YATES J:
1 The first plaintiff, Mr Sprowles, is the liquidator of the second plaintiff, Triumph N Triumph Pty Ltd (in liquidation) (the company). He was appointed by the Court on 24 July 2019 in an application brought by the Deputy Commissioner of Taxation (DCT) to wind up the company in insolvency.
2 The company was incorporated on 10 October 2007. It operated a service and petrol station business from a property at West Wallsend in New South Wales (the West Wallsend property). Although the evidence is equivocal, there is a significant likelihood that the company is the trustee of a discretionary trust identified as the Absolute Triumph Family Trust which was established by deed dated 3 May 2011 (the Trust Deed), and that the company purchased the West Wallsend property in its capacity as the trustee of that trust.
3 Clause 74 of the Trust Deed provides that the trustee will be automatically removed if, in the case of a corporate trustee, it is placed in liquidation.
4 In an affidavit made on 29 August 2019, Mr Sprowles has deposed that, based on his investigations into the affairs of the company to date, no other person or entity has been appointed as trustee on the trust, and he has not been informed of any other person or entity being appointed as trustee of the trust. Assuming that the company was appointed as trustee and acquired the West Wallsend property in that capacity, the apparent consequence of Mr Sprowles' appointment as liquidator is that the company now holds the West Wallsend property as a bare trustee.
5 Mr Sprowles' investigation into the affairs of the company is ongoing, but his present view is that it is likely that the company operated the service and petrol station business and incurred liabilities to its creditors solely in its name and not in the name of the trust. Mr Sprowles has deposed that once his investigations have been further advanced or completed, he anticipates seeking the direction and guidance of the Court with a view to determining, amongst other things, how he should deal with the ambiguities as to the assets and liabilities which are properly attributable to the trust and the company.
6 In the meantime, Mr Sprowles seeks to be appointed as receiver and manager of all the property, assets and undertakings of the trust, including but not limited to, the West Wallsend property, with all the powers provided under s 420 of the Corporations Act 2001 (Cth), other than those in ss 420(2)(s), (t), (u) and (w), as if the reference in that section to "the corporation" were a reference to the trust, including, without limitation, the power to do all things necessary and convenient to effect the sale of the trust assets.
7 The reason for the present application is conveniently captured in observations made recently by Moshinsky J in Cremin, in the matter of Brimson Pty Ltd (in liq) [2019] FCA 1023 at [49] - [50]:
49 There has, until recently, been a difference of opinion as to whether, in such circumstances, the liquidator's power to sell the "property of the company" in s 477(2)(c) of the Corporations Act permits him or her to sell trust assets: see Aced Kang Investments Pty Ltd (in liq), in the matter of Aced Kang Investments Pty Ltd (in liq) [2017] FCA 476 at [12]. It is now settled that the liquidator of an insolvent (former) corporate trustee cannot sell the trust's property without order of the Court, or by appointment of a receiver over the trust assets: see Jones & Matrix at [44] per Allsop CJ (Farrell J agreeing at [196]); Re Stansfield DIY Wealth Pty Ltd (in liq) (2014) 291 FLR 17 at [10]; Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103 at [45]. The rationale for this position is that, on a proper understanding, the trust assets are not the "property of the company", but are instead trust property in which the corporate trustee has a proprietary interest by way of lien or charge to secure its right of exoneration: see Jones & Matrix at [89]. Thus, to the extent that the subject of a sale is the whole of a trust asset, rather than merely the company's lien or charge in respect of that asset, it is not authorised by the power of sale in s 477(2)(c).
50 The courts are generally willing, upon an appropriate application, to make orders permitting the liquidator of a (former) corporate trustee to sell trust assets. In situations where the property of the trust will be exhausted following its sale and subsequent distribution to creditors, it may be appropriate merely to give the liquidator a power of sale: see Jones & Matrix at [91]. The more common course is, however, for the liquidator of the insolvent (former) corporate trustee to apply to be appointed a receiver for the purpose of selling the trust assets and distributing the proceeds among trust creditors: see Jones & Matrix at [142] per Siopis J; Amirbeaggi, in the matter of Simpkiss Pty Ltd (in liq) [2018] FCA 2121 (Amirbeaggi); Taylor v CJ & KL Bond Super Pty Ltd, in the matter of CJ & KL Bond Pty Ltd (in liq) [2018] FCA 1430 (Taylor v CJ & KL Bond Super Pty Ltd); Staatz v Berry, in the matter of Wollumbin Horizons Pty Ltd (in liq) (No 3) [2019] FCA 924. Orders appointing a liquidator as a receiver for this purpose may be made nunc pro tunc to authorise sales of trust assets that have already occurred: Jones & Matrix at [91], [152], [198].
8 The immediate reason for the appointment that is sought in the present case is this. After Mr Sprowles' appointment as liquidator of the company on 24 July 2019, he continued to trade the company's business from the West Wallsend property in order to run down the stock and inventory of the company. However, on 23 August 2019, he ceased to trade the business.
9 Based on his investigations of the affairs of the company and the trust to date, and in circumstances where (a) the company is liable to repay the balance of a substantial loan made by the Commonwealth Bank of Australia, and (b) the West Wallsend property appears to be a trust asset, Mr Sprowles has come to the view that the West Wallsend property needs to be sold in order to satisfy the company and the trust liabilities to the bank.
10 I am satisfied that it is appropriate that Mr Sprowles be appointed as receiver and manager, having the powers which he seeks, in order that he can realise the assets of the trust, including, importantly, the West Wallsend property. For these reasons, I am prepared to make the orders that are presently sought, save for an order in relation to Mr Sprowles' remuneration.
11 Mr Sprowles sought an order providing that he be entitled to draw, from the trust assets, his reasonable remuneration at hourly rates specified in his affidavit up to the sum of $35,000 (exclusive of GST) in respect of the proposed sale of the West Wallsend property. I am not persuaded that I should make that order at the present time. I would like to have more detail of the work involved in that regard and, also, the basis on which the sum of $35,000 has been calculated. I will, however, grant liberty to Mr Sprowles as receiver and manager to apply to the Court for further orders, including in relation to his remuneration.
12 With the amendments I have discussed with the Plaintiffs' counsel, I will make the orders sought.
I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.