In the matter of APH (Whitehorse Box Hill) Pty Ltd (rec & mgr apptd)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2025 00977

IN THE MATTER of APH (WHITEHORSE BOX HILL) PTY LTD (ACN 621 824 351) (RECEIVER AND MANAGER APPOINTED)

MANUEL HANNA AS RECEIVER AND MANAGER OF APH (WHITEHORSE BOX HILL) PTY LTD (ACN 621 824 351) (RECEIVER AND MANAGER APPOINTED)	First Plaintiff
APH (WHITEHORSE BOX HILL) PTY LTD (ACN 621 824 351) (RECEIVER AND MANAGER APPOINTED)	Second Plaintiff

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JUDGE:	Matthews J
WHERE HELD:	Melbourne
DATE OF HEARING:	13 March 2025
DATE OF JUDGMENT:	13 March 2025
DATE OF REASONS FOR JUDGMENT:	19 March 2025
CASE MAY BE CITED AS:	In the matter of APH (Whitehorse Box Hill) Pty Ltd (rec & mgr apptd)
MEDIUM NEUTRAL CITATION:	[2025] VSC 117

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CORPORATIONS – Receivership – Corporations Act 2001 (Cth), ss 424, 1318 – Privately appointed receiver seeking judicial advice/directions – Company carried on business and otherwise operated solely in capacity as trustee of a trust – Whether receiver appointed to trust assets – Construction of deed appointing receiver in context of ipso facto clause in the trust deed – Supreme Court (General Civil Procedure) Rules 2015, r 54.02 – Re One.Tel Network Holdings Pty Ltd (2001) 40 ACSR 83, applied.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr CEA Hibbard of counsel	Thomson Geer

HER HONOUR:

Introduction

The first plaintiff (Receiver) is the receiver and manager of the second plaintiff (Company).
By originating process dated 21 February 2025, the plaintiffs seek various forms of relief, principally in the nature of judicial advice. The key issues, in summary, are:
(a)whether the Receiver is justified in proceeding on the assumption that the Company operated exclusively as the trustee of the APH (Whitehorse Box Hill) Family Trust (Trust); and
(b)whether the Receiver is entitled to deal with assets of the Trust based on his current appointment and, if not, whether the Court will appoint him as a receiver of those assets (or confer power on the Company to deal with those assets).
In support of their application, the plaintiffs rely on:
(a)the Receiver’s affidavit sworn 20 February 2025 (Hanna Affidavit);
(b)three affidavits of service, being the affidavits of:
(i)Allison Marie Norman affirmed 12 March 2025;
(ii)Gabrielle Elisa Martino affirmed 12 March 2025; and
(iii)Brent Speck sworn 11 March 2025;
(c)a written outline of submissions from their counsel filed 11 March 2025 (Outline).
The plaintiffs served copies of the originating process and the Hanna Affidavit, together with notice of the hearing date, on the following persons whom they had identified as persons likely to be interested in the application:
(a)James Tenghui Zhang (director of the Company);
(b)Weina Huangfu (director and sole shareholder of the Company, and appointor of the Trust);
(c)Yixin Zhang (named beneficiary of the Trust);
(d)Lixin Zhang (named beneficiary of the Trust);
(e)Louis Kaixin Zhang (named beneficiary of the Trust); and
(f)ASIC.
Mr James Tenghui Zhang and Ms Weina Huangfu are married. Yixin, Lixin and Louis Zhang are their children.
I have read the affidavits of service and am satisfied that each of the persons named in paragraph 4 have received notice of the application and of the hearing. None of those persons appeared on the return of the originating process or otherwise communicated with the Court or the plaintiffs in respect of the application.
At the hearing of the plaintiffs’ application on 13 March 2025, I made orders granting the relief sought and indicated that I would publish short reasons for my decision as soon as practicable thereafter. These are my reasons for judgment.

