Kite v Mooney, re Mooney's Contractors Pty Ltd - [2018] FCA 34 - FCA 2018 case summary — Zoe

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Kite v Mooney, re Mooney's Contractors Pty Ltd

[2018] FCA 34

Federal Court of Australia|2018-02-02|Before: Gleeson J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2018-02-02

Before

Gleeson J

Source

Original judgment source is linked above.

Judgment (13 paragraphs)

[1]

THE COURT ORDERS THAT:

Pursuant to section 473A of the Corporations Act 2001 (Cth), Mark Roufeil is appointed liquidator of the second plaintiff.
Pursuant to rule 9.09 of the Federal Court Rules 2011: (a) John Vouris (the former liquidator of the second plaintiff) is removed as a party to the proceedings; and (b) Mark Roufeil (in his capacity as liquidator of the second plaintiff) is joined to the proceedings as the first plaintiff.
The plaintiffs have leave to file a further amended originating process in the form handed up to the Court at the hearing on 24 November 2017.
Pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth), the first plaintiff is appointed as receiver and manager without security over the property, assets and undertaking ("assets") of the Leighton Scaffolding Discretionary Trust ("trust").
The first plaintiff has, in respect of the assets of the trust, the powers that a liquidator has in respect of the business, property and assets of a company under the Corporations Act, including without limitation: (a) the power to do all things necessary and convenient to effect the sale of the business and assets of the trust; and (b) the power to pay dividends to the creditors of the second plaintiff incurred in respect of debts incurred by the second plaintiff in its capacity as trustee of the trust.
The costs and expenses incurred by and the remuneration of the first plaintiff in acting as receiver and manager of the trust, including the costs of this application, be paid from the assets of the trust.

[2]

[9]

Meetings with Mr Leighton and attempts to locate books and records of Leighton Scaffolding 21 The liquidator has received only limited assistance from Mr Leighton. 22 On 11 January 2017, Mr Loy and another accountant under Mr Vouris's supervision, Mr Li, interviewed Mr Leighton. Mr Leighton undertook to complete certain tasks for the liquidator, set out in Mr Vouris's affidavit, but he did not do so. Mr Vouris's evidence was that, as at 13 July 2017, Mr Leighton had failed to provide any assistance to Mr Vouris or any member of Mr Vouris's office in respect of the liquidation. 23 On 10 August 2017, Mr Vouris and Mr Loy met with Mr Leighton. When questioned on his failure to comply with previous undertakings to the liquidator, Mr Leighton explained that he had just finished a six month jail sentence and was currently completing a rehabilitation program. When asked if he was in possession of the books and records of Leighton Scaffolding, Mr Leighton said: I am not in possession of any of the books and records. I believe that my wife may have them, although I cannot be sure. My daughter may be in possession of some of them. I will contact my wife and attempt to get them for you. Alternatively, if you would like to contact her, you can call her on her mobile … 24 Since that meeting, Mr Leighton has made no further contact with the liquidator. On 8 and 18 September 2017, Mr Loy attempted unsuccessfully to contact Mr Leighton to seek an update on his endeavours to locate the books and records of the company. 25 On 18 September 2017, Mr Loy contacted Paula Leighton, seeking her address and an address for her and for their daughter. Mrs Leighton provided her own address, informed Mr Loy that she and her daughter were currently estranged and provided a possible address for her daughter. An attempt to serve the daughter with documents filed in this proceeding at the nominated address was unsuccessful. 26 The liquidator has also sought books and records of the company from Ms Stannard who said that her firm does not hold any of the records.

[10]

