Australia and New Zealand Banking Group Limited v State of Western Australia - [2023] WASC 409

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED -v- STATE OF WESTERN AUSTRALIA [2023] WASC 409
CORAM:   SOLOMON J
HEARD:   12 OCTOBER 2023
DELIVERED          :   30 OCTOBER 2023
FILE NO/S:   COR 85 of 2023
BETWEEN:   AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Plaintiff
AND
STATE OF WESTERN AUSTRALIA
First Defendant
GREGORY PAUL QUIN as liquidator of TRI STAR GROUP PTY LTD (IN LIQUIDATION)
Second Defendant
THE REGISTRAR OF TITLES
Third Defendant

Catchwords:

Validity of disclaimer under s 568 by liquidator or corporate trustee - Trustee's right of indemnity - Vesting of disclaimed property in mortgagee under s 568F - Application of s 89 of the Trustees Act 1962 (WA)

Legislation:

Corporations Act 2001 (Cth)
Transfer of Land Act 1893 (WA)
Trustee Act 1898 (Tas)
Trustees Act 1962 (WA)

Result:

Orders made under s 89 of the Trustees Act 1962 (WA) and s 568F of the Corporations Act 2001 (Cth)

Category: B

Representation:

Counsel:

Plaintiff	:	WCJ Zappia
First Defendant	:	S Cobbett
Second Defendant	:	No appearance
Third Defendant	:	No appearance

Solicitors:

Plaintiff	:	Thomson Geer - Perth
First Defendant	:	State Solicitor's Office
Second Defendant	:	In Person
Third Defendant	:	State Solicitor's Office

Cases referred to in decision:

AFSH Nominees Pty Ltd v State of Western Australia [2022] FCA 1168
Anderson as liquidator of G & G Contractors Pty Ltd v Aravanis [2021] FCA 1185
Break Fast Investments Pty Ltd v Sclavenitis [2022] VSC 288; 67 VR 132
Brooks in the matter of Tease Hair & Spa (in liq.) [2022] FCA 457
Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524
Hicks v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 757
Jones (Liquidator) v Matrix Partners Pty Ltd Re Killarnee Civil and Concrete Contractors Pty Ltd (In Liq) [2018] FCAFC 40; 260 FCR 310
Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 [2021] FCAFC 153; 287 FCR 181
Re Cremin, Brimson Pty Ltd (2019) 136 ACSR 649

SOLOMON J:

The application

In these reasons, a reference to a statutory provision is a reference to the Corporations Act 2001 (Cth) unless specified otherwise. These reasons relate to the application of the plaintiff (ANZ) dated 6 June 2023 for orders under s 568F. In essence, ANZ sought by its application to have vested in it the estate in fee simple in a property, Unit 26, 38 Fielder Street, East Perth (Property) for the purpose of ANZ exercising its powers under a mortgage over the Property.
Although the matter was initially contested, ultimately, the parties filed a minute of consent orders and the court made orders in those terms. However, given the complexity of the issues, it is appropriate that I set out in these reasons the background and some analysis that led to the court's acceptance of the appropriateness of the orders agreed by the parties.

