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[2018] FCA 2121
plaintiff. Applications allowed in full. Declaration made under s 1318 that the administrator acted honestly and ought fairly to be excused. Orders made deeming the December 2017 sale within power, appointing...
When a company that is the trustee of a family trust enters administration, the trust deed can automatically remove it as trustee, leaving it as a bare trustee with no power to sell assets. Here the administrator sold stock and equipment at auction before she had full documentation confirming the trust position. Once the true position became clear the liquidator asked the Court to fix the problem. The Court agreed: it appointed her as receiver so she could finish dealing with the assets, declared the earlier sale valid because it had produced good value and no one objected, approved her fees to be paid from the trust fund, excused her for the technical breach because she had acted honestly and quickly, and directed that the remaining money be paid to creditors using the usual Corporations Act priority rules rather than pure trust law. The decision shows insolvency practitioners how to regularise sales made in imperfect knowledge of trust structures and confirms that, in simple single-trust cases, the statutory waterfall governs distribution.
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Simpkiss Pty Ltd carried on a franchise business trading as Bridgestone Select Dural from two premises. Its sole director was Damon Purkiss. On 7 December 2017 Shabnam Amirbeaggi was appointed voluntary administrator under s 436A of the Corporations Act 2001 (Cth). At that moment, by operation of cl 11(e) of the Purkiss Family Trust Deed dated 21 June 2016, the office of trustee vacated and Simpkiss became a bare trustee of the Trust. The Trust's beneficiaries were Mr Purkiss, his wife and their two children; Mr Purkiss was also the appointor.
The administrator immediately took control of the business, secured assets, attempted to sell the business as a going concern, and continued trading on a limited basis. When a going-concern sale proved impossible she decided to sell the stock, plant and equipment by public online auction conducted by Grays Online between 18 and 29 December 2017. The auction realised net proceeds of $218,372.42, a sum materially higher than the pre-appointment valuation. Throughout the process the administrator kept Mr Purkiss informed; he raised no objection. Rent liabilities were managed to permit the auction to occur before 31 December 2017.
At the time of the sale the administrator did not possess an executed copy of the Trust Deed. An unsigned copy had been provided on 6 December 2017, but an executed version was not supplied until 15 January 2018. Further inquiries with the ATO, the company's accountant (Peter Knight) and Mr Purkiss confirmed that Simpkiss had never traded in its own right, held no assets beneficially, and had incurred all liabilities in its trustee capacity. On 23 January 2018 creditors resolved that the company be wound up and Ms Amirbeaggi was appointed liquidator.
By early 2018 it had become clear that the December sale had occurred at a time when Simpkiss, as bare trustee, lacked power of sale. The liquidator therefore commenced proceedings seeking multiple forms of relief: a declaration under s 1318 of the Corporations Act that she had acted honestly and should be excused; an order under s 81 of the Trustee Act 1925 (NSW) deeming the sale to have been within power; her appointment as receiver and manager of the Trust under s 57 of the Federal Court of Australia Act 1976 (Cth); approval of remuneration for the administration, receivership and liquidation periods; and judicial directions as to the character of assets and liabilities and the order of distribution. All creditors, Mr and Mrs Purkiss and the Department of Jobs and Small Business were served. No person appeared to oppose the orders.
On 20 April 2018 Markovic J made the declaration, orders and directions sought. Written reasons were published on 19 February 2019. The reasons traverse the factual chronology (paras 2-21), identify the legal consequences flowing from the Trust Deed (paras 22-26), and then deal seriatim with the receiver appointment (paras 27-31), validation of the sale (paras 32-38), remuneration (paras 39-42), distribution directions (paras 43-44) and the s 1318 relief (paras 45-54).
Markovic J began from the proposition that the Trust Deed operated automatically on 7 December 2017 to remove Simpkiss as trustee, leaving it as bare trustee (para 23). Citing Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 at [22]-[28], her Honour noted that a bare trustee's powers are limited to protecting the assets and preserving its equitable lien for indemnity; there is no power of sale (para 27). Consequently the December auction had been conducted without power (para 24). That factual conclusion necessitated each head of relief.
The appointment of the liquidator as receiver and manager under s 57(1) of the Federal Court of Australia Act was justified because it was "just or convenient" to protect trust property once the office of trustee had become vacant and no new trustee was proposed (para 30). The Court adopted Gleeson J's observation in Hosking that the "general ground" for such an appointment is preservation of property for those interested in it (para 29). The receiver was given adapted s 420 powers, expressly including investigation of transactions, demands for books and records, determination of claims, distribution to creditors after costs, and distribution of any surplus to beneficiaries (order 5). The need for a guarantee was dispensed with.
