Carrello v Formwest (WA) Pty Ltd (Administrators Appointed)
[2024] WASC 189
•20 MAY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CARRELLO -v- FORMWEST (WA) PTY LTD (ADMINISTRATORS APPOINTED) [2024] WASC 189
CORAM: HILL J
HEARD: ON THE PAPERS
DELIVERED : 9 MAY 2024
PUBLISHED : 20 MAY 2024
FILE NO/S: COR 60 of 2024
BETWEEN: GIOVANNI MAURIZIO CARRELLO
Plaintiff
AND
FORMWEST (WA) PTY LTD (ADMINISTRATORS APPOINTED)
Defendant
Catchwords:
Corporations - External administration - Winding up - Where company in liquidation is bare trustee - Plaintiff appointed as administrator and liquidator - Application for directions in respect of trust property - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 556, sch 2 s 90-15
Supreme Court (Corporations) Rules 2004 (WA) r 2.8
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Murfett Legal |
| Defendant | : | No appearance |
Cases referred to in decision:
Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524
Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677
Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310
HILL J:
On 19 March 2024, the plaintiff, Giovanni Maurizio Carrello, was appointed as administrator of the defendant, Formwest (WA) Pty Ltd (ACN 123 038 871) (Administrator) and on 3 May 2024, appointed as liquidator (Liquidator). Prior to his appointment, Formwest (WA) Pty Ltd (Company) was the trustee of the Formwest (WA) Trust (Trust).
On 10 April 2024, the plaintiff filed an originating process in this court seeking various orders as to the property and assets of the Trust.
The originating process was initially listed for hearing on 19 April 2024. Prior to the hearing, an adjournment was sought until after the second creditors' meeting. This request was acceded to and the originating process adjourned until 10 May 2024.
On 8 May 2024, after filing an additional affidavit and minute of proposed orders, the solicitors for the plaintiff requested the matter be dealt with on the papers and the hearing vacated. On 9 May 2024, I made orders in terms of the originating process subject to a minor amendment. These are my reasons for making these orders.
Factual background
Three affidavits were filed by the plaintiff in support of his application: an affidavit of the plaintiff filed 12 April 2024 and two affidavits of Amanda Fay Hayes filed 17 April 2024 and 8 May 2024. The first affidavit of Ms Hayes confirmed service of the application on the Australian Securities and Investments Commission (ASIC). I also had the benefit of written submissions filed 17 April 2024.
The Company was incorporated on 7 December 2006.[1] A current and historical company extract obtained from records of ASIC discloses that the Company's sole director and company secretary is Kerry Paul Williams. Further, it discloses that the sole shareholder of the Company is Lisa Alice Williams.[2]
[1] Affidavit of Giovanni Maurizio Carrello filed 12 April 2024, 'GMC-2'.
[2] Affidavit of Giovanni Maurizio Carrello filed 12 April 2024, 'GMC-2'.
On 19 March 2024, Mr Williams, in his capacity as sole director of the Company, passed a resolution to appoint Mr Carrello as administrator of the Company in accordance with s 436A of the Corporations Act 2001 (Cth) (Act).[3]
[3] Affidavit of Giovanni Maurizio Carrello filed 12 April 2024, 'GMC-1'.
Based on the enquires undertaken to date, the plaintiff believes:[4]
(a)the Company was the trustee of the Trust from 19 December 2006 to the date of the appointment of the Liquidator to the Company;
(b)the Company did not operate any business or conduct any activities in any capacity other than as trustee of the Trust, including in its own right;
(c)the only assets were plant and equipment, trade debtors, the balance of a bank account and the balance of related party loan accounts. He estimates the assets are in the order of $750,000;
(d)the creditors are in excess of $1.6 million; and
(e)the Company did not act as trustee of any other trust and does not own any assets in its own right or as trustee of any other trust.
[4] Affidavit of Giovanni Maurizio Carrello filed 12 April 2024 [8], [14].
Among the books and records of the Company is a copy of the Trust deed. The Trust deed discloses that the Trust was established on 19 December 2006.[5] On 19 March 2024, the Company was appointed as trustee of the Trust, following the retirement of the previous trustee.[6]
[5] Affidavit of Giovanni Maurizio Carrello filed 12 April 2024, 'GMC-8'.
[6] Affidavit of Giovanni Maurizio Carrello filed 12 April 2024 [5], 'GMC-1'.
Pursuant to cl 47 of the Trust deed, on the appointment of a liquidator, the appointment of the Company as trustee of the Trust automatically terminated.
