Corporations) (IPS) to the Corporations Act 2001 (Cth) (Corporations Act) that the Liquidators are justified and acting reasonably in proceeding on the basis that all the funds held by the Third Plaintiff as identified are, with the exception of any funds that the Court determines are held on trust, property of the Company (Funds).

(2) An order that the Liquidators have liberty to apply to the Court for further orders, directions and/or advice in relation to the conduct of the liquidation, including but not limited to the application of the Funds.

(3) An order that there be liberty to apply to any person who can demonstrate sufficient interest to modify any directions, orders and/or declarations made pursuant to this Originating Process on not less than 48 hours' notice to the Liquidators.

(4) An order that the Liquidators' costs of and incidental to this application be costs and expenses in the liquidation of the Company and be paid out of the property of the Company.

1. On 14 March 2025, this Court made orders affording interested parties the opportunity to be heard on the question of the proper characterisation and proposed application of funds sourced from, in particular, what I will describe as the Independent Accounts. Responses were received from various peak bodies of Surf Life Saving in Australia being Surf Life Saving New South Wales (SLNSW), Surf Life Saving Queensland (SLSQ), and Surf Life Saving Tasmania (SLST), respectively. Each of the companies limited by guarantee under the Corporations Act. SLST, is an incorporated association under the Associations Incorporation Act 1964 (Tas). They are all registered charities with the Australian Charities and Not-for-Profit Commission (the ACNC). Collectively, I will refer to these entities as the Applicants, unless it is necessary for me to refer to one of them separately.

1. The Company was formerly known as Sports Chaplaincy Australia Limited and was sometimes referred to as Life Saving Chaplaincy Australia or the LSCA. It entered liquidation on 6 May 2024, having been incorporated almost two years earlier as a public company limited by guarantee. During the period of its operation, the Company:

(1) trained, supported and provided chaplains to supporting clubs for the purpose of delivering pastoral care; and

(2) was registered as a public benevolent institution by the ACNC, and was endorsed for taxation purposes as a deductible gift recipient.

1. Liquidators were appointed by the Company on 6 May 2024 after it ceased trading on 5 May 2024.
2. Present proceedings were commenced on 20 February 2025, and on 14 March, the Court made orders to provide a process by which any party of an interest, or alleged interest in the funds held by the Company, could make an application.
3. There was an opportunity for any entities to put forward any evidence in support of their claims. On 15 May 2024, the Liquidators issued an initial advice to known creditors of the Company, and a statutory report was issued to known creditors on 6 August 2025.

1. Upon their appointment, the Liquidators ascertained the Company's assets primarily comprised cash reserves held in 16 bank accounts. They collected and consolidated funds totalling $175,270. Six accounts were apparently operated independently of the Company's other bank accounts, and were apparently maintained for specific divisions of the Company's operations (the Independent Accounts).
2. Information provided to the Liquidators by the Company's former finance manager suggested that some of the funds in some of the Independent Accounts included donations from third parties. The Liquidators were concerned that funds referable to donations and profit may have been held by the Company in an intermingled way, raising the prospect that they were not available for distribution, or otherwise for use in the liquidation - a situation made more complex by the significant number of unique donors who appeared to be responsible for the funds in Independent Accounts, which comprise some donations. The number of potential donors makes it difficult to discern the intentions of those donors in a cost-effective and efficient manner.
3. The creditors of the Company include former employees, assessed by the Liquidators as being owed employee entitlements in the order of $270,000 and various unsecured creditors, including the Australian Taxation Office.
4. The constitution of the Company identifies the Company's "object" as being "not-for-profit, public benevolent institution" that will provide "benevolent relief to communities in need" via the provision of various services to "sporting communities in Australia". Clause 5(a) of the Company's constitution provides as follows:

If, on the company's winding up... there is any property left, after paying all debts and other liabilities, the property must not be distributed among the members, but must be given to some other similar institution or institutions decided by the members at or before the time of winding up...

1. At present, Liquidators do not expect there will be a surplus after paying all debts and other liabilities. Rather, it is expected there will be a significant shortfall between the assets of the Company available to meet creditor claims, and the value of those creditor claims, with the consequence the Liquidators anticipate only priority creditors of the Company will receive a partial dividend. It is in this context that the Liquidators seek the orders set out in the application and which I have extracted above.

