Re Cremin, Brimson Pty Ltd (in liq)

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FEDERAL COURT OF AUSTRALIA

Cremin, in the matter of Brimson Pty Ltd (in liq) [2019] FCA 1023

File number: VID 645 of 2019
Judge: MOSHINSKY J
Date of judgment: 25 June 2019
Catchwords: CORPORATIONS – insolvency – trustee company – right of indemnity – right of exoneration – where trustee company ceased to be the trustee of a trading trust upon the company going into liquidation – where all liabilities of the company were incurred in its capacity as trustee for the trust – where the liquidator sought orders to enable him to carry on the business and sell the trust property to satisfy debts owing to creditors of the trust
Legislation:

Corporations Act 2001 (Cth), ss 420, 477, 491, 1318, Sch 2, Insolvency Practice Schedule (Corporations), ss 90-15, 90-20

Federal Court of Australia Act 1976 (Cth), s 57

Trustee Act 1958 (Vic) ss 63, 67

Federal Court (Corporations) Rules 2000, r 2.8

Cases cited:

Aced Kang Investments Pty Ltd (in liq), in the matter of Aced Kang Investments Pty Ltd (in liq) [2017] FCA 476

Amirbeaggi, in the matter of Simpkiss Pty Ltd (in liq) [2018] FCA 2121

Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103

Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20

Jones v Matrix Partner Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) (2018) 260 FCR 310

Re Stansfield DIY Wealth Pty Ltd (in liq) (2014) 291 FLR 17

Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99

Staatz v Berry, in the matter of Wollumbin Horizons Pty Ltd (in liq) (No 3) [2019] FCA 924

Taylor v CJ & KL Bond Super Pty Ltd, in the matter of CJ & KL Bond Pty Ltd (in liq) [2018] FCA 1430

Date of hearing: 25 June 2019
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 56
Counsel for the Plaintiffs: Mr CR Brown
Solicitor for the Plaintiffs: Harwood Andrews

ORDERS

VID 645 of 2019

IN THE MATTER OF BRIMSON PTY LTD (IN LIQ) (ACN 621 156 643) AND THE KANE RETAIL GROUP PTY LTD (IN LIQ) (ACN 147 179 922) AND THE TEAL RETAIL GROUP PTY LTD (IN LIQ) (ACN 165 892 544)

SHANE JUSTIN CREMIN IN HIS CAPACITY AS LIQUIDATOR OF BRIMSON PTY LTD (IN LIQ) (ACN 621 156 643) AND THE KANE RETAIL GROUP PTY LTD (IN LIQ) (ACN 147 179 922) AND THE TEAL RETAIL GROUP PTY LTD (IN LIQ) (ACN 165 892 544)

First Plaintiff

BRIMSON PTY LTD (IN LIQUIDATION) (ACN 621 156 643)

Second Plaintiff

THE KANE RETAIL GROUP PTY LTD (IN LIQUIDATION) (ACN 147 179 922) (and another named in the Schedule)

Third Plaintiff

JUDGE:

MOSHINSKY J

DATE OF ORDER:

25 JUNE 2019

THE COURT ORDERS THAT:

1.Compliance with r 2.8 of the Federal Court (Corporations) Rules 2000 be dispensed with.

2.Pursuant to s 1318 of the Corporations Act 2001 (Cth), the first plaintiff,…

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Details
Case
[2019] FCA 1023
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, Shane Justin Cremin, as liquidator of three companies, Brimson, Kane, and Teal, applied for orders to facilitate the sale of the companies' assets to satisfy debts owed to creditors. Each company operated a retail business under a franchise agreement and held its assets in trust for specific family trusts. Upon the companies' liquidation, the liquidator sought to continue operating the businesses and sell the assets to meet creditors' claims. The court needed to determine if the liquidator could act as a receiver and manager of the trusts' assets and if the liquidator's actions should be excused for any breaches of duty during the administration of the trusts.

The primary legal issue was whether the liquidator could be appointed as the receiver and manager of the family trusts' assets and if his actions could be excused for any administrative breaches. The court considered whether the liquidator's appointment would allow for the effective administration of the trusts' assets and the equitable treatment of creditors. Additionally, the court examined if the liquidator, having acted honestly, should be excused from any administrative shortcomings.

The court held that the liquidator could be appointed as the receiver and manager of the trusts' assets, enabling him to carry on the businesses and sell the assets to satisfy creditors. The court also excused the liquidator from any breaches, failures, or omissions relating to the administration of the trusts, as he had acted honestly. The court further granted the liquidator the necessary powers to manage the trusts' assets and prioritize the payment of creditors from the sale proceeds. The court ruled that the liquidator's costs and expenses, including those from the application, should be paid from the trusts' property.

The court's decision allowed the liquidator to proceed with the sale of the trusts' assets to satisfy creditors, providing a clear path for the equitable distribution of the available funds. The orders facilitated the effective administration of the trusts' assets and ensured that the liquidator's actions were excused due to his honest conduct. The court's ruling provided clarity and direction for the future management of the trusts' assets and the resolution of creditor claims.