Validation of the past sale rested on s 81 of the Trustee Act 1925 (NSW). The Court accepted the plaintiffs' submissions that it remained incumbent on the bare trustee to realise assets to satisfy the right of indemnity, that clarification of title removed uncertainty, and that there had been no opposition from the appointor or beneficiaries (para 35). Markovic J held that s 81 confers a "very wide discretion" analogous to the Queensland provision considered in Pleash, in the matter of Suncoast Restoration Pty Ltd (in liq) (2013) 211 FCR 203 (para 37). Reeves J's reasoning in Suncoast that the power extends to bare trustees and permits retrospective validation was adopted. Because the sale had produced value above valuation, had been conducted on professional advice, minimised ongoing costs and enjoyed stakeholder acquiescence, it was expedient to deem the sale within power (order 2).
Remuneration was approved on the basis of detailed evidence of work performed, hourly rates, recoveries achieved and the resolutions passed by creditors at the second meeting (paras 40-41). The Court invoked its inherent jurisdiction for the pre-receivership periods and r 14.24 of the Federal Court Rules 2011 (Cth) for the receivership. All remuneration, costs and expenses were ordered to be paid from trust assets (order 6), reflecting the trustee's right of indemnity.
Directions on distribution followed the majority reasoning in Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil and Concrete Contractors Pty Ltd (in liq) (2018) 354 ALR 436. In a "straightforward case" of a company operating only as trustee of a single trust, the Corporations Act priority regime applies (para 44). Directions were therefore given that all assets were beneficially owned by the company as bare trustee subject to its lien, that all liabilities were trust liabilities, and that distribution should occur in the statutory order after payment of application costs, fixed administration remuneration of $88,857 (plus GST), and further capped remuneration and expenses (direction 12).
Finally, relief under s 1318(2) was granted because an objective basis existed to apprehend a future claim by a beneficiary, the sale could constitute a breach of trust, and the liquidator had acted honestly (paras 50-53). Honesty was established by the absence of knowledge of the executed Trust Deed at the time of sale, the steps taken to maximise value, prompt disclosure once the position was clarified, creditor endorsement and the lack of opposition from the appointor and major creditor. The declaration was made in broad terms covering any breaches, failures or omissions in dealing with trust property (declaration 1).
Prior to the decisions in Jones and this matter, practitioners faced material uncertainty when a corporate trustee entered external administration. Trust deeds commonly contain clauses vacating the office of trustee upon insolvency events. Once a company becomes a bare trustee its powers of sale disappear, yet administrators must act urgently to preserve value. There was doubt whether a liquidator could rely on the trustee's right of indemnity without first obtaining court sanction, whether past sales could be regularised, and—most critically—whether the distribution of realised trust assets was governed by equitable tracing and trust priorities or by the statutory waterfall in s 556 of the Corporations Act.
The Full Court in Jones (applied at para 44 of this judgment) resolved the distribution question for "straightforward" single-trust cases: the Corporations Act regime applies. This judgment illustrates the practical machinery that follows. It confirms that s 57 of the Federal Court of Australia Act supplies a convenient route to receiver appointment (para 29), that s 81 of the Trustee Act supplies a flexible, retrospective validation power (paras 36-37), and that s 1318 remains available to protect honest insolvency practitioners who sell first and discover the trust structure later (paras 46-54). The pre-receivership remuneration approval rests on the Court's inherent jurisdiction (para 41), a position unchanged but now more clearly signposted.
After this decision, the law is clearer for New South Wales corporate trustees. Provided the liquidator can demonstrate expediency, honesty, value preservation and stakeholder non-opposition, the Court is likely to grant a bundled suite of orders that simultaneously validates past conduct, authorises future conduct, fixes remuneration on a time-cost capped basis, and directs distribution under the Corporations Act. The decision also underscores the importance of early inquiries into trust status; had the executed deed been available in December 2017 the receiver appointment could have preceded the sale.
Paragraph 23: "given the operation of the Trust Deed, it is apparent that Simpkiss is and has been since 7 December 2017 … a bare trustee of the Trust."
Plain English: The moment the administrator was appointed the company stopped being a full trustee and became a bare trustee with almost no powers.
Paragraph 28: "if a sale is necessary the liquidator or administrator must obtain a court order to sell or an order for the appointment of a receiver: Jones … at [44]."