1. The Applicants are all surf lifesaving entities. They have no formal corporate relationship with the Company, beyond what is disclosed in the evidence. The Applicants assert they provided the Company - who they referred to as LSCA - with support at different points in time.
2. The Applicants say the LSCA has regularly sought donations and support from the Applicants, and other lifesaving entities since 1995, and its representatives attended various executive management group meetings of different surf lifesaving entities at different points over the past few years. It says that LSCA chaplains voluntarily and regularly attend various state and Australian surf lifesaving championships to make available pastoral chaplaincy and welfare services to persons participating in or attending those events. The Applicants were listed as potential donors and recipients of independent funds. It initially argued that a combined sum of $35,732 was comprised of either donations or payments for chaplaincy services made to the Company by the Applicants.
3. The Applicants submit that payments made to the Company were solely made for the Company's charitable purposes, and are therefore held on trust by the Company, and must be expended to achieve those purposes. It submitted the Applicants made the payments, based on the understanding that they would be used to support the LSCA. In effect, the Applicants expected the payments would have been held on trust for, and applied towards, lifesaving chaplaincy services, and thus, it was said they were "impressed with an equitable proprietary obligation". The obligation is said to extend to $18,700 held in the Independent Accounts by the Company, and by their application to this Court, the Applicants seek to have those funds refunded to them.

1. It is appropriate to set out some relevant principles. Section 90-15, of the IPS is cast in wide terms, and allows the Court to make such orders as it thinks fit in relation to the external administration of a company, including to provide guidance as to whether the property held by a company in liquidation is to be treated as a company property, or to be held on trust for a third party. It provides:

90-15  Court may make orders in relation to external administration

Court may make orders

 (1) The Court may make such orders as it thinks fit in relation to the external administration of a company.

1. The approach for the court, on application for directions by an external administrator, were set out in Re GGA Lifestyle Proprietary Limited (Administrator Appointed); Ex parte Woodhouse 2019 WASC 167, which Vaughan J stated at [23] (citations omitted):

A direction that an external administrator may properly and justifiably carry out a proposed course of conduct is used to signify that it is appropriate that he or she do so. It is a conventional form of direction in common use. It is implicit in such an order that the court is approving the proposed conduct. Often a proposed direction in this form will raise an issue of propriety or reasonableness. Directions are available and appropriate on that basis.

1. There is no doubt the present application is appropriately made.
2. The Liquidators have directed my attention to a similar application heard and determined by Hill J, of the West Australian Supreme Court in Re Leeuwin Ocean Adventure Foundation Limited (in administration); Ex Parte John Allan Bumbak and Richard Scott Tucker as joint and several administrators of Leeuwin Ocean Adventure Foundation Limited [2023] WASC 480. In that case, the company at issue had entered voluntary administration. The company was limited by guarantee, and registered as a charity with the ACNC. It had cash at bank, at the date of appointment, of approximately $293,371.42. That cash was deposited in four separate bank accounts, two of which carried the name "Public fund Leeuwin Ocean Adventure Foundation Limited".
3. The liquidator considered those accounts were public funds for the purposes of the company's constitution. Considering the issues, her Honour made a number of relevant observations.

(1) The question of whether the funds held as public funds by a company limited by guarantee for a specified charitable purpose, are held on trust by that company is not settled. However, her Honour referred to the decision of Grain Technology Australia Ltd v Rosewood Research Pty Ltd (No 3) [2023] NSWSC 238 (Grain Technology). The decision of Parker J, in which the court held a charitable corporation is not a trustee in the strict sense, but only a quasi-trustee (at [352]).

(2) As a matter of fact, in that case, the extent of the funds that were public funds was unclear. There was evidence in that case that it was common practise for funds to be transferred between the public fund accounts and other bank accounts of the company.

(3) The costs of undertaking a forensic tracing exercise to ascertain what funds in the company's bank accounts were public funds, and which were not, was likely to significantly outweigh any benefit that would be obtained from such an exercise. As a result, her Honour made the orders sought by the administrators to permit the use of the funds the company's bank accounts, including the potentially public funds, for the purpose of the operating expenses, and in the event of liquidation, as property of the company.

1. In Re Australian Elizabethan Theatre Trust [1991] FCA 344; (1991) 30 FCR 491; 102 ALR 681, Gummow J stated at 503, the existence of any express trust was to be determined by reference to intention, which is to be (citations omitted):

...inferred from the language employed by the parties in question and to that end, the court may look also to the nature of the transaction and the relevance of the circumstances attending the relationship between them.