Background facts

The facts are not controversial and are set out in the affidavit of Ezra May, an ANZ case officer, of 5 June 2023. The facts that follow are taken from Mr May's affidavit.
The registered proprietor of the Property is Tri Star Group Pty Ltd (Tri Star). It is plain on the evidence that Tri Star held the Property solely in its capacity as trustee for the Terry Spiro Family Trust (Trust) since it became the registered proprietor on 20 September 2010. The Trust was established by a deed of settlement dated 24 June 1981 and the trustee changed its name to Tri Star on 10 September 1991.
On 17 January 2023, this court appointed the second respondent, Mr Quin as liquidator of Tri Star.
By clause 20 of the deed of settlement, the office of trustee is vacated if the trustee company enters into liquidation. Clause 21 provides for the appointment of a new trustee. On the evidence before the court, no new trustee was appointed. It is uncontroversial that Tri Star thereby became a bare trustee of the Property.
The Property is estimated to be worth $360,000. On the evidence before the court, I am satisfied the Property is vacant. The evidence also indicated that strata-related fee arrears have accumulated on the Property in excess of $200,000 for items such as strata levies, utilities and legal fees. Mr May's evidence was that these debts take priority over ANZ's debt although whether, and to the extent this is so, was not a matter that was explored.
By a written loan agreement between ANZ and Tri Star, ANZ agreed to lend the sum of $350,000 to Tri Star (Loan). Tri Star agreed to grant ANZ a registered mortgage over the Property as security for the Loan. The mortgage was registered with Landgate on 13 October 2014 (Mortgage). ANZ advanced the funds to Tri Star pursuant to the terms of the Loan and the Mortgage. The Loan and the Mortgage were entered into by Tri Star both in its own capacity and in its capacity as trustee of the Trust. The Loan was guaranteed by Terry Peter Spiro and Ellen Ann Spiro.
On 13 April 2018, Tri Star defaulted under the terms of the Loan. On 16 April 2018, ANZ sent a notice of termination and demand to Tri Star terminating the Loan. On 14 June 2018, ANZ issued a default notice to Tri Star under s 106 of the Transfer of Land Act 1893 (WA) requesting payment within one month. Payment was not made.
Tri Star and the guarantors have failed to pay the amounts due under the Loan. As at 17 January 2023, Tri Star was indebted to ANZ under the Loan in the amount of $616,939.32, that is, well in excess of the Property's value. As at 1 June 2023, the amount owing under the Loan was $649,839.91.
By a Form 525 Notice of disclaimer of onerous property dated 10 February 2023, Mr Quin as liquidator of Tri Star purportedly disclaimed the Property pursuant to s 568 on the basis that the Property 'is property of the company and consists of land burdened with onerous covenants'.
By affidavit dated 11 October 2023, the plaintiff filed evidence establishing that Tri Star was deregistered on 11 September 2023.

ANZ's position

It is clear from that overview of the circumstances that the value of the Property is wholly absorbed by the debt to ANZ and that ANZ wishes to exercise its rights under the Loan and the Mortgage to salvage whatever value it can from its security. To that end ANZ sought by its application to have vested in it ownership of the Property which Mr Quin as liquidator has disclaimed, so that it may realise its security.

The State's position

The first defendant is the State of Western Australia (State). That is so, because in the ordinary course, upon a liquidator disclaiming property of the company under s 568, it reverts to the State. Where real property is disclaimed, the interest of the fee simple owner 'escheats' to the Crown. That means the interest of the fee simple owner expires and reverts to the Crown in right of the State by its radical title based on the notion that in feudal times in certain circumstances (such as intestacy) real property would return to the lord of the fee or the Crown. The State is therefore a necessary party to the application under s 568F to have the Property vested in ANZ.
However, the State contends that because Tri Star held the Property in its capacity as trustee, Mr Quin did not have the power to disclaim the Property under s 568.

