In the Matter of Accurate Flooring Pty Ltd (in Liquidation) (ACN 164 204 577) in Its Own Capacity and as trustee for the Cansam Unit Trust (ABN 18 611 506 268); Ex Parte
[2024] WASC 126
•16 APRIL 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: IN THE MATTER OF ACCURATE FLOORING PTY LTD (IN LIQUIDATION) (ACN 164 204 577) IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE CANSAM UNIT TRUST (ABN 18 611 506 268); EX PARTE RE JEROME HALL MOHEN as liquidator of ACCURATE FLOORING PTY LTD (IN LIQUIDATION) (ACN 164 204 577) IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE CANSAM UNIT TRUST (ABN 18 611 506 268) [2024] WASC 126
CORAM: HILL J
HEARD: ON THE PAPERS
DELIVERED : 16 APRIL 2024
FILE NO/S: COR 44 of 2024
MATTER: IN THE MATTER OF JEROME HALL MOHEN as liquidator of ACCURATE FLOORING PTY LTD (IN LIQUIDATION)
EX PARTE
JEROME HALL MOHEN as liquidator of ACCURATE FLOORING PTY LTD (IN LIQUIDATION) (ACN 164 204 577) IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE CANSAM UNIT TRUST (ABN 18 611 506 268)
Plaintiff
Catchwords:
Corporations - External administration - Winding up - Where company in liquidation was trustee of trust - Company removed as trustee on liquidation by terms of trust deed - Application for relief under s 89 of Trustees Act 1962 (WA)
- Turns on own facts
Legislation:
Corporations Act 2001 sch 2 90-15
Trustees Act 1962 s 89
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
Solicitors:
| Plaintiff | : | Mills Oakley |
Cases referred to in decision:
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
Rathner (liquidator), Re Garrows Close Pty Ltd (in liq) [2021] FCA 505
Re Australian Property Custodian Holdings Ltd (in liq) [2021] VSC 51
Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481
HILL J:
On 30 January 2024, the plaintiff, Jerome Hall Mohen, was appointed as liquidator of Accurate Flooring Pty Ltd (ACN 164 204 577) (in liquidation) (Company). Prior to his appointment, the Company was the trustee of the Cansam Unit Trust (ABN 18 611 506 268) (Trust).
On 19 March 2024, the plaintiff filed an originating process in this court seeking orders pursuant to s 90-15 of sch 2 to the Corporations Act 2001 (Cth) (the Act) and s 89 and s 90 of the Trustees Act 1962 (WA) (Trustees Act),[1] that:
(a)the plaintiff is justified and acting reasonably in proceeding to conduct the affairs of the Trust on the basis that the Company carried on business in its capacity as trustee of the Trust, all assets of the Company, save two of the Company's bank accounts (Company Bank Accounts),[2] are properly characterised as property held by the Company in its capacity as trustee of the Trust, and all creditors of the Company (except the debt owed to the Australian Taxation Office in its own right in the amount of $15,391.06), to the extent their debts are admitted by the plaintiff, are properly characterised as creditors of the Trust;
(b)all assets held by the Company (except the two Company Bank Accounts) were and are properly characterised as Trust property including the vehicles registered to the Company as set out in the affidavit of Jerome Hall Mohen filed 20 March 2024;
(c)the Company, in its capacity as trustee, has and had various powers to sell and otherwise deal with the Trust property; and
(d)the plaintiff is entitled to be paid remuneration, costs, and expenses out of the Trust property.
[1] Further and alternatively the court's inherent and/or equitable jurisdiction.
[2] Affidavit of Jerome Hall Mohen filed 20 March 2024 [57] - [58].
On 25 March 2024, I raised several queries with Mills Oakley, solicitors for the plaintiff, particularly in relation to the order sought at [2(c)].[3] On 26 March 2024, the plaintiff filed an amended originating process which addressed this concern and limited the order sought to an order that the court confer on the Company as bare trustee the powers of sale and to deal with the Trust property.
[3] Email from the Associate to Justice Hill to Mills Oakley dated 25 March 2024.
