Jones (Liquidator) v Matrix Partners Pty Ltd

JACKMAN J: 1 By an application filed on 18 July 2024, the first and second applicants (the Liquidators) who are the joint and several liquidators of Lentelle Pty Ltd (the Company) seek an order pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth) that they be appointed as receivers and managers of the assets and undertaking of the D & H Aldemir Family (the Trust). The liquidators rely on an affidavit made by Mr Sanderson (one of the Liquidators) on 17 July 2024 and an affidavit sworn by Ms McLean (the solicitor for the Liquidators) on 30 July 2024. 2 The Company was incorporated on 17 February 1997 and was wound up on 10 May 2024 at which time the Liquidators were appointed. The Company's sole director was Mr Aldemir. On 17 February 1997, the Company entered into a deed (the Trust Deed) whereby a discretionary trust, being the Trust, was established, and the Company became the trustee. The named beneficiaries were Mr Aldemir and his wife. Additional discretionary objects were their children and other relatives of each of them. Clause 15 of the Trust Deed conferred a right of indemnity on the trustee. The trustee was defined in the Trust Deed as the Company. Mr Aldemir was nominated in the Trust Deed as the "Guardian". 3 The Company is the registered proprietor of four properties: (a) 23 Baronial Way, Craigieburn, Victoria, which is subject to a first registered mortgage granted to Perpetual Trustee Company Limited. Mr Aldemir guaranteed the obligations of the Company under the mortgage. The property is tenanted and requires work before it can be sold; (b) 28A Robson Avenue, Avondale Heights, Victoria, which is subject to a first registered mortgage granted to National Australia Bank Limited. The Company is in default under that mortgage, and the mortgagee has indicated an intention to enter into possession; (c) 37 Fraserburgh, Crescent, Greenvale, Victoria, which is subject to a first registered mortgage granted to Suncorp-Metway Limited; and (d) 47 Canning Street, Avondale Heights, Victoria, which is subject to a first registered mortgage granted to Nader Pty Ltd. Mr Aldemir guaranteed the Company's obligations under the mortgage. 4 The Company also carried out residential building work using the name "Jim's Construction (Essendon)" which was registered in its name. 5 Mr Aldemir has not assisted the Liquidators in their investigations of the affairs of the Company. He has failed to provide the Company's books and records. He has not provided a report on Company activities and property and has failed to assist the Liquidators in their efforts to inspect the Company's properties. 6 From the investigations that the Liquidators have carried out to date, at the time the Company entered into liquidation and for a significant period before that, the Company's only activities were as the trustee of the Trust. Pursuant to cl 23, the right to appoint a person who can remove the trustee of the Trust resides with Mr Aldemir as Guardian. 7 The Company has failed to make payments on its mortgage debts for some time and the interest is running at the default rate. Any equity in the properties is diminishing daily. Nevertheless, the Liquidators are of the view that the prompt sale of the properties may yield a surplus. There is thus a need to take prompt steps to sell the properties so as to be able to realise that surplus for the benefit of the creditors. 8 The power conferred on a liquidator by s 477(2)(c) of the Corporations Act 2001 (Cth) does not empower the liquidator to sell assets held by the company on trust: Re Stansfield DIY Wealth Pty Ltd (in liq) [2014] NSWSC 1484; (2014) 103 ACSR 401 at [28]-[30] (Brereton J). The earlier decision of McKerracher J in Re South West Kitchens (WA) Pty Ltd [2014] FCA 670; (2014) 224 FCR 408 at [29]-[33] was to the opposite effect, but I regard that reasoning as wrong for the reasons given by Brereton J in Stansfield. In particular, I agree that the liquidator cannot sell interests in property that the company does not have. Indeed, I am bound to say that, given that the Full Federal Court has held that s 477(2)(c) should not be taken to refer to the sale or disposition of property which is not the property of the company, but which is trust property in which the trustee has a proprietary interest by way of lien or charge to secure its right of indemnity or exoneration: Jones (Liquidator) v Matrix Partners Pty Ltd [2018] FCAFC 40; (2018) 260 FCR 310 at [89] (Allsop CJ, with whom Siopis J at [24] and Farrell J at [196] agreed). In such circumstances, the appropriate remedy for a liquidator is to seek appointment as a receiver of the trust assets by way of enforcement of the trustee's right of indemnity: Stansfield at [31]-[33]. 9 The Company was and is the trustee of the Trust pursuant to the Trust Deed, which created an entitlement (at least while it remains trustee) to indemnification from the trust assets in relation to liabilities incurred as trustee. It has a similar entitlement as a matter of general equitable principles. 10 There is an immediate need to take steps to realise the properties in a cost-efficient way for the benefit of creditors. Accordingly, it is appropriate for the Court to make the appointment to allow that process to proceed. 11 On 19 July 2024, the Liquidators' solicitor forwarded copies of the originating process to the secured creditors either directly or through their lawyers, and to Mr Aldemir by email, and posted a copy of the originating process to Mrs Aldemir. Mr and Mrs Aldemir are the only discretionary objects specifically identified in the Trust Deed. On 30 July 2024, those potential interested parties were notified of the change in the listing time. Other than a request by Nader Pty Ltd, which apparently has entered into possession of the Canning Street property, to amend the process to exclude that property, none of the other recipients have indicated that they oppose the application. The Liquidators' solicitors have advised Nader Pty Ltd that if appointed, the Liquidators do not intend to interfere with the steps which it is taking as secured creditor. 12 In all the circumstances, I regard it as appropriate to make orders in accordance with orders 1 to 4 of the originating process and I also note the matter in paragraph 5 of the originating process. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.