IN THE MATTER OF MACKAY RURAL PTY LTD (RECEIVERS AND MANAGERS APPOINTED); WAYNE EDWARD BENTON, KENNETH STEWART SELLERS AND SHELLEY MAREE BROOKS IN THEIR CAPACITY AS RECEIVERS AND MANAGERS OF MACKAY RURAL PTY LTD (RECEIVERS AND MANAGERS APPOINTED) and MACKAY RURAL PTY LTD (RECEIVERS AND MANAGERS APPOINTED) v PAUL MACKAY AMOURGIS and JANETTE CHRISTINE AMOURGIS

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 641 of 2014

IN THE MATTER OF MACKAY RURAL PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 062 285 269) BETWEEN: WAYNE EDWARD BENTON, KENNETH STEWART SELLERS AND SHELLEY MAREE BROOKS IN THEIR CAPACITY AS RECEIVERS AND MANAGERS OF MACKAY RURAL PTY LTD (RECEIVERS AND MANAGERS APPOINTED)

MACKAY RURAL PTY LTD (RECEIVERS AND MANAGERS APPOINTED)

JUDGE: BEACH J DATE: 25 November 2014 PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 This is an originating application for orders to facilitate the sale of a dairy farm in Tasmania at 1037 Dairy Plains Road, Deloraine, Tasmania (the Property). 2 The first plaintiffs are receivers of various assets of the registered proprietor of the Property; they are Wayne Benton, Kenneth Sellers and Shelley Brooks (the Receivers). The registered proprietor is the second plaintiff, Mackay Rural Pty Ltd (receivers and managers appointed) (Mackay). The Receivers desire to sell the Property. The defendants, the directors of Mackay, Mr and Mrs Amourgis, oppose the sale by and in the hands of the Receivers. 3 Mr and Mrs Amourgis dispute the validity of the appointment of the Receivers and their control and say that Mackay ought to have control of the sale on instruction from them. But they do not otherwise dispute that the Property should be sold. 4 The following questions are raised in this originating application: Have the Receivers been validly appointed to the assets and undertaking of Mackay, including the Property? Does the Debenture under which the Receivers were appointed extend to the Property? Are the Receivers entitled to possession of the Property and to conduct a sale of the Property? 5 The Receivers and Mackay have brought this application to resolve these issues by seeking declaratory orders and directions under ss 418A and 424 of the Corporations Act 2001 (Cth) (Corporations Act). An order for the possession of the Property is also sought under ss 22 and 23 of the Federal Court of Australia Act 1976 (Cth). 6 The present application is supported by the affidavits of Wayne Edward Benton sworn 30 October 2014, Chris Young sworn 30 October and 12 and 21 November 2014, John Brian Hewitt sworn 30 October 2014 and Nathan James Watts sworn 30 October 2014. In opposition to the application, the defendants rely upon the affidavit of Paul Amourgis sworn 19 November 2014.

The Property and the Bank's SECURITIES 7 The Property is used in the operation of a dairy farm business owned by Mackay. Prior to the Receivers' appointment, Mr and Mrs Amourgis managed the dairy business. The only substantial assets of Mackay are the Property, the plant and equipment utilised in the operation of the dairy business and the livestock. 8 The National Australia Bank Ltd (the Bank) has been providing financial accommodation to Mackay since 2001. This has included a bill facility and an overdraft facility, both of which have varied over time as to limits, draw down capacity and other terms and conditions. The defendants now claim that Mackay is the trustee of the Amourgis unit trust (the Trust) and at all relevant times has held the Property solely in that capacity. However, the facilities provided by, and securities given in favour of, the Bank do not reflect that Mackay was and has been acting in such a capacity when dealing with the Bank. I will return to this issue. 9 Since 2001, the Bank has held security for the facilities which has included a registered mortgage dated 22 October 2001 No. C323359 over the Property (the Mortgage) and a registered debenture dated 22 October 2001 over various assets of Mackay (the Debenture); the scope of the Debenture is a matter in issue in the present proceeding. 10 Mackay has been in default under the facilities and securities for some time. The Bank has provided opportunities to Mackay to sell the Property. The terms on which the Bank was prepared to allow Mackay to sell were recorded in a written agreement made in July 2010 (the July 2010 agreement). The defendants have asserted other oral agreements which are said to differ from the July 2010 agreement. I will discuss these shortly. 11 Despite attempts to do so, Mackay has not sold the Property. The July 2010 agreement permitting Mackay to sell no longer applies as various conditions of that agreement have not been met. 12 Since 1 September 2012, Mackay has: stopped crediting any income which it earned, being the proceeds of milk receipts, to the overdraft facility; allowed the overdraft facility to exceed its limit; not made any interest or other payments to the Bank as required under the terms of the bill facility and the overdraft facility; and been in default under the terms of the bill facility, overdraft facility, Mortgage and Debenture. 13 However, after September 2012 the Bank was apparently prevented from taking enforcement steps against Mackay as Mackay had made a complaint to the Financial Ombudsman Service Ltd. This apparently prevented the Bank from instigating any enforcement proceedings against Mackay whilst the complaint was pending. As I understand it, the usual practice is for the Bank to desist from such action whilst a complaint is being investigated. 14 On 10 June 2014, the Financial Ombudsman Service Ltd informed the parties that no action would be taken. After 10 June 2014, the Bank began recovery processes by issuing notices under the facilities regarding defaults. As part of that process the Bank called up the whole of the amount due under the facilities. According to the evidence before me, Mackay did not pay the amounts due when demanded and the facilities are currently in default. 