Re Jennifer Elizabeth Low As Liquidator of Midwest Marine Pty Ltd
[2023] WASC 481
•20 DECEMBER 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE JENNIFER ELIZABETH LOW AS LIQUIDATOR OF MIDWEST MARINE PTY LTD; EX PARTE MIDWEST MARINE PTY LTD (IN LIQUIDATION) [2023] WASC 481
CORAM: HILL J
HEARD: 8 DECEMBER 2023
DELIVERED : 11 DECEMBER 2023
PUBLISHED : 20 DECEMBER 2023
FILE NO/S: COR 182 of 2023
MATTER: IN THE MATTER OF MIDWEST MARINE PTY LTD (IN LIQUIDATION)
EX PARTE
JENNIFER ELIZABETH LOW AS LIQUIDATOR OF MIDWEST MARINE PTY LTD
First Plaintiff
MIDWEST MARINE PTY LTD (IN LIQUIDATION)
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 420
Insolvency Practice Schedule 2016 (Cth), s 90-15
Rules of the Supreme Court 1971 (WA), O 51 r 1
Supreme Court Act 1935 (WA), s 25(9)
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | Mr W B Macdonald |
| Second Plaintiff | : | Mr W B Macdonald |
Solicitors:
| First Plaintiff | : | Roe Legal Services |
| Second Plaintiff | : | Roe Legal Services |
Case(s) referred to in decision(s):
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:
On 25 October 2023, the first plaintiff, Jennifer Elizabeth Low, was appointed as liquidator of the second plaintiff, Midwest Marine Pty Ltd (Liquidator). Prior to the appointment of Ms Low as liquidator, Midwest Marine Pty Ltd (Company) was the trustee of the Midwest Marine Trust (Trust).
On 23 November 2023, the plaintiffs filed an originating process in this Court seeking, among other things, orders that the Liquidator:
(a)be appointed as receiver and manager of the assets of the Trust;
(b)in acting as receiver and manager, 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; and
(c)is entitled to be paid remuneration, costs, disbursements, and expenses out of the property of the Trust assets.
The originating process was listed before me for hearing on 8 December 2023. When the matter came before me that day, there was no evidence that the application had been served on the Australian Securities and Investments Commission (ASIC) and counsel confirmed this had not been done. For this reason, I adjourned the originating process for seven days to enable this to occur. On receipt of an affidavit of service, it was my view that the matter could be dealt with on the papers. Accordingly, on 11 December 2023, I made orders in terms of the originating process. These are my reasons for making these orders.
Factual background
The plaintiffs filed two affidavits in support of their application: an affidavit of the first plaintiff filed 23 November 2023 and an affidavit of Ms Melissa Jane Ledger filed 7 December 2023. As set out above, a further affidavit was filed on 8 December 2021 confirming service of the application on ASIC. This summary is taken from these affidavits.
The Company was incorporated on 14 June 2016.[1] A current and historical company extract obtained from the records of ASIC discloses that the sole director of the Company is Deane Anthony Cleaver. Mr Cleaver holds 70 per cent of shares in the Company, with Christopher Thomas Davidson holding the remainder.[2]
[1] Affidavit of Jennifer Elizabeth Low filed 23 November 2023, 'JEL-2'.
[2] Affidavit of Jennifer Elizabeth Low filed 23 November 2023, 'JEL-2'.
On 25 October 2023, the shareholders of the Company passed a members' resolution to voluntarily wind up the Company and appoint the first plaintiff as Liquidator.[3]
[3] Affidavit of Jennifer Elizabeth Low filed 23 November 2023, 'JEL-1'.
Based on the enquires undertaken to date, the first plaintiff believes:[4]
(a)the Company was the trustee of the Trust;
(b)the Company did not trade in its own right; and
(c)the Company only acted in its capacity as trustee of the Trust and did not conduct any other business or hold any assets in any other capacity.
[4] Affidavit of Jennifer Elizabeth Low filed 23 November 2023 [10].
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 14 June 2016.[5] Pursuant to cl 20.3(a) of the Trust deed, on the appointment of a liquidator, the Company was required to retire as trustee of the Trust and was disqualified from acting as trustee.
[5] Affidavit of Jennifer Elizabeth Low filed 23 November 2023, 'JEL-4'.
Service of application
I am satisfied that ASIC has been served with copies of the originating process and the affidavit of Ms Low,[6] as required by r 2.8 of the Supreme Court (Corporations) (WA) Rules 2004 (WA).
[6] Affidavit of William Bowie Macdonald filed 8 December 2023.
No one gave notice to the plaintiffs' solicitors or to the court that they wish to be heard on the application.
Legal principles for appointment of receiver
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. 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.[7]
[7] 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, 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.
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, Corporations Act 2001 (Cth)) (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.
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 11 of the Act.
Courts are generally willing, upon an appropriate application, to make orders permitting the liquidator of a (former) corporate trustee to sell trust assets.
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. Orders may be made nunc pro tunc to authorise any sale of assets that have already occurred.[8]
[8] Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [91], [152], [198].
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.[9]
[9] In the matter of Hercules Car Parking Systems (Victoria) Pty Ltd [2018] NSWSC 409 (Brereton J).
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.[10]
[10] In the matter of Mecfab Holdings Pty Ltd [2015] NSWSC 46 [9].
Once the sale of the trust's assets have 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.[11] This includes the costs of the liquidation.
[11] 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
On the evidence before me, I accept that by reason of cl 20.3(a) of the Trust deed, on the appointment of Ms Low as Liquidator, the Company was required to retire as trustee of the Trust and was immediately disqualified from acting as trustee. 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.
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.
The orders sought by the plaintiffs are consistent with the legal principles that I have outlined above.
Given the evidence before the court, I accept that it is expedient for Ms Low to have the power to sell the property of the Trust and that orders be made nunc pro tunc from the time of her appointment as Liquidator.
I also accept it is appropriate to appoint Ms Low as receiver and manager of the Trust without security. 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 first plaintiff is subject to the regulatory regime applicable to insolvency practitioners, she has professional indemnity insurance and is subject to the continued supervision of the court.
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.
In relation to the orders sought under s 90-15 of the Insolvency Practice Schedule, I accept Ms Low'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 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 sought orders for the costs of the application be costs in the winding up of the second plaintiff and otherwise be paid from the Trust property. In my view, this is the appropriate costs order.
Conclusion
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.
FD
Associate to the Honourable Justice Hill
20 DECEMBER 2023
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