Plain English: You cannot simply sell trust assets once the company is a bare trustee; you must ask a judge first.
Paragraph 37: "Section 81 of the Trustee Act … gives the Court a very wide discretion to confer upon a trustee the power to deal with trust property."
Plain English: The judge can look back and say the sale that should not have happened is nevertheless treated as valid if it was a sensible thing to do.
Paragraph 44: "in a straightforward case such as this one, where a company in liquidation operated as trustee of a single trust only, the regime in s 556 of the Corporations Act applies."
Plain English: In ordinary cases the money goes to creditors in the order set out in the Corporations Act, not according to pure trust law.
Paragraph 53: "Ms Amirbeaggi acted honestly. She undertook the sale … based on the information she had at the time which did not indicate that those assets were Trust assets. That only became apparent after the sale had been concluded. Upon becoming aware of that fact Ms Amirbeaggi acted diligently…"
Plain English: She did not know the legal problem when she sold the assets, she sold them to help creditors, and as soon as she learned the truth she came straight to Court. That is honest conduct.
These passages, read together, form a practical checklist for practitioners confronting similar facts.
The precedent is engaged whenever four elements coincide. First, the company must be the trustee of a trust whose deed contains an ipso facto vacancy clause triggered by administration or liquidation. Second, the insolvency practitioner must realise, or wish to realise, trust assets before the precise trust status has been confirmed by production of an executed deed and supporting financials. Third, the sale must have been conducted in good faith on professional advice to preserve value and minimise costs, without opposition from the director, appointor or major creditors. Fourth, the company must have no assets or liabilities outside the trust, presenting a "straightforward" single-trust case.
Typical triggers include franchise operations, trading trusts, family companies that have never lodged separate trust tax returns, and situations where the only documents initially available are unsigned deeds or accountant summaries. The precedent is not limited to New South Wales; the reasoning on receiver appointment and s 1318 relief is of general application, although the s 81 analysis is tied to the New South Wales Trustee Act.
The fact pattern does not require actual loss to beneficiaries; the mere patent breach arising from sale by a bare trustee is sufficient to create the "apprehension" of a claim that enlivens s 1318 (para 50). Conversely, if a new trustee has already been appointed or if there is active opposition from beneficiaries, the discretionary factors may shift.
Although the reasons were delivered in 2019, the judgment sits squarely within the line of authority commenced by Caterpillar, developed in Suncoast, clarified by the Full Court in Jones, and applied in Hosking. Markovic J expressly followed Jones on the distribution question (para 44) and applied the Suncoast reasoning to both s 81 validation and s 1318 relief (paras 36-37, 46-53). The decision therefore operates as a single-judge working example of the principles articulated by the Full Court.
Subsequent single-judge decisions in the Corporations and Corporate Insolvency sub-area have treated the bundled relief granted here—retrospective validation, receiver appointment, capped remuneration orders, s 1318 declaration and Jones-distribution directions—as the standard suite for bare-trustee liquidations. The emphasis on "expediency" under s 81 and the objective test for apprehension of a claim under s 1318 have been cited as guiding the width of the respective discretions. The judgment's detailed recitation of service on all creditors and beneficiaries, coupled with the liberty-to-apply clauses (orders 9 and 10), has become a model for ensuring procedural fairness in ex parte or low-opposition applications.
The case also reinforces the practical utility of obtaining creditor resolutions approving remuneration before approaching the Court; Markovic J placed weight on those resolutions when fixing the $88,857 figure and the subsequent cap (para 41). Later courts have likewise treated such resolutions as strong but not conclusive evidence of reasonableness.
Several narrower questions remain unresolved on the face of the reasons. First, the precise boundaries of "expedient" under s 81 where the sale price is below valuation or where a beneficiary can point to a materially better price obtainable by a properly appointed trustee. The judgment notes the sale exceeded valuation and enjoyed stakeholder acquiescence, but does not explore the outer limits.
Second, the interaction between the trustee's lien and employee entitlements under ss 560 and 561 of the Corporations Act where the trust assets are insufficient to meet both the liquidator's remuneration and priority employee claims. The directions assume sufficiency after costs; the position if a shortfall exists is not addressed.
Third, the extent to which a s 1318 declaration can extend to breaches that are not merely technical but involve positive misrepresentations to third parties. The declaration here was broadly framed to cover "any breaches, failures or omissions" (declaration 1), yet the underlying facts involved an honest mistake rather than deliberate concealment.
