Re Metrobore Australia Pty Ltd
[2014] VSC 247
•27 May 2014
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted |
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 02445
IN THE MATTER OF METROBORE AUSTRALIA PTY LTD (AS TRUSTEE
FOR METROBORE UNIT TRUST) (ADMINISTRATORS APPOINTED) ACN 079 489 062
BETWEEN:
| MICHAEL CARRAFA AND RICHARD JOHN CAUCHI IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF METROBORE AUSTRALIA PTY LTD (AS TRUSTEE FOR METROBORE UNIT TRUST) (ADMINISTRATORS APPOINTED) (ACN 079 489 062) | First Plaintiffs |
| METROBORE AUSTRALIA PTY LTD (AS TRUSTEE FOR METROBORE UNIT TRUST) (ADMINISTRATORS APPOINTED) (ACN 079 489 062) | Second Plaintiff |
---
JUDGE: | Ferguson J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 May 2014 |
DATE OF JUDGMENT: | 27 May 2014 |
CASE MAY BE CITED AS: | Re Metrobore Australia Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2014] VSC 247 |
---
CORPORATIONS – Trustee company in administration – Terms of Trust Deed provided for Trustee to retire if company placed into administration – Unitholders unable to appoint replacement trustee – Power of Administrators to realise assets – Express power of sale conferred by Trust Deed.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr S Rubenstein | Logie-Smith Lanyon |
HER HONOUR:
Metrobore Australia Pty Ltd (‘Metrobore’), as trustee of the Metrobore Unit Trust (‘Trust’), operated an underground services business in the civil construction industry, in particular, horizontal directional drilling, underground civil construction and cable hauling. Metrobore acted solely as trustee of the Trust and in no other capacity. All the assets owned by Metrobore are held by it as trustee of the Trust and all its liabilities were incurred by it in its capacity as trustee.
Metrobore had three directors and shareholders — Gregory John Tucker, Edward Bartholomew Tenberge and Michael Bartholomew Tenberge. Mr Tucker is now deceased. The units in the Trust are held by Gregory John Tucker (as to 50 per cent), Edward Bartholomew Tenberge (as to 25 per cent) and Michael Bartholomew Tenberge and his wife (as to 25 per cent).
Following the death of Mr Tucker, the Tenberges did not wish to continue with the business. Metrobore ceased trading and all employees were terminated about 4 April 2014. On 30 April 2014, Richard John Cauchi and Michael Carrafa (‘Administrators’) were appointed as Administrators of Metrobore.
Among other things, the Administrators seek directions pursuant to s 447D of the Corporations Act 2001 (Cth). The directions that they seek are in respect of the sale of some Trust assets. They seek directions because of the terms of the Trust Deed pursuant to which the Trust is established.
The Trust Deed is dated 7 August 1997. Clause 27(a)(i) of the Trust Deed provides that a trustee will retire if an administrator is appointed. Clause 27(c) provides that the unitholders may, by special direction, direct that any trustee cease to hold office or that any additional or other trustee take office as trustee. Clause 22 of the Trust Deed provides that if a unitholder dies, the only person recognised by the Trustee as having any title to the unitholder’s interest in the units will be the unitholder’s personal representative. At present, Mr Tucker does not have a personal representative. He died intestate and no application for letters of administration has yet been made.[1] Consequently, the making of a special direction as to the cessation of the current trustee or the appointment of a replacement trustee is now problematic, because it requires the agreement of unitholders who hold more than 75 per cent of the issued units. The Tenberges simply do not hold enough issued units to approve a special direction. This means that there is no real and immediate prospect of a new trustee being appointed in place of Metrobore. Metrobore will not retire without a replacement trustee to take legal title of the Trust assets.
[1]See Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466 [21] for an analogous situation.
Based on their investigations, the Administrators’ current view is that the Trust is likely to be insolvent. It is highly unlikely that a deed of company arrangement will be proposed. In all likelihood, Metrobore will be placed into liquidation. In the circumstances, the Administrators consider it appropriate to mitigate ongoing liabilities and to realise most of the Trust assets. The assets which they wish to sell include trucks, vehicles (other than those subject to a security interest registered on the PPSR[2] in favour of ANZ Bank), mobile plant, horizontal borers, general tools, office furniture and equipment (other than a photocopier which is subject to a security interest registered on the PPSR in favour of Konica Minolta/Alliance) and stock (‘Plant and Equipment’). The Administrators have engaged Lockwood & Co Pty Ltd, auctioneers and valuers, to sell the Plant and Equipment. The auctioneers have provided a valuation of the Plant and Equipment on both a fair market value and an auction realisation basis. An auction is scheduled for 3 June 2014. The Administrators will consider offers from prospective purchasers before the auction taking into account the valuation that they have obtained.