Applicable principles

To understand the State's contention it is necessary to turn to the relevant statutory provisions and then to an overview of the principles, particularly those which emerge from two decisions; the decision of the Full Court of the Federal Court in Jones (Liquidator) v Matrix Partners Pty Ltd Re Killarnee Civil and Concrete Contractors Pty Ltd (In Liq)[2018] FCAFC 40; 260 FCR 310,[1] and the decision of the High Court in Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524.[2]
[1] (Jones).
[2] (Carter Holt).
Section 568 provides, relevantly:
(1)Subject to this section, a liquidator of a company may at any time, on the company's behalf, by signed writing disclaim property of the company that consists of:
(a)land burdened with onerous covenants; or
(b)shares; or
(c)property that is unsaleable or is not readily saleable; or
(d)property that may give rise to a liability to pay money or some other onerous obligation; or
(e)property where it is reasonable to expect that the costs, charges and expenses that would be incurred in realising the property would exceed the proceeds of realising the property; or
(f)a contract;
(1A)A liquidator cannot disclaim a contract (other than an unprofitable contract or a lease of land) except with the leave of the Court.
(1B)On an application for leave under subsection (1A), the Court may:
(a)grant leave subject to such conditions; and
(b)make such orders in connection with matters arising under, or relating to, the contract;
as the Court considers just and equitable.
Section 568F provides:
(1)The Court may order that disclaimed property vest in, or be delivered to:
(a)a person entitled to the property; or
(b) a person in or to whom it seems to the Court appropriate that the property be vested or delivered; or
(c) a person as trustee for a person of a kind referred to in paragraph (a) or (b).
(2)The Court may make an order under subsection (1):
(a) on the application of a person who claims an interest in the property, or is under a liability in respect of the property that this Act has not discharged; and
(b)after hearing such persons as it thinks appropriate.
(3) Subject to subsection (4), where an order is made under subsection (1) vesting property, the property vests immediately, for the purposes of the order, without any conveyance, transfer or assignment.
(4) Where:
(a) a law of the Commonwealth or of a State or Territory requires the transfer of property vested by an order under subsection (1) to be registered; and
(b) that law enables the order to be registered;
the property vests in equity because of the order but does not vest at law until that law has been complied with.
Under s 568 what the liquidator is able to disclaim is 'property of the company'. The State contends that as the Property was held by Tri Star only as trustee, it was not 'property of the company' for the purposes of s 568 and therefore could not be disclaimed by the liquidator. It is necessary therefore to consider the meaning of those words in the context of a company that holds property only in the capacity of trustee. The principles set out below, were summarised and explained in Jones and Carter Holt.
Broadly speaking, the general application of the principles of trust law means that property held by a company on trust is not available for distribution to the company's creditors. At the same time, the trust is not a separate entity and therefore does not have a separate solvency status from the trustee. A trustee is personally liable for debts incurred as trustee whether or not the trustee contracted with creditors as a named trustee.
Where the trustee acting within its powers makes a contract with a third person in the course of the administration of the trust, although the trustee is ordinarily personally liable to the third person on the contract, it is entitled to indemnity out of the trust estate. The trustee is entitled to apply the trust property to discharge debts that were properly incurred by the trustee in the course of trust business. This is known as the trustee's right of indemnity or right of exoneration and confers upon the trustee a proprietary interest in the trust assets themselves. A trustee's rights of indemnity and exoneration persist even though it has been removed from office and holds the property as bare trustee.
The rights of a trustee in relation to trust assets, to the extent of the associated powers of indemnity, pass to a liquidator of a corporate trustee. The liquidator's power is limited in the same way as the trustee's power of exoneration by the terms of the power in the exercise of control over the trust assets.
The trustee's right of exoneration is a proprietary interest of the trustee that is held by the trustee in preference or priority to the beneficiaries' interests. The right and attendant proprietary interest is property of the trustee company. That is, the trust assets themselves are not property of the company, but the trustee's right of exoneration supported by the lien in the character of a proprietary interest, is.
In Jones, the Full Court of the Federal Court considered whether the insolvent trustee company's right of exoneration from trust assets was property of the company available to satisfy debts of all creditors of the company or only liabilities of the company undertaken in the carrying out of the trust. In that context, Allsop CJ said:[3]
Once one appreciates that the trustee's right of exoneration is a proprietary interest of the trustee that is held by the trustee in preference or priority to the beneficiaries' interests, it cannot be considered as other than property of the company. Not only is that conclusion required by Octavo Investments, but also by Buckle 192 CLR at 246 - 247 [49] ‑ [51] and Bruton Holdings Pty Ltd (in liq) v Cmr of Taxation [2009] HCA 32; 239 CLR 346 at 359 [43]. The trust assets are not property of the company, but the trustee's right of exoneration supported by the lien in the character of a proprietary interest is.
(emphasis added)
[3] Jones [69].
In the context of those principles, the Court was concerned with s 477(2)(c) which empowers a liquidator to sell 'property of the company'. Relevantly, Allsop CJ considered whether s 477(2)(c) empowered the liquidator of a trustee company to sell trust assets as 'property of the company'. In rejecting that proposition, Allsop CJ explained:[4]
