Sanderson, in the matter of Jabaluka Pty Ltd (in liq)
[2022] FCA 1012
•31 August 2022
FEDERAL COURT OF AUSTRALIA
Sanderson, in the matter of Jabaluka Pty Ltd (in liq) [2022] FCA 1012
File number(s): NSD 533 of 2022 Judgment of: CHEESEMAN J Date of judgment: 31 August 2022 Catchwords: CORPORATIONS – application under s 57 of the Federal Court of Australia Act 1976 (Cth) for the appointment of a liquidator, without security, as receiver and manager over the assets and undertaking of a unit trust – where the company in liquidation’s sole activity was in acting as the trustee of the unit trust through which a supermarket was operated – where Trustee entitled to indemnity out of trust assets – where company in liquidation disqualified as Trustee upon being placed in liquidation – where liquidator seeks to realise trust property for, inter alia, benefit of creditors – whether liquidator should be appointed as receiver and manager – Held: application successful.
PRACTICE AND PROCEDURE – confidentiality order sought in respect of evidence supporting the application – where the evidence relates to an agreement the liquidated entity appears to have entered into on strict terms as to confidentiality – where the liquidator is concerned the evidence may reveal the nature of certain investigations the liquidator is contemplating undertaking – whether confidentiality orders ought to be made – Held: confidentiality orders made.
Legislation: Federal Court of Australia Act 1976 (Cth), ss 37AF, 57 Cases cited: Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430
Australian Competition and Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278
Clark v Digital Wallet Pty Ltd [2020] FCA 877
Onefone Australia Pty Ltd v OneTel Ltd [2010] NSWSC 498; 78 ACSR 163
Ward, in the matter of PIC Lindfield 19 Pty Ltd (in liquidation) v Zhu [2021] FCA 1526
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 27 Date of hearing: 31 August 2022 Counsel for the Plaintiffs: Mr A Spencer Solicitor for the Plaintiffs: McLean & Associates Solicitors ORDERS
NSD 533 of 2022 IN THE MATTER OF JABALUKA PTY LTD (IN LIQUIDATION) ACN 143 706 343
BETWEEN: CLIFFORD JOHN SANDERSON IN HIS CAPACITY AS LIQUIDATOR OF JABALUKA PTY LTD (IN LIQUIDATION) ACN 143 706 343
First Plaintiff
JABALUKA PTY LTD (IN LIQUIDATION) ACN 143 706 343
Second Plaintiff
ORDER MADE BY:
CHEESEMAN J
DATE OF ORDER:
31 AUGUST 2022
THE COURT ORDERS THAT:
1.Clifford John Sanderson, of Level 8, 80 Clarence Street, Sydney, Registered Liquidator, be appointed without security as receiver and manager (the Receiver) of the assets and undertaking of the Morgan Unit Trust until further order.
2.The Receiver have the powers in the Schedule of Powers, together with the powers that a liquidator has in respect of property of a company pursuant to s 477(2) of the Corporations Act2001 (Cth).
3.Upon completion of the realisation of property and payment of costs and expenses, and creditors, the Receiver is to deliver to the Court a statement of receipts and payments in relation to the realisation of property and payments made by the Receiver.
4.The costs, expenses, and remuneration of the Receiver in:
(a)Acting as the liquidator of the Second Plaintiff; and
(b)Acting as the Receiver of the assets and undertaking of the Morgan Unit Trust;
be paid from the trust property.
5.Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), the affidavit of Clifford John Sanderson sworn 19 August 2022, shall be kept confidential and not be capable of inspection pursuant to r 2.32 of the Federal Court Rules 2011 (Cth) until such time as any litigation (including any appeal) arising out of the winding up and affairs of the Second Plaintiff is concluded or until otherwise ordered.
THE COURT NOTES THAT:
6.The object of the appointment in order 1 is to enable the First Plaintiff as Receiver:
(a)to realise the assets and undertaking of the Morgan Unit Trust, including but not limited to the $403,110.77 held in the Macquarie Bank Limited Account identified in the evidence relied on by the Plaintiffs and with an Account Number ending in the numbers 577 in the name of the Second Plaintiff, to enforce the Second Plaintiff’s indemnity, and apply the proceeds to discharge all of those liabilities of the Second Plaintiff which were incurred by it in its capacity as trustee in accordance with the priorities set out in s 556 of the Corporations Act 2001 (Cth); and
(b)to recover the costs of the receivership and, because the Second Plaintiff’s sole function was to act as trustee of the trust, the general costs of the liquidation.
SCHEDULE OF POWERS
1.Power to do all things necessary or convenient to be done for or in connection with or as incidental to the attainment of the objective noted above.
2.Power to discontinue, terminate or wind up any such business, enterprise or venture, in whole or in part.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
EX TEMPORE REASONS FOR JUDGMENT
(Revised from transcript)CHEESEMAN J:
INTRODUCTION
The First Plaintiff, the Liquidator of Jabaluka Pty Ltd, applies under s 57 of the Federal Court of Australia Act 1976 (Cth) for an order that he be appointed without security as receiver and manager of the assets and undertaking of the Morgan Unit Trust. Prior to the appointment of the Liquidator, Jabaluka was the Trustee of the Trust until such time as it was disqualified by operation of the terms of the Trust Deed on the event of the Liquidator’s appointment. Jabaluka’s sole function appears to have been acting as the Trustee.
