Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), the plaintiff would be justified in treating the Property described in land title reference folio 47/SP101127 and known as Unit 501, 25 Mann Street, Gosford in the State of New South Wales and the funds received from the renting of this property as assets of the Ceylan Irmak Trust ("Trust").
Pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth), the plaintiff be appointed as receiver and manager ("Receiver") of the Property and undertaking of the Trust.
Pursuant to rule 1.34 of the Federal Court Rules 2011 (Cth) ("Rules"), the requirement for the Plaintiff as Receiver to file a guarantee under rule 14.21 of the Rules be dispensed with.
The Receiver have the following powers:
the powers set out in s 420 of the Corporations Act 2001 (Cth) ("Act") (other than ss 420(2)(s), (t), (u) and (w)), as if references in that section to "the corporation" were references to the Trust;
the power to demand books and records of the Trust from any person; and
the power to determine and pay any creditor claims against Ceylan Irmak Pty Ltd (in liq) ("the Company") in its capacity as trustee of the Trust in accordance with Subdivision D of Division 6 of Part 5.6 of the Act.
The remuneration of the Receiver in acting as receiver and manager of the Property and undertaking of the Trust be calculated on a time-cost basis in accordance with the schedule of rates that is Document 48 in Exhibit VP-1 to the affidavit of Vincent Pirina affirmed on 26 September 2024 and be paid from the Property of the Trust provided that the Receiver is not to pay any amount of remuneration until the amount has first been fixed by the Court.
The Receiver is not to distribute any surplus funds or assets of the Trust without further order of the Court.
The Plaintiff's costs of this application be costs in the winding up of the Company.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
Delivered ex tempore, revised from transcript
JACKMAN J:
The plaintiff, Mr Vincent Pirina of Aston Chase Group (Aston Chase), was appointed liquidator of Ceylan Irmak Pty Ltd (the Company) by orders of this Court on 1 December 2023. Those orders were made because of the Company's failure to comply with a statutory demand issued by Strata Plan 101127 for payment in the amount of $8,729.09, comprising unpaid levies and charges attributable to a strata unit known as Unit 501, 25 Mann Street, Gosford (the Property).
The plaintiff seeks, among other things, a direction pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS) that he would be justified in treating the Property and the funds received from the leasing of the Property as assets of the Ceylan Irmak Trust (the Trust). Further, the plaintiff seeks an order pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) that he be appointed as receiver and manager of the Property and undertaking of the trust.
Mr Pirina deposes that as part of the investigations carried out by Aston Chase, it was discovered that the Company was the registered owner of the Property and subject to a registered mortgage to BC Invest Loans Pty Ltd (BC Invest). Inquiries made by the plaintiff to date have not found any bank accounts.
In December 2023, the plaintiff became aware that the Company may have held the Property as trustee of a trust when he was adverted to this fact by an accountant at Ideal Business Group (IBG). The premises of IBG were the registered office of the Company between 31 May 2021 and 16 March 2023. IBG subsequently provided an unexecuted copy of a trust deed for the Trust, and also the front page of a contract for the sale of the Property dated 28 May 2021 with Ms Ceylan Irmak, the sole director and shareholder of the Company, as the purchaser, rather than the Company. I note that the Company was incorporated three days later on 31 May 2021. In her completed report on company activities signed on 28 February 2024, Ms Irmak answered "no" to the question: "Is the Company a trustee of a trust?".
However, on 22 May 2024, ERA Legal, who were acting for Ms Irmak in her personal capacity, provided a copy of the executed fixed unit trust deed for the Trust dated 31 May 2021 (being the date of incorporation of the Company) (the Trust Deed) in response to enquiries from Aston Chase. Additionally, ERA Legal confirms that the Company had acted as trustee of the Trust and that as the sole beneficiary, Ms Irmak consented to the plaintiff being appointed receiver and manager.