Legal principles 27 In Hosking, re Business Aptitude Pty Ltd (in liq) [2016] FCA 1438 ("Hosking"), I recorded the following propositions of relevance to this application: 17. The general ground upon which the Court appoints a receiver is the protection or preservation of property for the benefit of persons who have an interest in it: QBE Insurance (Australia) Ltd v WA Metal Recycling Pty Ltd, in the matter of WA Metal Recycling Pty Ltd (in Liq) [2016] FCA 238 ("QBE Insurance") at [13], citing Sapphire (SA) Pty Ltd v Ewens Glen Pty Ltd [2011] FCA 600 at [15]. 18. Where a trustee is removed, it retains a right of indemnity from the trust assets secured by an equitable charge over them for its liabilities incurred by reason of acting as trustee: In the matter of Stansfield DIY Wealth Pty Ltd (in liquidation) [2014] NSWSC 1484; (2014) 291 FLR 17 ("Re Stansfield") at [10]. 19. There is a conflict of authority as to whether the liquidator of a corporate trustee, which has ceased to be trustee, has the power to sell trust assets to enforce the (former) trustee's right of indemnity. In Apostolou v VA Corporation of Aust Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84, Finkelstein J held, at [48]-[50], that the liquidator of a corporate trustee which held legal title to trust property in which it also had an equitable interest could sell the subject property pursuant to the power of sale conferred by s 477 of the Act and that this survived the removal of the corporate trustee. 20. However, in Re Stansfield, Brereton J disagreed with the decision of Finkelstein J and held (at [10],[16]-[20],[30],[33]) that, if a trustee company ceases to be trustee of a trust it can no longer exercise the trustee's power of sale under the trust instrument or general law and that s 477(2)(c) of the Act does not empower the liquidator to sell property held by the trustee company on trust, even if the trustee company has an equitable charge over it, because the property is not in itself "property of the company". 21. Notwithstanding this conflict of authority, it is well-established that a receiver and manager can be appointed over trust property to secure the trustee's right of indemnity out of the assets of the trust: SMP Consolidated Pty Ltd (in liquidation) v Posmot Pty Limited [2014] FCA 1382 ("SMP Consolidated") at [7] citing Re Indopal Pty Ltd (1987) 12 ACLR 54 at 57; Kerr, in the matter of Angel's Castle Pre-School Pty Ltd (In Liquidation) [2010] FCA 786 ("Angel's Castle Pre-School") at [25]; In the matter of Gramarker Pty Ltd; Clifford Sanderson (as liquidator of Gramarker Pty Ltd) v Kerr [2014] NSWSC 243 at [6]-[7]; Re Stansfield at [31], [33], [45]. 22. This Court has exercised its power under s 57(1) of the FCA Act for the purpose of appointing a liquidator of a former trustee company as receiver and manager of the trust, for example, in QBE Insurance and in Kite v Mooney, in the matter of Mooney's Contractors Pty Ltd (in liq) [2016] FCA 886.

[12]

Employee entitlements 31 An issue raised at the hearing on 24 November 2017 was the treatment of entitlements of former employees of Leighton Scaffolding. The evidence before the Court is that: (1) upon the company being placed into liquidation, there were only two weeks of wages for two employees, and up to two years of superannuation, that were unpaid; and (2) those two employees, Peter Blount and Luke Stevens, has each lodged a proof of debt form for their unpaid wages. 32 The unpaid wages and unpaid superannuation amounts were recorded as "TBD" in the estimated financial position of Leighton Scaffolding as set out in the "Official Liquidator's Report to Creditors" prepared for the meeting of creditors on 6 June 2017 ("creditors report"). The creditors report also indicates that the employees are afforded a priority over unsecured creditors for outstanding entitlements pursuant to s 556 of the Corporations Act. It was resolved at the creditors' meeting on 6 June 2017 that the report was read and understood. 33 The liquidator referred to recent case law to the effect that s 556 does not have a relevant obligation in connection with the payment of liabilities from trust property, particularly, Re Independent Contractor Services (Aust) Pty Limited (in liq) (No 2) [2016] NSWSC 106; (2016) 305 FLR 222 at [23][25], Kite v Mooney, re Mooney's Contractors Pty Ltd (in liq) (No 2) [2017] FCA 653 at [109] and Re Amerind Pty Ltd (recs and mgrs apptd) (in liq) [2017] VSC 127; 2017) 320 FLR 118 ("Re Amerind"). 34 Applying this line of authority, the liquidator does not have an obligation under the Corporations Act to give priority to the outstanding employee entitlements of Leighton Scaffolding, and, with all else equal, would be entitled to treat them as ranking pari passu in distributing the assets of the company. However, there have been recent challenges to the correctness of the line of authority: judgment has been reserved in an appeal from Re Amerind and by a Full Court of this Court in the matter of Killarnee Civil & Concrete Pty Ltd (in liquidation) (WAD181/2016). 35 It is not necessary for me to address this issue. As counsel for the liquidator noted, it falls to the liquidator to ensure that any distribution of surplus assets in accordance with the Court's orders is appropriate in light of the creditors report and matters voted on by creditors and it is a matter for the liquidator whether to seek a relevant direction.

Kite v Mooney, re Mooney's Contractors Pty Ltd

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Judgment (13 paragraphs)

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