JACKMAN J:
1 The plaintiffs (the Administrators) seek their appointment as receivers and managers of the assets of the Forte Sydney Carlingford Unit Trust (Trust), being a trust of which Sydney Carlingford Pty Limited (Administrators Appointed) (Company) is trustee. On 27 June 2024, the plaintiffs were appointed as joint and several voluntary administrators of the Company by a resolution of the Company's directors in accordance with s 436A of the Corporations Act 2001 (Cth) (the Act). Clause 27.1 of the trust deed which governs the Trust provides that the powers of the trustee cease upon an Event of Disqualification to the Trustee. An Event of Disqualification is defined at subparagraph (j) to include the appointment of an administrator under s 436A of the Act. Accordingly, the Administrators are concerned that by entering into voluntary administration, the Company has now lost its powers to act as trustee of the Trust, and that the Administrators will not be able to cause the Company, as trustee, to deal with any assets which the Company holds in its capacity as trustee of the Trust.
2 Prior to the plaintiffs being appointed as administrators, the Company, as developer, carried out an apartment development project at 8-10 Shirley Street, Carlingford, New South Wales. The Administrators have been informed by Mr Zhang, a director of the Company, that the Company was established solely to operate as the corporate trustee of the Trust which was formed by the unit holders of the Trust for the sole purpose of conducting the project. That proposition is consistent with the following matters:
(a) an ABN search discloses that there is no Australian business number registered for the Company, but there is an ABN that has been registered for the Trust;
(b) the Trust's accounting records held on the Xero accounting platform are kept only in the name of the Trust and not the Company in its own capacity;
(c) the Company's pre-appointment accounts have informed the Administrators that they do not hold accounting records for the Company in its own capacity outside of the records for the Trust;
(d) the Administrators have not located any accounting records in relation to any business conducted by the Company in its own capacity; and
(e) the Company's directors have confirmed by email that the Company has always acted solely as a trustee of the Trust, and has not engaged in any business activities in its own capacity, or administered other trusts.
3 According to the PPSR records, there is a security interest registration by a party known as Seywood Fabrications Pty Ltd lodged on 2 February 2024 in relation to the ACN of the Company. It appears that there is a dispute as to whether Seywood Fabrications is a secured creditor and entitled to make a PPSR security interest registration. It may be thought to be of some significance that the registration is against the Company's ACN rather than the Trust's ABN, and that appears to depart from the requirement in cl 1.5 of sch 1 of the Personal Property Securities Regulations 2010 (Cth) to the effect that such a registration with respect to trust assets must be registered against the Trust's ABN. However, in the light of the other evidence, the existence of this disputed PPSR registration against the Company's ACN suggests a registration error as opposed to any indication that the Company was actually conducting the relevant business, or indeed any other business, in its own right.
4 The Administrators have conducted investigations into the status of the development project in Carlingford, as well as its value as an asset of the Trust. The majority of the apartments within the project have been sold. The searches conducted by the Administrators identify that the Company is presently the registered owner of the three apartments remaining in the project, being units 504, 803 and 902. In relation to those apartments:
(a) unit 504 is unsold and is listed for sale with a local real estate agency, and that agency has advised that there are a number of interested parties and an exchange of contracts may need to take place soon;
(b) unit 803 has been sold at a price of $1,050,000 and is presently under contract with settlement due on 22 July 2024; and
(c) unit 902 has been sold at a price of $1,100,000 and is presently under contract with settlement due on 8 July 2024.
5 Units 504, 803 and 902 are each subject to registered mortgages, however, one of the mortgagees has confirmed that all outstanding liabilities against the Company have been fully paid. The gross estimated values of the three residual apartments are $2,930,000 and the total estimated mortgage value is $2,220,522.74 as at 31 May 2024.
6 The Administrators have identified that the Company did not operate any bank accounts in its own name, but operates a bank account in the name of the Trust with a current balance of $60,456.84. The Administrators have also discovered that the Company or the Trust is the owner of a strata defect warranty bond, which is said to be valued at approximately $318,617.
