Re Gaip Pty Ltd (in Liq)

Case •

[2023] WASC 496

•

9 APRIL 2024

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

CITATION:   RE GAIP PTY LTD (IN LIQ); EX PARTE NICOLE JANE ALLMARK as joint and several liquidator of GAIP PTY LTD (IN LIQ) (ACN 659 853 335)
[2023] WASC 496

CORAM:   HILL J

HEARD:   ON THE PAPERS

DELIVERED          :   15 NOVEMBER 2023

PUBLISHED           :   9 APRIL 2024

FILE NO/S:   COR 165 of 2023

MATTER:   IN THE MATTER OF GAIP PTY LTD (IN LIQ)

EX PARTE

NICOLE JANE ALLMARK as joint and several liquidator of GAIP PTY LTD (IN LIQ) (ACN 659 853 335)

First Plaintiff

PAULA LAUREN SMITH as joint and several liquidator of GAIP PTY LTD (IN LIQ) (ACN 659 853 335)

Second Plaintiff

GAIP PTY LTD (IN LIQ)

Third Plaintiff


Catchwords:

Corporations - External administration - Winding up - Where company in liquidation is bare trustee - Application for appointment of liquidators as receivers and managers of trust property - Application for directions by liquidators - Turns on own facts

Legislation:

Corporations Act 2001 (Cth) s 420, s 477(2), s 556, Sch 2 s 90-15
Rules of the Supreme Court 1971 (WA) O 51 r 1
Supreme Court Act 1935 (WA) s 25(9)

Category:    B

Representation:

Counsel:

First Plaintiff : No appearance
Second Plaintiff : No appearance
Third Plaintiff : No appearance

Solicitors:

First Plaintiff : Edwards Mac Scovell
Second Plaintiff : Edwards Mac Scovell
Third Plaintiff : Edwards Mac Scovell

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:

  1. On 28 July 2023, the first and second plaintiffs, Nicole Jane Allmark and Paula Lauren Smith, were appointed as liquidators of the third plaintiff, Gaip Pty Ltd (ACN 659 853 335) (Liquidators).  Prior to their appointment, Gaip Pty Ltd (Company) was the trustee of The Izzy and Pea Family Trust (Trust).

  2. On 26 October 2023, the plaintiffs filed an originating process in this Court seeking, among other things, orders that the Liquidators:

    (a)be appointed as receivers and managers, without security, over the property, assets and undertaking held by the Company in its capacity as trustee of the Trust;

    (b)in acting as receivers, have the powers under s 420 of the Corporations Act 2001 (Cth) (Act), as if the reference to 'corporation' in that section was a reference to the Trust;

    (c)have the powers under s 477(2) of the Act that a liquidator has in respect of property of a company (in its role as legal owner and trustee);

    (d)in acting as receiver, have the powers under s 556 of the Act, to effect and distribute the proceeds from the sale of the Trust property; and

    (e)are justified and acting reasonably in proceeding on the basis that the Company carried on business solely in its capacity as trustee of the trust, all assets of the Company are properly characterised as property held by the Company in its capacity as trustee of the Trust, and all the creditors of the Company are creditors of the Trust.

  3. The originating process was initially listed for hearing on 17 November 2023.  On 13 November 2023, the solicitors for the plaintiffs requested the matter be dealt with on the papers and the hearing vacated.  On 15 November 2023, I made orders in terms of the originating process subject to a minor amendment.  These are my reasons for making these orders.

Factual background

  1. The plaintiffs filed two affidavits in support of their application: an affidavit of the first plaintiff filed 26 October 2023 and an affidavit of service of Charmaine Ruth James filed 13 November 2023.  I also had the benefit of a detailed outline of submissions filed 13 November 2023. 

  2. The Company was incorporated on 1 June 2022.[1]  A current and historical company extract obtained from records of the Australian Securities and Investments Commission (ASIC) discloses that the Company's directors and shareholders are Allison Louise Filinski and Gregory Paul Filinski, who each hold one of the Company's two shares.[2]

    [1] Affidavit of Nicole Jane Allmark filed 26 October 2023 [7].

    [2] Affidavit of Nicole Jane Allmark filed 26 October 2023 [8], 'NJA2'.

  3. On 28 July 2023, the first and second plaintiffs were appointed as liquidators pursuant to a resolution of the Company in accordance with s 491 of the Act.[3]

    [3] Affidavit of Nicole Jane Allmark filed 26 October 2023 [5].

  4. Based on the enquires undertaken to date, the first plaintiff believes:[4]

    (a)the Company was the trustee of the Trust from 21 July 2022 to the date of the Liquidators' appointment to the Company;

    (b)the Company did not operate any business or conduct any activities in any capacity other than as trustee of the Trust, including in its own right; and

    (c)the Company did not act as trustee of any other trust and does not own any assets in its own right or as trustee of any other trust. 

    [4] Affidavit of Nicole Jane Allmark filed 26 October 2023 [20].

  5. 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 6 April 2018.[5]  On 21 July 2022, the Company was appointed as trustee of the Trust, following the retirement of the previous trustee.[6] 

    [5] Affidavit of Nicole Jane Allmark filed 26 October 2023, 'NJA3'.