Fourth, the judgment assumes no new trustee will be appointed. Where the appointor actively seeks to appoint a replacement trustee after the liquidator has been appointed receiver, questions of comity between the receiver's powers and the new trustee's duties may require further elucidation.
Finally, the decision leaves open whether the same suite of orders would be granted if the trust deed lacked an automatic vacancy clause and the trustee remained technically in office. In such cases the liquidator might argue that the full trustee powers remain available, altering the need for receiver appointment or s 81 relief. Practitioners should therefore still obtain early legal advice on the exact terms of the trust instrument rather than assume the Simpkiss pathway will always apply.
THE COURT DECLARES THAT:
MARKOVIC J: 1 On 20 April 2018 I made a declaration, orders and directions in this matter. These are my reasons for doing so.
background 2 The first plaintiff, Shabnam Amirbeaggi is the liquidator of the second plaintiff, Simpkiss Pty Ltd (in liquidation) (Simpkiss). 3 Simpkiss carried on a franchise business, known as Bridgestone Select Dural, which involved motor vehicle repairs and the sale of motor vehicle parts and accessories from two locations. Its sole director and secretary was Damon Purkiss.
Administrator appointed to Simpkiss 4 On 7 December 2017 Ms Amirbeaggi was appointed as administrator of Simpkiss pursuant to s 436A of the Corporations Act 2001 (Cth) (Corporations Act). 5 As at the date of Ms Amirbeaggi's appointment, Simpkiss was still trading. Its main assets were the business and its stock, plant and equipment used in the business. 6 Following her appointment as administrator Ms Amirbeaggi undertook a number of tasks including: (1) taking control of Simpkiss' affairs pursuant to s 437A of the Corporations Act; (2) attending to her statutory obligations prescribed by the Corporations Act; (3) liaising with Simpkiss' external accountant, Peter Knight of Knight Partners, and its employees; (4) taking steps to secure Simpkiss' assets; (5) temporarily trading the business in the interests of attempting to sell it as a going concern and taking steps to sell the business as a going concern; and (6) liaising with Simpkiss' stakeholders including creditors and the lessors of the premises from which Simpkiss traded.
Sale of Simpkiss' assets 7 Despite her attempt to do so, Ms Amirbeaggi was unable to sell Simpkiss' business as a going concern. Accordingly, Ms Amirbeaggi decided to sell Simpkiss' stock, plant and equipment by way of public online auction. Her decision to do so was based on a number of factors including: that the stock, plant and equipment could not be moved without significant cost being incurred making it more effective to sell them from their current locations; Simpkiss had only paid rent for one of the premises it occupied until 31 December 2017 and Ms Amirbeaggi had secured favourable terms for the ongoing rental of the second premises it occupied to enable the sale to proceed; and that advice she received from valuers and auctioneers was to the effect that she would achieve best results for the sale if it was completed by December 2017. 8 Ms Amirbeaggi engaged Grays Online Auctions via Cardinal Asset Services to undertake the auction of the stock, plant and equipment which was conducted between 18 and 29 December 2017. The auction raised net proceeds of $218,372.42. At auction Ms Amirbeaggi realised substantially more for the plant and equipment than the valuation obtained prior to Ms Amirbeaggi's appointment. 9 Throughout the auction process Ms Amirbeaggi was in contact with Mr Purkiss who did not express any opposition or objection to it at any point.
The Purkiss Family Trust 10 On 6 December 2017 Mr Knight provided Ms Amirbeaggi with an unsigned copy of a trust deed in relation to the Purkiss Family Trust (Trust) which disclosed that Simpkiss was the trustee of the Trust. Following receipt of the unsigned trust deed Ms Amirbeaggi sought details of the Trust from Messrs Purkiss and Knight in order to ascertain whether Simpkiss was in fact acting as trustee of the Trust, including an executed copy of the trust deed and copies of any financial accounts for the Trust. 11 Between 12 December 2017 and 12 January 2018 Ms Amirbeaggi sought information from the Australian Taxation Office (ATO) and Knight Partners to ascertain the status of the Trust. On 15 January 2018 Knight Partners provided Ms Amirbeaggi with an executed copy of the trust deed for the Trust dated 21 June 2016 (Trust Deed). 12 The Trust Deed disclosed that the Trust was created and Simpkiss was appointed as trustee of the Trust on 21 June 2016 and that the beneficiaries of the Trust were Mr Purkiss, his wife (Fiona Jane Purkiss), and their two children. 13 The Trust Deed relevantly provides at cl 11(e) that the office of trustee is vacated if an administrator is appointed to the trustee and at cl 9(a) that the appointor, Mr Purkiss, has the power to remove and/or appoint a trustee of the Trust which power may be exercised by written document or deed signed by him at the time, whether or not it is also signed by the trustee being removed or the new trustee. 14 Ms Amirbeaggi concluded, based on her review of the details of the Trust Deed and books and records of Simpkiss, that Simpkiss' sole role was to act as trustee of the Trust, it did not trade or own any assets in its own right and all of its liabilities had been incurred by it as trustee of the Trust. 15 As at 19 January 2018 Mr Purkiss had not appointed a new trustee to replace Simpkiss, despite the office of trustee having become vacant by operation of cl 11 of the Trust Deed.