Background

The Company was incorporated on 21 September 2017.[1] Mr Zhang has been a director since that date, and Ms Huangfu has been a director since 5 September 2018.
[1]The Company was at that time called Australia Poly (Whitehorse Box Hill) Pty Ltd.
On 5 September 2018, a discretionary trust deed was executed establishing the Trust (then known as the Australia Poly (Whitehorse Box Hill) Family Trust (Trust Deed). On 7 June 2022, the name of the Trust was amended to its present title.
Until their recent compulsory acquisition by the Suburban Rail Loop Authority (SRLA), the Company was the registered proprietor of the following land:
(a)941–945 Whitehorse Road, Box Hill in the State of Victoria, being the whole of the land described in volume 08847 folio 393;
(b)947 Whitehorse Road, Box Hill, being the whole of the land described in certificate of title volume 08623 folio 402;
(c)949 Whitehorse Road, Box Hill, being the whole of the land described in certificate of title volume 08287 folio 306; and
(d)951 Whitehorse Road, Box Hill, being the whole of the land described in certificate of title volume 08287 folio 307,
(together, the Properties).
On 13 May 2024, the Company, in its own right and as trustee for the Trust, entered into a suite of facility agreements and other security documents as a borrower, alongside other entities controlled by Mr Zhang and Ms Huangfu, with Australian Commercial Mortgage Corporation Pty Ltd as trustee for the Balmain Opportunity Trust (ACMC) as the lender. Relevantly, this involved the provision of loans, advances and financial accommodation to the Company pursuant to a loan agreement (Junior Loan Agreement), which was secured by a general security agreement (General Security Agreement).
Relevant provisions of the General Security Agreement include:
(a)the Company (in its own right and as trustee for the Trust) is described as a ‘Grantor’;
(b)ACMC is described as the ‘Secured Party’;
(c)clause 8.1(h) permits ACMC to appoint a receiver and manager over the ‘Secured Property’ at any time after an Event of Default occurs;
(d)‘Secured Property’ is defined as ‘the whole of the undertaking property and assets of the Grantor …’; and
(e)an ‘Event of Default’ includes non-payment, which includes any indebtedness or obligation of the Grantor to the Secured Party that is not paid, and a cross-default under any of the ‘Transaction Documents’.
The General Security Agreement was registered on the Personal Property Securities Register (PPSR) with the grantors listed as both the Company and the Trustee.
The security documents also included a mortgage registered on 13 May 2024 in respect of the Properties (Mortgage).
Each of the General Security Agreement and the Mortgage are second-ranking securities. The first-ranking securities in each instance were held by Perpetual Corporate Trust Limited as Custodian for the Box Hill Sub-Trust (PCT). PCT’s interests as secured by those first ranking securities were assigned to ACMC on 21 November 2024.
Each of the Properties is subject to a statutory charge under s 96(1) of the Land Tax Act 2005 (Vic).
On 3 July 2024, ACMC sent default notices to the Company (in its own right and as trustee for the Trust) stating that it was in default under the General Security Agreement. The default was not remedied.
On 31 October 2024, the SRLA issued a Notice of Acquisition under the Suburban Rail Loop Act 2021 (Vic) in respect of the Properties (Notice). The effect of the Notice was that all interests in the Properties as stated in the Notice vested in the SRLA. The Hanna Affidavit sets out, in some detail, the correspondence between the SRLA and PCT, ACMC and the Receiver since the Notice was given. It is unnecessary for me to set that out here.
The Receiver believes that the right to compensation under s 30 of the Land Acquisition and Compensation Act 1986 (Vic) is now the only asset of the Company and/or the Trust. The Receiver anticipates that, in order to pursue that right to compensation, it will be necessary to take a number of steps (including instructing a valuer and potentially other experts, seeking legal advice and potentially having the matter referred to the Supreme Court or the Victorian Civil and Administrative Tribunal). This application has been brought now — some three months after the Receiver’s appointment — because it appears necessary for the Receiver to incur costs in pursuing the compensation claim, and the Receiver seeks to avoid any uncertainty about the scope of his appointment, and power to deal with Trust assets, before doing so.

