In the matter of Gramarker Pty Ltd; Clifford Sanderson (as liquidator of Gramarker Pty Ltd) v Kerr
[2014] NSWSC 243
•03 March 2014
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Gramarker Pty Ltd; Clifford Sanderson (as liquidator of Gramarker Pty Limited) v Simon Kerr [2014] NSWSC 243 Hearing dates: Monday, 3 March 2014 Decision date: 03 March 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Liquidator appointed as receiver of the assets of trust of which company was trustee
Catchwords: CORPORATIONS - winding up - liquidators - where company is trustee of a discretionary trust - where office of trustee vacated on liquidation and no replacement trustee appointed - liquidator appointed as receiver of trust assets Legislation Cited: (CTH) Corporations Act 2001, s 477(2) Cases Cited: Re Indopal Pty Limited (1987) 12 ACLR 54 Category: Principal judgment Parties: Gramarker Pty Ltd (plaintiff)
Simon Kerr (first defendant)
Thomas Marshall (second defendant)Representation: Counsel:
C Harris SC (plaintiff)
J Clifton (defendants)
Solicitors:
Colin Biggers & Paisley (plaintiff)
JMA Legal (defendants)
File Number(s): 2013/360494
Judgment
HIS HONOUR: By summons filed on 29 November 2013 the plaintiff Clifford Sanderson in his capacity as liquidator of Gramarker Pty Limited seeks an order that he be appointed without security as receiver of the GMK Number 1 Trust, and that he be given all powers in relation to the assets of the trust that are exercisable by the trustee under the trust deed and all powers in relation to the trust as a liquidator has under the (CTH) Corporations Act 2001, s 477(2)
The company was incorporated on 5 April 2005 with the first defendant Simon Kerr and the second defendant Thomas Marshall as its only directors and equal shareholders. The trust was settled on the same day apparently as a discretionary trust of which Mr Kerr and Mr Marshall are the appointors, Gramarker the trustee, and the respective family trusts of Messrs Kerr and Marshall the beneficiaries. By clause 16 of the trust deed, the trustee is entitled to indemnity from the assets of the trust for debts incurred by it in the course of acting as trustee. By clause 21, a corporate trustee is disqualified from holding office as such if it goes into liquidation.
The company was wound up by order of the Court and the plaintiff was appointed liquidator on 16 April 2013. He has sought the usual information and reports as to affairs from the directors but has received no response. After his appointment as liquidator, the plaintiff ascertained that there was registered in the name of the company a property at 49 Stanley Road Ingleburn, over which was secured a mortgage to Horizon Credit Union. The Ingleburn property appears to be the only asset of the company, and its only debts are an amount owed to the mortgagee Horizon Credit Union of some $349,000, $1,100 owed to the Australian Taxation Office and $2,678 owed for rates to Sydney Water Corporation, upon whose application the winding up order was made.
Having commenced steps to sell the Ingleburn property, correspondence with the directors and ultimately solicitors acting for them elicited information which ultimately established to the satisfaction of the liquidator that the Ingleburn property was held by the company not beneficially but as trustee for the GMK Property Number 1 Trust. The directors and their solicitors have from time to time asserted that a new trustee has been appointed, but there is nothing to indicate that that is anything more than assertion and nothing to indicate the identity of the new trustee. Indeed, one of the directors who asserted that a new trustee had been appointed was unable to identify it.
The only liabilities of the company appear to be liabilities which it owes in its capacity as trustee and relate to the Ingleburn property. The directors have asserted that the company has not traded otherwise than in its capacity as trustee. In that context, and no new trustee having been appointed, the liquidator seeks orders appointing himself as receiver of the assets of the trust in order to enforce the trustee's lien for its indemnity for the debts which it owes in that capacity.
In Re Indopal Pty Limited (1987) 12 ACLR 54 McLelland J considered a similar application in relation to a company in respect of which a winding up order had been made, which was the trustee of a discretionary trust. The directors of the company were also beneficiaries under the trust. The trust deed provided that the office of trustee should be determined and vacated if the trustee being a corporation should enter into liquidation. The directors did not comply with the request by the liquidators to submit a statement as to affairs, and had not provided to the liquidator the books of the company. By motion in the winding up proceedings, the liquidator sought a declaration that the company was entitled to be indemnified out of the assets of the trust, an order for the appointment of a receiver and manager of the trust, and orders that the directors deliver to the liquidator the books and property of the company and a statement as to affairs.
His Honour held that it appeared that the company was entitled to be indemnified out of the assets of the trust, at least to the extent of those assets as were in existence at the date of the winding up order, in respect of liabilities incurred by it by virtue of being trustee, including the costs and expenses of the winding up. But his Honour declined to make the declaration sought in that respect until either the present trustee of the trust, or some other representative of the existing and future beneficiaries of the trust, was joined as a respondent. However, his Honour observed that any right of indemnity of the company out of the assets of the trust would be secured by an equitable lien over those assets and, accordingly, that it was expedient to appoint a receiver and manager of the trust assets to protect the company's interests. In that respect his Honour said:
In view of the tentative view I have already expressed as to the company's right of indemnity there is I think a strong case for the appointment of a receiver and manager of the assets of the ... trust. Any right of indemnity of the company out of assets of the trust would be secured by an equitable lien over those assets and in the light of circumstances disclosed by the evidence it is clear that it is expedient to protect the company's interests by the appointment of a receiver and manager. The liquidator proposes that he should be appointed and this appears to me to be a convenient and sensible course ...
The circumstances in this case are closely analogous to those described by his Honour. For the same reasons, it seems to me appropriate and convenient to appoint the liquidator as receiver of the trust.
I have reservations, however, as to whether the liquidator should be given all the powers of the trustee under the trust deed, since that would conceivably extend to exercising discretions and making distributions to beneficiaries. To my mind, if there are assets to be distributed, then the liquidator should return to the Court for further directions in that respect. While it would be in order for the liquidator to proceed to sell the property, some measures will need to be put in place to ascertain the extent of the lien and protect the trust assets in circumstances where the liquidator's interests in acting for the creditors will not accord with those of the beneficiaries of the trust. That position I think can be accommodated by requiring the liquidator to return to the Court for directions before distributing any of the trust property, either to creditors or to beneficiaries or, for that, matter to himself.
The Court orders that:
(1) The plaintiff Clifford Sanderson be appointed without security as receiver of the assets of the GMK Property Number 1 Trust.
(2) The plaintiff has in respect of the trust property the powers that a liquidator has in respect of the property of a company under the Corporations Act s 477(2).
(3) The plaintiff not distribute the assets of the trust to creditors or beneficiaries without the further direction of the Court, provided that the plaintiff may pay from the assets of the trust the debts described in Tab 19 of exhibit CS1 herein, together with any interest accrued thereon.
(4) The parties have leave to apply for directions on 48 hours notice by arrangement with my associate.
(5) The plaintiff's costs of the application be costs in the liquidation.
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Decision last updated: 24 July 2014
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