Other investigations 16 Ms Amirbeaggi subsequently reviewed other books and records including financial statements from Simpkiss' accounting software, documents in connection with Simpkiss' motor vehicle leases, invoices from creditors, an employment contract, leases, the franchise agreement with Bridgestone Australia Ltd, a draft sale of business agreement and documents received from the ATO, some of which referred to Simpkiss in its capacity as trustee for the Trust. In addition, Mr Purkiss informed Ms Amirbeaggi on 24 January 2018 that the Trust was "the intended owner of all assets". 17 For those reasons Ms Amirbeaggi formed the view that the intention was that Simpkiss' stock, plant and equipment were owned by it in its capacity as trustee of the Trust.
Winding up of Simpkiss 18 On 23 January 2018 the creditors of Simpkiss resolved that it be wound-up and Ms Amirbeaggi was appointed as its liquidator.
Ms Amirbeaggi's position 19 Ms Amirbeaggi formed the view that it was in the best interests of creditors to sell the stock, plant and equipment at auction in mid to late December in order to maximise the return to creditors. She was concerned that delaying the sale beyond December 2017 would increase rental liabilities and other fixed costs and thus reduce the return to creditors and would increase the cost of the administration. 20 Throughout December 2017 Ms Amirbeaggi honestly believed that she had the power to sell the stock, plant and equipment. She did not form the view that she did not have power to sell those assets as administrator, nor did she have sufficient evidence to conclude that Simpkiss was trustee of the Trust, until January 2018.
Service 21 On 19 and 20 March 2018 Ms Amirbeaggi arranged for service of the amended originating process and her three affidavits, sworn on 19 January 2018, 2 February 2018 and 15 March 2018, on each of Simpkiss' creditors, Mr and Mrs Purkiss and the Department of Jobs and Small Business.
CONSIDERATION 22 A number of consequences flow from the facts set out above. 23 First, given the operation of the Trust Deed, it is apparent that Simpkiss is and has been since 7 December 2017, the date of Ms Amirbeaggi's appointment as administrator, a bare trustee of the Trust. 24 Secondly, given that all of Simpkiss' assets were owned by it in its capacity as trustee of the Trust, Ms Amirbeaggi did not have the power to sell those assets in her capacity as administrator in December 2017. Based on Ms Amirbeaggi's evidence, this was not apparent to her at the time of the sale. 25 Thirdly, because Simpkiss' assets were assets of the Trust there remained a restriction on Ms Amirbeaggi's ability to sell or realise any residual assets or otherwise deal with those assets, despite her appointment as liquidator. 26 That state of affairs gave rise to the need for the application made by Ms Amirbeaggi and resulted in the orders that were subsequently made.
Appointment as receiver 27 Upon the appointment of Ms Amirbeaggi as administrator, Simpkiss was removed as trustee of the Trust by operation of cl 11(e) of the Trust Deed and became a bare trustee. While it may have still held the assets, Simpkiss' powers in that capacity were limited to protecting the trust assets. It retained its right of indemnity or exoneration and its lien over the assets of the Trust and had the right to hold the assets but not to sell them: Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 at [22]-[28] (Caterpillar). 28 In those circumstances, that is where upon the appointment of a liquidator or administrator the company becomes a bare trustee, if a sale is necessary the liquidator or administrator must obtain a court order to sell or an order for the appointment of a receiver: Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil and Concrete Contractors Pty Ltd (in liq) (2018) 354 ALR 436 at [44]; [2018] FCAFC 40 at [44] per Allsop CJ (Jones). 29 Section 57(1) of the Federal Court of Australia Act 1976 (Cth) empowers the Court at any stage of a proceeding and on such terms and conditions as it thinks fit to appoint a receiver by interlocutory order in any case in which it appears to be just or convenient to do so. In Hosking, in the matter of Business Aptitude Pty Ltd (in liq) [2016] FCA 1438, a case similar to the present case, Gleeson J noted that the "general ground upon which the Court appoints a receiver is the protection or preservation of property for the benefit of those who have an interest in it": at [17]. 30 Here, as noted above, the office of trustee of the Trust became vacant as a result of Ms Amirbeaggi's appointment as administrator. There was no suggestion that a new trustee would be appointed. It was thus necessary to appoint Ms Amirbeaggi as receiver and manager to permit her to further deal with any remaining Trust assets, bring certainty to the process of finalising the liquidation and secure Simpkiss' right of indemnity out of the assets of the Trust for the benefit of Simpkiss' (and the Trust's) creditors. 31 Accordingly, I was satisfied that an order appointing Ms Amirbeaggi as receiver and manager and the related orders should be made.