Appointment of the Receiver

On 14 November 2024, ACMC executed a deed of appointment (Deed of Appointment) appointing the Receiver as receiver and manager of the ‘whole of the undertaking property and assets of … APH (Whitehorse Box Hill) Pty Ltd ACN 621 824 351 in its own right and as trustee for the Australia Poly (Whitehorse Box Hill) Family Trust both present and after acquired …’. The Deed of Appointment stated that it was made under the General Security Agreement.
Clause 8.1 of the General Security Agreement relevantly provides:
Despite any other provision of this document, at any time after an Event of Default occurs how and when the Secured Party in its absolute discretion decides, the Secured Party may sign anything and do anything the Secured Party considers appropriate to recover the Secured Money and deal with the Secured Property. The Secured Party may do this with or without taking possession of the Secured Property, whether or not in conjunction with other property, despite any omission, neglect, delay, and without liability for loss or need to account as Secured Party in possession. Without limitation, the Secured Party may do any one or more of the following:
…
(h)appoint in writing any person or any two or more persons jointly and/or severally to be a Receiver or agent of the Secured Party of the whole or any part of the Secured Property whether or not a Receiver has previously been appointed;
‘Secured Property’ is defined in the General Security Agreement to mean ‘the whole of the undertaking property and assets of the Grantor …’. The Company in its own right and as trustee for the Trust is a Grantor under the General Security Agreement.
‘Event of Default’ is defined in cl 7 and includes the following:
If any one or more of the following occur, an Event of Default at the Secured Party’s option will have occurred. A determination by the Secured Party in its absolute discretion that any one or more has occurred will be final and binding on the Grantor:
(a)(cross default) there is default (other than by the Secured Party) in the performance of any term, agreement, or condition contained in or implied by this document or any Transaction Documents;
(b)(non payment) any indebtedness or obligation of the Grantor to any person including the Secured Party is not paid, met, or satisfied when due or becomes due and payable before its specified maturity or any creditor of the Grantor becomes entitled to declare any indebtedness of the Grantor due or the Grantor defaults under any Encumbrance in favour of any person;
…
The Deed of Appointment appoints the Receiver as receiver and manager of the ‘Secured Property’. ‘Secured Property’ is defined in cl 1.1 and Schedule 1 of the Deed of Appointment to include ‘The whole of the undertaking property and assets of [the Company] in its own right and as trustee for the [Trust] both present and after acquired …’.