Section 477(2)(c) should not be taken to refer to the sale or disposition of property which is not the property of the company, but which is trust property in which the trustee has a proprietary interest by way of interest or lien or charge to secure its right of exoneration. In such circumstances, the lien or charge is not being sold or disposed of, but the whole asset. It may well be that (as here) the size of the debt to the trust creditors is such that there will not be a relevant interest of the beneficiaries. That will not always be the case. Nevertheless, the assets that were held on trust are the subject of sale, not the right of exoneration or the lien or charge.
[4] Jones [89].
In this matter, the State contended that the reasoning in Jones that the trust asset was not property of the company that could be sold for the purposes of s 477(2)(c) leads necessarily to the conclusion that the Property was not property of Tri Star capable of being disclaimed under s 568.
The conceptual distinction discussed in Jones is reflected also in the High Court decision in Carter Holt. The High Court was concerned there with s 433 and relevantly whether trust assets held by the trustee company were property of the company coming into the hands of the receiver for the purposes of that section. Bell, Gaegler and Nettle JJ said:[5]
[I]t is necessary to keep in mind that the property constituted of the right of indemnity as such and the property constituted of the trust assets themselves are separate and distinct, albeit that the former confers a proprietary interest in the latter.
[5] Carter Holt [85].
That passage reflects the distinction drawn by Allsop CJ in Jones. However, the analysis of the High Court does not, in my view, necessarily lead to the conclusion that trust assets could never constitute 'property of the company' for some statutory purpose. Circumstances may be such that the trustee's right of indemnity may render assets of the trust or proceeds from the sale of such assets, property of the trustee for some statutory purpose.
At [82] Bell, Gaegler and Nettle JJ observed:
As has been understood at least since Maitland's explication of the trust, a trustee as legal owner of the trust assets has all the powers incidental to ownership subject only to the power of the beneficiaries to compel the trustee to exercise the trustee's powers in accordance with the terms of trust. Inasmuch as a court of equity will aid the beneficiaries in the enforcement of the terms of trust, the beneficiaries are described, especially in revenue contexts, as having a beneficial interest in, or occasionally even beneficial ownership of, the trust assets. The beneficiaries' interest is not, however, to be conceived of as cut out of the trustee's legal estate but rather as engrafted onto it as a restriction on the manner in which the trustee may deal with trust assets.
At [90] Bell, Gaegler and Nettle JJ continued:
In the winding up of a corporate trustee, the "property of the company" that is available for the payment of creditors includes so much of the trust assets as the company is entitled, in exercise of the company's right of indemnity as trustee, to apply in satisfaction of the claims of trust creditors. Thus, in this case, where the liabilities identified in s 556(1)(e) were trust liabilities, the "property of the company" that would have been available for the payment of creditors in the event of a winding up would have been so much of the trust assets as would be sufficient to pay or satisfy the claims of trust creditors. Because the trust assets were inventory, rather than money or an equivalent, and there was a deficiency, the whole of the receivership surplus was to be applied to priority "debts" and "amounts".
(emphasis added)
And then at [95] Bell, Gaegler and Nettle JJ said:
The liquidator of a company assumes control of the company's assets subject to equities, and, accordingly, must deal with assets held by the company as trustee in accordance with the terms of trust. But to the extent that the company has a beneficial interest in the trust assets, as it has by reason of the company's right of indemnity in respect of properly incurred trust obligations, the trust assets are property of the company available for the payment of creditors.
(emphasis added)
Kieffel CJ, Keane and Edelman JJ said:[6]
[T]he "trust assets" are the property of the company and are held by the Receivers, although only to the extent to which [the trustee] could use them for its own benefit, relevantly by [the trustee]'s power of indemnity. Further, the statutory expression "out of the property" cannot mean that the payment must only be made immediately from the trust rights. That would preclude even the conversion of non-monetary trust rights to money and then payment of the cash. "Out of the property" must include payments made "by the use of the property". Hence, if the trustee can use its rights in relation to the trust assets, including its power of indemnity, to sell the assets for the purpose of exoneration, then a payment of a trust creditor directly from the trust assets by use of the power of exoneration is a payment made "out of" the trustee's rights in relation to the trust assets. A payment by the Receivers of trust creditors by use of [the trustee]'s power of exoneration must be a payment "out of the property" in the Receivers' hands.
(emphasis added)
[6] Carter Holt [55].
And in their Honours' conclusion they said:[7]
The fundamental reason why this appeal must be dismissed flows from an appreciation that s 433 of the Corporations Act is not based upon a conception of a trustee company's rights that draws a sharp division between, on the one hand, the rights held on trust and, on the other hand, the trustee's powers in association with those rights, here the power of exoneration. The rights of the trustee, collectively so viewed, can be used for the benefit of the trustee in discharging debts to trust creditors and, to that extent, when the subject of a circulating security interest they are property of the company coming into the hands of a receiver.
[7] Carter Holt [57].