15 Mackay is currently indebted to the Bank in at least the sum of $5.741 million with interest accruing at the rate of 17.32% per annum. That amount does not include the costs of the receivership or ongoing trading losses. I have also been informed that the expected realisation value of the Property, the dairy business as a going concern and the non-land business assets is well below the outstanding debt due to the Bank. 16 None of the facts at [7]-[15] have been disputed in these proceedings. 17 On 12 June 2014, Mackay and Mr and Mrs Amourgis commenced a proceeding in the Supreme Court of Tasmania seeking an injunction to restrain the Bank from acting under its securities pending a sale of the Property by Mackay. 18 The principal basis of the relief sought by Mackay in that proceeding is said to be an oral agreement reached on 20 June 2010 to the effect that the Bank would agree not to enforce its securities until such time as the Property was sold by Mackay. The alleged June 2010 agreement was subject to conditions that Mackay: placed the Property on the market for sale; agreed to provide financial information to the Bank as and when requested; and paid ongoing interest in respect of the amounts payable under the bill facility. 19 Further, in the Tasmanian proceeding, oral representations have been asserted to the same effect; these have then been used as the basis for allegations of estoppel and unconscionable conduct. The Bank denies the existence of the alleged June 2010 agreement and the alternative allegations. 20 The Tasmanian proceeding is at an early stage. The proceeding is meandering leisurely through the usual pleadings and languid discovery processes. This is a characterisation not a criticism. Further, neither Mackay nor Mr and Mrs Amourgis have sought any interlocutory relief in the Tasmanian proceeding to restrain the Bank from exercising its rights under the facilities and associated securities. 21 In terms of the relief sought in the Tasmanian proceeding, it appears that there has been little, if any, issue between Mr and Mrs Amourgis, Mackay, the Bank and the Receivers that the Property should be sold. Rather, the issue is who controls the sale process and the timing of the sale. 22 At one stage, it was suggested by the defendants that the proceedings before me should be cross-vested to the Supreme Court of Tasmania given the overlap in issues, alternatively that the present proceedings should be stayed. However, no such application was made. Moreover, the parties appeared content for me to adjudicate on all issues relevant to the appointment of the Receivers and the powers that they could exercise. Further, any findings that I make will advantage the Tasmanian proceeding as the parties will have the benefit of relevant issues estoppel and the like from my determination. Indeed, most if not all of the issues in the Tasmanian proceeding may be resolved by my decision. 23 On 6 August 2014, the Bank appointed the Receivers to Mackay, but only under the Debenture. 24 The steps taken by the Receivers to date include: taking control of the dairy business; making repairs to the Property; selling surplus cattle; and commencing a sales campaign for the Property. 25 The Receivers' marketing campaign has encompassed selling the Property as a going concern. The Receivers have appointed a real estate agent to conduct an expressions of interest campaign. Apparently, a going concern sale will realise the best price for Mackay's assets according to the evidence adduced before me. 26 The dairy farm is currently operating at a loss. Further, the Receivers informed me that they do not intend to cause the business to continue to trade after Christmas because the operating losses are unsustainable. For the Property to be sold as a going concern, it must be sold before Christmas according to the evidence. 27 There are also other reasons why the sale should occur prior to Christmas according to the Receivers. The Receivers have been advised that in order to maximise the sale price: the sale should occur early in the lactation cycle of the dairy cows and whilst the pastures are still green; and further, that the sale should take place prior to Christmas to avoid the delay in the sale process which will be caused by the Christmas/January holiday period. 28 According to one estimate given by the Receivers, the expected financial detriment to Mackay and ultimately the Bank of a delay in the sale of the Property to the new year is estimated to be more than $1 million. That estimate is based on: a reduction in the sale price due to selling the Property on a stand-alone basis and not as a going concern; and also taking into account the accrual of interest and receivership costs until May 2015, when a sale could next be expected to occur. 29 In order to conduct the sales campaign, the Receivers say that access to the Property is required. One of the three houses on the Property is occupied by Mr and Mrs Amourgis. Mr and Mrs Amourgis initially permitted the Receivers to conduct inspections of the Property for the purposes of the sales campaign. But apparently, according to the evidence before me, since 10 October 2014 Mr and Mrs Amourgis have advised the Receivers that they will not permit any inspections of the Property to take place. According to the Receivers, the denial of access to the Property by Mr and Mrs Amourgis is frustrating the sales campaign. I should say at this point that there is no evidence of any rental agreement between Mr and Mrs Amourgis and Mackay in relation to that part of the Property that they currently occupy; there is also evidence before me that Mr Amourgis advised Chris Young (a chartered accountant at SellersMuldoonBenton) that there was, in fact, no rental agreement in place. 