The relief sought in the originating process

This application is made under ss 424 and 1318 of the Corporations Act 2001 (Cth) (Corporations Act), s 63 of the Trustee Act 1958 (Vic) (Trustee Act), s 37 of the Supreme Court Act 1986 (Vic) (Supreme Court Act), rr 39.02 and 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules) and the inherent equitable jurisdiction of the Court.
The relief sought in the originating process includes the matters set out below.
Firstly, a direction is sought concerning the second plaintiff operating as trustee of the Trust, in the following terms:
(1)An order pursuant to s 424 of the Corporations Act and/or r 54.02 of the Rules and/or the inherent equitable jurisdiction of the Court that the first plaintiff is justified and acting reasonably in proceeding on the basis that:
(a)the Company carried on business and otherwise operated solely in its capacity as trustee of the Trust;
(b)all assets and undertakings of the Company are properly characterised as property held by the Company in its capacity as trustee of the Trust; and
(c)all of the creditors of the Company are creditors of the Trust.
Secondly, a direction concerning the first plaintiff as privately appointed receiver of trust assets, in the following terms:
(2)An order pursuant to s 424 of the Corporations Act and/or r 54.02 of the Rules and/or the inherent equitable jurisdiction of the Court that the first plaintiff is justified and acting reasonably in proceeding on the basis that:
(a)the Deed of Appointment appointing him as receiver and manager of certain property had the effect of appointing him as receiver and manager of the undertaking, property and assets of the Trust (Trust’s Assets), which included the Properties; and
(b)he has in respect of the Trust’s Assets all of the powers conferred by the Deed of Appointment, including the power to do anything the first plaintiff in his capacity as receiver and manager considers appropriate to recover the moneys secured by the “Security” as that word is defined in the Deed of Appointment and to deal with the Trust’s Assets, which includes without limitation the power to:
(i)sell, assign, transfer, dispose, exchange, barter, and grant options in respect of the Trust’s Assets;
(ii)institute, prosecute, and defend proceedings at law, in equity, or in bankruptcy in the Trust’s name or otherwise;
(iii)make any arrangement or compromise which the Receiver thinks expedient in the Secured Party's interest; and
(iv)pay his costs, fees, and expenses out of the Trust’s Assets.
Alternatively to the relief described in paragraph 28 above, orders appointing the first plaintiff as receiver of trust assets, in the following terms:
(3)An order pursuant to s 37 of the Supreme Court Act that the First Plaintiff be appointed nunc pro tunc, without security, as receiver and manager (Court Appointed Receiver) of the Trust’s Assets.
(4)An order that the Court Appointed Receiver have in respect of the Trust’s Assets nunc pro tunc all the powers prescribed by s 420 of the Corporations Act (other than those in ss 420(2)(s), (t), (u) and (w)) as if 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:
(a) effect the sale and realisation of the Trust’s Assets;
(b)compromise any claim made against the Second Plaintiff in its capacity as trustee of the Trust or against any of the Trust’s Assets on any terms the Receiver sees fit;
(c)bring any claim against any party on behalf of the Trust; and
(d)execute any tax returns, financial statements or other documents relating to the Trust.
(5)An order pursuant to s 424 of the Corporations Act and/or rr 39.09 and/or 54.02 of the Rules and/or the inherent equitable jurisdiction of the Court that the Court Appointed Receiver is justified and otherwise acting reasonably in proceeding on the basis that he can deal with, hold, apply and/or distribute the Trust’s Assets as receiver and manager of those assets with the powers referred to in paragraph 4 of these orders.
Alternatively to the relief described in paragraphs 28 and 29 above, orders conferring powers on the second plaintiff to deal with trust assets, in the following terms:
(6)An order pursuant to s 63 of the Trustee Act that there be conferred nunc pro tunc on the Company the power to do all things necessary and convenient to:
(a) effect the sale and realisation of the Trust’s Assets;
(b)compromise any claim made against the Company in its capacity as trustee of the Trust or against any of the Trust’s Assets on any terms the Company sees fit;
(c)bring any claim against any party on behalf of the Trust; and
(d)execute any tax returns, financial statements or other documents relating to the Trust.
(7)An order pursuant to s 424 of the Corporations Act and/or r 54.02 of the Rules and/or the inherent equitable jurisdiction of the Court that the first plaintiff is justified and otherwise acting reasonably in proceeding on the basis that he can, in his capacity as receiver and manager of the assets of the Company, deal with, hold, apply and/or distribute the Trust’s Assets with the powers referred to in paragraph 6 of these orders.
The primary relief sought by the Receiver is that set out in proposed orders (1) and (2), which is described as the Receiver’s application for directions/judicial advice. This judgment sets out my reasons for granting the primary relief sought. It is therefore unnecessary for me to set out the submissions made in respect of the alternative forms of relief, being proposed orders (3) to (5) or proposed orders (6) to (7). I have described those forms of relief in the preceding paragraphs because, had I not been persuaded to grant the primary relief, I would have made orders granting either set of the alternative forms of relief.

The Receiver’s submissions regarding its application for directions/judicial advice

Submissions regarding the Court’s powers to make the directions and/or give the judicial advice

Section 424 of the Corporations Act permits a privately appointed receiver of a company to seek judicial advice. It provides as follows:
424 Controller may apply to Court
(1)A controller of property of a corporation may apply to the Court for directions in relation to any matter arising in connection with the performance or exercise of any of the controller’s functions and powers as controller.
(2)In the case of a receiver of property of a corporation, subsection (1) applies only if the receiver was appointed under a power contained in an instrument.
The Court’s power to grant directions under s 424 is ‘a broad one’,[2] to be interpreted liberally.[3]
[2]Korda v Silkchime Pty Ltd (2010) 243 FLR 269, 276 [30] (Korda).
[3]Deputy Federal Commissioner of Taxation v Best & Less (Wollongong) Pty Ltd (1992) 7 ACSR 245, 247; Re One.Tel Network Holdings Pty Ltd (2001) 40 ACSR 83, 90 [27] (Re One.Tel).
The Court’s power under s 424 has been described as comparable to the Court’s power to give directions to executors and trustees (in Victoria, under r 54.02 of the Rules).[4] In Re One.Tel Network Holdings, Austin J said:[5]
Case law on the statutory provision for judicial advice in trustee legislation shows that the Court will not as a general rule give a trustee any opinion or advice where the question concerns the respective rights of the beneficiaries or their identity, or the matter is one of controversy between parties to the trust … However, the procedure is appropriate where the question involves the nature and extent of the trustee's powers or duties of management or administration …
[4]See Preston, in the matter of Sandalwood Properties Ltd [2018] FCA 547, [21]–[40]; Re One.Tel (2001) 40 ACSR 83, 90-1 [29].
[5]Re One.Tel (2001) 40 ACSR 83, 90-1 [29].
The role of s 424 has been described as being ‘to provide a procedure for a receiver to obtain some guidance from the court in conducting the receivership and so as to give protection against a claim for breach of duty or allegations that he or she has acted improperly or unreasonably’.[6] In the analogous context of an application by voluntary administrators for directions, Goldberg J has explained:[7]
There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised.
[6]Korda (2010) 243 FLR 269, 266-7 [32].
[7]Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409, 428 [65] (Re Ansett No 3). See also Re One.Tel (2001) 40 ACSR 83, 91 [30].

