Condon, in the matter of Nicolas Criniti Pty Ltd (in liquidation)
[2020] FCA 1339
•16 September 2020
FEDERAL COURT OF AUSTRALIA
Condon, in the matter of Nicolas Criniti Pty Ltd (in liquidation) [2020] FCA 1339
File number: NSD 1028 of 2020 Judgment of: YATES J Date of judgment: 16 September 2020 Catchwords: CORPORATIONS – application by liquidator for appointment as receiver and manager of trust property pursuant to s 57 of the Federal Court of Australia Act1976 (Cth) Legislation: Corporations Act 2001 (Cth) s 477(2)(c)
Federal Court of Australia Act1976 (Cth) s 57
Cases cited: Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103
Jones (Liquidator) v Matrix Partners Pty Ltd,in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liquidation) FCAFC 40; 260 FCR 310
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 7 Date of last submission: 16 September 2020 Date of hearing: Determined on the papers Counsel for the Plaintiff: Mr J R Anderson Solicitor for the Plaintiff: Bartels Business Lawyers ORDERS
NSD 1028 of 2020 IN THE MATTER OF NICOLAS CRINITI PTY LTD (IN LIQUIDATION) ACN 603 457 772
SCHON GREGORY CONDON AS LIQUIDATOR OF NICOLAS CRINITI PTY LTD (IN LIQUIDATION) ACN 603 457 772
Plaintiff
ORDER MADE BY:
YATES J
DATE OF ORDER:
16 SEPTEMBER 2020
THE COURT ORDERS THAT:
1.Pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth), the plaintiff be appointed as receiver and manager (receiver) of the property owned by Nicolas Criniti Pty Ltd (in liquidation) (ACN 603 457 772) (Company) as trustee for the Bridge Road Unit Trust (Trust) without security.
2.The receiver have all of the powers under s 420 of the Corporations Act 2001 (Cth), as if the reference in that section to "the corporation" were a reference to "the Trust" including, without limitation, the power to do all things necessary and convenient to realise the property of the Trust.
3.The receiver’s costs, expenses and remuneration in connection with the receivership be paid from the property of the Trust.
4.The plaintiff's costs of and incidental to this application be costs in the liquidation of the Company.
5.Liberty to apply be granted to the plaintiff including, if necessary, for approval of his remuneration as liquidator of the Company.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
YATES J:
The plaintiff, Mr Condon, is the liquidator of Nicolas Criniti Pty Ltd (in liquidation) (the company). By an originating process filed on 16 September 2020 he seeks, amongst other relief, an order pursuant to s 57 of the Federal Court of Australia Act1976 (Cth) that he be appointed as receiver and manager of the property of the Bridge Road Unit Trust, which is presently held by the company as a bare trustee.
On 22 November 2019, Mr Condon was appointed as administrator of the company. On 3 December 2019, receivers and managers of the company’s property were appointed by a secured creditor, AMAL Trustees Pty Ltd (AMAL). On 24 February 2020, the company’s creditors resolved that the company be wound up and that Mr Condon be appointed as liquidator. On 3 September 2020, Mr Condon was informed by the receivers and managers that their receivership had been finalised and that they intended to distribute/transfer the surplus assets of the receivership to him as the company’s liquidator. Mr Condon is now in receipt of cash in the sum of $818,804.94 and a home unit property with an estimated value of $425,000.
Based on his investigations, first as administrator and then as liquidator, Mr Condon has come to the view that the company’s only business has been to act as trustee of the Bridge Road Unit Trust. Its business, in this capacity, included developing land in Bridge Road at Westmead, New South Wales into a home unit complex comprising 27 home units. The company’s financial difficulties appear to have arisen from a dispute between the company and the builder it had engaged to carry out that project. The home unit property to which I have referred is part of that complex.
The deed creating the Bridge Road Unit Trust was executed on 19 December 2014. It contains a provision to the effect that if the trustee goes into liquidation (except for the purposes of amalgamation or reconstruction) or if a receiver is appointed, the trustee will cease to hold its office. The deed also creates particular rights of indemnity in favour of the trustee.
As a consequence of the appointment of the receivers and managers by AMAL, the company’s office as trustee of the Bridge Road Unit Trust has ceased. No new trustee has been appointed. Therefore, the company now holds the property of the trust as a bare trustee. Although its rights of indemnity—its rights of reimbursement and exoneration—out of the property of the trust is secured by an equitable lien or charge, that lien or charge in respect of non-cash property does not confer a right of sale. The company’s right of indemnity in respect of that property is only enforceable by a court order for sale or by the appointment of a receiver with a power of sale: Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103 at [45]; Jones (Liquidator) v Matrix Partners Pty Ltd,in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liquidation) [2018] FCAFC 40; 260 FCR 310 at [44]. It is to be noted in this connection that the trust property held by the company as a bare trustee does not constitute “property of the company” within the meaning of s 477(2)(c) of the Corporations Act 2001 (Cth), which confers a general power of sale on a liquidator.
Mr Condon seeks his appointment as receiver and manager of the property of the Bridge Road Unit Trust to enable him to sell the home unit and distribute the sale proceeds, along with the other (cash) trust property. It has not been necessary for him to deal with the realisation of the trust property before now because of the appointment of the receivers and managers by AMAL on 3 December 2019. As control of the company’s property had been assumed by the receivers and managers, Mr Condon formed the view that it was prudent to await the outcome of that receivership to determine if any residual assets remained, over which his appointment as receiver might be necessary. As I have noted, the receivership commenced by AMAL only came to an end recently.
I am satisfied that it is appropriate that Mr Condon be appointed as receiver and manager of the property of the Bridge Road Unit Trust, with the power of sale. I am also satisfied that it is appropriate that the ancillary relief set out in the originating process be granted. Orders have been made accordingly.
I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates. Associate:
Dated: 17 September 2020
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