Both Jones and Carter Holt were considered by Riordan J in Break Fast Investments Pty Ltd v Sclavenitis [2022] VSC 288; 67 VR 132.[8] In that matter, a trustee company had guaranteed a debt. The principal debtor defaulted. The trustee company paid out under the guarantee which gave it a right of indemnity against the principal debtor. That right was held by the company as a trust asset. A liquidator was appointed to the trustee company who purported to assign to the plaintiff the company's right of indemnity against the principal debtor. The plaintiff sued to enforce the assigned right. The first defendant contended that the assignment was ineffective because, upon the liquidator's appointment the trustee company had become a bare trustee of the guarantor's right of indemnity against the principal debtor. Section 477(2)(c) did not empower the liquidator of the company as bare trustee to sell or assign the right. Consistently with the distinction discussed in Jones, the trust assets were not property of the company and s 477(2)(c) did not alter that position.
[8] (Break Fast).
Riordan J then considered the consequences of a bare trustee nevertheless purporting to sell a trust asset to a third party. His Honour concluded that the sale was not void. It was effective, but constituted a breach of trust, and the purchaser's rights may be subject to the grant of equitable remedies. Riordan J said:[9]
In summary, a sale by a bare trustee in breach of trust is effective to convey the legal title even if the purchaser has notice; but the purchaser will be subject to a court of equity granting remedies including those referred to in the previous paragraph.
The position of a bare trustee is to be contrasted with a purported sale by a non-owner of property that, in accordance with the principle of nemo dat quod non habet, usually effects no transfer of property rights to the would-be purchaser.

Conclusion
The first defendant's submission that the sale by a bare trustee is a nullity is contrary to the above analysis and was made without reference to any authority. It is also inconsistent with the authorities that have considered the effect of sales of trust assets by liquidators of trustee companies, after their removal from office. In each of the cited cases, the liquidators of former trustees, who sold assets without power, were excused from their breach of duty under s 1318 of the Act. It was not suggested, in any of the authorities, that the sales made without power were void.
Accordingly, the assignment […] by the liquidator of the [trustee company] was effective to transfer the legal title.
[9] Break Fast [55] - [58].