Rule 54.02 of the Rules permits a trustee to seek judicial advance and relevantly provides:
54.02 Relief without general administration
(1)A proceeding may be brought for any relief which could be granted in an administration proceeding and a claim need not be made for the administration or execution under the direction of the Court of the estate or trust in respect of which the relief is sought.
(2)Without limiting paragraph (1), a proceeding may be brought for—
(a)the determination of any question which could be determined in an administration proceeding, including any question—
(i)arising in the administration of an estate or in the execution of a trust;
(ii)as to the composition of any class of persons having a claim against an estate or a beneficial interest in an estate or in property subject to a trust; or
(iii)as to the rights or interests of a person claiming to be a creditor of an estate or to be entitled under the will or on the intestacy of a deceased person or to be beneficially entitled under a trust;
…
In Longboat Holdings GroupNo3 Pty Ltd v Zacole Pty Ltd, M Osborne J described the Court’s role in an application under r 54.02 as follows (citations omitted):[8]
The procedure enables the Court to give advice to a trustee, which is private in the sense that the function of the advice is to give personal protection to the trustee in respect of a course of action it proposes to undertake. The procedure is to be deployed in circumstances where the trustee is in doubt as to the course to be undertaken, and where the trustee seeks to obtain personal protection for the contemplated action.
The central question for a Court is whether on the material before it, the Court can be satisfied not of the commercial wisdom of the course proposed to be taken by the trustee, nor its correctness, but of its propriety.
In determining that question, the Court must consider firstly, whether there is power for the trustee to do what is proposed; and secondly, the propriety of the proposed exercise of power.
The exercise of the power will be improper where it is not exercised in good faith, where the trustee did not give real and genuine consideration to the exercise of the power, and where the exercise of the power is not in accordance with the purpose for which the power was conferred or is for an ulterior purpose.
[8][2021] VSC 280, [57]–[60]. See also Re The Macedonian Orthodox Church Community ‘Saint Dimitrij Solunski’ Springvale Inc [2020] VSC 274, [33]; Re Mandeville Group Pty Ltd (in liq) [2020] VSC 293, [141] (Re Mandeville Group).