Sale of Simpkiss' assets 32 Ms Amirbeaggi sold Simpkiss' assets at a time when Simpkiss did not have a power to do so. 33 The plaintiffs submitted that the Court has power under s 81 of the Trustee Act 1925 (NSW) (Trustee Act) to sanction an otherwise unauthorised transaction by a trustee and therefore to deem that the sale was made within power. 34 Section 81 of the Trustee Act relevantly relevantly provides that: (1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the instrument, if any, creating the trust, or by law, the Court: (a) may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries, as the Court may think fit, and (b) may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne as between capital and income. (2) The provisions of subsection (1) shall be deemed to empower the Court, where it is satisfied that an alteration whether by extension or otherwise of the trusts or powers conferred on the trustees by the trust instrument, if any, creating the trust, or by law is expedient, to authorise the trustees to do or abstain from doing any act or thing which if done or omitted by them without the authorisation of the Court or the consent of the beneficiaries would be a breach of trust, and in particular the Court may authorise the trustees: (a) to sell trust property, notwithstanding that the terms or consideration for the sale may not be within any statutory powers of the trustees, or within the terms of the instrument, if any, creating the trust, or may be forbidden by that instrument, (b) to postpone the sale of trust property, (c) to carry on any business forming part of the trust property during any period for which a sale may be postponed, (d) to employ capital money subject to the trust in any business which the trustees are authorised by the instrument, if any, creating the trust or by law to carry on. … 35 The plaintiffs submitted that the Court should make an order deeming that the sale of assets was within power for the following reasons: (1) even though the office of trustee was made vacant by operation of cl 11 of the Trust Deed, Simpkiss retained the benefit of the former trustee's right of indemnity and the corresponding equitable lien over the Trust property which Ms Amirbeaggi, in her capacity as administrator, would have had the right to exercise for the benefit of creditors of the Trust. That is, it was incumbent on her to realise the Trust assets, albeit that it would have been necessary to have first sought the power to do so from the Court; (2) it is expedient, in the sense described in s 81 of the Trustee Act, to clarify that the proceeds of sale of the Trust assets will be available for the Trust's creditors and theoretically, at least, the beneficiaries of the Trust and thereby remove any residual uncertainty about the validity of the sale; and (3) there was no opposition from Mr Purkiss, who is the largest creditor of Simpkiss, the appointor of the Trust and one of its two sui juris beneficiaries, nor from Mrs Purkiss, the other adult beneficiary. 36 In Pleash, in the matter of Suncoast Restoration Pty Ltd (in liq) (2013) 211 FCR 203; [2013] FCA 355 (Suncoast) Reeves J considered an application made by the liquidators of Suncoast Restoration Pty Ltd (in liquidation) (Suncoast) for relief including pursuant to s 94 of the Trusts Act 1973 (QLD) (Trusts Act) which is in similar but not identical terms to s 81 of the Trustee Act. In that case the liquidators had entered into contracts for the sale of property in the trust fund before realising that an effect of their earlier appointment as administrators was to remove Suncoast as trustee of the trust fund. In considering the liquidators' application, his Honour was satisfied that the power conferred by s 94(1) of the Trusts Act, which gave the Court a very wide discretion to confer upon a trustee the power to deal with trust property, applied to a bare trustee. His Honour opined that given the breadth of the discretion conferred by s 94 of the Trusts Act it extended to permit him to make retrospective orders and to validate the sale. Accordingly, his Honour was prepared to make the orders sought: at [62]-[63]. 37 The position that Ms Amirbeaggi and Simpkiss found themselves in was similar to that in which the liquidators of Suncoast and Suncoast found themselves. That is, like those latter parties, Ms Amirbeaggi sold the stock, plant and equipment at a time when Simpkiss was a bare trustee and did not have the power to effect a sale of those assets. Section 81 of the Trustee Act is in analogous terms to s 94 of the Trusts Act and, in my opinion, also gives the Court a very wide discretion to confer upon a trustee the power to deal with trust property. 38 Accordingly and for the reasons given by the plaintiffs in their submissions (see [35] above) I was satisfied that an order in the form sought validating the sale of the stock, plant and equipment by Simpkiss should be made.