1. In Grain Technology, Parker J said at [337] to [339]:

The proposition that a gift to a corporation having charitable objects is necessarily a gift on trust, needs to take account of the way in which charitable gifts operate. Usually, a charitable trust comes into existence because there is a gift of legal property. The alternative is a formal declaration of trust... As I have stated, in the case of a gift the critical intention is that of the donor.

The distinction between a gift to a company as corporate property, but to be dealt with in accordance with its objects, and a gift to the company as trustee for charitable purposes expressed in those objects, is a fine one. But it can be of real significance...

It may be accepted that usually donors will not be conscious of the distinction. But not necessarily in every case. What if the donor is an experienced company lawyer, or sits on the board of the particular institution? In my view, it is impossible to deny the possibility that some donors may understand the distinction and may, for their own reasons, choose to make a gift to the company as corporate property. If that intention appears sufficiently clearly from the language used by a donor, understood in the light of the surrounding circumstances, there is no justification for a rule which refuses to give effect to it.

1. Justice Parker used the concept of a "quasi trust", which was drawn from a journal article, HAJ Ford, "Charitable corporations taking income in perpetuity" (1953) 26 ALJ 653, which his Honour cited at paragraphs [264] and [265] of Grain Technology.
2. The Liquidators could not direct me to more authority illuminating the meaning behind the label "quasi trust". However, the cases make clear that while gifts and donations are not presumed to be held on trust by a corporation, it's nonetheless possible that they do so, provided that the necessary intention to create a trust at the time of the transfer of the property is demonstrated. Whether a donor possessed the necessary certainty of intention to create a trust requires examination of, in each case, the full context and circumstances of the donation at the time that it was made (Trident General Insurance Co Ltd v McNiece Brothers Pty Ltd [1988] HCA 44; [1988] 165 CLR 107 at 121).

1. The evidence of the Liquidators is set out in three affidavits.

(1) An affidavit of Paul Burness, a liquidator dated 11 April 2025 (the Burness Affidavit); and

(2) Two affidavits of Nathan Deppeler, a liquidator, dated 19 February 2025 and 13 March 2025, (the First Deppeler Affidavit and Second Deppeler Affidavit, respectively).

1. The First Deppeler Affidavit sets out the background to the incorporation of the Company, and exhibits to the incorporation of the Company. The objects of the Company include:

(1) provision of services addressing, amongst other things, poverty, depression, suicide, grief, emergencies and family breakdowns to supporting communities in Australia; and

(2) advances the object of the Company by, amongst other things, seeking training and appointing candidates for chaplaincy.

1. The First Deppeler Affidavit outlines investigations undertaken by the Liquidator, which include

(1) the collection and review of books recording records of the Company, including in relation to the Company's banking records;

(2) inquiries with former and current staff of the Company, including in relation to the Company's financial affairs;

(3) collecting monies from the bank of the Company;

(4) recovering outstanding debtors of the Company;

(5) selling the intellectual property of the Company; and

(6) considering any offences, recoverable transactions and, or, insolvent trading which may have occurred.

1. As I've identified above, the investigations identify the assets of the Company primarily consist of cash held in 16 bank accounts, with $175,270 having been collected from those accounts, which is now held by Liquidators. The Liquidators understand from the directors and officers of the Company that:

(1) six of the Company's bank accounts were opened and maintained solely for specific divisions of the Company;

(2) the Independent Accounts were operated independently to the Company's other bank accounts; and

(3) some of the funds held in the Independent Accounts may have been gifted by third parties for specific charitable purposes.

1. Of the total funds, $106,178.72 comes from the Independent Accounts. The Independent Accounts had the following names and balances:

Life Saving Chaplaincy Australia account (LSCA Account)

Debit card linked to the Life Saving Chaplaincy Australia account (LSCA Debit Account)

1. The Liquidators frankly acknowledge that their investigations have not been exhaustive. However, I pause to note they appear to me to have been appropriate. They depose to their belief that they consider it prudent to obtain relief or guidance regarding the funds held by the Company in Independent Accounts before significant costs are incurred in dealing with those amounts, and I agree with the approach the Liquidators have adopted.
2. Information received from the former finance manager of the Company provides some insight into the operation of Independent Accounts, and that evidence suggests that they are pooled funds, comprising:

(1) regular ad hoc donations from third parties in support of specific causes or objects;

(2) profit from the sale of goods and services, such as uniforms and tickets;

(3) payment for chaplaincy services;

(4) funds held to reimburse specific entities for business expenses' and specific people for personal expenses; and

(5) GST refunds.