Riordan J observed that following both Jones and Carter Holt, Moshinsky J set out what his Honour described as the settled state of the law in respect of s 477(2)(c) in Re Cremin, Brimson Pty Ltd (2019) 136 ACSR 649[10] in a passage which has been widely adopted:[11]
[O]n 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.
[10] (Cremin).
[11] Cremin [49].
From [67], Riordan dealt with a submission that passages in Carter Holt were inconsistent with (and therefore rendered incorrect) the statement of principle as distilled by Moshinsky J and now widely adopted. That appears to be because aspects of the analysis in Carter Holt suggested the trustee company has powers of ownership over trust assets that might bring trust assets with the compass of property of the trustee company. Riordan J rejected the suggestion that any passage in Carter Holt was inconsistent with the settled position in respect of s 477(2)(c) as expressed by Moshinsky J in Cremin. Riordan J said:[12]
The issue before the Court in Carter Holt was not related to the effect of s 477 of the Act. Rather, it concerned the interrelationship of a corporation's trustee obligation and the priority regime for payment of creditors under s 433 and 556.
[12] Break Fast [69].
The analysis of Riordan J illustrates in my respectful view the potential difficulty in adopting the understanding of the notion of 'property of the company' for the purposes of s 477(2)(c) and applying the same understanding of that term without qualification or analysis in the context of a different statutory provision.
That brings me to the position pressed by the State in its written and oral submissions. As noted, the State contends that the liquidator's disclaimer of the Property was ineffective because the Property was an asset of the Trust, not property of the company Tri Star. The liquidator was therefore not empowered to disclaim the Property.
For the same reason the State urges me to conclude that the decision of Colvin J in AFSH Nominees Pty Ltd v State of Western Australia [2022] FCA 1168,[13] was plainly wrong. In AFSH, Colvin J considered an application in similar circumstances to this matter. A company (NII) held a property in Port Hedland as trustee. The property was mortgaged to AFSH. The sale of the property was not expected to produce a surplus; its only value was the interest of AFSH under the mortgage. Under the terms of the trust deed, NII's position as trustee was automatically terminated on an application or resolution to wind up the company. A resolution was passed to wind up NII. There was no replacement trustee. The liquidator of NII purported to disclaim both the Port Hedland Property and the mortgage in favour of AFSH under s 568. AFSH then brought an application for the vesting in it of the Port Hedland Property in order to realise its interest as mortgagee.
[13] (AFSH).
Colvin J set out the usual principle that upon disclaimer, the property escheats to the State. However, his Honour went on to explain that while the interest of the fee simple owner expires, charges over land do not go out of existence and the land reverts to the Crown subject to any such charges. Thus, a mortgagee's rights under a registered mortgage in respect of a property are not affected save as is necessary to release the disclaiming company from liability. The Crown in right of the State has no obligation under the mortgage. It is therefore necessary to appreciate that the ancient doctrine of 'escheat' is subject to and must be understood in light of the court's statutory power (now under s 568F) to vest disclaimed property in a person the court considers appropriate. It follows that the disclaimer of real property by a company liquidator does not operate so as to defeat the interest of the mortgagee, but the mortgagee must obtain relief under s 568F if it is to be able to be in a position to act as if its mortgage was enforceable despite the escheatment to the Crown effected by the disclaimer of the property.
Colvin J concluded that the liquidator had no authority to disclaim the registered mortgage because, as explained, charges over the property do not go out of existence and the mortgagee's rights were preserved over the property itself (and only extinguished to release the disclaiming company itself from liability). However, it appears Colvin J had no difficulty proceeding on the basis that the liquidator was capable of disclaiming the fee simple ownership of the company even though the company only held the property in its capacity as trustee. Colvin J concluded (as noted above, in circumstances not dissimilar to this matter):[14]