Orders

Orders of the court

1. Compliance with r 2.8 of the Federal Court (Corporations) Rules 2000 be dispensed with.

2. Pursuant to s 1318 of the Corporations Act 2001 (Cth), the first plaintiff, Shane Justin Cremin, in his capacity as liquidator of the second plaintiff and the fourth plaintiff, acted honestly and ought fairly to be excused for any breaches, failures, or omissions relating to the administration of the second plaintiff in dealing with the property of the Brimson Family Trust and relating to the administration of the fourth plaintiff in dealing with the property of the Teal Retail Group Family Trust.

3. Pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth), Mr Cremin, an official liquidator, be appointed without security as receiver and manager over the business and assets of:

(a) the Brimson Family Trust;

(b) the Kane Retail Group Family Trust; and

(c) the Teal Retail Group Family Trust,

(the Receiver).

4. The need for the Receiver to file a guarantee under r 14.21 and r 14.22 of the Federal Court Rules 2011 be dispensed with.

5. The Receiver have, in respect of the business and assets of each trust referred to in paragraph 3, the powers that a receiver has in respect of the business and property of a company under s 420 of the Corporations Act (other than s 420(2)(s), (t), (u) and (w)) as if the reference in that section to “the corporation” were a reference to the trust including without limitation, the power to do all things necessary or convenient to:

(a) carry on the business of the trust;

(b) employ any person in connection with the business of the trust;

(c) sell the assets of the trust;

(d) pay the creditors of the trust from the proceeds of the assets, pursuant to the priorities prescribed under the provisions of the Corporations Act;

(e) compromise any claim made against the second, third or fourth plaintiff in its capacity as trustee of the trust or against any of the trust property on any terms the Receiver sees fit;

(f) bring any claim against any party on behalf of the trust; and

(g) execute any tax returns, financial statements or other documents relating to the trust.

6. The costs, expenses and remuneration incurred by Mr Cremin as liquidator of the second, third and fourth plaintiffs and as the Receiver, including the costs of this application, be paid in priority from the property of the trusts (including any proceeds from the sale of the businesses).

7. There be liberty to apply to any person who can demonstrate sufficient interest to modify or discharge paragraphs 1 to 6 on not less than 48 hours’ written notice to the first plaintiff.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

No person has appeared today in opposition to the application.Background The background facts, as set out in the Cremin Affidavit, are as follows.The Companies The Companies were incorporated as follows:(a)Brimson on 17 August 2017;(b)Kane on 3 November 2010; and(c)Teal on 19 September 2013. Prior to liquidation, each Company in its capacity as trustee of the relevant Trust, operated a retail business known as “Snooze” under a franchise agreement. The businesses were as follows:(a)Brimson as trustee for the Brimson Trust traded as Snooze Pakenham;(b)Kane as trustee for the Kane Trust traded as Snooze Fountain Gate; and(c)Teal as trustee for the Teal Trust traded as Snooze Dandenong,(the Businesses). On 22 May 2019, Snooze Sleep Well Pty Ltd (Snooze) issued breach notices to each of the Companies in accordance with the terms set out in the respective franchise agreements. The sole director of the Companies is and was at all material times Neal Brimfield. Mr Brimfield and Kate Brimfield each hold 50% of the shares in Brimson and Teal, and Ms Brimfield holds 100% of the shares in Kane. On 29 May 2019, the Liquidator was appointed liquidator of the Companies pursuant to s 491 of the Corporations Act.The Trusts The Companies were appointed trustees of the Trusts pursuant to declarations of trust as follows:(a)Brimson on 21 August 2017;(b)Kane on 5 November 2010; and(c)Teal on 19 September 2013. Pursuant to the terms of the respective trust deeds, the appointors or principal of the Trusts are as follows:(a)Brimson Trust – Mr and Ms Brimfield;(b)Kane Trust – Mr Brimfield; and(c)Teal Trust – Mr and Ms Brimfield. Based on his investigations to date, the Liquidator’s view is that each Company:(a)operated the relevant Business exclusively in its capacity as trustee of the relevant Trust;(b)did not undertake any activities or conduct any business in its own right; and(c)at all times held, and continues to hold, all property on trust for the relevant Trust.Assets Each Company as trustee of the relevant Trust holds the following assets:(a)cash at bank;(b)stock (inventory); and(c)plant and equipment (including office equipment). Kane as trustee of the Kane Trust also holds two motor vehicles. On 29 May 2019, the Liquidator received cash transfers representing the cash on hand for each of the Companies. The remaining assets are valued as follows in the balance sheets for the Trusts: On 29 May 2019, the Liquidator engaged Grays Asset Services Pty Ltd (Grays) to conduct a valuation of the assets (Grays Valuation).Creditor position The Liquidator has undertaken searches of the Personal Properties and Securities Register (PPSR) with respect to the Companies and the Trusts (PPSR Searches) in order to ascertain the secured creditor position of each of the Companies and the Trusts. The PPSR searches confirm that certain parties have registered security interests against the Companies or the Trusts. These are set out at [21] of the Cremin Affidavit. Details of the amounts owed to creditors who have registered security interests against the Companies or the Trusts are set out at [23] of the Cremin Affidavit.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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