30 On 31 October 2014, interlocutory orders were made in the present proceeding by Davies J that the defendants be injuncted until the hearing and determination of this proceeding: (a) from interfering with the marketing and sale process for the Property; (b) from interfering with, removing or damaging any of the livestock located on the Property; (c) not to remove, damage or appropriate any of the milk from the dairy on the Property; (d) from preventing or otherwise hindering the First Plaintiffs and their agents and any contractor who they have engaged from obtaining physical access to the Property for the purposes of supervising the operation of the dairy business on the Property; and (e) from preventing or otherwise hindering access to the Property including each of the three houses, on receipt of 48 hours notice in writing (which may be given by e-mail to the defendants' solicitor at cdavis@stacklaw.com.au), by the Plaintiffs' agent, Mr John Brian Hewitt of Landmark Harcourts Tasmania, and any person accompanying Mr Hewitt, which access may be used for the purpose only of inspecting the Property and any house thereon by potential purchasers of the Property, and/or the associated business and livestock, and/or by any potential purchaser's advisors and consultants. 31 Presently, the Receivers are in negotiation with various interested parties to sell the Property, but apparently no deal can be consummated with any of the interested parties until the validity and scope of the Receivers' appointment and their powers has been resolved. 32 Accordingly, these proceedings have been brought on as a matter of urgency. The proceedings were filed on 30 October 2014. As I say, interlocutory injunctions were granted (as set out at [30] above) on 31 October 2014. The trial was then listed before me on 14 November 2014. On 14 November 2014, the defendants sought an adjournment of the trial, which I granted until yesterday, 24 November 2014. 33 The trial then proceeded yesterday. It was then further adjourned until this morning to enable the parties to consider a suggestion that I made yesterday dealing with an alternative pathway to realising the Bank's securities, not solely relying upon the terms and conditions of the Debenture. No objection was taken by the defendants to this course. Mr Schlicht, counsel for the defendants, took the appropriate and responsible course of recognising that it was preferable now for all relevant issues to be dealt with finally, rather than to leave other potential issues dangling that would merely have been productive of yet further litigation, delay and expense. Accordingly, this morning I heard further argument on the matter that I raised late yesterday with counsel.

The Grounds of Challenge 34 The originating application seeks the following relief: 1. A declaration pursuant to section 418A(1) of the Corporations Act 2001 that the appointment under the debenture dated 22 October 2001 (Debenture) of Wayne Edward Benton, Kenneth Stewart Sellers and Shelley Maree Brooks each of Sellers Muldoon Benton (Receivers) as Receivers and Managers of Mackay Rural Pty Ltd (Receivers and Managers Appointed) (McKay) was valid and effective, including over all McKay, including: (a) the land known as 1037 Dairy Plans Road, Deloraine, Tasmania more particularly described in Certificate of Title Volume 34584 Folio 3, Volume 53611 Folio 1, Volume 121925 Folio 1 and Volume 52764 Folios 1, 2, 3 and 4 (Property); and (b) further or alternatively, any right of indemnity in favour of McKay over any the assets of the Amourgis Unit Trust (Indemnity). 2. A declaration that the Debenture operates over the property, assets and undertaking of McKay, including the Property and, further or alternatively, the Indemnity. 3. A declaration that the Receivers are validly in possession or control of any property of McKay under the terms of the Debenture, including the Indemnity. 4. A declaration that the Receivers are entitled to exercise any right given to McKay in its capacity a trustee of the Amourgis Unit Trust. 5. A declaration that the Receivers have power to cause McKay to take steps to obtain possession of the Property, and market, sell and convey the Property. 6. An interlocutory and final order for possession of the Property. 7. An interlocutory and final order that the first defendants be restrained from engaging in conduct that interferes with, or interrupts, the sale of the Property in any way, or in the sale process of the Property… 35 In summary, the defendants have raised the following challenges to the appointment of the Receivers and their entitlement in the name of Mackay to enter into possession and to sell the Property. 36 First, they assert that by reason of various oral agreements made in 2010, the Bank was not and is not entitled to enforce its securities. 37 Second, they assert that the appointment of the Receivers under the Debenture does not apply to the Property as the Property had been excluded from its ambit by reason of a provision on the cover page which excluded the Property from the definition of "Mortgaged Property". 38 Third, and separately to the second point, they assert that the appointment of the Receivers under the Debenture does not apply to the Property as the Property was a trust asset and the Debenture did not cover trust assets. 39 For the reasons given below, I have rejected the defendants' first argument (at [43]-[59]). 40 For the reasons given below, I have accepted the defendants' second and third arguments (at [60]-[75]). However, to so accept such arguments does not entail that enforcement cannot occur. In my view, enforcement can proceed under Mackay's equitable right of indemnity against trust assets. Such a right is a personal right and asset of Mackay and is covered by the Debenture, even though the Property itself is not directly covered. Such a right can then track through to the trust instrument, any powers of possession or sale thereunder and any rights that Mackay may have to enforce any equitable lien over trust assets, including the Property, to secure its right of indemnity. 41 Further, for the reasons given below, there is also an alternative pathway available to the Receivers justifying possession and sale of the Property. This morning, the Bank also appointed the Receivers as receivers under the Mortgage. Accordingly, the Receivers now have the right and power to enter into possession and sell the Property thereunder. They do not need to rely upon any rights under the Debenture through the indirect route of using Mackay's equitable right of indemnity. 42 It is appropriate to address each argument in turn.

