Holden v Monpetit Soler Pty Ltd
[2024] VSC 394
•2 July 2024 (ex tempore)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2024 02425
IN THE MATTER OF MONPETIT SOLER PROPERTY PTY LTD (IN LIQUIDATION) (ACN 608 172 390) (AS TRUSTEE FOR THE MONPETIT PROPERTY TRUST)
BETWEEN
| TIMOTHY MARK SHUTTLEWORTH HOLDEN (IN HIS CAPACITY AS LIQUIDATOR OF MONPETIT SOLER PROPERTY PTY LTD (IN LIQUIDATION) (ACN 608 172 390) (AS TRUSTEE FOR THE MONPETIT PROPERTY TRUST)) | First Plaintiff |
| and | |
| MONPETIT SOLER PROPERTY PTY LTD (IN LIQUIDATION) (ACN 608 172 390) (AS TRUSTEE FOR THE MONPETIT PROPERTY TRUST) | Second Plaintiff |
| v | |
| MONPETIT SOLER PTY LTD (ACN 605 601 769) (AS TRUSTEE FOR THE MONPETIT SUPERANNUATION FUND) | Defendant |
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JUDGE: | Delany J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 July 2024 |
DATE OF RULING: | 2 July 2024 (ex tempore) |
CASE MAY BE CITED AS: | Holden v Monpetit Soler Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2024] VSC 394 |
CORPORATIONS – Application for orders for external administration – s 90-15 Insolvency Practice Schedule (Corporations) (Schedule 2 to the Corporations Act 2001 (Cth)) – Application by liquidator for appointment as receiver and manager – s 37(1) Supreme Court Act 1986 (Vic) – Rule 39.07 of the Supreme Court (General Civil Procedure) Rules 2015 – Order as to remuneration, costs and expenses of liquidator – Priority payment under s 556(1)(b) of the Corporations Act 2001 (Cth) – Superannuation Industry (Supervision) Act 1993 (Cth), s 126K – Resignation of Trustee.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | N Frenkel | Atticus Lawyers Pty Ltd |
HIS HONOUR:
On 6 October 2023, Mr Timothy Mark Shuttleworth Holden (‘the Liquidator’) was appointed liquidator of Mon Petit Soler Property Pty Ltd (in liq) (‘MS Property’) pursuant to s 472(1) of the Corporations Act 2001 (Cth) (‘the Act’).
On 1 April 2015, the Monpetit Superannuation Fund (‘MSF’), a self-managed superannuation fund, was established by a SMSF Trust Deed dated 1 April 2015 (‘SMSF Trust Deed’). The initial trustees of the MSF were Sevdie Soler and Johnmark Soler, who were and are also the only members of the MSF. By a Deed dated 15 May 2015, the individual trustees resigned and were replaced as trustee of the MSF by Monpetit Soler Pty Ltd (ACN 605 601 769) (‘MS’).
MS Property was incorporated on 10 September 2015. Its directors were also Sevdie Soler and Johnmark Soler.
On 28 October 2015, MS Property became the registered proprietor of a property at 35 Keilor Road, Essendon, Victoria (‘the Property’). The Liquidator reports that the Property was purchased in 2015 for $309,000. It consists of a strata retail / office unit located on the ground floor of a mixed use development. At the time it was registered as proprietor and now the interest of MS Property is subject to a registered mortgage in favour of Westpac Banking Corporation.
The circumstances in which MS Property came to be registered as the proprietor of the Property are material to and explain what lies behind the present application.
By a SMSF Side Deed dated 23 September 2015 between MS Property, MS, Sevdie and Johnmark Soler (in their capacities as directors of SMSF trustee, SMSF beneficiaries and as directors of the security custodian, a reference to MS Property) and Westpac Banking Corporation (‘SMSF Side Deed’), Westpac agreed to loan funds to MS (as trustee for the MSF) to enable MS Property to purchase the Property as trustee for MS and as security custodian.
The SMSF Side Deed refers to a Deed of Trust establishing the trust between MS Property and MS. An unsigned copy of the Property Trust Deed between MS Property and MS dated 2015 (‘Property Trust Deed’) provides evidence that MS Property agreed to establish the Monpetit Property Trust (‘MPT’) and to purchase the Property as trustee for MS, in turn, as trustee for the MSF.
While the plaintiffs have been unable to obtain a signed version of the Property Trust Deed consistent with the provisions of that deed, the fact that MS Property holds the Property on trust for the trustee of the MSF is apparent from the terms of the SMSF Side Deed and from the conduct of the relevant parties. At all times, the parties to the SMSF Side Deed have proceeded on the basis that the Property Trust Deed had been signed and that MS Property is and was the security custodian and the bare trustee of the Property for MS (as trustee for the MSF), pursuant to the MPT.
