Taylor (Liquidator) v CJ & KL Bond Super Pty Ltd

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WHITE J: 1 The Plaintiff applies pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) to be appointed as the receiver and manager (Receiver) of the assets of the CJ & KL Bond Trust. The Plaintiff accepts that there is only one asset of the CJ & KL Bond Trust, so that his application is to be appointed as Receiver of that asset. 2 The Plaintiff is the liquidator of CJ & KL Bond Pty Ltd (Bond), having been appointed by an order of the Supreme Court of Queensland on 21 May 2018. 3 Bond was incorporated on 5 November 2014. On the following day, it entered into a Deed of Trust with CJ & KL Bond Super Pty Ltd (Bond Super) in its capacity as trustee of the CJ & KL Bond Superannuation Fund (the Fund). The Fund is a registered fund under the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act). 4 The directors and shareholders of both Bond and Bond Super are Colin John Bond and Katherine Lacy Bond (Mr and Mrs Bond). 5 By a transfer executed on 26 November 2014 and registered in the Queensland Titles Registry on 16 December 2014, Mr and Mrs Bond transferred their interest in a property at Garbutt in Queensland (the Garbutt Property) to Bond for a stated consideration of $380,000. Bond is shown on the transfer as having executed it as a trustee. The Deed of Trust between Bond and Bond Super was attached to the transfer. Pursuant to that Deed, Bond agreed to hold the Garbutt Property on behalf of Bond Super as trustee for the Fund. The Deed indicates that the trust between Bond and Bond Super has the name "CJ & KL Bond Trust". 6 At the same time that the transfer was registered, Bond registered a mortgage of the Garbutt Property to La Trobe Financial Asset Management Ltd. 7 The Plaintiff has deposed that Bond's only function was to act as bare trustee of the CJ & KL Bond Trust. As indicated already, the Garbutt Property is the only asset of that trust. 8 Bond incurred liabilities in its capacity as trustee of the CJ & KL Bond Trust. The outstanding liabilities comprise strata fees and council rates. The Plaintiff wishes to recover the amount of those liabilities pursuant to the trustee's right of indemnity from the proceeds of sale of the Garbutt Property. 9 The Plaintiff recently became aware of the provisions in s 126K of the SIS Act. That section makes it an offence for a person who knows that he or she is a "disqualified person" to act, amongst other things, as a "custodian" of a superannuation entity to which the SIS Act applies. Section 10 of the SIS Act defines a custodian in relation to a superannuation entity to be a person, other than a trustee of the entity, who, under a contract with a trustee or an investment manager of the entity, performs custodial functions in relation to any of the assets of the entity. 10 By reason of s 120(2)(e) of the SIS Act, Bond is a "disqualified person" because it is being wound up. 11 The Plaintiff wishes to remedy the position. In addition, as indicated, he wishes to be able to sell the Garbutt Property in order to exercise Bond's entitlement as trustee to be indemnified out of the trust asset in respect of the liabilities it has incurred in the discharge of its duties as trustee. 12 The Plaintiff could, of course, remedy the apparent contravention of s 126K by resigning Bond's trusteeship. However, that course would leave uncertain the exercise by Bond of its right to indemnity. 13 The proceedings first came on for hearing on 24 September 2018. At that time the proceedings had not been served on Bond Super or on Mr and Mrs Bond. The Court adjourned the hearing to today in order to give the Plaintiff the opportunity to attend to service and to address some other apparent shortcomings in the evidence. 14 The Plaintiff and his solicitor have since filed further affidavits. These affidavits indicate that the proceedings have been notified to Mr and Mrs Bond in their capacities as directors of Bond Super and in their personal capacities. That occurred by way of email. Mr and Mrs Bond have indicated by return email that they do not require formal service of the proceedings. I am satisfied that the proceedings and notice of today's hearing have been brought sufficiently to the attention of Mr and Mrs Bond so that, if they wished to be heard in relation to the orders sought by the Plaintiff, they have had the opportunity to do so. 15 Mr and Mrs Bond have not appeared today to oppose the orders sought by the Plaintiff and he has deposed to an understanding on his part that they do not oppose the making of the orders. 16 A number of considerations point in favour of the appointment of the Plaintiff as Receiver of the Garbutt property. These include: (a) Bond Super does not oppose the appointment of the Plaintiff as Receiver, nor does Bond Super point to any other means by which Bond's right of indemnity may be exercised; (b) Mr and Mrs Bond, who are members of the Fund and who established it, do not oppose the appointment of the Plaintiff as Receiver and, as indicated, the Plaintiff has deposed that they do not oppose the sale by him of the Garbutt Property; (c) it is now established that the power of sale vested by s 477(2)(c) of the Corporations Act 2001 (Cth) does not encompass property which is not the property of the company, but is, instead, trust property in which a trustee has a proprietary interest by way of lien or a charge to secure its right of exoneration: Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 354 ALR 436 (Killarnee) at [89]. Because of the uncertainty of the position before Killarnee it had become common in circumstances such as the present for courts to order that the liquidator of an insolvent corporate trustee be appointed receiver and manager over the trust assets and to vest the receiver with a power of sale: Re Stansfield DIY Wealth Pty Ltd (in liq) [2014] NSWSC 1484, (2014) 291 FLR 17; SMP Consolidated Pty Ltd (in liquidation) v Posmot Pty Ltd [2014] FCA 1382; Freeman, in the matter of Blue Oasis Holdings Pty Ltd (in liq) [2018] FCA 822, and see the authorities cited in these cases; (d) on the appointment of the Plaintiff as Receiver, Bond will cease to be the custodian of the Garbutt Property (SMP Consolidated at [7]), thereby avoiding any continuing contravention of s 126K of the SIS Act; and (e) the appointment of the Plaintiff as Receiver of the Garbutt Property will enable the property to be sold without adding significantly to the expense of the liquidation. This will not be the case if a replacement trustee is found as the costs of transferring title in the Garbutt Property to the new trustee or to Bond Super itself will then be incurred together with the cost and inconvenience of enforcing the right of indemnity. 17 These reasons persuade me that it is appropriate to make an order that the Plaintiff be appointed Receiver of the Garbutt Property without provision of security as contemplated by rr 14.21 and 14.22 of the Federal Court Rules 2011 (Cth). The Plaintiff should be vested with the power that a liquidator has in respect of property of a company pursuant to s 477(2) of the Corporations Act. 18 The Plaintiff also seeks an order that his remuneration as Receiver be fixed in the sum of $10,000. In SMP Consolidated, the Court fixed the liquidator's remuneration as receiver and manager in the same sum, but on the express basis that the work to be performed included the work associated with the sale of the property, liaising and corresponding with the secured creditor, attending to regulatory requirement with the Australian Securities and Investments Commission, the lodging of the controller's accounts under s 432 of the Corporations Act and the general administration of the receivership. I will accede to the Plaintiff's request as to the fixation of his remuneration, but on the same basis as stated in SMP Consolidated. 19 For these reasons I will make orders substantially in the form sought by the Plaintiff. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White.