7 The Administrators have undertaken an assessment of the creditors of the Trust and, given the timing of the settlement of the three residual apartments, any delays to the completion of the respective sales will cause a detriment to the body of creditors, as they are continuing to accrue interest on the mortgages. In addition, the Administrators are currently incurring costs to secure assets of the Trust and to deal with its creditors.
8 The Administrators seek an order under s 57 of the Federal Court of Australia Act 1976 (Cth) that they be appointed as receivers of the assets of the Trust. Section 57(1) confirms that the court may, at any stage of a proceeding, on such terms and conditions as the court thinks fit, appoint a receiver by interlocutory order in any case in which it appears to the court to be just or convenient so to do. As McKerracher J said in Re Hughes in their capacity as joint and several liquidators of Substar Holdings Pty Limited (in liq) [2020] FCA 1863; (2020) 149 ACSR 185 at [27]:
Where a corporate trustee is removed by operation of a disqualification clause in the trust deed (here, cl 7.6), the company assumes the position of a bare trustee. Its powers are limited to protecting the trust assets. The right of indemnity or exoneration persists, albeit that the company's lien does not confer a power of sale to realise that right.
9 In my view, there is no substantive difference between a disqualification clause, which removes a corporate trustee from the role of trustee, and the present clause, which prevents the trustee from exercising the powers of trustee upon an event of disqualification. Further, there is no relevant difference between the position of a trustee company in liquidation and the position of a trustee company in administration in relation to this question: see Re Amirbeaggi, in the matter of Simpkiss Pty Ltd (in liq) [2018] FCA 2121 at [27]-[30] (Markovic J).
10 In the present case, the powers of the trustee ceased upon the appointment of the Administrators. It is thus necessary to appoint the Administrators as receivers and managers to permit them to deal with the trust assets and to bring certainty to the process of the administration. The common course is to appoint the administrators or liquidators, as the case may be, as receivers over all trust property for the purpose of realising the assets for the benefit of creditors, and that is clearly the appropriate course in the present case.
11 The plaintiffs also seek orders that the costs, expenses and remuneration incurred by them in acting as receivers and managers of the Trust, including the costs of this application, be paid from the assets of the Trust. As to the costs and expenses, the trust deed makes specific provision for costs and expenses of the Trust to be paid from the assets of the trust: see sch 1, cl 58 of the trust deed. The trust deed also contemplates that where a professional person (such as an accountant) is acting as trustee, then that person may charge all usual and reasonable professional fees for professional work done in the administration of the Trust: cl 19.1 of the trust deed.
12 In any event, court appointed receivers are entitled to reasonable remuneration in accordance with an order of the court. Accordingly, I will make the orders sought by the plaintiffs, but I will expressly qualify the reference to remuneration to be such remuneration as is calculated in accordance with the initial remuneration notice dated 1 July 2024 attached to the letter to creditors of that date. That is consistent with the order made by McKerracher J in Re Hughes (namely, order 11(c)), confirming the rates to be applied for the receiver's remuneration in that case. Those orders permitted payment for remuneration at the approved hourly rates without further order of the court fixing that remuneration in a particular sum, given that it appeared that further work by the receivers was necessary and given that McKerracher J granted liberty to apply for orders discharging the receivers but did not make any order in relation to further applications for the approval of remuneration. I note that r 14.24 of the Federal Court Rules 2011 (Cth) allows for a receiver's remuneration to be fixed, but it does not require that it be fixed.
13 Given the evidence of the work already undertaken, the proposed rates for future work, and the costs and time that would be incurred as a result of any further applications for the approval of remuneration, I regard it as consistent with s 37M of the Federal Court of Australia Act that the orders be made on the basis that they permit payment of the receiver's remuneration without the need for any further order.
14 The Administrators have given notice of this application to the three mortgagees of the residual apartments and to the unit holders of the Trust. No party has sought leave to appear at today's hearing, nor has any party indicated to the Administrators that they wish to be heard on the application. The orders that I make today provide for the plaintiffs to notify ASIC and creditors whose contact details are known to the plaintiffs of these orders, and those parties have liberty to apply, if they wish to do so, to vary the orders on the giving of reasonable notice to the plaintiffs. I am satisfied that the orders sought by the plaintiffs should be made (with the additions which I have indicated at today's hearing) are appropriate.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.