Remuneration 39 The plaintiffs sought orders approving Ms Amirbeaggi's remuneration in her capacity as administrator and receiver and manager and liquidator. 40 At the second meeting of Simpkiss' creditors, on 23 January 2018, resolutions were passed by the creditors approving, for payment: (1) the administrator's remuneration for the period 7 December 2017 to 10 January 2018 calculated at hourly rates detailed in the report to creditors in the sum of $66,417.10 plus GST; (2) the administrator's future remuneration for the period 11 January 2018 to 23 January 2018 at a sum equal to the cost of the time spent by her, her partners and staff calculated at the hourly rates detailed in the report to creditors up to a capped amount of $19,440 plus GST; (3) disbursements incurred and an amount for future disbursements; and (4) Ms Amirbeaggi's remuneration in her capacity as liquidator for the period 23 January 2018 to completion determined at a sum equal to the cost of time spent by her, her partners and staff and calculated at hourly rates detailed in the report to creditors up to a capped amount of $55,122.50 plus GST and disbursements incurred in that capacity. 41 The Court has power under r 14.24 of the Federal Court Rules 2011 (Cth) to fix the remuneration of a receiver. For the period prior to Ms Amirbeaggi's appointment as a receiver the source of the Court's jurisdiction to approve remuneration for a liquidator or administrator who administers trust assets is its inherent jurisdiction: see Application of Sutherland (2004) 50 ACSR 297 at [10]; [2004] NSWSC 798 at [10]. 42 Ms Amirbeaggi provided detailed evidence about the claim for remuneration including the basis upon which it was charged, who undertook the work and whether, in her opinion, it was reasonable having regard to the work undertaken and the recoveries. In light of that evidence and the approval of the amounts claimed by the creditors of Simpkiss I was satisfied that the orders sought by Ms Amirbeaggi in relation to her remuneration should be made.
Distribution of trust assets 43 The plaintiffs also sought directions from the Court in relation to the distribution of the Trust's assets. In particular, they sought directions that the balance of the monies in the liquidation of Simpkiss be paid out according to the regime in s 556 of the Corporations Act. 44 It is clear, following the decision of the majority of a Full Court of this Court in Jones that in a straightforward case such as this one, where a company in liquidation operated as trustee of a single trust only, the regime in s 556 of the Corporations Act applies: see Jones at [95]-[108] per Allsop CJ, [212]-[214], [223] per Farrell J, (Siopis J dissenting); Commonwealth v Byrnes (2018) 124 ACSR 246 at [276]-[277], [281]. Accordingly, I made the directions sought by the plaintiffs.
Section 1318 of the Corporations Act 45 Ms Amirbeaggi sought a declaration under s 1318 of the Corporations Act that she acted honestly and ought fairly to be excused for any breaches, failures or admissions in dealing with the property of the Trust including the sale of the stock, plant and equipment in December 2017 in her capacity as administrator. 46 The Court has power, pursuant to s 1318 of the Corporations Act, to excuse an administrator who inadvertently sells trust assets when he or she does not have the power to do so: see Caterpillar at [42]; Suncoast at [21], [29]-[39]. That section relevantly provides: (2) Where a person to whom this section applies has reason to apprehend that any claim will or might be made against the person in respect of any negligence, default, breach of trust or breach of duty in a capacity as such a person, the person may apply to the Court for relief, and the Court has the same power to relieve the person as it would have had under subsection (1) if it had been a court before which proceedings against the person for negligence, default, breach of trust or breach of duty had been brought. … (4) This section applies to a person who is: … (d) a receiver, receiver and manager, liquidator or other person appointed or directed by the Court to carry out any duty under this Act in relation to a corporation. … 47 In order for Ms Amirbeaggi to obtain the relief she sought under s 1318(2) of the Corporations Act she had to establish that: (1) she had reason to apprehend that a claim would, or might, be made against her; (2) such a claim is in respect of any negligence, default, breach of trust or breach of duty in her capacity as administrator; and (3) she acted honestly in relation thereto, see Suncoast at [29]. 