1. The Second Deppeler Affidavit confirms that various steps have been taken to inform potential creditors and ASIC of the orders sought in this proceeding, and the Applicants are the only party that have responded, or raised any issues.
2. The Burness Affidavit responds to the evidence in the affidavit of Mr Fullager (the Fullager Affidavit), which I have summarised below. Mr Burness carried out a review of the claims and the amounts claimed by the Applicants, and identified a range of documents that inform the proper characterisation of the amounts referred from the Fullager Affidavit to which I will now turn.

1. The Applicants rely on the affidavit of Mr Ian Fullager dated 25 March 2025. Mr Fullager is a solicitor who appeared on the application today. He gives no evidence about how he came into possession of the business records or information set out in his affidavit, save where that information is drawn from the Liquidators' own material.
2. The Fullager Affidavit states the funds held in the LSCA Account and the LCA Debit Account totalling $35,732.02 should be repaid, because they are either donations or service payments. However, I understand that position was revised, following the receipt of the Burness Affidavit, and was not pressed in the course of oral submissions today. The Fullager Affidavit exhibits a bundle of invoices, being from LSCA, to various of the Applicant entities. The invoices total $18,700, and Mr Fullager clarified, in submission today, that it is that amount which is sought by way of refund. Mr Fullager says that the invoices have been paid, which appears to be the case, based on the evidence disclosed in the bank accounts exhibited to the affidavits of the Liquidators.
3. He states, in addition, that no services were provided or could be provided in 2025, and it is not known where the services were provided in 2024, or if the sums paid were more by way of donation. From the bar table today, Mr Fullager accepted that the invoices were accurate invoices, and that the payment made pursuant to those invoices could not properly be characterised as a donation, even though, in some instances, he is unsure whether services were provided in the manner invoiced.

1. The present matter is before the Court because there is some uncertainty about how parts of the Independent Funds should be used. A particular issue that arises in relation to independent funds concerns the matters raised by the Applicants. There is also a second issue about how to deal with amounts generally, where they may include donated amounts where no person has stepped forward to suggest that they would seek return of those funds.
2. In light of the way that the hearing today has progressed, and in light of the Applicants' appropriate acknowledgement that the sums paid by it to the Company were paid in response to invoices that were regularly issued and not fraudulent, the amounts were paid for services described as "well-being chaplaincy and partial care services". Thus, the amount of $18,700 was appropriately paid in response to invoices. The question of whether or not services were actually provided matters which would need to be proved in any winding up in the usual way as unsecured creditors.
3. There is no basis in the evidence to conclude that money paid in response to invoices for services could be properly considered a donation, even though it might be the case that the Applicants sought to engage or support the Company because it supported its aims or wanted to ensure its ongoing operation. The position which the Applicants' solicitor takes before me today makes clear that the funds not properly considered a donation at all.
4. I am therefore satisfied that those funds cannot be said to be impressed with a trust in favour of the Applicants, and in making that observation, I note that the identification of a trust of that kind would, at the very least, require the provision of evidence of some specificity identifying particular donations and their purpose of payment at the time they were made. The evidence of the Applicants does neither, and the concessions made by the solicitor for the Applicants today make clear that no such evidence could be provided because there was no relevant charitable intention in the payment of invoices. Accordingly, it is not appropriate to make the payment sought by the Applicants.
5. In relation to the balance of the funds, I note that they were, at least in part, provided by donations; however, individuals have had the opportunity to raise any request for the return of those funds based on the principles that I've outlined and no response has been received. Given the evident shortfall and the appropriate investigations undertaken by the Liquidators to date, it would do no more than irresponsibly exhaust the resources available to the Company to require any further investigations to be undertaken or to take any further steps to investigate the provenance of the funds beyond what has already been done. Doing so would only deplete the funds further and reduce the amounts available to creditors.
6. I am therefore satisfied the orders sought by the Plaintiffs are appropriate.

I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bennett.

A.C.N. 085 483 923 LIMITED (IN LIQUIDATION) (ACN 085 483 923)