2010 Oral Agreements 43 Mr Amourgis has given evidence of the June 2010 agreement in the following terms: On or about 20 June 2010 I had a meeting with Mr [David] Martin [State Agribusiness Manager of the Bank] at Launceston, Tasmania. During the meeting I had a conversation with Mr Martin whereby we reach an agreement (Agreement) in words to the following effect: Mr Martin: "Paul, unfortunately the Bank is not prepared to continue to roll over your facilities and support you unless you are prepared to agree to market and sell the property." Me: "That's very disappointing." Mr Martin: "You will have to place the property on the market for sale and provide the bank with financial reports as and when the Bank requires them. If you agree to that then the Bank will agree to not charge default or penalty interest and it will agree to not enforce its securities. If you don't agree to this then we intend to stop the facilities and enforce our securities." Me: "Okay, it seems I have no choice." Mr Martin: "It's agreed then that you will engage an agent and put the property on the market for sale and provide financial information when required and the Bank agrees to continue your facilities until the property is sold and it won't charge default interest and it won't enforce its securities in the meantime." Me: "Ok, agreed." 44 I will accept for present purposes a version of this conversation to this effect, although it has the colour of artificiality and appears to have been massaged. The plaintiffs' counsel cross-examined Mr Amourgis, but did not challenge this version. But it seems to me that this version little assists Mr and Mrs Amourgis in any event. 45 First, it is doubtful as to whether consideration passed from Mr and Mrs Amourgis. Second, it is uncertain in various respects. I doubt its enforceability, but for the moment I will assume this in favour of the defendants. 46 Second, and in any event more importantly, it seems to me that any such June 2010 agreement was superseded by the July 2010 written agreement. 47 Third, it seems to me that it was a necessary implied term in fact that this alleged June 2010 agreement could be brought to an end on reasonable notice, which reasonable notice has now been given. The June 2010 agreement has no provision for termination and in one sense is for an indefinite period (see a potential analogue in Staffordshire Area Health Authority v South Staffordshire Waterworks Co [1978] 1 WLR 1387 at 1395-7 per Lord Denning MR and at 1399-1400 per Goff LJ). The absence of such an implied term would otherwise lead, in my view, to manifest absurdity on the defendants' version. If the Property was put on the market by them, there could be an indefinite postponement of the sale as the defendants then delayed at their leisure. By the Bank's conduct, reasonable notice has effectively been given, and any such agreement is at an end. 48 Fourth, in any event, it does not seem to me that the defendants have complied with any such agreement in the period post late 2012, alternatively, post mid-2014. The Bank, in my view, by such non-compliance was entitled to treat the same as effectively a repudiation and to accept that repudiation and terminate the agreement if it actually existed. The Bank by no later than mid-2014 so conducted itself if the agreement had not otherwise been terminated as discussed at [47]. 49 I should also say something about the affidavit of Mr Amourgis, in terms of the recording of steps that have been taken by the defendants. 50 Mr Amourgis refers to steps taken to sell the Property in accordance with the so called June 2010 agreement or further agreement. It appears that some steps were taken from September 2010 which were then delayed by the illness and then death of Mr Amourgis' father. Then further delay ensued, apparently relating to probate issues concerning the deceased's will. I am not quite sure how that affected Mackay's position, the marketing and sale of the Property or other steps that needed to be taken to sell, but such matters can be put to one side. In the period from 20 June 2010 through to 31 August 2012, the Bank continued the facilities, did not charge default interest under the facilities and did not seek to enforce its securities. 51 Post-August 2012, little of any substance appears to have been done by the defendants in terms of selling the Property. Mr Amourgis' affidavit recites only the following: 33. In the period from 20 June 2010 to 31 August 2012 in accordance with the Agreement and the Further Agreement, NAB continued the Facilities, did not charge default interest under the Facilities and it did not seek to enforce its securities under the Facilities. 34. I continued to advertise the Property for sale after September 2012. A well known family in the cheese and dairy farm industry expressed interest in purchasing the Property and I instructed my lawyers, Douglas & Collins in Launceston to prepare a draft Contract for Sale. 35. The interested family did not proceed to purchase the Property because another property next to their property came on the market and they decided to purchase that property. 36. The Property was on the market for sale until August 2014 when the receivers and managers of Mackay Rural were appointed. 52 Generally, subsequent to August 2012, and certainly by mid-2014, there was no impediment to the Bank thereafter enforcing its securities. 53 In my view, the alleged 2010 June conversation said to constitute an agreement provided no bar to the appointment of the Receivers under either the Debenture or the Mortgage. 54 Mr Amourgis has now also given evidence of a further oral agreement with the Bank in December 2010 in the following terms: At approximately 4.32pm on 23 December 2010, I telephoned Mr Hardie on his mobile number 0429 421 335 and I had a conversation with Mr Hardie during which we agreed (Further Agreement) in words to the following effect: Me: "We've had delays in marketing the property due to my father's death and the probate issue. Can we agree on a plan to market the property in the new year." Mr Hardie: "I understand the delays. Let's work on a marketing plan in the new year. The bank will continue to support you as previously agreed." Me: "Okay. So it's agreed that I will market the property in the new year, provide the bank with Mackay Rural's financials as and when requested and the bank agrees to continue the facilities and it won't charge default interest and won't enforce its securities until I sell the Property." Mr Hardie: "Yes, agreed." 