48 In Suncoast Reeves J noted that the nature of the apprehension that a claim might be made was that there "must be an objective basis for believing that the claim will or might be made against that person": at [31] quoting Re Vouris (2003) 177 FLR 289 at [116] per Campbell J. 49 In this case, the plaintiffs submitted that the Court should make an order pursuant to s 1318(2) of the Corporations Act in relation to Ms Amirbeaggi's conduct in selling Simpkiss' stock, plant and equipment in December 2017 because: (1) at the time of the sale, it was far from clear that Simpkiss was carrying on its business as trustee of the Trust. No executed trust deed had been provided and other relevant documents did not disclose the existence of the Trust; (2) prior to undertaking the sale Ms Amirbeaggi attempted to ascertain the position with respect to the existence of the Trust by corresponding with Messrs Purkiss and Knight and the ATO but that correspondence did not provide any indication about the existence of the Trust at the relevant time; (3) in selling the assets without delay Ms Amirbeaggi acted on professional advice so as to maximise the proceeds of the sale and minimise the costs and length of the administration to preserve the interests of Simpkiss' creditors; (4) the sale of the stock, plant and equipment was for a price substantially in excess of their valuation; (5) throughout the sale process Ms Amirbeaggi kept Mr Purkiss aware of the position and he did not express any opposition or objection to her conduct; (6) upon discovering the position Ms Amirbeaggi obtained legal advice, informed creditors of the potential need to make an application to the Court and approached the Court without delay; (7) Ms Amirbeaggi had given evidence as to her honest belief and it is clear that she did not knowingly commit any breach of trust as she did not believe that she lacked the power to sell the assets at the time of the sale; (8) Simpkiss' creditors had been made aware of the orders sought and passed a resolution endorsing the making of the application indicating that there was no opposition to excusing Ms Amirbeaggi's conduct; and (9) Mr Purkiss, the major creditor of the company and appointor of the Trust, had expressly indicated that he did not oppose the relief being sought. 50 The evidence relied on by the plaintiffs suggested, given the approval of creditors and the position taken by Mr Purkiss, that the prospect of a claim being made against Ms Amirbeaggi is unlikely. However, that does not mean that at no time in the future would a beneficiary of the Trust decide to pursue a claim against Ms Amirbeaggi. The same was found to be the case in Suncoast. Further, a potential outcome of this nature is reinforced by the patent nature of Ms Amirbeaggi's breach of trust; that is, the sale of the assets was undertaken when Simpkiss was a bare trustee and had no power of sale: Suncoast at [32]. 51 In those circumstances I was satisfied that there was an objective basis for concluding that a claim might be made against Ms Amirbeaggi. 52 It was also clear that the sale of the stock, plant and equipment by Ms Amirbeaggi in her capacity as administrator at a time when Simpkiss was a bare trustee, albeit undertaken innocently, could give rise to a claim for a breach of trust or breach of duty as contemplated by s 1318(2) of the Corporations Act: see Suncoast at [33]-[35]. 53 Finally, I am satisfied that Ms Amirbeaggi acted honestly. She undertook the sale of the stock, plant and equipment in an expedient fashion in order to maximise their value for the benefit of all creditors. She did so based on the information she had at the time which did not indicate that those assets were Trust assets. That only became apparent after the sale had been concluded. Upon becoming aware of that fact Ms Amirbeaggi acted diligently to bring the matter to the attention of creditors and to make this application. 54 Given the matters set out above, including the plaintiffs' submissions, which I accepted, I made the declaration sought by the plaintiffs pursuant to s 1318(2) of the Corporations Act.
conclusion 55 For those reasons I made the orders sought by the plaintiffs. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.
Jones (Liquidator)
Matrix Partners Pty Ltd, in the matter of Killarnee Civil and Concrete Contractors Pty Ltd
(2018) 354 ALR 436
(2013) 211 FCR 203
(2003) 177 FLR 289
Applications allowed in full. Declaration made under s 1318 that the administrator acted honestly and ought fairly to be excused. Orders made deeming the December 2017 sale within power, appointing the first plaintiff as receiver and manager without security, dispensing with guarantee, conferring s 420 powers adapted to the trust, permitting remuneration and costs to be paid from trust assets, fixing administration remuneration at $88,857 (plus GST), capping further remuneration, and granting liberty to apply. Directions given that all assets are beneficially held by the company as bare trustee subject to its lien and that all liabilities are trust liabilities; distribution directed in accordance with the statutory priority regime after payment of costs and remuneration.