In response to a request to the solicitor who apparently acted for the Company on the purchase of the Property, on 6 August 2024, the plaintiff obtained a counterpart to the contract for the sale of the Property dated 10 June 2021, signed by the vendor which recorded, as the purchaser, the Company as trustee for the Trust. That version of the sale contract has recorded the payment of stamp duty which was not reflected on other versions of the sale contract.
In light of the conflicting documentary evidence, the plaintiff seeks a direction pursuant to s 90-15 of the IPS that he will be justified in treating the Property and the funds received from the renting of the Property as assets of the Trust. I am satisfied that the Property was, in fact, purchased by the Company as trustee for the Trust and is currently held by the Company as registered proprietor in that capacity. Accordingly, it is appropriate to make a direction that the plaintiff is justified in treating the Property as trust property in circumstances where the evidence referred to above supports that conclusion, albeit in the face of contradictory documents and information provided to the plaintiff in the course of his investigations.
As to the appointment of the plaintiff as receiver and manager, cl 19.2.2(a) of the Trust Deed provides a disqualification clause in which a trustee will be automatically removed as trustee of the Trust if, as a company, it goes into liquidation, as has occurred. There is no evidence to suggest that a replacement trustee of the Trust has been appointed.
The plaintiff deposes that it appears to him that all of the debts of the Company have been incurred by the Company in its capacity as trustee of the Trust. In this regard, Mr Pirina observes that BC Invest has a debt as of 18 June 2024 totalling $570,240.20. Otherwise, the strata plan 10127 is owed $40,855.00, and $6,515.00 is owing to the Commissioner of State Revenue.
Although BC Invest's legal representatives corresponded with Aston Chase regarding the Property and were advised by Aston Chase that solicitors had been instructed to apply to the Court for the plaintiff to be appointed as receiver and manager of the assets of the Trust, no further communication has been received from BC Invest or its legal advisers after a 29 August 2024 email, in which Aston Chase was advised that BC Invest's legal representatives would seek instructions. In any case, a copy of the application and evidence in support was served on BC Invest on 16 October 2021. There has been no appearance at the hearing today by any party other than the plaintiff.
The Property was valued in November 2021 at $830,000, and the plaintiff expects that its current value is at least $800,000. The Property was leased at the time of the plaintiff's appointment as liquidator. That lease remains in place with payment of the rent redirected to the plaintiff. At the time of making his affidavit, the accumulated rent was $25,718.10.
As noted above, upon the appointment of the plaintiff as liquidator, the Company was removed as trustee of the Trust. The consequence of this is that the Company became a bare trustee and in order to effect a sale of the Property, the plaintiff must obtain either a court order to sell or an order for his appointment as a receiver: Amirbeaggi, Re Simpkiss Pty Ltd (in liq) [2018] FCA 2121 at [27] to [28] (Markovic J).
The plaintiff seeks his appointment as receiver and manager of the assets and undertaking of the Trust pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) in order to protect and preserve the trust property and with a view to realising the assets of the Trust in order for all of the creditors of the Company to receive a return on their debt.
As I said in Xu, in the matter of Sydney Carlingford Pty Ltd (Administrators Appointed) [2024] FCA 799 at [10], the appointment of a liquidator as a receiver and manager is a common course which brings certainty to the process of administration or liquidation, as the case may be. Such an appointment is plainly appropriate in the present case.
The plaintiff also seeks an order that his remuneration in acting as receiver and manager of the trust assets be calculated on a time cost basis in accordance with his firm's current schedule of rates, to be paid from the Property of the Trust, on the proviso that he is not to be paid any amount of the remuneration until the amount has been fixed by the Court. I note that the rates proposed are consistent with the broader parameters in cll 14.2 and 14.3 of the Trust Deed for the trustee's remuneration. In my view, the order for remuneration sought is appropriate in the circumstances.
Accordingly, I make orders in accordance with orders 1 to 8 as sought in the originating process, with the addition in order 4(a), after the reference to "s 420 of the Corporations Act 2001 (Cth) (Act)", of the words: "(other than in ss 420(2)(s), (t), (u) and (w))".
I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.