The originating process was initially listed for hearing on 27 March 2024. On 25 March 2024, the solicitors for the plaintiffs requested the matter be dealt with on the papers and the hearing vacated. Following receipt of an amended originating process on 26 March 2024, I made orders in terms of the amended originating process, subject to minor amendments.[4] These are my reasons for making these orders.
[4] Email from the Associate to Justice Hill to Mills Oakley dated 26 March 2024.
Factual background
The plaintiff filed two affidavits in support of their application: one affidavit of the plaintiff filed 20 March 2024, and an affidavit of service of Jessica Celeste Gordon on the Australian Securities and Investments Commission (ASIC) filed 25 March 2024. This summary is taken from these affidavits.
The Company was incorporated on 11 June 2013. A current and historical company extract obtained from the records of ASIC discloses that as of 18 March 2024, the Company's sole director, company secretary and shareholder was George Vlahos (Director).[5]
[5] Affidavit of Jerome Hall Mohen filed 20 March 2024, 'JM-01'.
On 30 January 2024, the plaintiff was appointed as liquidator of the Company pursuant to an order of Registrar Trott of the Federal Court of Australia.[6]
[6] Affidavit of Jerome Hall Mohen filed 20 March 2024, 'JM-02'.
Mr Mohen's evidence is that after his appointment as liquidator, he was advised by the Director's son, Samuel Vlahos, that George Vlahos had been ill for some time and passed away prior to 30 January 2024. Following his father's death, Samuel Vlahos had taken steps to wind up the Company and its business.
Mr Mohen deposes that as a result of George Vlahos' passing, he has 'incurred significant difficulties' in investigating the affairs of the Company and Trust and that their 'books and records were not well maintained'.[7] The registered office is the offices of the Company's accountant, Carbon Group. They advised the plaintiff that they have rendered no significant professional services to the Company since approximately July 2019 and accordingly have been unable to provide any substantial assistance in his investigation of the Company's affairs.
[7] Affidavit of Jerome Hall Mohen filed 20 March 2024 [13].
The Company registered three business names, being 'Port Hedland Carpet Court' from 21 April 2015 until 30 August 2018, 'South Hedland Carpet Court' from 25 May 2015 until 23 December 2017, and 'Accurate Maintenance' from 27 July 2016 until 30 August 2018.[8] In its capacity as trustee of the Trust, the Company registered a further three business names, being 'South Hedland Carpet Court', 'Karratha Carpet Court', and 'C&C Stone', all of which remain registered as of the date of Mr Mohen's affidavit.[9]
[8] Affidavit of Jerome Hall Mohen filed 20 March 2024, 'JM-01'.
[9] Affidavit of Jerome Hall Mohen filed 20 March 2024, 'JM-03'.
The Company operated a flooring business in South Hedland and Karratha as trustee for the Trust under the trading names 'C&C Stone', 'Karratha Carpet Court', and 'South Hedland Carpet Court', from in or around October 2017.
Mr Mohen's evidence is that:[10]
(a)he was informed by Samuel Vlahos that the Company operated solely in its capacity as trustee for the Trust prior to his appointment as liquidator;
(b)the business' operating account, accounting software, supply agreements, and the lease of the premises through which it operates are in the name of the Company in its capacity as trustee for the Trust;
(c)the Company deregistered its business name 'South Hedland Carpet Court' in or around 23 December 2017 and the Company as trustee of the Trust registered and has continued to trade under this same business name since 21 November 2017;
(d)the Company's returns show that the Company held limited assets in its own right, and since October 2017 or early 2018, had operated and held its recorded assets and income primarily in its capacity as trustee of the Trust; and
(e)from his investigations, he believes the Company has not acted in any other capacity other than as trustee of the Trust since in or around 2017.
[10] Affidavit of Jerome Hall Mohen filed 20 March 2024 [43].
Based on the enquires undertaken to date, the plaintiff believes the Company:[11]
(a)was the sole trustee of the Trust from 1 February 2017 to the date of his appointment and did and has not acted as trustee of any other trust;
(b)operated its business and conducted its activities as trustee of the Trust from on or around October 2017, being shortly after the Trust was established; and
(c)save for the Company Bank Accounts, does not own any assets in its own right or as trustee of any other trust and as such, holds all remaining assets in its capacity as trustee of the Trust.