55 As best as I can tell, Mr Amourgis' affidavit of 19 November 2014 is the first time such an alleged further agreement has been raised. It has not been pleaded in the Tasmanian proceeding. But again, the plaintiffs' counsel did not cross-examine Mr Amourgis on this conversation. But in any event, similar points as set out above can be made, even if I accept a version of this December 2010 conversation in the terms that Mr Amourgis has deposed to. In my view, such an alleged conversation, even if it occurred, provides no bar to the appointment of the Receivers for reasons identified earlier. 56 I should say for completeness that the defendants sought to raise a Jones v Dunkel (1959) 101 CLR 298 inference, given the absence of evidence from relevant bank officers who were parties to these conversations in June and December 2010. But as I have accepted the defendants' version of these conversations, there is little room left for any such inference. 57 Finally, the defendants have also raised arguments based upon estoppel and unconscionable conduct. In my view, those arguments are not maintainable and certainly not maintainable after late August 2012 to justify an argument that the Bank was estopped from enforcing its securities thereafter. 58 It seems to me that if there was any evidence of reliance upon any representation of the Bank and any estoppel arising from any such representation, reliance and potential detriment, that any estoppel would, at best, have given rise to a suspension of the right or power of the Bank to enforce its securities until only late August 2012. But as I say, I cannot see how any such estoppel could reasonably be argued to arise such as to suspend the Bank's powers or rights thereafter. 59 In summary, the alleged oral conversations provided no bar to the Bank enforcing its securities in and after mid-2014. Indeed, the Bank was well within its rights to enforce its securities in and after late August 2012.

Scope of Debenture - Covering Clause 60 The defendants argue that the covering clause of the Debenture entails that the Property is excluded from the terms of the Debenture, hence any appointment of the Receivers under the Debenture does not apply to the Property. 61 On the front page of the Debenture, the consideration is stated. Further, there is a stipulation of the assets said to be covered by the Debenture in the following terms: In return for the Bank agreeing to give or to continue giving credit and banking facilities to or at the request of the Mortgagor, the Mortgagor as beneficial owner charges all and every part of the Mortgaged Property (other than any Mortgaged Property comprised in any specific security to the Bank which the Mortgagor charges subject to that specific security) with the payment and satisfaction of all and every part of the Secured Amounts and undertakes to the Bank as follows. 62 "Mortgaged Property" in the Debenture is defined as "the undertaking of the Mortgagor and all its property and assets whatsoever and wheresoever both present and future...". But the defendants contend that the covering clause on the face of the Debenture, and particularly the words in parenthesis, are controlling and limit the scope of "Mortgaged Property" notwithstanding the broader definition in the detailed operative provisions. 63 Now there is no dispute that the Bank holds the Mortgage over the Property. The defendants contend that as the Mortgage is a specific security in favour of the Bank covering the same indebtedness, that this has the effect of excluding the Property from the Debenture by reason of the text of the covering clause. As such, it is argued that the Receivers have not been appointed under the Debenture over the Property and are unable to deal with the Property under the Debenture directly. 64 I agree with the defendants' contention in terms of the scope of the covering clause of the Debenture and the effect of the exclusion. The ordinary meaning of the words is to the effect suggested by the defendants. The contract between the parties and its terms should be strictly construed in this context (see in an analogous respect R Jaffe Ltd (in liq) v Jaffe (No 2) [1932] NZLR 195 at 198-201 per Smith J). Moreover, notwithstanding the broader definition of "Mortgaged Property" in the more detailed provisions of the Debenture, in my view, the covering clause is controlling. 65 The plaintiffs have proffered a different construction of the covering clause to the effect that there is no such exclusion. Rather, it is suggested that all the covering clause does is to regulate the question of priorities. I disagree. The effect of the covering clause is to exclude the Property from the Debenture so that the question of priorities or potential conflict between two competing security instruments strictly does not then arise. The plaintiffs' contention, in effect, involves a rewriting of the provision. Further, in my view, Le Cornu & Kurda v Place on Brougham Pty Ltd [2013] SADC 32 does not assist the plaintiffs. A similar clause (see at [60]) had to be read in the context of other provisions of the security discussed in that case (see at [65]); it is distinguishable. 66 In my view, by reason of the covering clause of the Debenture, the Property itself does not fall under the Debenture. That being the case, I do not strictly need to deal with the separate point as to whether Mackay only held the Property on trust and whether more generally trust property was excluded from the Debenture. But it is appropriate to deal with this point because of the separate dimension concerning the equitable right of indemnity and what consequential steps the Receivers may be empowered to take concerning such a right.