Submissions regarding the application of those powers in this instance

The direction in proposed order (1) is sought in circumstances where, in the opinion of the Receiver, the Company appears to have operated (and held the Properties) solely in its capacity as trustee of the Trust. The Receiver’s opinion is based on the following:
(a)the Trust was established on 5 September 2018, approximately one year after the Company was incorporated on 21 September 2017 and prior to the Company’s acquisition of the property known as 941–945 Whitehorse Road, Box Hill in the State of Victoria on or about 10 March 2020 with each of the subsequent property acquisitions that comprise the Properties occurring after 10 March 2020;
(b)the Company does not have its own ABN; and
(c)the Trust has had its own ABN since 5 September 2018 and has been registered for GST since 5 September 2018.
The Company did not operate a business per se, although the Trust has an ABN. That means that the usual indicia considered in determining whether the Company operated in its own right or solely as trustee are of limited assistance.[9] Nonetheless, the facts in this case suggest that the Company only ever operated as a trustee. The only assets of the Company (either in its own capacity or as trustee of the Trust) were the Properties. While the Company was listed on title as the registered proprietor of the Properties, it is not possible to identify when a registered proprietor acts as a trustee on a certificate of title.
[9]See, eg, Re Civil Construction Network Services Pty Ltd (in liq) [2020] VSC 474, [15].
The direction in proposed order (2) is sought to dispel any uncertainty as to the validity of the appointment of the Receiver over the Trust’s assets.
The reason why uncertainty may arise is because of the existence of an ‘ipso facto’ clause in the Trust Deed. Clause 53 relevantly provides that:
The appointment of a trustee terminates automatically if any of the following occurs … the trustee enters into compulsory or voluntary liquidation … or has an administrator, receiver, official manager, or receiver and manager appointed to any part of its assets.
In the context of the winding up of trustee companies, such clauses have become notorious in removing as trustee a company that operated solely as the trustee of a trading trust. The only means of permitting a liquidator of such a trustee company to deal with the assets of the trust is to appoint her or him as a receiver of the trust’s assets, or to make orders to permit the company to deal with the trust’s assets.[10]
[10]See, eg, Cremin, Re Brimson Pty Ltd (in liq) [2019] FCA 1023, [49]–[51]; Re Mandeville Group [2020] VSC 293, [197]–[208]; Re Waratah Group Pty Ltd (in liq) [2020] VSC 523, [41]–[48]; Re Windsor Development Co Pty Ltd (in liq) (No 2) [2024] VSC 297, [233]–[241] (Re Windsor Development).
The Receiver submits that orders of that kind are not necessary in this case. That is because, under the Deed of Appointment, he was appointed not only as receiver of the ‘whole of the undertaking property and assets of’ the Company in its own right, but also the ‘whole of the undertaking property and assets of’ the Company in its capacity as trustee for the Trust.
There is no doubt that the appointment of the Receiver as receiver and manager of the assets of the Company had the automatic effect of removing the Company as trustee.[11] The question is what effect that had on the assets held by the Company in its capacity as trustee of the Trust. That requires consideration of the proper construction of the Deed of Appointment (read in light of the General Security Agreement).
[11]See, eg, the similarly worded ipso facto clause in Re Mandeville Group [2020] VSC 293, fn 276.
The Receiver submits that the relevant provisions of the Deed of Appointment (cl 2(a) and item 15(a) of Schedule 1) are capable of three constructions. Identifying the correct construction turns on the application of ordinary principles of contractual interpretation.[12] The Court must ask what a reasonable businessperson in the position of the parties would have understood the terms to mean, construing those terms objectively by reference to the text, context and purpose of the provision.[13]
[12]See Herzfeld and Prince, Interpretation (Law Book Co, 3^rd ed, 2024), [25.3.1630].
[13]See Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201, [70].
The first available construction is that Deed of Appointment effected a simultaneous appointment of the Receiver as receiver and manager of the assets of the Company, and assets the Company held as trustee of the Trust. This meant that, although the Company was ousted as trustee, the Receiver was validly appointed over the assets of the Trust at the time of appointment. The Receiver is therefore entitled to deal with the assets of the Trust in accordance with the terms of his appointment (and powers stated in the Deed of Appointment).
