IAN CHARLES FRANCIS as joint and several liquidator of COALCLIFF PTY LTD (IN LIQ)
[2022] WASC 446
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: IAN CHARLES FRANCIS as joint and several liquidator of COALCLIFF PTY LTD (IN LIQ) [2022] WASC 446
CORAM: HILL J
HEARD: ON THE PAPERS
DELIVERED : 5 DECEMBER 2022
PUBLISHED : 15 DECEMBER 2022
FILE NO/S: COR 177 of 2022
MATTER: IN THE MATTER OF COALCLLIFFE PTY LTD (IN LIQ)
BETWEEN: IAN CHARLES FRANCIS as joint and several liquidator of COALCLIFF PTY LTD (IN LIQ)
DANIEL HILLSTON WOODHOUSE as joint and several liquidator of COALCLIFF PTY LTD (IN LIQ)
First Plaintiffs
COALCLIFF PTY LTD (IN LIQ)
Second Plaintiff
HAYDEN LEIGH WHITE as joint and several liquidator of WA ECO PLANT PTY LTD (IN LIQ)
CLINT PETER JOSEPH as joint and several liquidator of WA ECO PLANT PTY LTD (IN LIQ)
Third Plaintiffs
WA ECO PLANT PTY LTD (IN LIQ)
Fourth Plaintiff
Catchwords:
Corporations – Winding up – Directions sought by liquidator – Company in liquidation is registered proprietor of property held on trust – Company retired as trustee prior to insolvency – Company disqualified as trustee due to insolvency – Whether to grant direction permitting liquidator as bare trustee to transfer property to current trustee – Turns on own facts
Legislation:
Insolvency Practice Schedule (Corporations) 2016 (Cth), s 90-15
Result:
Directions given
Category: B
Representation:
Counsel:
| First Plaintiffs | : | No appearance |
| Second Plaintiff | : | No appearance |
| Third Plaintiffs | : | No appearance |
| Fourth Plaintiff | : | No appearance |
Solicitors:
| First Plaintiffs | : | Lavan |
| Second Plaintiff | : | Lavan |
| Third Plaintiffs | : | Lavan |
| Fourth Plaintiff | : | Lavan |
Case(s) referred to in decision(s):
Caterpillar Financial Australia Limited 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
Re Montpac Pty Ltd (in liquidation) and Global Network Link Pty Ltd (in liquidation) [2020] NSWSC 1237; (2020) 149 ACSR 138
Woodhouse v Francis [No 2] [2022] WASC 318
HILL J:
The first plaintiffs, Ian Charles Francis and Daniel Hillston Woodhouse are liquidators of the second plaintiff, Coalcliff Pty Ltd (Coalcliff). The third plaintiffs, Hayden Leigh White and Clint Peter Joseph are liquidators of the fourth plaintiff, WA Eco Plant Pty Ltd (WA Eco). Each of the second and fourth plaintiffs are former trustees of the Massara Superannuation Fund (MSF).
On 3 October 2022, the plaintiffs filed an originating process and sought directions of the court under s 90-15 of the Insolvency Practice Schedule (Corporations) 2016 (Cth) (Insolvency Practice Schedule) to the Corporations Act 2001 (Cth) (Act).
The plaintiffs, as liquidators and former trustees of the MSF, seek directions and orders permitting the liquidators to cause their respective company, in its capacity as a former trustee of a super fund, to transfer its interest in a parcel of land to the succeeding trustee of the MSF.
In support of the application, the plaintiffs filed four affidavits: an affidavit of Mr Woodhouse (the second named first plaintiff) filed 3 October 2022, an affidavit of Mr Joseph (the second named third plaintiff) filed 3 October 2022, an affidavit of Lee Anne Massara filed 5 October 2022 and an affidavit of Terry Christopher Massara also filed on 5 October 2022. Ms Massara is the sole director and company secretary of the second plaintiff, a director of Boronia Heights (WA) Pty Ltd (Boronia), and one of the members and beneficiaries of the MSF. Boronia is the current trustee of the MSF. Mr Massara is the sole director and company secretary of the fourth plaintiff, one of the directors of Boronia, and one of the members and beneficiaries of the MSF.
Following a query being raised by the court as to the power of the court to make the orders sought, the plaintiffs also filed a very helpful outline of submissions.