Clause 4 of the Property Trust Deed provides a right of indemnity in favour of the trustee out of the property of the Trust, limited to the Property itself. The Property Trust Deed is silent about what is to occur should the trustee, MS Property, cease to exist as a corporation or be placed into liquidation.
On 1 February 2021, MS Property was deregistered by ASIC pursuant to section 601AB of the Act.
On 11 July 2023, the Owners Corporation in respect of the Property filed an application in this Court in proceeding S ECI 2023 03033, seeking, amongst other things, to reinstate the registration of MS Property and, upon reinstatement, the winding up of MS Property pursuant to s 461(1)(k) of the Act. It was this application by the Owners Corporation that led to the Court making orders on 6 October 2024 winding up MS Property and appointing Mr Holden as the liquidator.
The plaintiffs seek relief as follows:
(a) that it is advised and directed that the Liquidator is justified in causing MS Property to resign as trustee of the trust known as the Monpetit Property Trust, pursuant to which the MS Property holds the property known as Ground Floor, 35 Keilor Road, Essendon, Victoria, on trust for MS. This order is sought pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (Schedule 2 to the Corporations Act 2001 (Cth)) (‘IPS’);
(b) that it is advised and directed that the Liquidator is justified in applying to the Court to be appointed, without security, as receiver and manager over the Property;
(c) that the Liquidator is appointed, without security, as receiver and manager over the Property;
(d) the need for the receiver and manager to give and file a guarantee under rule 39.05 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) be dispensed with;
(e) the need for the receiver and manager to submit accounts under rule 39.07 of the Rules be dispensed with;
(f) a declaration that the receiver and manager has all the powers set out in s 420 of the Act including the power to sell the Property and to apply the proceeds of sale to pay creditors of MS Property;
(g) a declaration that MS Property Pty Ltd’s sole activity was to act as the bare trustee of the MPT and the creditors of MS Property Pty Ltd are creditors of the MPT;
(h) the receiver and manager be entitled to remuneration calculated in accordance with the rates set out on page 117 of exhibit “TH-1” to the affidavit of Timothy Mark Shuttleworth Holden sworn on 16 May 2024; and
(i) the plaintiffs’ costs of this application be paid out of the proceeds of the sale of the Property as a priority payment pursuant to s 556(1)(b) of the Act.
The plaintiffs have given notice of this application to the defendant, to ASIC and to the directors of MS, who are also the former directors of MS Property. No person has appeared on the application to oppose the orders that are sought and no person has indicated they oppose the orders.
The plaintiffs submit MS Property has only ever acted as the bare trustee of the Property, and as such, the creditors of MS Property are creditors of the MPT. In support of their application, the plaintiffs submit:
(a) the only asset of MS Property is the Property, which it holds as bare trustee for MS pursuant to the MPT;
(b) the Property is estimated to be valued at approximately $525,000; and
(c) the mortgage over the Property is held by MS Property as custodian on behalf of MSF.
The evidence discloses that MS Property has liabilities of approximately $252,164, including approximately $184,125 owing to Westpac and $56,125 owing to the Owners Corporation.
If successful in their application, the plaintiffs intend to sell the Property and apply the proceeds of sale to discharge MS Property’s liabilities incurred in its capacity as custodian, including liabilities to Westpac and to the Owners Corporation.
Application under s 90-15 of the IPS
The plaintiffs seek an order that the Liquidator is justified in causing MS Property to resign as trustee of the MPT, pursuant to which MS Property holds the Property as custodian for MS.
Section 90-15 of the IPS relevantly provides:
90 - 15 Court may make orders in relation to external administration
Court may make orders
(1) The Court may make such orders as it thinks fit in relation to the external administration of a company.
Orders on own initiative or on application
(2) The Court may exercise the power under subsection (1):
(a) … ; or
(b) on application under section 90-20.
Examples of orders that may be made
(3) Without limiting subsection (1), those orders may include any one or more of the following:
(a) an order determining any question arising in the external administration of the company; …
(f) an order in relation to remuneration, including an order requiring a person to repay to a company, or the creditors of a company, remuneration paid to the person as external administrator of the company.
The plaintiffs submit and I accept that the Liquidator has standing to bring an application under s 90–20(1)(d) of the IPS as an officer of MS Property.