    [6] Affidavit of Nicole Jane Allmark filed 26 October 2023 [11], 'NJA4'.

  6. Pursuant to cl 49 of the Trust deed, on the appointment of a liquidator, the appointment of the Company as trustee of the Trust automatically terminated.

Service of application

  1. I am satisfied that ASIC has been served with copies of the originating process and the affidavit of Nicole Jane Allmark,[7] as required by r 2.8 of the Supreme Court (Corporations) Rules 2004 (WA).  The plaintiffs have also given notice of the application to the directors of the Company, the beneficiaries of the Trust and the creditors of the Company.[8] 

    [7] Affidavit of Charmaine Ruth James filed 13 November 2023, 'CRJ1' - 'CRJ3'.

    [8] Affidavit of Charmaine Ruth James filed 13 November 2023, 'CRJ4', 'CRJ6'.

  2. No one gave notice to the plaintiffs' solicitors[9] or to the court that they wish to be heard on the application. 

    [9] Affidavit of Charmaine Ruth James filed 13 November 2023, 'CRJ7'.

Legal principles for appointment of receiver

  1. The legal principles that govern this application are well known and can be summarised as follows. 

  2. 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.  Where a company has been removed as trustee of the trust by reason of the terms of the trust deed, the company retains the right to holds trust assets as bare trustee.  However, the liquidator of the company does not have the power to sell those assets to satisfy that indemnity absent intervention by the court.[10]

    [10] 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), [198] (Farrell J); Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 [22] - [28] (Gordon J).

  3. The liquidator, in essence, has two options.  First, to apply for an order that confers power on the liquidator to deal with the assets of the trust or, second, to apply to be appointed as receiver and manager of the trust.

  4. In this case, the Liquidators seek to be jointly appointed as receivers and managers of the Trust and also seek orders under s 90‑15 of sch 2 of the Act (Insolvency Practice Schedule) to facilitate their dealing with the assets of the Company to enable the winding up of the Company and the Trust to proceed.

  5. Section 90-15(1) of the Insolvency Practice Schedule provides that the court may make 'such orders as it thinks fit in relation to the external administration of a company'. The power is broad and is at least as extensive as the powers formerly available under s 479(3) and s 511 of the Act.

  6. Order 51 r 1 of the Rules of the Supreme Court 1971 (WA) deals with the court's power to appoint a receiver. The court also has power, pursuant to s 25(9) of the Supreme Court Act 1935 (WA), to appoint a receiver where it appears to be just and convenient.

  7. In the absence of any relevant conflict, it is commonly the case that the court will appoint the liquidator of the corporate trustee as receiver without security.[11]

    [11] In the matter of Hercules Car Parking Systems (Victoria) Pty Ltd [2018] NSWSC 409 (Brereton J).

  8. Appointing a liquidator or administrator of a corporate trustee as a receiver of a 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.[12]

    [12] In the matter of Mecfab Holdings Pty Ltd [2015] NSWSC 46 [9].

  9. Once the sale of the trust's assets has occurred, the proceeds may be appropriated by way of exoneration as part of the conduct of the liquidation in accordance with the statutory priorities set out in pt 5.6, div 6 of the Act.[13]  This includes the costs of the liquidation. 

    [13] 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).

Disposition

  1. On the evidence before me, I accept that by reason of cl 49 of the Trust deed, on the appointment of Ms Allmark and Ms Smith as Liquidators, the Company was automatically removed as trustee of the Trust.  As a consequence, the Company is now a bare trustee of the Trust's assets and does not have the power to sell or otherwise deal with the assets of the Trust.  No new trustee has been appointed.   

  2. I am satisfied that the Company only acted as trustee of the Trust and in no other capacity, and that all Trust assets held by the Company were held in its capacity as trustee of the Trust.

  3. The orders sought by the plaintiffs are consistent with the legal principles that I have outlined above.   

  4. On the evidence before the court, I accept it is appropriate to appoint the Liquidators as receivers and managers of the Trust without security and for them to have the powers in respect of the property of the Trust provided under s 420 and s 477(2) of the Act. This is in accordance with the legal principles outlined above and will protect the Company's right of indemnity, as well as the position of creditors. Other advantages with the proposal include that the Liquidators are subject to the regulatory regime applicable to insolvency practitioners, have professional indemnity insurance and are subject to the continued supervision of the court.

  5. The form of orders sought in terms of service of the court's orders and the allowance for any aggrieved party to apply to this court to vacate or vary these orders protects the creditors of the Company from any possible prejudice that might otherwise arise from this application. 

  6. In relation to the orders sought under s 90-15 of the Insolvency Practice Schedule, I accept Ms Allmark's evidence that the Company has acquired assets and incurred liabilities only as trustee of the Trust. For this reason, it is appropriate to make orders that the Liquidators will be acting properly and are 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.

  7. Finally, in relation to the costs of the application, the Liquidators sought orders for the costs of the application be costs in the winding up of the third plaintiff and otherwise be paid from the Trust property.  In my view, this is the appropriate costs order.

Conclusion

  1. For these reasons, I was satisfied it was appropriate to make the orders which are annexed to these reasons marked 'Annexure A'.

Annexure A

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

9 APRIL 2024


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