Scope of Debenture - Trust Property 67 In my view, the Debenture on its face does not include property held by Mackay as trustee. Item 2 on the front page of the Debenture dealing with any "Trust" has not been completed. Moreover, only the p 37 execution clauses (execution "Personally and not as trustee") have been properly completed, as compared with the p 38 execution clauses (execution "Personally, and also as trustee of the Trust Fund") which have not been properly completed. Further, as the "Trust Deed" and "Trust Fund" (see cl 1.1) have not been identified, there is no work for cl 38 of the Debenture to do in relation to the Trust per se. 68 That being so, the next question that arises is whether the Property is only held by Mackay as a trustee. If so, it is excluded from the Debenture. 69 The plaintiffs assert that the defendants have not established that the Property is only held on trust. On balance, I am inclined to disagree. In my view, the preponderance of evidence establishes that it is only held by Mackay as trustee. Moreover, even if the plaintiffs were correct, the Property would still be excluded from the Debenture by reason of the matters discussed in the preceding section. 70 Let me deal with the evidence on the subject. 71 In summary, the plaintiffs assert that there is no evidence on the face of the title, transfer or other documents, such as a sales contract, to establish that Mackay acquired the Property in its capacity as trustee. It is said that the purchasers under the original contract of sale were Paul and Neil Amourgis "or nominee". No nomination document has been produced, according to the plaintiffs. Further, the plaintiffs say that: there is no admissible evidence verifying that the Property is held on trust; the current financial statements of Mackay or the trust have not been provided; the earlier financial statements provided have not been signed by the directors; the plaintiffs in the Tasmanian proceeding do not plead that the Property is held on trust; and the existence of the trust was not disclosed in any of the Bank's facility or security documents. 72 Contrastingly, Mr Amourgis deposed to the following, which again was not the subject of any cross-examination: 4. On 2 March 1994 my father, Neil Mackay Amourgis and I or our nominee entered into an agreement (Agreement) to purchase a farm located at 1037 Dairy Plains Road, Deloraine, Tasmania described in Certificate of Title Volume 34584 Folio 3, Volume 53611 Folio 1, Volume 121925 Folio 1 and Volume 52764 Folios 1, 2, 3 and 4 (Property) from Somerford Pty Ltd. Now produced and shown to me and marked "A" is copy of the Agreement. 5. Shortly after the Agreement was signed my father and I sought advice from our accountants, Powell Accounting Pty Ltd as to the appropriate purchaser of the Property. 6. By letter dated 9 May 1994 Powell Accounting Pty Ltd advised my father and I that it is preferable that the Property be purchased by a trust with a company as trustee. Now produced and shown to me and marked "B" is a copy of a letter of advice dated 9 May 1994 from Powell Accounting Pty Ltd to my father and I. 7. On or shortly after 9 May 1994, my father and I engaged solicitors, Zeeman Kable and Page to act for us in respect of the registration of Mackay Rural Pty Ltd, the preparation of a trust deed and the purchase of the Property. Now produced and shown to me and marked "C" is a copy of a trust deed dated 7 July 1994 and an invoice from Zeeman Kable and Page dated 13 July 1994. 8. Under the terms of the Trust, Mackay Rural Pty Ltd (Mackay Rural) was the trustee of the Trust. 9. On 13 July 1994, the Trust purchased the Property. 10. On 15 July 1994, the Trust received a letter from Lloyds Bank, its financier that confirmed the loan drawdown occurred on 13 July 1994. Now produced and shown to me and marked "D" is a copy of the letter from Lloyds Bank together with statements of account to the Trust. 11. Since 15 July 1994 the Property has been owned by the Trust. 73 On balance, in my view, the evidence favours a finding that at the time the Debenture and the Mortgage were given to the Bank, the Property was held on trust. But as a corollary, the liabilities Mackay incurred to the Bank under the various facilities were trust liabilities (see, for example, the various sets of annual accounts for the Trust that are in evidence). 74 Accordingly, the Property was excluded from the Debenture (as a trust asset), but in my view picked up by the Mortgage. Nevertheless, what is picked up by the Debenture is Mackay's right of indemnity as I will discuss in the next section. 75 Finally, I have also considered a further argument that may be put along the following lines to the effect that the Property is directly covered by the Debenture. The Mortgage secures the Property. If it is accepted, as the defendants assert, that the Property is held on trust, then the corollary is that the Mortgage secures trust liabilities. But the secured moneys under the Mortgage are intended to be and are the same secured moneys under the Debenture. Accordingly, what is covered by the Debenture are trust liabilities. But if that be so, then notwithstanding deficiencies in how the Debenture has been expressed, one would expect the Debenture to encompass trust assets, notwithstanding the deficiencies as to form discussed at [67] above. But, of course, the Property can be and still has been excluded by the covering clause argument. But the existence of this chain of reasoning usefully fortifies the conclusions that I have reached in the next section.