Factual background
This brief summary of the factual background to the application is taken from the documents that have been filed by the plaintiffs in support of the application.
On 30 October 2000, the MSF was established. Coalcliff was appointed as trustee.[1]
[1] Affidavit of Daniel Hillston Woodhouse filed 3 October 2022 [12] - [14].
On or around 11 September 2006, Coalcliff, in its capacity as trustee of the MSF, purchased a property located at 481 Patstone Road, Collie (Property).[2]
[2] Affidavit of Daniel Hillston Woodhouse filed 3 October 2022 [15].
On 30 September 2010, Coalcliff retired as trustee of the MSF and, in its place, WA Eco was appointed trustee.[3]
[3] Affidavit of Daniel Hillston Woodhouse filed 3 October 2022 [16] - [17].
On 29 October 2019, WA Eco was removed as trustee and replaced by Boronia.[4] Boronia remains the current trustee of the MSF.
[4] Affidavit of Daniel Hillston Woodhouse filed 3 October 2022 [19] - [20].
On 2 November 2018, the first plaintiffs were appointed as voluntary administrators of Coalcliff. On 11 January 2019, the creditors resolved to wind up Coalcliff in insolvency and appoint the administrators as liquidators.[5]
[5] Affidavit of Daniel Hillston Woodhouse filed 3 October 2022 [6] - [9].
On 18 August 2020, the third plaintiffs were appointed as liquidators of WA Eco.[6]
[6] Affidavit of Clint Peter Joseph filed 3 October 2022 [7] - [8].
Despite the changes in the trustee of the MSF, the Property was not transferred from Coalcliff to WA Eco, or from WA Eco to Boronia. All parties accept this should have occurred.[7]
[7] Affidavit of Lee Anne Massara filed 5 October 2022 [12], [19(b)]; Affidavit of Terry Christopher Massara filed 5 October 2022 [14], [17(a)].
At the time of the application, Coalcliff remained the registered proprietor of the Property and holds the Property as bare trustee. As bare trustee, the plaintiffs recognise they do not have power to deal with the Property without an order of the court. Each of the plaintiffs accepts they do not have the power to sell the Property and none seeks to exercise any power of sale of the Property.
Orders sought by the plaintiffs
The plaintiffs sought orders and directions in relation to the proposed transfer of the property of the MSF from Coalcliff to WA Eco, and from WA Eco onto Boronia. They require this to be resolved to allow in order to finalise the liquidations of Coalcliff and WA Eco.
Specifically, the plaintiffs sought the following directions:
1.In respect of the first and second plaintiffs:
1.1The first plaintiffs, in their capacity as liquidators of the second plaintiff, would be justified in causing, and must cause, the second plaintiff to transfer its interest in the property situated at 481 Patstone Road, Collie, Western Australia, more particularly described as lot 2041 on deposited plan 213142, being the whole of the land in certificate of title volume 1490 folio 129 (Property) (being an asset of the Massara Superannuation Fund (MSF)) to the fourth plaintiff pursuant to the Deed of Amendment of the MSF dated 30 September 2010.
1.2Any acts by the first plaintiffs in their capacity as liquidators of the second plaintiff are not invalid by reason of any removal or disqualification of the second plaintiff as trustee of the MSF arising by virtue of the appointment of external administrators to the second plaintiff.
1.3The first plaintiffs ought fairly be excused for any breaches, failures or omissions arising from the transfer of the Property, being an asset of the MSF.
1.4The costs and expenses incurred by the first plaintiffs in dealing with any assets of the MSF be costs in the winding up of the second plaintiff.
1.5The first and second plaintiffs’ costs of and incidental to this proceeding be costs in the winding up of the second plaintiff.
2.In respect of the third and fourth plaintiffs:
2.1The third plaintiffs, in their capacity as liquidators of the fourth plaintiff, would be justified in causing, and must cause, the fourth plaintiff to transfer its interest in the Property to Boronia Heights (WA) Pty Ltd (ACN 606 350 510) pursuant to the Deed of Retirement and Appointment of Trustee dated 29 October 2019.
2.2Any acts by the third plaintiffs in their capacity as liquidators of the fourth plaintiff are not invalid by reason of any removal or disqualification of the fourth plaintiff as trustee of the MSF arising by virtue of the appointment of external administrators to the fourth plaintiff.