The second available construction is that the effect of the Deed of Appointment had a primary and secondary effect:
(a)Its primary effect was the appointment of the Receiver as receiver of the Company’s assets, with the outcome that cl 53 of the Trust Deed was triggered, and the Company was ousted as trustee.
(b)Its secondary effect was the appointment of the Receiver to the property of the Company ‘as trustee for the Trust’. While in this scenario, cl 53 removed the Company as trustee, the Company remained a bare trustee of the Properties and in that capacity still held, as a matter of fact, property the subject of the Trust.[14] The Receiver was capable of being appointed as receiver and manager of that property under the terms of the Deed of Appointment. In this regard, there is no doubt that the Trust Deed conferred power on the trustee — prior to the appointment of the Receiver — to mortgage or charge the Trust assets of the trust as security. Such a mortgage or charge having been entered into, the fact that the assets of the Trust are held by a bare trustee has no effect on the ability of the mortgagee or chargee to appoint a receiver if the terms of the relevant agreement permit the mortgagee or chargee to do so.
[14]CGU Insurance Ltd v One.Tel Ltd (in liq) (2010) 242 CLR 174, 182-3 [36]; Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271, 281.
The third available construction is that the Deed of Appointment removed the Company as trustee of the Trust, so that any purported appointment of the Receiver over ‘the undertaking property and assets of [the Company] … as trustee for [the Trust]’ was ineffective.
Either of the first two constructions mean that the Receiver was appointed as receiver and manager of the Trust’s assets. On either basis, the Receiver seeks the direction in proposed order (2).
The Receiver submits that the first construction should be preferred because:
(a)it is most consistent with the actual text of the Deed of Appointment (which adopts the expression used in cl 8.1(h) of the General Security Agreement). That text provides for the appointment of a receiver to the ‘undertaking property and assets’ held beneficially by the Company and held on trust for the Trust. Both those appointments take place at the same time. The only way that the Company can be ousted as trustee prior to the Receiver’s appointment to the Trust’s assets is if the appointment to the Company’s assets is construed as occurring at a separate point in time prior to the appointment of the Receiver to the Trust’s assets. There is no textual basis for finding such a separate point in time arises — indeed, cl 4 of the Deed of Appointment addresses the ‘time appointment takes effect’, and suggests that the appointment occurs at the same time. Read as a whole, the effect of the Deed of Appointment is that the appointment occurs simultaneously;
(b)it is most consistent with the apparent purpose of the Deed of Appointment (read with the General Security Agreement), which is to enforce the security granted by the Company in its own capacity and as trustee of the Trust; and
(c)it should be assumed that sensible businesspersons would seek that the terms of the General Security Agreement and the Deed of Appointment, produce a commercial result.[15] A result that would see a lender unable to appoint a receiver to the only assets held by the grantor of security is an implausible and uncommercial outcome.
[15]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656-7 [35].
The analysis in paragraphs 50(b) and (c) above supports the second construction, although the Receiver submits that this construction should not be preferred as it assumes a staggered series of appointments that has no basis in the text of the Deed of Appointment.
The third construction means the Receiver is not entitled to deal with the Trust’s assets, and it is necessary for orders to be made either appointing him as a receiver of the Trust’s assets, or permitting the Company to deal with the Trust’s assets under the Trustee Act. If the Court finds that construction is correct, then the Receiver seeks the alternative forms of relief. Of those two alternatives, the Receiver submits that his appointment as a court appointed receiver under proposed orders (3)–(5) would be a more appropriate and convenient course to proposed orders (6)-(7), including because it would pre-empt any potential risk of a substitute trustee being appointed.[16]
[16]See Re Windsor Development [2024] VSC 297, [239]–[240].