Mackay's Right of Indemnity - a Personal Asset 76 Irrespective of whether the Property is secured by the Debenture, Mackay as trustee has a right of indemnity against the Property. The right of indemnity is a personal asset that is subject to the Debenture. The right of indemnity entitles Mackay to apply trust assets to discharge or secure the liabilities of Mackay as trustee, including the Bank's debt on the predicate that this was a trust liability; an equitable lien to secure this right may also arise. 77 The nature of the charge created by the Debenture is a fixed and floating charge. It is a fixed charge in respect of, inter alia (cl 4.1): all of the present and future estate, right, title and interest of [Mackay] in and to: … (i) book debts, other debts and monetary claims, with the benefit of all related guarantees, indemnities and securities for their payment; and … (k) personal property not referred to above which is not acquired for disposal or consumption in the ordinary course of, and for the purposes of carrying on, the ordinary business of the Mortgagor. 78 Further, in terms of all other assets, the floating charge would appear to have become fixed in any event. 79 In my view, the right of indemnity is personal property which is caught by the Debenture. The defendants asserted that it wasn't by reason of an implication said to arise from cl 38.8 of the Debenture. It was said by the defendants that, first, you needed an express provision of the Debenture to cover the right and, second, that cl 38.8 had not been triggered because no "Trust Fund" had been identified. 80 I agree that cl 38.8 in its terms has not been triggered and that cl 38 more generally of the Debenture has not been triggered. But that does not entail that the right of indemnity is not a personal asset that is not in any event caught by the more general charging provisions of the Debenture. In my view it is. A provision such as cl 38.8 was strictly unnecessary. The defendants also contended that if the Property was excluded from the terms of the Debenture, then so too was the personal right of indemnity. I disagree. The defendants' contention involves mixing discrete concepts. Trust property may be excluded from the Debenture, but a right of indemnity is personal property of Mackay, even though it may have arisen by reason of Mackay acting as trustee. The latter may be caught by the general charging provisions of the Debenture even if the former is not. Moreover, the alternative argument referred to in [75] above fortifies my view that the right of indemnity is caught. 81 What follows from the right of indemnity being caught by the Debenture? 82 The right of indemnity arises both under cll 17(b) and 28 of the trust deed and also to a more limited extent under s 27(2) of the Trustee Act 1898 (Tas). 83 Mackay is given power under the trust deed to sell trust property and to recover possession of trust property (see cll 11.1(a)(i) and 11(e)). In my view, there is a strong argument that such powers can be exercised to enforce or to secure the personal right of indemnity and that such powers could be exercised under the trust deed but not the Debenture directly. Accordingly, if the Property is a trust asset as the defendants so contend, Mackay in exercising its right of indemnity can proceed under the trust deed to enter into possession and sell the Property. Moreover, if the Receivers stand in the shoes of Mackay with respect to this personal right of indemnity, then they can proceed accordingly to exercise these ancillary powers. 84 The defendants argue against the conclusion. They contend that to permit of this conclusion would allow the Receivers to do indirectly what they cannot directly do under the Debenture. That may be so, but if the terms of the relevant securities permit it, then that is what the Receivers are entitled to do. 85 Further, statutory confirmation of the Receivers' power to cause the trustee (Mackay) to exercise its powers under the trust deed exists, provided that this is necessary or incidental to a purpose for which they have been appointed, namely, in this context, to exercise, deal with and to secure the personal right of indemnity (see ss 420(1) and 420(2)(a), (b) and (k) of the Corporations Act and more generally Re Great Southern Managers Australia Ltd (2009) 76 ACSR 146 at [33] per Davies J; Re Environinvest Ltd (2009) 69 ACSR 530 at [68]-[72] per Judd J and Re Great Southern Managers Australia Ltd (2009) 77 ACSR 9 at [7]-[12] per Robson J). 86 Further, as I have said, a trustee who has a right of indemnity also has the benefit of an ancillary equitable lien over the trust assets as a means of securing or enforcing its right of indemnity (Kitay, in the matter of South West Kitchens (WA) Pty Ltd [2014] FCA 670 (Kitay) at [12] per McKerracher J; Pleash, Re; Suncoast Restoration Pty Ltd (in liq) (2013) 211 FCR 203 at [27] per Reeves J and Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 at [14] per Gordon J). On one view it might be said that even if trust property including the Property is not directly caught by the Debenture, yet "property" in the form of this equitable lien is caught by the Debenture. Another view may be to say that although the equitable lien is not caught by the Debenture, nevertheless this lien attaches to and is ancillary to the personal right of indemnity such that if the Receivers as agent for Mackay can control the latter, then they can also control the former. And even though an equitable lien securing a trustee's right of indemnity may not give a direct power of sale, s 420 of the Corporations Act may again assist. Alternatively, the trust deed may confer the relevant power of sale as it does in the present case. In my view and also by the pathway of this equitable lien, the Receivers through Mackay exercising its right of indemnity can take possession of the Property and exercise a power of sale. In a sense, this route may be seen as just an alternative formulation of the route discussed at [83]-[86], but there is a formal conceptual difference. 