Re Cloud Nine Melbourne Pty Ltd (In Liq) - [2024] VSC 357

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2024 02942

IN THE MATTER OF CLOUD NINE MELBOURNE PTY LTD (ACN 160 781 831) (IN LIQ)

PETER MALONE IN HIS CAPACITY AS LIQUIDATOR OF CLOUD NINE MELBOURNE PTY LTD (ACN 160 781 831) (in liq)	Plaintiff
and
CLOUD NINE MELBOURNE PTY LTD (ACN 160 781 831) (in liq)	Second Plaintiff

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JUDGE:	DELANY J
WHERE HELD:	Melbourne
DATE OF HEARING:	21 June 2024
DATE OF RULING:	21 June 2024 (ex tempore)
CASE MAY BE CITED AS:	Re Cloud Nine Melbourne Pty Ltd (In Liq)
MEDIUM NEUTRAL CITATION:	[2024] VSC 357

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CORPORATIONS – Application seeking conferral of power to sell or otherwise deal with the property of the company held on trust – Section 63 of the Trustee Act 1958 (Vic) – Power of the Court to appoint a receiver under the Supreme Court Act 1986 (Vic) and Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Whether the preferable course is to confer power under the Trustee Act 1958 (Vic) or to appoint a receiver – Re Amerind Pty Ltd (receivers and managers apptd) (in liq) (2017) 320 FLR 118 applied – Ipso facto provision of the Trust Deed – Company acting as bare trustee – Conferral of power under s 63 of Trustee Act 1958 (Vic) more cost efficient than appointing receiver – Orders under s 1318 of the Corporations Act 2001 (Cth) – Re Simpkiss Pty Ltd (in liq) [2018] FCA 2121 applied – Order as to remuneration, costs and expenses of liquidator.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Ark Legal	Patrick Miller

HIS HONOUR:

On 19 February 2024 Peter Malone (‘the Liquidator’) was appointed liquidator of Cloud Nine Melbourne Pty Ltd (ACN 160 781 831) (‘the Company’) pursuant to s 513B of the Corporations Act 2001 (Cth) (‘Corporations Act’) at a meeting of the members of the Company where they resolved to wind up the Company.

The Company was incorporated on 15 October 2012. Rockey Dean is the Company’s sole director, shareholder and secretary. On 15 October 2012, the Company was appointed as trustee of the Rockey & Preeti Family Trust (ABN 95 580 756 778) (‘the Trust’).

From at least June 2016, the Company operated a Red Rooster franchise store trading as Red Rooster Doncaster (‘the Business’) pursuant to a Franchise Agreement with Red Rooster. The agreement with Red Rooster was terminated on 18 February 2024.

The Liquidator brings this application under s 63 of the Trustee Act 1958 (Vic) (‘Trustee Act’) seeking orders conferring power to sell or otherwise deal with the property of the Company held on trust and other orders. In support of this application, the Liquidator relies on his affidavit affirmed on 6 June 2024 together with three affidavits relating to service of the application. The Liquidator also relies on detailed submissions dated 19 June 2024.

In the alternative to orders under s 63 of the Trustee Act, the Liquidator relies on the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] VSC 357
Decision Date: 21 June 2024 (ex tempore)

CaseChat Overview and Summary

Cloud Nine Melbourne Pty Ltd, in liquidation, was the subject of an application by the liquidator, seeking the conferral of power under section 63 of the Trustee Act 1958 (Vic) to sell or otherwise deal with the property of the company held on trust. The application was heard in the Supreme Court of Victoria, with the matter concerning the resolution of competing interests regarding the management and disposition of the company's assets. The central issue before the Court was whether it was preferable to confer the power under the Trustee Act or to appoint a receiver under the Supreme Court Act 1986 (Vic) and the Supreme Court (General Civil Procedure) Rules 2015 (Vic).

The Court examined the legislative frameworks and case law, including the decision in Re Amerind Pty Ltd (receivers and managers apptd) (in liq) (2017) 320 FLR 118, which emphasised the need for a cost-effective and efficient approach. It was noted that the company was acting as a bare trustee and that the conferral of power under section 63 of the Trustee Act 1958 (Vic) would be more cost-efficient than appointing a receiver. The Court also considered the implications of the ipso facto provision of the Trust Deed and the statutory provisions under the Corporations Act 2001 (Cth). In making its decision, the Court applied the principles from the case of Re Simpkiss Pty Ltd (in liq) [2018] FCA 2121, which underscored the importance of a practical and economical approach to resolving the liquidation process.

Ultimately, the Court found that it was in the best interests of the company and its stakeholders to confer the power under section 63 of the Trustee Act 1958 (Vic). This decision was made in light of the potential for reduced costs and administrative burdens associated with appointing a receiver. The Court also made orders under section 1318 of the Corporations Act 2001 (Cth) regarding the remuneration, costs, and expenses of the liquidator, ensuring that these were fairly and reasonably determined. This decision provides clear guidance on the preferable course of action in similar future cases involving the liquidation of companies acting as bare trustees.

Orders