In Re Force Corp Pty Ltd (In Liq)[1] Gleeson J held the Court’s power under section 90-15 of the IPS is broad:
[16] Section 90-15(1) of the Insolvency Practice Schedule (Corporations) provides that the Court may make such orders as it thinks fit in relation to the external administration of a company. A company is taken to be under external administration, if, among others, a liquidator has been appointed in relation to the company: s 5-15(c). The powers of the Court under s 90-15 include making an order determining any question arising in the external administration of the company: s 90-15(3)(a).
[17] It has been said that the Court’s power to give directions under s 90-15 at least corresponds with and is arguably wider than its power to give directions to the liquidators under former ss 479 and 511 of the Corporations Act... In this case, no reliance is placed on the possible wider scope of the power under s 90-15.
[18] The function of a liquidator’s application for directions is to give the liquidator advice as to the proper course of action for him or her to take in the liquidation…
[19] The proper subject matter of an application for directions is to provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion, but not a matter relating to the making or implementation of a business or commercial decision unless there is a particular legal issue raised or an attack on the propriety or reasonableness of the decision… Assuming the liquidator has made full and fair disclosure to the Court of the material facts, he or she will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him or her in accordance with the direction…
[1][2020] NSWSC 1842; (2020) 149 ACSR 451 [16] – [19] (citations omitted).
In One T Development Pty Ltd v Peter Krejci in his capacity as liquidator of ENA Development Pty Ltd[2] where the NSW Court of Appeal expressed its agreement with Gleeson J including that the power in s 90-15 extends to the determination of substantive rights, the Court said:
[33] It is plain that the current form of the conferral of power is broader than its predecessor. The restriction noted by McLelland J concerning determining rights and liabilities cannot survive the express power in subsection (3)(a). The former power, framed in terms of authorising the liquidator to “apply to the Court for directions in relation to any particular matter arising under the winding up”, has been expanded so as to include, specifically, “an order determining any question arising in the external administration of the company”. There is no reason not to read the new grant of power broadly, nor is there any reason to prevent “any” from bearing its ordinary meaning. After all, it is “quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words”… The basic question posed by statute is whether the order relates to the external administration of the company.
…
[35] There is no reason to doubt that the current form of the power extends to the determination of substantive rights, although that could only occur, as Gleeson JA observed, with necessary and proper parties being given an opportunity to be heard, and (it might be added) joined.
[2][2023] NSWCA 120 [33], [35].
Resignation as Trustee
Section 126K of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SIS Act’) provides:
126K Disqualified persons not to be trustees, investment managers or custodians of superannuation entities
(1) A person commits an offence if:
(a) the person is a disqualified person; and
(b) the person knows he or she is a disqualified person; and
(c) the person is or acts as a trustee, investment manager or custodian of a superannuation entity; and
(d) for a person who is an individual and who is a disqualified person only because he or she was disqualified under section 126H—the person is disqualified from being or acting as a trustee of that superannuation entity.
Penalty: Imprisonment for 2 years.
MS Property is a disqualified person under s 120(2)(e) of the SIS Act.
Pursuant to the SIS Act it is unlawful for MS Property to continue to act as custodian of a superannuation entity.[3]
[3]Superannuation Industry (Supervision) Act 1993 (Cth) s 126K.
I am in no doubt that it is appropriate and Mr Holden is justified in causing MS Property to resign as trustee of the MPT. That is the case even though there is nothing in the SIS Act that provides that, upon becoming a disqualified person, a trustee or custodian thereupon ceases to be a trustee or custodian. However, by continuing to be and to act as a custodian while a disqualified person, s 126K provides that an offence is committed. As Brereton J noted in Re Stansfield[4] the liquidator would probably be liable as an accessory.
[4]In the matter of Stansfield DIY Wealth Pty Limited (in liquidation) [2014] NSWSC 1484 (‘Re Stansfield’).
In Re Stansfield[5] his Honour concluded that the appropriate course was for the liquidator of the trustee of the superannuation fund to seek the approval of the Court to resign as trustee of the fund and to be appointed as receiver without security of the property of the fund, with the powers that a liquidator has under s 477(2) of the Act.
[5]In the matter of Stansfield DIY Wealth Pty Limited (in liquidation) [2014] NSWSC 1484.
I agree with the plaintiffs’ submission that the circumstances of this case are appropriate for the exercise of the broad powers in section 90-15. The parallels with the decision in Re Stansfield are significant. In this case the complication is that MS Property is not itself the trustee of the superannuation fund, it is the custodian for MS, who in turn is trustee of the fund.
Appointment as receiver and manager
MS Property has only ever acted as bare trustee of the Property. Pursuant to the Property Trust Deed, creditors of MS Property are creditors of the trust. The Property Trust Deed does not grant MS Property a power of sale.
