Re Chrisover Pty Ltd (in Liquidation)
[2024] WASC 373
•11 OCTOBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE CHRISOVER PTY LTD (IN LIQUIDATION); EX PARTE GREGORY PAUL QUIN AS LIQUIDATOR OF CHRISOVER PTY LTD (IN LIQUIDATION) (ACN 655 980 340) AND CHRISOVER PTY LTD (ACN 655 980 340) [2024] WASC 373
CORAM: HILL J
HEARD: 4 OCTOBER 2024
DELIVERED : 4 OCTOBER 2024
PUBLISHED : 11 OCTOBER 2024
FILE NO/S: COR 146 of 2024
MATTER: IN THE MATTER OF CHRISOVER PTY LTD (IN LIQUIDATION)
EX PARTE
GREGORY PAUL QUIN as liquidator of CHRISOVER PTY LTD (IN LIQUIDATION) (ACN 655 980 340)
First Plaintiff
CHRISOVER PTY LTD (ACN 655 980 340)
Second Plaintiff
Catchwords:
Corporations - External administration - Winding up - Where company in liquidation is bare trustee - Application for appointment of liquidator as receiver and manager of trust property - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 477(2)
Insolvency Practice Schedule (Corporations) (sch 2 to the Corporations Act
2001) (Cth) s 90-15
Rules of the Supreme Court 1971 (WA) O 51 r 1
Supreme Court Act 1935 (WA) s 25(9)
Supreme Court (Corporations) Rules 2004 (WA) r 2.8
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | B Powell |
| Second Plaintiff | : | B Powell |
Solicitors:
| First Plaintiff | : | Pragma Lawyers |
| Second Plaintiff | : | Pragma Lawyers |
Cases referred to in decision:
Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524
Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677
In the matter of Hercules Car Parking Systems (Victoria) Pty Ltd [2018] NSWSC 409
In the matter of Mecfab Holdings Pty Ltd [2015] NSWSC 46
Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310
HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript to include references, headings and to correct matters of grammar and expression.)
On 10 September 2024, the first plaintiff was appointed as liquidator of the second plaintiff, Chrisover Pty Ltd (Liquidator). Prior to this appointment, Chrisover Pty Ltd (Company) was the trustee of KC Trust trading as Overton Transport (Trust).[1]
[1] Affidavit of Gregory Paul Quin filed 24 September 2024 [9], 'GPQ-4'.
On 24 September 2024, the plaintiffs filed an originating process seeking, among other things, orders that the Liquidator:
(a)be appointed as receiver and manager of the assets of the Trust without security;
(b)in acting as receiver and manager, has the powers that a liquidator has in respect of property of a company pursuant to s 477(2) of the Corporations Act 2001 (Cth) (Act), as if the reference to 'corporation' in that section was a reference to the Trust including, without limitation, the power to do all things necessary or convenient to effect the sale or distribution of the assets and undertaking of the Trust; and
(c)would be justified and acting reasonably in proceeding on the basis that the Company carried on business solely in its capacity as trustee of the Trust, that all assets of the Company are properly characterised as property held by the Company in that capacity and that all creditors of the Company are creditors of the Trust.
Factual background
The plaintiffs filed two affidavits in support of their application: an affidavit of the first plaintiff filed 24 September 2024, and an affidavit of William James Gilbert filed 30 September 2024, which confirms service of this application on the Australian Securities and Investments Commission (ASIC) as well as the Australian Taxation Office. The following summary is taken from the affidavit of the first plaintiff.
The Company was incorporated on 10 December 2021.[2] A current and historical company extract obtained from the records of ASIC discloses that the sole director and company secretary of the Company is Casey Ann Christie.[3]
[2] Affidavit of Gregory Paul Quin filed 24 September 2024 [12(a)].
[3] Affidavit of Gregory Paul Quin filed 24 September 2024, 'GPQ-1'.
Based on the enquires that he has undertaken to date, Mr Quin believes that:
(a)the Company was the trustee of the Trust; [4]
(b)the Company did not trade in its own right;
(c)the Company routinely received and made payments to other parties, including wages, in its capacity as trustee of the Trust;
(d)the financial statements were prepared in the name of the Trust but not the Company;[5] and
(e)the Company did not hold any assets in its own rights.[6]
[4] Affidavit of Gregory Paul Quin filed 24 September 2024 [9].
[5] Affidavit of Gregory Paul Quin filed 24 September 2024 [12(e)], [14] - [15], 'GPQ-5', 'GPQ-6'.
[6] Affidavit of Gregory Paul Quin filed 24 September 2024 [12(f)].
Among the books and records of the Company is a copy of the Trust deed. The Trust deed discloses that the Trust was established on 10 December 2021, the same date that the Company was incorporated.[7] Pursuant to cl 22(iv)(A) of the Trust deed, on the appointment of a liquidator, the Company's position as trustee of the Trust automatically terminated.