Consideration

I accept the Receiver’s submissions regarding the Court’s powers to make the directions and/or give the judicial advice sought. In particular:
(a)Section 424 of the Corporations Act is relevantly engaged because the Receiver was appointed under a power contained in an instrument, being the General Security Agreement, and the directions are for matters arising in connection with the performance or exercise of his functions and powers as a receiver.
(b)The directions concern the nature and extent of the Receiver’s powers and duties, as opposed to matters which are not amenable to judicial advice. In this regard, I refer to Re One.Tel, as cited at paragraph 34 above, and to Re Ansett No 3, as cited at paragraph 35 above.
On the basis of the matters deposed to in the Hanna Affidavit, as reflected in the submissions described at paragraphs 38 and 39 above, I am satisfied on the balance of probabilities that the Company operated, and held the Properties, solely in its capacity as Trustee of the Trust. All of the matters referred to therein are consistent with that proposition and I have seen no evidence suggesting the contrary.
Consequently, making the direction in proposed order (1) is appropriate.
I have carefully considered the content of the Hanna Affidavit, including the documents exhibited thereto. After reviewing that material, I am satisfied that:
(a)when entering into the Junior Loan Agreement with ACMC, the Company had the power to do so pursuant to cl 31 of the Trust Deed, which expressly confers a power on the trustee to ‘borrow and raise money from any person’;
(b)when entering into the General Security Agreement with ACMC, the Company had the power to do so pursuant to cl 31 of the Trust Deed, which expressly confers a power on the trustee ‘to mortgage, pledge, charge or otherwise provide the assets of the trust as security for any borrowing, raising, facility, guarantee, indemnity, lease or other contractual obligation’. The plaintiffs submit, and I accept, that a power of this kind impliedly confers a power of enforcement, which may include a power to appoint a receiver;[17]
(c)when entering into both the Junior Loan Agreement and the General Security Agreement, the Company expressly did so in its own right and as Trustee for the Trust;
(d)an Event of Default within the meaning of the General Security Agreement occurred, notice of which was given to the Company (in both capacities) and which default was not remedied;
(e)by reason of that Event of Default, ACMC’s right under cl 8.1 of the General Security Agreement to appoint a receiver over the Secured Property (as defined in the General Security Agreement) was triggered;
(f)the definition of Secured Property in the General Security Agreement included property held by the Company in its own right and as Trustee for the Trust, and therefore ACMC could appoint a receiver over Trust property held by the Company;
(g)the Deed of Appointment had the effect of appointing the Receiver as receiver and manager over the Secured Property, which was defined as including ‘[t]he whole of the undertaking property and assets of [the Company] in its own right and as trustee for the [Trust] both present and after acquired’. Thus, the Receiver was appointed to the Trust property held by the Company;
(h)the Properties, being part of the ‘property and assets’ of the Company in its own right and as Trustee for the Trust, in circumstances where I have already found that they were held by the Company as trustee of the Trust, are Trust property and they are properties to which the Receiver was appointed; and
(i)any rights or choses in action belonging to the Company in connection with the Properties, including any such rights or choses in action arising from their acquisition by the SRLA, also form part of the Trust property over which the Receiver was appointed.
[17]See, eg, Gaskell v Gosling [1896] 1 QB 669, 691; Nom de Plume Nominees Pty Ltd v Fingal Developments Pty Ltd [2016] VSCA 159, [140]–[141]; Carey v Korda (2012) 45 WAR 181, 191-3 [45]–[51]. In Visbord v Federal Commissioner of Taxation (1943) 68 CLR 355, 381, Williams J described a mortgagee’s power of appointment of a receiver on default by a mortgagor as a ‘well-established legal device’.
In my view, the matters described in the preceding paragraph clearly establish the validity of the appointment of the Receiver over the Trust property.
I accept, in light of the presence of an ipso facto clause in the Trust Deed, that this may give rise to some uncertainty in this regard such that the Receiver seeks the Court’s guidance. I am satisfied that in this case, the Deed of Appointment had the effect of appointing the Receiver to Trust property, despite the ipso facto clause in the Trust Deed. It is therefore appropriate to make the direction in proposed order (2), as:
(a)the Receiver was appointed over the Trust property, for the reasons set out in paragraph 56 above;
(b)therefore, the situation is different to that where a voluntary administrator or liquidator has been appointed to a company, where the appointment is to the entity rather than over the assets per se;
(c)while the ipso facto clause in the Trust Deed had the effect of removing the Company as trustee, I accept that the question of what effect that had on the assets held by the Company in its capacity as trustee of the Trust requires consideration of the proper construction of the Deed of Appointment;
(d)I accept the Receiver’s submissions, as set out in paragraph 45 above, regarding the proper approach to questions of contractual interpretation and I apply those here;
(e)I agree with the Receiver’s submission that the relevant provisions of the Deed of Appointment (particularly cl 2(a) and item 15(a) of Schedule 1) are capable of the three constructions described above;
(f)I agree with the Receiver’s submission that either the first available construction, being that described in paragraph 46 above, or the second available construction, being that described in paragraph 47 above, mean that the Receiver was appointed as receiver and manager of the Trust’s assets, and that this justifies the direction in proposed order (2);
(g)in respect of the second construction:
(i)while I disagree that the second construction assumes a staggered series of appointments (see paragraph 51 above), I agree that a staggered series of appointments has no basis in the text of the Deed of Appointment; and
(ii)I agree with the conclusion set out in paragraph 47(b) above that the General Security Agreement having been entered into, the fact that the Trust assets are held by a bare trustee has no effect on ACMC’s ability to appoint a receiver, given that the terms of that agreement permit ACMC to do so, for the reasons set out in that paragraph; and
(h)I agree with the Receiver’s submissions as to why the first construction should be preferred, as set out at paragraph 50 above. Those submissions are well‑reasoned, supported by the evidence, and clearly expressed. I adopt the submission in that paragraph in its entirety, noting that I cannot express it any better.

Conclusion

For these reasons, I gave the judicial advice sought by making orders in the form of proposed orders (1) and (2).
I also made orders:
(a)that the plaintiffs provide a copy of the orders as made to the interested persons referred to in paragraph 4(a) to (e) above; and
(b)granting liberty to apply to the Receiver, and to any person who can demonstrate sufficient interest to modify the orders on not less than 48 hours’ written notice to the Receiver.

[2025] VSC 117

13 March 2025