Mutton (Liquidator), in the matter of Raftery Creek Pty Ltd (In Liquidation) v Rural Intention Pty Ltd

ANASTASSIOU J: 1 The First Applicant, Mr Mutton, is the Liquidator of the Second Applicant, Raftery Creek Pty Ltd. On 17 August 2010 the Raftery Creek Unit Trust was established, pursuant to a Trust Deed of that date. Raftery Creek was appointed trustee under and pursuant to the Trust Deed. 2 The Trust has effectively one asset, namely, it is the registered proprietor of 335 Raftery Road, Kialla VIC 3631 (more properly described as Lot 1 on Plan of Subdivision 132988, Volume 08992, Folio 786 (the Property)). The Property is encumbered by a mortgage. 3 Raftery Creek's plan, which ultimately failed, was to develop the Property into 506 subdivided lots forming a housing estate. To achieve this, between August 2010 and November 2012 Raftery Creek entered into "Put and Call Option Agreements" with prospective purchasers of the lots in exchange for a premium. The premiums varied in value between $1.10 and $28,000, depending on the lot in question. The Liquidator estimated that around $2.5 million was raised by Raftery Creek in total from the receipt of premiums. The subdivision did not come to fruition, and ultimately, on 31 May 2019 orders were made by this Court winding up Raftery Creek and appointing the Liquidator. Clause 57.2 of the Trust Deed provided that if a corporate trustee was wound up, it would cease to be the Trustee. Accordingly, Raftery Creek ceased to be the Trustee upon being wound up, with the result that the Liquidator was a bare trustee only of the Trust assets. 4 By originating process filed 20 December 2019, the Liquidator applied to be appointed as the receiver of the Trust's assets. The Liquidator sought orders that it be so appointed invoking the representative procedure under r 9.21 of the Federal Court Rules 2011 (Cth). Pursuant to that procedure, the Liquidator sought orders that the first respondent, Rural Intention Pty Ltd, be appointed as a representative respondent to the application on behalf of the prospective purchasers pursuant to r 9.21(1) of the Rules. Ultimately, for reasons to become apparent, the relief in the originating process was not pressed. 5 The orders were originally sought on an ex parte basis. I declined to make such an order and directed that the Liquidator serve the application materials, which it did so on 14 May 2020. One such party served was Azana Investments Pty Ltd. Azana holds 15% of the units in the Trust. Azana opposed the relief sought by the Liquidator, and in its place pressed for the following orders: (1) Raftery Creek be removed as the trustee of the Trust; (2) Pursuant to section 48(1) of the Trustee Act 1958 (Vic) 290 High Street Nagambie Pty Ltd ACN 049 810 168 be appointed as trustee of the Trust; and (3) Pursuant to section 51(1) of the Act all property of the Raftery Creek Unit Trust is vested in 290 High Street as trustee of the Trust. 6 Ultimately the form of orders to be made was agreed between the parties, though formally the Liquidator neither consented nor opposed the orders sought by Azana. 7 I am satisfied that orders in the agreed form should be made. 8 I note that 75% of the unit holders in the Trust consented to the appointment of 290 High Street as trustee of the Trust. The only unit holder that has not effectively consented is Bigroc Investments Limited (Bigroc), which holds 25% of units in the Trust. As explained in Azana's written submissions: Bigroc has been struck from the register of companies of the British Virgin Islands, the consequence of which appears to be that Bigroc, and the directors, members and any liquidator or receiver thereof may not: (a) commence legal proceedings, carry on any business or in any way deal with the assets of Bigroc; (b) defend any legal proceedings, make any claim or claim any right for, or in the name of, Bigroc; or (c) act in any way with respect to the affairs of Bigroc. Nevertheless, … the sole director of Bigroc … and its sole shareholder, at least in equity, … has also given his consent to the appointment of 290 High Street as the trustee of the Trust. 9 It is necessary that a new trustee be appointed by court order as the Trust Deed does not contain any presently applicable provision to enable the calling of a meeting of unitholders, or to enable the appointment of a new trustee without a unitholders' meeting being called. The position was explained in Azana's submissions: …It has not been possible for Azana to convene a meeting of the unitholders of the Trust as the power to do so resides with the trustee or the "Advisory Committee" - clause 17 of the trust deed. As matters stand there is no person who can act as the trustee of the Trust, and no "Advisory Committee" has been constituted. 10 As a result there is presently a practical absence of power to appoint a new trustee. In such circumstances, the appointment of a new trustee pursuant to section 48(1) of the Act is necessary to remedy the lacuna in the present circumstances. I am satisfied this Court has the jurisdiction to exercise the power conferred under that section: see, by analogy, what was said by Perram J at [50]-[52] in Hodges v Waters (No 7) [2015] FCA 264; 232 FCR 97. 11 For the reasons referred to above, Raftery Creek is a mere bare trustee and accordingly it is appropriate that it be removed as trustee and be replaced by a trustee able to exercise the powers to deal with the Trust assets under and in accordance with the Trust Deed. 12 Further, in the present circumstances it is expedient in the interests of the efficient administration of the liquidation of Raftery Creek that the Court make the orders sought. 13 For the above reasons, I shall make the orders in the form as agreed. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anastassiou.