[7] Affidavit of Gregory Paul Quin filed 24 September 2024, 'GPQ-4'.
Service of application
I am satisfied that ASIC has been served with copies of the originating process and the affidavit,[8] as required by r 2.8 of the Supreme Court (Corporations) Rules 2004 (WA).
[8] Affidavit of William James Gilbert filed 30 September 2024.
No one has given notice to the plaintiffs' solicitors or to the court that they wish to be heard on the application.
Should the plaintiff be appointed as receiver and directions given?
The legal principles that govern this application are well known and can be summarised as follows.
Where a corporate trustee enters external administration, the company's right of indemnity and accompanying equitable lien over the assets of the trust survives the appointment. If the company has been removed as trustee of the trust under the terms of the trust deed, the company retains the right to hold the trust assets as bare trustee; but does not have the power to sell those assets to satisfy that indemnity unless it obtains an order from 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 Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 [22] - [28] (Gordon J).
The liquidator has two options. First, they can apply for an order that confers power on the liquidator to deal with the assets of the trust, or second, they can seek orders to be appointed as receiver and manager of the trust.
In this case, the first plaintiff seeks to be appointed as receiver and manager of the Trust and also seeks orders under s 90‑15 of the Insolvency Practice Schedule (Corporations) (sch 2 of the Act) (IPS) to facilitate his dealing with the assets of the Company to enable the winding up of the Company and the Trust.
Section 90-15(1) of the IPS provides that the court may make 'such orders as it thinks fit in relation to the external administration of a company'. This power is extremely broad and is at least as extensive as the powers that were formerly available to the court under s 479(3) and s 511 of the Act.
On an appropriate application, courts are generally willing to make orders permitting the liquidator of a (former) corporate trustee to sell trust assets.
The court has power to appoint a receiver under O 51 r 1 of the Rules of the Supreme Court 1971 (WA), as well as s 25(9) of the Supreme Court Act 1935 (WA), which allows a court to appoint a receiver where it appears to be just and convenient.
In the absence of any relevant conflict, the court will commonly appoint the liquidator of the corporate trustee as receiver of the trust without security.[10]
[10] In the matter of Hercules Car Parking Systems (Victoria) Pty Ltd [2018] NSWSC 409 (Brereton J).
Appointing the liquidator of a corporate trustee as receiver of the trust's assets facilitates and simplifies the external administration of the corporate trustee by providing for the trust's business and assets to be under the same control as the corporate trustee while it is in external administration. This aids in the vindication of the trustee company's right of indemnity out of the trust's assets.[11]
[11] In the matter of Mecfab Holdings Pty Ltd [2015] NSWSC 46 [9].
Once the sale of the trust assets has occurred, the proceeds may be appropriated by way of exoneration as part of the conduct of liquidation in accordance with the statutory priorities, which are set out in pt 5.6, div 6 of the Act.[12] This includes the costs of liquidation.
[12] Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [55] - [58] (Kiefel CJ, Keane & Edelman JJ), [95] - [97] (Bell, Gageler & Nettle JJ), [171] (Gordon J).
On the evidence before me, I accept that by reason of cl 22(iv)(A) of the Trust deed, on the appointment of the first plaintiff as Liquidator, the Company immediately ceased to be trustee of the Trust. As a consequence, the Company is now a bare trustee and does not have the power to sell or otherwise deal with the assets of the Trust. There is no evidence to suggest a new trustee has been appointed to the Trust.
I am also satisfied on the evidence before me that the Company solely acted as trustee of the Trust and that all assets held by the Company were held in its capacity as trustee of the Trust.
The orders that are sought by the plaintiffs in the originating process are consistent with the legal principles that I have already outlined.
Given the evidence, I accept it is expedient for the first plaintiff to have the power to appoint the first plaintiff as receiver and manager of the Trust without security. This will protect the Company's right of indemnity as well as the position of creditors. Other advantages of this proposal are that the first plaintiff is subject to the regulatory regime that applies to insolvency practitioners. He has professional indemnity insurance and is also subject to the continued supervision of the court.
The form of orders that have been sought by the plaintiffs in the originating process in relation to service of the court's orders and the allowance for any party aggrieved by the orders to apply to the court to vacate or vary these orders protects creditors of the Company from any possible prejudice that might otherwise arise.
In relation to the orders that are sought under s 90-15 of the IPS, I accept the first plaintiff's evidence that the Company has acquired assets and incurred liabilities only in its capacity as trustee of the Trust. On this basis, I accept that it is appropriate to make orders that the first plaintiff will be acting properly and is justified in proceeding to conduct the affairs of the Trust on the basis that the business and assets of the Company comprised the assets of the Trust.
Finally, in relation to the costs of the application, the plaintiffs seek orders that the costs of the application be costs in the winding up of the second plaintiff and otherwise be paid from Trust property. In my view, this is the appropriate costs order.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
11 OCTOBER 2024
0
6
6