AFSH has demonstrated that it is entitled to relief under s 568F. In particular, the estimated value of the PH Property as at 14 February 2022 was $390,000 when the total debt secured by the mortgage was almost $600,000. But for the disclaimer AFSH would have been able to take steps to enforce its mortgage. Relevant default notices have been served and there is evidence to establish the defaults.
[14] AFSH [22].
In the result Colvin J ordered that the liquidator's purported disclaimer of the mortgage (as distinct from the Port Hedland Property itself) was ineffective. Colvin J made orders under s 568F vesting the Port Hedland Property in AFSH for the purpose of AFSH exercising its powers as mortgagee.
In contending that Colvin J's conclusion that the disclaimer of the Port Hedland Property itself was effective, was wrong, the State referred also to the decision of O'Callaghan J in Brooks in the matter of Tease Hair & Spa (in liq.) [2022] FCA 457.[15] In that matter the company held assets at all times as trustee. A liquidator was appointed to the trustee company under s 491 and s 499. Under the terms of the trust instrument the office of trustee was automatically vacated. No replacement trustee was appointed. The liquidator disclaimed two vehicles in the trustee company's name. The liquidator brought an application for the court to confer on the trustee company (through the liquidator) the necessary powers to wind up the trust. That was said to be necessary because the automatic vacation of the trusteeship under the trust instrument left the trustee company without power to deal with trust assets. Citing the established principle articulated in Cremin, O'Callaghan J explained that the orders were necessary because 'a liquidator of an insolvent former corporate trustee cannot sell trust property', because 'trust assets are not property of the insolvent company, the sale of which would be authorised by the power of sale in s 477(2)(c) of the Corporations Act, but rather trust property in which the corporate trustee has a proprietary interest'.[16] In the circumstances, O'Callaghan J was persuaded that it was appropriate to confer the necessary powers as 'it is well accepted that the court can make orders under State trustee legislation to confer a corporate trustee with the relevant powers to deal with trust assets',[17] and that extended to retrospective relief.[18] O'Callaghan J was dealing with s 47 of the Trustee Act 1898 (Tas). In this jurisdiction the relevant provision is s 89 of the Trustees Act 1962 (WA).
[15] (Brooks).
[16] Brooks [9].
[17] Brooks [10].
[18] Brooks [13].
It is at least implicit in the decision in Brooks that the liquidator's disclaimer was ineffective in the absence of bespoke orders under the relevant trustee legislation. It also appears that that position was based on the proposition contended for in this matter by the State: that the absence of a corporate trustee's power under s 477(2)(c) led to the conclusion that the liquidator of a corporate trustee similarly lacked power to disclaim trust assets under s 568.
The State contended that the decisions in AFSH and Brooks are relevantly irreconcilable, and that the former is wrong, and the latter is right. The State submitted that the effect of the authorities discussed above is that a liquidator of a trustee company, in the absence of orders conferring power under relevant trustee legislation, has no power to disclaim trust assets under s 568, and Colvin J was in error to proceed on any basis to the contrary.
On that basis, the State's position was that in the absence of the grant of retrospective relief under s 89 of the Trustees Act, to validate the purported disclaimer of the Property, the relief sought by ANZ could not be granted. The State did not oppose the grant of relief under s 89 and indeed pointed to cases supporting its deployment in these circumstances, including Brooks (which as explained above, included relief in respect of disclaimers) and Anderson as liquidator of G & G Contractors Pty Ltd v Aravanis [2021] FCA 1185 (which concerned relief relating to the sale of assets).