2.3The third plaintiffs ought fairly be excused for any breaches, failures or omissions arising from the transfer of the Property, being an asset of the MSF.
2.4The costs and expenses incurred by the third plaintiffs in dealing with any assets of the MSF be costs in the winding up of the fourth plaintiff.
2.5The third and fourth plaintiffs’ costs of and incidental to this proceeding be costs in the winding up of the fourth plaintiff.
3.The plaintiffs notify all beneficiaries of the MSF within 7 days of the date of extraction of these orders.
Legal principles
In Woodhouse v Francis [No 2], I set out the legal principles that apply on an application by liquidators of a company to the court for directions in respect of conduct of their liquidation.[8] I adopt without reproducing those principles for the purpose of determining this application.
[8] Woodhouse v Francis [No 2] [2022] WASC 318 [22] ‑ [28].
Where a corporate trustee enters into 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, the company retains the right to holds trust assets as bare trustee, but the liquidator of the Company does not have the power to sell those assets to satisfy that indemnity absent intervention by the court.[9]
[9] 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) and [198] (Farrell J); Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 [22] ‑ [28] (Gordon J).
Specifically in relation to a trustee of a superannuation fund, pursuant to s 120(2)(e) of the Superannuation Industry (Supervision) Act 1993 (Cth), a company under external administration is disqualified from being a trustee and commits an offence under s 126K of that act, if they act as a trustee.
Where the liquidator of a company in external administration seeks to exercise any powers of sale in respect of trust property that it holds as bare trustee, the usual course is for the liquidator to be appointed as receiver and manager.
In this case, however, the liquidators do not seek any power of sale; they simply seek orders for the transfer of the Property to the current trustee. For this reason, the plaintiffs contended it was not necessary for receivers and managers to be appointed. In support of this submission, the plaintiffs' solicitors referred me to the decision of Black J in Re Montpac Pty Ltd (in liquidation) and Global Network Link Pty Ltd (in liquidation).[10]
[10] Re Montpac Pty Ltd (in liquidation) and Global Network Link Pty Ltd (in liquidation) [2020] NSWSC 1237; (2020) 149 ACSR 138.
Disposition
In this case, the evidence before the court is that the liquidators of the second plaintiff have formed a view, based on their investigations, that the Property was owned by the second plaintiff in its capacity as trustee of the MSF. There is no reason to doubt this evidence or the liquidators' assessment of the position.
On the evidence before me, I accept that the second plaintiff retired as trustee of the MSF on 30 September 2010 and was replaced by the fourth plaintiff, and that the fourth plaintiff retired as trustee of the MSF on 29 October 2019 and was replaced by Boronia.
I am also satisfied that Coalcliff currently holds the Property as bare trustee and cannot transfer the Property without order of the court. This raises an issue of their legal power to deal with the Property and, as such, can be the subject of a direction under s 90-15 of the Schedule. Similarly, on transfer of the Property to WA Eco, WA Eco will similarly hold the Property as bare trustee and will be unable to transfer the Property without order of the court.
I am satisfied on the evidence before the court that the liquidators of the second plaintiff would be justified in causing the second plaintiff to transfer the Property to the fourth plaintiff and that the liquidators of the fourth plaintiff would be justified in causing the fourth plaintiff to transfer the Property to Boronia.
It is, however, not appropriate on an application for directions that the orders extend to a direction that the liquidators must cause these matters to happen. The plaintiffs accepted that the deletion of the words 'and must cause' in the proposed orders was an appropriate course.[11]
[11] Email from Lavan to Associate to Hill J of 3 December 2022.
The liquidators also sought orders that they excused for any breach of trust arising from the transfer of the Property. I accept that the liquidators are acting honestly and reasonably in seeking to transfer the Property and that it is appropriate to excuse them from any breach of trust committed in causing this to occur.
Finally, the liquidators sought orders that the costs of the application be costs in the winding up. I accept that in circumstances where the liquidators have acted reasonably and in good faith in seeking directions from the court, it is appropriate for the costs of the application to be costs in the winding up. On the same basis, I consider the same orders should be made in respect of the costs of dealing with the transfer of the Property.
Conclusion
For these reasons, I made orders in terms of Annexure 'A' in respect of the application.
ANNEXURE A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FD
Associate to the Honourable Justice Hill
15 DECEMBER 2022
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