611 Pty Ltd (in liq), in the matter of 611 Pty Ltd (in liq)
[2018] FCA 2028
•14 December 2018
FEDERAL COURT OF AUSTRALIA
611 Pty Ltd (in liq), in the matter of 611 Pty Ltd (in liq) [2018] FCA 2028
File number: NSD 2267 of 2018 Judge: YATES J Date of judgment: 14 December 2018 Catchwords: CORPORATIONS – application by liquidators for appointment as receivers of trust assets under s 57 of the Federal Court of Australia Act 1976 (Cth) Legislation: Corporations Act 2001 (Cth), ss 420, 477(2)
Federal Court of Australia Act 1976 (Cth), s 57
Date of hearing: 14 December 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 10 Counsel for the Plaintiffs: Mr S A Wells with Mr J R Anderson Solicitor for the Plaintiffs: Henry William Lawyers ORDERS
NSD 2267 of 2018 IN THE MATTER OF 611 PTY LIMITED (IN LIQUIDATION) ACN 146 472 362
BETWEEN: 611 PTY LIMITED (IN LIQUIDATION)
First Plaintiff
JUSTIN HOLZMAN
Second Plaintiff
ANTHONY WAYNE ELKERTON
Third Plaintiff
JUDGE:
YATES J
DATE OF ORDER:
14 DECEMBER 2018
THE COURT ORDERS THAT:
1.Pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth), the second and third plaintiffs be appointed as receivers of the trust property owned by the first plaintiff as trustee for the Zumbo Trust, without security, effective on and from 22 July 2018.
2.The appointment made by Order 1 is without prejudice to the right of any creditor to raise any question as to the remuneration of the second and third plaintiffs as receivers in the period 22 July 2018 to the date of these orders.
3.The second and third plaintiffs, as receivers of the property of the first plaintiff, have all the powers under s 420 of the Corporations Act 2001 (Cth) as if the reference to a "corporation" in that section were a reference to the first plaintiff as trustee for the Zumbo Trust.
4.The second and third plaintiffs retain the proceeds of sale of the trust property owned by the first plaintiff pending further order.
5.The costs of this application be reserved.
6.The proceeding be listed for a case management hearing on 18 February 2019 at 9.30 am.
7.Liberty be granted to the plaintiffs to apply on 3 days’ notice.
8.These orders be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
YATES J:
The second and third plaintiffs are the joint and several liquidators of the first plaintiff, 611 Pty Limited (in liquidation) (the company). They were appointed on 24 October 2018, when the Court made an order, on the application of the Deputy Commissioner of Taxation, that the company be wound up in insolvency. Prior to that, the second and third plaintiffs were administrators of the company and of two related entities, one of which was Mel611 Pty Limited (in liquidation) (Mel611). On 26 October 2018, the creditors of Mel611 resolved that it be wound up voluntarily and that the second and third plaintiffs be appointed as joint and several liquidators.
Prior to the plaintiffs’ respective appointments as liquidators, the company and Mel611 carried on a specialist patisserie business from leasehold and freehold premises in New South Wales and Victoria. Since their respective appointments as liquidators, the second and third plaintiffs have continued to trade the business. They have also conducted a sales campaign in relation to the business and entered into detailed negotiations with one purchaser group.
The company has traded exclusively as trustee of the Zumbo Trust, which is a discretionary trust established by a deed dated 15 February 2008. The company became the trustee on 11 October 2010. However, its appointment was terminated automatically under clause 47 of the deed when the second and third plaintiffs were appointed as joint and several administrators. No other trustee has been appointed. Therefore, the company continues to act as a bare trustee of the Zumbo Trust.
There is some uncertainty as to whether all the company’s assets are owned by it in its capacity as trustee of the Zumbo Trust or whether some of its assets, and if so which assets, are owned beneficially. What is apparent to the second and third plaintiffs is that, for accountancy purposes, all expenses incurred with respect to the assets have been treated as expenses of the Zumbo Trust.
The second and third plaintiffs seek an order, pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) that they be appointed as receivers of the property of the Zumbo Trust with retrospective effect from 22 July 2018 (the date of their appointment as joint and several administrators of the company), and with the powers that a receiver has under s 420 of the Corporations Act 2001 (Cth) (the Corporations Act), as if the reference therein to a “corporation” were to the company as trustee of the Zumbo Trust. They seek this relief to enable them to proceed to sell all the assets of the company, whether held beneficially or as trustee of the Zumbo Trust.
In this connection, there is some doubt about whether a liquidator’s powers under s 477(2) of the Corporations Act extend to property of a trust of which the company in liquidation is the trustee, whether as a bare trustee or otherwise. Because of that doubt, a practice has developed whereby liquidators, in the position of the second and third plaintiffs, have applied to be appointed as receivers of the trust property so that, in that capacity, they can deal with the trust property at the same time as dealing with the company’s beneficially-held property in the course of the liquidation, confident in the knowledge that they have the authority and power to do so.
The second and third plaintiffs propose to hold the proceeds of sale of all the assets pending determination of the appropriate order of priority for distribution. I have been informed that this will be the subject of a separate application to the Court.
Given the second and third plaintiffs’ present uncertainty as to the capacity in which property is held by the company, and given the desirability that all the company’s assets should, in any event, be sold for the benefit of creditors, whether they be creditors of the company or creditors more conveniently described as creditors of the Zumbo Trust, it is appropriate that, in the present case, the Court should lend its aid by making orders under s 57 of the Federal Court Act that will facilitate the realisation of all the company’s assets, irrespective of how those assets are held.
The second and third plaintiffs have given notice of the present application to the company’s known creditors and to the Australian Securities and Investments Commission. They have received no objection to their present application.
Orders will be made accordingly.
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate:
Dated: 14 December 2018
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