ANZ's amended position

On the afternoon of 11 October 2023, the day before the hearing of 12 October 2023, ANZ filed an amended originating process in which it abandoned the relief it sought, and sought instead purely declaratory relief that the purported disclaimer of the Property by the liquidator was invalid. That turn of events was explained at the opening of the hearing by counsel for ANZ who advised that he had been recently engaged and had come to the view that the contention advanced by the State regarding the disclaimer was correct. Moreover, as noted above, the affidavit evidence of ANZ filed on 11 October 2023 established that the company had been deregistered. On that basis, counsel submitted that the position was governed by s 601AD(1A) the effect of which was that the Property vested in the Commonwealth.

Disposition and orders

In the course of submissions and exchanges with counsel, I explained that I was not (at least yet) persuaded to the position adopted by both counsel that the purported disclaimer was ineffective and that the decision of Colvin J in AFSH was plainly wrong.[19] Rather, it seemed to me from the passages set out above from the observations of the High Court in Carter Holt, that in the present circumstances it did not inevitably follow that for the purposes of s 568, the Property was not 'property of the company'. Moreover, consistently with the observation in paragraph [38] above, the decision of Riordan J gave me pause in concluding that the principles governing the notion of 'property of the company' for the purposes of s 477(2)(c) were invariably applicable in all circumstances to s 568.
[19] As to which, see the remarks of French J in Hicks v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 757; and Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 [2021] FCAFC 153; 287 FCR 181 per Allsop CJ at [30].
It also emerged in the course of submissions and exchanges with counsel that:
(a)It was agreed by both parties that the court had the power, and it would be appropriate, to make orders under s 89 of the Trustees Act conferring power on the liquidator retrospectively to validate the disclaimer of the Property;
(b)If orders to that effect were made, the court had power and it would be appropriate to make the vesting orders initially sought by ANZ in respect of the Property;
(c)Such a course would have far more utility than a considered and conclusive (and invariably lengthy) decision at first instance by this court as to the merits of the decision in AFSH.
In the circumstances, I invited the parties to confer and give consideration to agreeing orders that would reflect such a course as well as the most efficient use of the parties' and the court's resources. By a signed minute of consent orders, the parties agreed to orders in the following terms:
1.If and to the extent required, pursuant to section 89 of the Trustees Act 1962 (WA), the second defendant be conferred with the power as and from the date of his appointment as liquidator of Tri Star Group Pty Ltd ACN 008 982 027 (Company) on 17 January 2023 to disclaim the property known as Unit 26, 38 Fielder Street, East Perth WA 6004, which is more particularly described as Lot 26 on Strata Plan 54685 and being the whole of the land comprised in Certificate of Title Volume 2714 Folio 426 (Fielder Property).
2.Pursuant to section 568F of the Corporations Act 2001 (Cth), the estate in fee simple in the Fielder Property shall vest in the plaintiff for the purposes of the plaintiff exercising its powers as mortgagee under the Transfer of Land Act 1893 (WA) and registered mortgage number M846076 (Fielder Mortgage), subject to the following conditions:
(a)for the purposes of any dealings with the Fielder Property the plaintiff may (but is not bound to) act as if it were exercising its power as mortgagee and as mortgagee in possession under the Transfer of Land Act 1893 (WA) and under the Fielder Mortgage, except that it is deemed to have served any additional default notices pursuant to section 106 Transfer of Land Act 1893 (WA);
(b)the plaintiff is entitled to calculate the entirety of the debt secured and owing pursuant to the Fielder Mortgage as including all monies that would have been secured by the Fielder Mortgage had the Second defendant not disclaimed the Fielder Property, and to deduct and retain for its own absolute use and property such amount from any proceeds of sale of the Fielder Property as if it were money secured by the Fielder Mortgage (including the costs of this application and all costs properly incurred in selling, and incidental to the sale of, the Fielder Property);
(c)the proceeds of sale from the Fielder Property shall be applied as follows:
(i)first, in payment of any statutory charges affecting the Fielder Property which the relevant statute provides are payable in priority to the plaintiff (in its capacity as a mortgagee);
(ii)secondly, in payment of all costs, charges and expenses properly incurred by the plaintiff in selling, and incidental to the sale of or any attempted sale of, the Fielder Property;
(iii)thirdly, in discharge of the debt owed to the plaintiff as secured by the Fielder Mortgage (including its costs of this application);
(iv)fourthly, in payment of any subsequent mortgages or caveats (if any);
(v)the residue (if any) of the proceeds so received must be paid into the Court; and
(vi)if the Court holds any surplus proceeds two years after receipt by it of those proceeds, they shall be paid to the Crown in right of the State of Western Australia.
3.The plaintiff serve a sealed copy of these orders on the Commonwealth within 2 business days.
4.The Commonwealth have liberty to apply to the Court within 28 days from the date of these orders to vary or discharge these orders on the giving of 3 business days' written notice to the plaintiff.
5.There be no order as to costs.
In the circumstances and against the background and issues set out in these reasons, I agreed that the orders were appropriate and accordingly the court made orders in those terms.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
YM
Associate to the Honourable Justice Solomon
30 OCTOBER 2023