[2]Personal Property Securities Register.
The Plant and Equipment is located on premises which are leased from a related company of Metrobore. No‑one else occupies the premises apart from Metrobore. The owner of the leased property is taking steps to sell it. The Administrators are concerned that the Plant and Equipment is exposed to a significant risk, including occupational health and safety issues.
Before proceeding with a sale of the Plant and Equipment, the Administrators wish to have the benefit of a direction that they may do so. In my view, this case is an appropriate one in which directions might be given under s 447D of the Corporations Act. The Administrators have raised issues about how they may proceed in light of the Trust Deed providing for the retirement of the Trustee. This raises legal issues about the scope of their powers to sell the Trust assets. It is not a case where the Administrators are seeking directions about commercial decisions that they themselves ought make.[3]
[3]Re Ansett Australia Limited (No 3) (2006) 115 FCR 409 [44],[65]. See also Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674; Bastion v Gideon Investments Pty Ltd (in liq) (2000) 18 ACLC 854.
In Irvine v Australian Sharetrading and Underwriting Ltd (in liq),[4] the trust deed provided that ‘The Trustee shall immediately retire from office if it ceases to carry on business’. The corporate trustee was placed into liquidation. Mandie J held that the company did not cease to carry on business upon the commencement of the winding up. Nevertheless, his Honour went on to consider the position if (contrary to his opinion) the deed obliged the trustee to immediately retire following the appointment of the liquidator. Mandie J observed that it was inappropriate for the company in liquidation to continue as trustee ‘beyond the stage at which the liquidator had identified the trusts involved and collected sufficient information concerning their financial position and any other relevant matters to enable him to act on an informed basis, unless, at that stage, it was appropriate to terminate the trusts rather than appoint a new trustee to enable the trusts to continue.’[5] His Honour held that the liquidator’s duty included ‘the identification of the trust’s constituent document, the ascertainment of the nature and value of the trust assets and trust liabilities, the investigation of the financial relationship between the trustee and the trust, the identification of the trust’s creditors and beneficiaries and any matters necessary to determine appropriate action to be taken in relation to the trust on behalf of the trustee including action to preserve and protect assets or to wind up the trust where appropriate and there is express power to do so.’[6] To that I would add that until the trustee retires at an appropriate time or is replaced, the trustee should continue to perform the role of trustee and may exercise all its rights and powers as trustee. This includes the trustee’s right of indemnity out of the trust assets for expenses and liabilities incurred by it and exoneration of the trustee from liability. It also includes the power to sell trust assets to satisfy the indemnity where the trust instrument confers a power of sale.[7]
[4](1996) 22 ACSR 765.
[5]Ibid 785–786.
[6]Ibid 783.
[7]Apostolou v VA Corporation of Australia Pty Ltd (2010) 77 ACSR 84 [46].
As I have noted, the Trust Deed in this case provides for the Trustee to retire if it is placed into administration. This does not, however, effect an immediate removal of the Trustee[8] and it does not result in Metrobore holding the Trust assets merely as bare trustee.[9] In my opinion, the Administrators would be justified in proceeding on the basis that Metrobore, and therefore they, as its administrators, have power to sell the Plant and Equipment in circumstances where:
[8]The relevant clause is to be compared with those the subject of consideration in other cases such as Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 [6] (trustee will cease to be the trustee immediately if an official liquidator is appointed).
[9]As to corporate trustees holding assets as bare trustee see, for example, Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674; Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466.
(a)the Trust Deed does not provide for the automatic termination of the Trustee’s appointment;
(b)there is no immediate prospect of a replacement trustee being appointed;
(c)the Trust is likely insolvent;
(d)the Administrators are concerned to minimise risk to the Trust assets and further depletion of them;
(e)the Trustee has a right of indemnity in respect of liabilities incurred in the role of trustee;
(f)there is an express power of sale conferred on the Trustee under the Trust Deed; and
(f)there is no opposition to the course proposed by any interested person.[10]
[10]As to whether there is an independent power of the Administrators of a trustee company to sell under s 437A of the Corporations Act, see Bacchus Distillery Pty Ltd (Administrators Appointed) [2014] VSC 111 [63]–[67].
Accordingly, I will make orders under s 447D of the Corporations Act to that effect.
6
0