RE AQUA BLUE PLUMBING (QLD) PTY LTD (IN LIQUIDATION); EX PARTE ROSS STEPHEN THOMSON as liquidator of AQUA BLUE PLUMBING (QLD) PTY LTD (IN LIQUIDATION) [2024] WASC 177 (15 May 2024)

1. The originating process was initially listed for hearing on 3 May 2024. The plaintiffs' solicitors requested that the matter be determined on the papers. On reviewing the materials, I considered it was appropriate for the matter to be determined on the papers. On 2 May 2024, I made orders in terms of the minute of proposed orders of the same date and vacated the hearing.[1] These are my reasons for making these orders.

1. The plaintiffs filed two affidavits in support of their application: an affidavit of the first plaintiff filed 24 April 2024 and an affidavit of Charmaine James filed 2 May 2024, confirming service of the application on the Australian Securities and Investments Commission (ASIC). This summary is taken from these affidavits.
2. The Company was incorporated on 10 June 2014.[2] A current and historical company extract obtained from the records of ASIC discloses that the sole director, company secretary and shareholder of the Company is Edward Matthew Chyer.[3]
3. On 12 March 2024, Mr Chyer, in his capacity as sole shareholder of the Company, passed a resolution to appoint Ross Stephen Thomson as liquidator of the Company in accordance with s 491 of the Act.[4]
4. Based on the enquires undertaken to date, Mr Thomson believes:[5]

(a) the Company was the trustee of the Trust;

(b) the Company did not trade in its own right; and

(c) the Company only acted in its capacity as trustee of the Trust and did not conduct any other business or hold any assets in any other capacity.

1. Among the books and records of the Company is a copy of the Trust deed. The Trust deed discloses that the Trust was established on 10 June 2014.[6] Pursuant to cl 6.4(a)(2) of the Trust deed, on the appointment of a liquidator, the Company was required to retire as trustee of the Trust and was disqualified from acting as trustee.

1. I am satisfied that ASIC has been served with copies of the originating process and the affidavit,[7] as required by r 2.8 of the Supreme Court (Corporations) Rules 2004 (WA).
2. No one gave notice to the plaintiffs' solicitors or to the court that they wish to be heard on the application.

1. The legal principles that govern this application are well known and can be summarised as follows.
2. Where a corporate trustee enters external administration, the company's right of indemnity and accompanying equitable lien over the assets of the trust survives the appointment. Where a company has been removed as trustee of the trust by reason of the terms of the trust deed, the company retains the right to hold trust assets as bare trustee. However, the liquidator of the company does not have the power to sell those assets to satisfy that indemnity absent intervention by the court.[8]
3. The liquidator, in essence, has two options. First, to apply for an order that confers power on the liquidator to deal with the assets of the trust or, second, to apply to be appointed as receiver and manager of the trust.
4. In this case, the first plaintiff seeks to be appointed as receiver and manager of the Trust and also seeks orders under s 90‑15 of the Insolvency Practice Schedule (Corporations) (sch 2, Act) (IPS) to facilitate his dealing with the assets of the Company to enable the winding up of the Company and the Trust to proceed.
5. Section 90-15(1) of the IPS provides that the court may make 'such orders as it thinks fit in relation to the external administration of a company'. The power is broad and is at least as extensive as the powers formerly available under ss 479(3) and 511 of the Act.
6. Courts are generally willing, upon an appropriate application, to make orders permitting the liquidator of a (former) corporate trustee to sell trust assets.
7. Order 51 r 1 of the Rules of the Supreme Court 1971 (WA) deals with the court's power to appoint a receiver. The court also has power, pursuant to s 25(9) of the Supreme Court Act 1935 (WA), to appoint a receiver where it appears to be just and convenient.
8. In the absence of any relevant conflict, it is commonly the case that the court will appoint the liquidator of the corporate trustee as receiver without security.[9]
9. Appointing a liquidator or administrator of a corporate trustee as a receiver of a trust's assets facilitates and simplifies the external administration of the corporate trustee by providing for the trust's business and assets to be under the same control as the corporate trustee while it is in external administration. This aids in the vindication of the trustee company's right of indemnity out of the trust's assets.[10]
10. Once the sale of the trust's assets have occurred, the proceeds may be appropriated by way of exoneration as part of the conduct of the liquidation in accordance with the statutory priorities set out in pt 5.6, div 6 of the Act.[11] This includes the costs of the liquidation.

1. On the evidence before me, I accept that by reason of cl 6.4(a)(2) of the Trust deed, on the appointment of Mr Thomson as Liquidator, the Company immediately ceased to be trustee of the Trust. As a consequence, the Company is now a bare trustee of the Trust's assets and does not have the power to sell or otherwise deal with the assets of the Trust. No new trustee has been appointed.
2. I am satisfied that the Company only acted as trustee of the Trust and in no other capacity, and that all Trust assets held by the Company were held in its capacity as trustee of the Trust.
3. The orders sought by the plaintiffs are consistent with the legal principles that I have outlined above.
4. Given the evidence before the court, I accept that it is expedient for Mr Thomson to have the power to sell the property of the Trust.
5. I also accept it is appropriate to appoint Mr Thomson as receiver and manager of the Trust without security. This is in accordance with the legal principles outlined above and will protect the Company's right of indemnity, as well as the position of creditors. Other advantages with the proposal include that the first plaintiff is subject to the regulatory regime applicable to insolvency practitioners, he has professional indemnity insurance and is subject to the continued supervision of the court.
6. The form of orders sought in terms of service of the court's orders and the allowance for any aggrieved party to apply to this Court to vacate or vary these orders protects the creditors of the Company from any possible prejudice that might otherwise arise from this application.
7. In relation to the orders sought under s 90-15 of the IPS, I accept Mr Thomson's evidence that the Company has acquired assets and incurred liabilities only as trustee of the Trust. For this reason, it is appropriate to make orders that the first plaintiff will be acting properly and is justified in proceeding to conduct the affairs of the Trust on the basis that the business and assets of the Company comprised the assets of the Trust.
8. Finally, in relation to the costs of the application, the plaintiffs sought orders for the costs of the application be costs in the winding up of the second plaintiff and otherwise be paid from the Trust property. In my view, this is the appropriate costs order.

1. For these reasons, I was satisfied it was appropriate to make the orders which are annexed to these reasons marked 'Annexure A'.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Email from Edwards Mac Scovell to Associate to Hill J dated 2 May 2024.

[2] Affidavit of Ross Stephen Thomson filed 24 April 2024 [7].

[3] Affidavit of Ross Stephen Thomson filed 24 April 2024, 'RST2'.

[4] Affidavit of Ross Stephen Thomson filed 24 April 2024 [5].

[5] Affidavit of Ross Stephen Thomson filed 24 April 2024 [19].

[6] Affidavit of Ross Stephen Thomson filed 24 April 2024, 'RST3'.

[7] Affidavit of Charmaine James filed 2 May 2024.

[8] See Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310 [44], [85] ‑ [91] (Allsop CJ), [139], [142] (Siopis J) and [198] (Farrell J); Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 [22] ‑ [28] (Gordon J).

[9] In the matter of Hercules Car Parking Systems (Victoria) Pty Ltd [2018] NSWSC 409 (Brereton J).

[10] In the matter of Mecfab Holdings Pty Ltd [2015] NSWSC 46 [9].

[11] Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [55] - [58] (Kiefel CJ, Keane & Edelman JJ), [95] - [97] (Bell, Gageler & Nettle JJ), [171] (Gordon J).