As Brereton J stated in Re Stansfield,[6] s 477(2)(c) does not empower the liquidator to sell property the company holds on trust, even if the company has an equitable charge over it because the property is not property of the company.
[6]In the matter of Stansfield DIY Wealth Pty Limited (in liquidation) [2014] NSWSC 1484 [30].
In Jones, in his capacity as liquidator of Killarnee Civil & Concrete Contractors Pty Ltd(in liq) v Matrix Partners Pty Ltd,[7] the full Federal Court held that the liquidator of an insolvent corporate trustee cannot sell the trust property without an order of the Court or by appointment of a receiver over the trust assets. The trust assets are not property of the company but rather trust property in which the corporate trustee has an interest by way of a lien or charge to secure its right of exoneration. That is the situation in this case.
[7][2018] 260 FCR 310.
In this case, as in Re Stansfield,[8] the plaintiffs seek an order that the Liquidator be appointed a receiver. Section 37(1) of the Supreme Court Act 1986 (Vic) provides:
The Court may by order, whether interlocutory or final, grant an injunction or appoint a receiver if it is just and convenient to do so.
[8]In the matter of Stansfield DIY Wealth Pty Limited (in liquidation) [2014] NSWSC 1484.
In this case the company, MS Property, has never traded in its own right. It is clear that unless the Property is sold, the creditors, in particular the body corporate, will not recover money due to them. There are no funds in the company itself to meet the costs of the liquidation or other expenses.
The power to make an order pursuant to s 37(1) of the Supreme Court Act 1986 (Vic) is a wide power.
In National Australia Bank v Redside Pty Ltd,[9] Osborne J said in relation to s 37(1):
The words ‘just or convenient’ mean ‘where it is practicable, and the interests of justice require it’. The Court’s power to appoint a receiver is construed broadly and must be exercised with a view to all the circumstances of the case. The power includes the power to appoint a receiver and manager.
[9][2023] VSC 145 [44] (citations omitted).
The appointment of a receiver and manager, without security, to assets held by a corporate trustee on trust to enable those assets to be sold has recently been made by this Court in Holden v Kukay (No 2);Re Jay Invest Property Pty Ltd (In Liq)[10] and Re Golden Prosperity Pty Ltd (In Liq).[11]
[10][2023] VSC 54.
[11][2024] VSC 177.
In Holden v Kukay (No 2); Re Jay Invest Property Pty Ltd (In Liq),[12] Elliott J said:
The circumstances in which it may be considered “just and convenient” for the court to appoint a receiver of trust property include where it is necessary for the protection or preservation of trust property for the benefit of persons who have an interest in that property. Recent authorities demonstrate that it is not uncommon for a liquidator of a former corporate trustee to be appointed by the court as receiver to enable it to sell trust assets…
[12][2023] VSC 54 [65] (citations omitted).
There is no evidence that the mortgagee, Westpac Banking Corporation, has an intention to sell the Property pursuant to its mortgage. Unless the orders sought appointing the Liquidator as receiver are made enabling the Property to be sold, the Owners Corporation fees referrable to the Property will both continue to increase and will not be capable of being recovered by the Owners Corporation. The only means of resolving the stalemate that presently exists is to confer power of sale on the Liquidator.
I accept the proposed orders are necessary to enable the Property to be sold and creditors of the property trust to be paid. The power in s 37(1) is a wide power. I accept it is ‘just and convenient’ that the Liquidator be appointed as receiver over the property. I will make orders in accordance with the plaintiffs’ proposed orders.
Given that there is no ongoing dispute between the parties or expected loss that may arise by reason of the appointment of the Liquidator as receiver, it is appropriate to dispense with the need to provide security as per the proposed orders.
Costs and remuneration
The Liquidator seeks an order that the costs of this application are to be paid out of the proceeds of the sale of the Property as a priority payment pursuant to s 556(1)(b) of the Act and that as a receiver he be entitled to remuneration calculated in accordance with the rates set out in the exhibit to his 16 May 2024 affidavit.
The principles to be applied when considering applications such as these were outlined by Sloss J in Re Mandeville Group Pty Ltd (In Liq)[13]. It is unnecessary to repeat the statements made by her Honour as part of this ruling.
[13][2020] VSC 293 [209]-[210].
In this case it is appropriate to make the orders sought by the Liquidator concerning remuneration, costs and expenses. For the avoidance of doubt, the order will specify that it operates in relation to such remuneration, costs and expenses from the date of appointment.
While no party has appeared to oppose the orders sought, it is appropriate to include an order granting liberty to apply to any person or creditor with sufficient interest on three business days’ notice to the Liquidator.
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