[11] Affidavit of Jerome Hall Mohen filed 20 March 2024 [42].
Among the books and records of the Company is a copy of the Trust deed.[12] The Trust deed discloses that the Trust was established on 1 February 2017. Pursuant to cl 6.4(a)(2) of the Trust deed, on the appointment of a liquidator, the Company was required to retire as trustee of the Trust and was disqualified from acting as trustee.
[12] Affidavit of Jerome Hall Mohen filed 20 March 2024, 'JM-04'.
Service of application
I am satisfied that ASIC has been served with copies of the originating process and the affidavit of Mr Mohen a reasonable time before the hearing of the application, as required by r 2.8 of the Supreme Court (Corporations) Rules 2004 (WA).[13]
[13] Affidavit of Jessica Celeste Gordon filed 25 March 2024, 'JG-02'.
No one gave notice to the plaintiffs' solicitors or to the court that they wished to be heard on the application.
Legal principles
The legal principles that govern this application are well known and can be summarised in the following terms.
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 by reason of the terms of the trust deed, 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.[14]
[14] 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 Limited v Ovens Nominees Pty Ltd [2011] FCA 677 [22] - [28] (Gordon J).
The liquidator, in essence, has two options available to him. One, to apply for an order conferring on him the power to deal with the assets of the trust or, two, to apply to be appointed as receiver and manager of the trust.
In this case, the plaintiff seeks orders under s 90-15 of sch 2 of the Act (Schedule) and s 89 of the Trustees Act to facilitate their 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 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.[15]
[15] See Re Australian Property Custodian Holdings Ltd (in liq) [2021] VSC 51 [35] (Sloss J); Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481 at [7] - [8] (Gleeson CJ).
The power under s 89 of the Trustees Act is also relatively broad. It enables the court to confer upon a trustee the power to deal with trust assets.[16] It has been accepted by courts in respect of similar, but not identical legislation, that, by necessary implication, this power not only permits the conferral of power on a corporate trustee, but also its liquidators in such a capacity.[17]
[16] Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [30] (Gordon J).
[17] Rathner (liquidator), Re Garrows Close Pty Ltd (in liq) [2021] FCA 505 [8] (Beach J).
Courts are generally willing, upon an appropriate application, to make orders permitting the liquidator of a (former) corporate trustee to sell trust assets.
Disposition
On the evidence before me, I accept that by reason of 6.4(a)(2) of the Trust deed, on the appointment of Mr Mohen as liquidator, the Company was required to retire as trustee of the Trust and was immediately disqualified from acting as trustee. 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.
The orders sought by the plaintiffs are consistent with the legal principles that I have outlined above. Given the evidence before the court, I accept that it is expedient for Mr Mohen to have the power to sell and otherwise deal with the Trust property.
I accept Mr Mohen's evidence that the Company has, from on or around October 2017, acquired assets and incurred liabilities only as trustee of the Trust, save for the Company Bank Accounts. For this reason, it is appropriate to make orders under s 90-15 of the Schedule that the plaintiff will be acting properly and is justified in proceeding to conduct the affairs of the Trust on the basis that, save for the Company Bank Accounts, the business and assets of the Company comprised the assets of the Trust.
I also accept Mr Mohen's evidence that that all creditors of the Company (except the debt owed to the Australian Taxation Office in its own right in the amount of $15,391.06), to the extent their debts are admitted by the plaintiff, are creditors of the Trust.
I accept that 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 of this application.
The plaintiffs sought orders for his remuneration as liquidator to be paid out of the assets of the Trust. I also accept that it is appropriate to make these orders.
Finally, in relation to the costs of the application, the plaintiffs sought orders for the costs of the application be paid from the Trust property. I consider this to be the appropriate costs order and make that order.
Conclusion
For these reasons, on 26 March 2024, I made orders in terms of 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
16 APRIL 2024
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