87 The Receivers raised another argument. It was said that a liquidator's statutory power of sale under s 477(2)(c) of the Corporations Act entitles him to dispose of trust property held by a corporate trustee to which he was appointed and that this was a right independent of the trust deed and any right of indemnity (see Kitay). It was also said that a similar position applies in relation to an administrator's statutory power of sale under s 437A(1)(c) to sell property of a trust (see Re Bacchus Distillery Pty Ltd (admins apptd) (2014) 98 ACSR 539). That may be so. But these contexts, although in a general sense analogous, do not assist. They do not deal with private appointments under contractual or other instruments. In terms of s 420, any exercise of powers thereunder cannot be inconsistent with the relevant instrument. That is quite a different context from the appointment of a liquidator or administrator where the genesis of the appointment and the corresponding powers are not affected or constrained by such a private instrument. 88 The Receivers also argued that there were other pathways to get to an entitlement to enter into possession and to sell the Property. The Receivers sought to rely upon the Power of Attorney provisions of cl 19 of the Debenture, particularly cl 19.2 and the reference to "Collateral Security", as a direct route into the Mortgage and the exercise of powers under the Mortgage. In my view, the breadth of "Collateral Security" is sufficiently broad to include the Mortgage. The defendants raised an argument that the last sentence of cl 19.2 and the reference to "Mortgaged Property" should read down the reference to "Collateral Security". I do not agree. The expression "Collateral Security" is not defined by or read down to only include security over "the Mortgaged Property" under the Debenture. It could separately include the Mortgage over the Property. If that is correct, the Receivers as attorneys could exercise the powers of possession and sale under the Mortgage. This is an independent route to the pathway discussed at [83]-[85] or the pathway discussed at [86].

Appointment under the Mortgage 89 Finally, this morning, the Bank appointed the Receivers as joint and several receivers and managers under the Mortgage and conferred upon them all powers thereunder (see cl 9(h) of the Mortgage). 90 Under the Mortgage, cl 10(a) thereof provides that: a Receiver shall have the powers conferred on receivers by Statute and all the powers conferred on the Bank hereunder. 91 Clause 9(a) of the Mortgage confers on the Bank the power to enter upon and take possession of the Property. Accordingly, under cl 10(a) thereof, the Receivers also have that power, but as agent for Mackay. 92 As to the power of sale, that is not directly conferred under the Mortgage, but rather under s 78(1) of the Land Titles Act 1980 (Tas) (Land Titles Act). But s 78(1) only gives the Bank the power of sale rather than the Receivers as agent for the mortgagor. There may be an argument that this is indirectly picked up by the Mortgage, but I doubt it. 93 But putting to one side s 78(1) of the Land Titles Act, it seems to me that s 420(2) of the Corporations Act provides the Receivers with the necessary power of sale. To pick up s 420(2)(b) is not inconsistent with the Mortgage. Indeed, the Mortgage itself provides that the Receivers shall have "the powers conferred on receivers by Statute" (see cl 10(a) thereof). The concept "Statute" is defined in the Mortgage (see cl 36) in sufficiently broad terms to encompass the powers under the Corporations Act. 94 In my view and in summary, the Receivers have now been validly appointed under the Mortgage and they have the requisite power of sale and the power to enter into possession of the Property on behalf of Mackay. This is the fourth pathway. 95 This morning, counsel for the defendants raised the point that these questions are also issues in the Tasmanian proceeding. That may be so, but as I've said earlier, both sets of parties have proceeded on the basis that this Court ought adjudicate on these questions. As I say, no application has been made to either stay this proceeding or to cross-vest it to the Supreme Court of Tasmania.

Other Matters 96 The defendants have asserted prejudice in relation to how the Receivers have gone about their task. 97 Mr Amourgis has deposed in terms that: Since their appointment the Receivers have: (a) Failed to mow the grass surrounding one of the houses on the Property; (b) Failed to irrigate the pasture; (c) Failed to cut silage over the past 2 weeks; (d) Have been discharging raw effluent into the river system; (e) Sold all replacement young stock which undermines the business as a going concern; and (f) Failed to spray weeds on the Property. 98 These complaints, even if made out, which I do not suggest that they have been, are beside the point. They do not go to the validity of the Receivers' appointment or the powers that the Receivers may exercise. Moreover, neither in this proceeding nor the Tasmanian proceeding have such claims been formally pursued. Further, even if made out they do not deny any of the relief sought by the plaintiffs. 99 Finally, on the separate matter of possession, as I have said: there is no evidence of a rental agreement between Mr and Mrs Amourgis and Mackay in relation to their occupation of the homestead; and Mr Amourgis advised Chris Young that there was no rental agreement in place.

Conclusion 100 In my view, the plaintiffs are entitled to the substantive relief sought in their originating application. I will discuss the precise form of orders with counsel. I certify that the preceding one-hundred (100) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.