On 24 April 2024, Mr Carrello sent notice of the second creditors' meeting and a copy of his report to the Company's creditors. On 3 May 2024, at the second creditors' meeting, the creditors of the defendant passed a resolution to appoint Mr Carrello as liquidator of the Company.[7]
[7] Affidavit of Amanda Fay Hayes filed 8 May 2024 [7], 'AFH-2'.
Service of application
I am satisfied that ASIC has been served with copies of the originating process and the affidavit of Mr Carrello,[8] as required by r 2.8 of the Supreme Court (Corporations) Rules 2004 (WA).
[8] Affidavit of Amanda Fay Hayes filed 17 April 2024 [3], 'AFH-1'.
No one gave notice to the plaintiff's solicitors[9] or to the court that they wish to be heard on the application.
[9] Affidavit of Amanda Fay Hayes filed 17 April 2024 [7].
Legal principles for appointment of receiver
The legal principles that govern this application are well known and can be summarised as follows.
Where a corporate trustee enters external administration, the company's right of indemnity and accompanying equitable lien over the assets of the trust survives the appointment. Where a company has been removed as trustee of the trust by reason of the terms of the trust deed, the company retains the right to holds trust assets as bare trustee. However, the liquidator of the company does not have the power to sell those assets to satisfy that indemnity absent intervention by the court.[10]
[10] See Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq)[2018] FCAFC 40; (2018) 260 FCR 310 [44], [85] ‑ [91] (Allsop CJ), [139], [142] (Siopis J), [198] (Farrell J); Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 [22] - [28] (Gordon J).
The liquidator, in essence, has two options. First, to apply for an order that confers power on the liquidator to deal with the assets of the trust or, second, to apply to be appointed as receiver and manager of the trust.
In this case, the Liquidator seeks orders under s 90‑15 of sch 2 of the Act (Insolvency Practice Schedule) to facilitate his dealing with the assets of the Company to enable the winding up of the Company and the Trust to proceed.
Section 90-15(1) of the Insolvency Practice Schedule provides that the court may make 'such orders as it thinks fit in relation to the external administration of a company'. The power is broad and is at least as extensive as the powers formerly available under s 479(3) and s 511 of the Act.
Once the sale of the trust's assets has occurred, the proceeds may be appropriated by way of exoneration as part of the conduct of the liquidation in accordance with the statutory priorities set out in pt 5.6, div 6 of the Act.[11] This includes the costs of the liquidation.
[11] Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [55] - [58] (Kiefel CJ, Keane & Edelman JJ), [95] - [97] (Bell, Gageler & Nettle JJ), [171] (Gordon J).
Disposition
On the evidence before me, I accept that by reason of cl 47 of the Trust deed, on the appointment of Mr Carrello as Liquidator, the appointment of the Company as trustee of the Trust was automatically terminated. As a consequence, the Company is now a bare trustee of the Trust's assets and does not have the power to sell or otherwise deal with the assets of the Trust. No new trustee has been appointed.
I am satisfied that the Company only acted as trustee of the Trust and in no other capacity, and that all Trust assets held by the Company were held in its capacity as trustee of the Trust.
The orders sought by the plaintiff are consistent with the legal principles that I have outlined above. On the evidence before the court, the entitlement of the Company to exoneration from the assets of the Trust far exceeds the assets of the Trust which are limited. In these circumstances, I accept that it is expedient for the plaintiff to have the power to sell or otherwise deal with the assets of the Trust and that the orders sought will facilitate his dealing with the assets of the defendant to enable the winding up of both the Company and Trust to proceed.
The form of orders sought in terms of service of the court's orders and the allowance for any aggrieved party to apply to this court to vacate or vary these orders protects the creditors of the Company from any possible prejudice that might otherwise arise from this application.
In relation to the orders sought under s 90-15 of the Insolvency Practice Schedule, I accept Mr Carrello's evidence that the Company has acquired assets and incurred liabilities only as trustee of the Trust. For this reason, it is appropriate to make orders that the Liquidator will be acting properly and are justified in proceeding to conduct the affairs of the Trust on the basis that the business and assets of the Company comprised the assets of the Trust.
Finally, in relation to the costs of the application, the Liquidator sought orders for the costs of the application be costs in the administration or winding up of the plaintiff and otherwise be paid from the Trust property. In my view, this is the appropriate costs order.
Conclusion
For these reasons, I was satisfied it was appropriate to make the orders which are annexed to these reasons marked 'Annexure A'.
Annexure A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KC
Associate to the Honourable Justice Hill
20 MAY 2024
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