Jabaluka has liabilities which it incurred in its role as Trustee, including a debt due to the Australia and New Zealand Banking Group Limited (ANZ), employees for their entitlements, Akulabaj Pty Limited, a related entity, and the Australian Taxation Office (ATO). The Liquidator has control of funds in the liquidation account that appear to be trust property and that is available to be realised for the benefit of trust creditors and in payment of the Trustee’s remuneration. The Liquidator seeks appointment as a Receiver for that purpose and in order to deal with the assets of Jabaluka as quickly as possible so as to minimise the amount of interest accruing and maximise the return to creditors, as well as facilitate further investigations.
The application is made ex parte. The Liquidator’s solicitor has notified all parties interested in the outcome of the proceedings of the present application. None of the interested parties have sought to appear to oppose the application.
EVIDENCE - CONFIDENTIALITY
The Liquidator relies on his affidavits, the first sworn on 7 July 2022 which refers to exhibit “CJS-1” (tendered on the application) and the second sworn on 19 August 2022, and an affidavit of Ms McLean, solicitor, sworn on 18 August 2022.
The Liquidator seeks an order that the second of his affidavits, which is confined in its scope, be kept confidential pursuant to s 37AF of the Act.
It is well established that commercial sensitivity can be an appropriate basis for making a suppression or non-publication order: Clark v Digital Wallet Pty Ltd [2020] FCA 877 at [21] – [22] (Abraham J); see also Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430 at [35] (Perram J); Australian Competition and Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278 at [148] (Katzmann J). Further, the clear public interest in the due and beneficial administration of the estates of insolvent companies for the benefit of creditors is a relevant consideration in favour of granting an order under s 37AF: see Onefone Australia Pty Ltd v OneTel Ltd [2010] NSWSC 498; 78 ACSR 163 at 164 [2] - [5] (Barrett J as his Honour then was).
The basis of the application for confidentiality orders is the Liquidator’s concern to protect the confidentiality of an agreement that Jabaluka appears to have entered into on confidential terms and the nature of the certain investigations which the Liquidator is contemplating undertaking in respect of Jabaluka’s solvency. I am satisfied that it is both necessary and appropriate to make confidentiality orders in respect the second affidavit on the basis that it is necessary to prevent prejudice to the proper administration of justice and facilitate the due and beneficial administration of Jabaluka. Accordingly, I will make an order substantially in the form sought.
BACKGROUND
In brief terms and at a level of generality that is consistent with the confidentiality order which I have made, the background facts are as follows.
The Liquidator was appointed as liquidator of Jabaluka on 30 September 2021 by resolution passed at the general meeting of the members of Jabaluka, at which it was resolved that Jabaluka be wound up. The Liquidator graduated with a Bachelor of Commerce from the University of Technology, Sydney in 1982. He has been a member of Chartered Accountants Australia and New Zealand since 1989, and a member of the Australia Restructuring Insolvency and Turnaround Association since 28 February 1994. The Liquidator was admitted to practice as a Registered Liquidator on 28 August 1995, and registered as an Official Liquidator on 11 December 1997. In August 1998, the Liquidator was granted a Certificate of Public Practice by Chartered Accountants Australia and New Zealand.
Jabaluka was incorporated on 17 May 2010. At that time, the two directors were Anthony Morgan and Blair Morgan. The Liquidator deposes to the fact that from the date of incorporation until his appointment, Anthony and Blair Morgan were directors and shareholders of Jabaluka and that there were no other officeholders.
On 23 May 2010, Jabaluka entered into the Trust Deed pursuant to which the Trust was established and Jabaluka became the Trustee of the Trust. From the date of its establishment Anthony Morgan and Blair Morgan have each held 60 ordinary units and one special unit in the Trust. There are no other unitholders.
Based on the Liquidator’s investigations, it appears that Jabaluka’s sole purpose was to operate as Trustee of the Trust and in that capacity it operated an IGA Supermarket under the trading name, Captain Stirling IGA, from 22 September 2010 until it ceased trading on 13 March 2020. In operating the Supermarket, Jabaluka accepted an assignment of a lease of the premises from which the Supermarket operated, entered into various loan agreements, including with ANZ and incurred liabilities in operating the Supermarket.
Under clause 18.6 of the Trust Deed, Jabaluka is entitled to be indemnified as follows:
Without affecting anything in Clause 2 hereof the Trustees shall be entitled to be indemnified out of the assets for the time being comprising the Trust Fund against liabilities incurred by them in the execution or attempted execution or as a consequence of the failure to exercise any of the trust authorities powers and discretions hereof or by virtue of being the Trustees hereof..
In the Trust Deed, “Trustee” is defined as “the Trustee or the Trustee or Trustees for the time being of this Trust whether original additional or substituted”.
Clause 19.2 of the Trust Deed relevantly provides:
A Trustee shall be disqualified from holding office if –
(a) …;
(b)being a company it goes into liquidation or if a receiver manager or official manager of any of its assets or undertaking is appointed
Clause 19.4 of the Trust Deed provides:
The Unit Holders shall be entitled unanimously in writing or in general meeting –
(a) by unanimous resolution to remove any Trustee or to appoint an additional Trustee;
(b) by Special Resolution to appoint a Trustee in place of any Trustee who dies or retires or is disqualified or removed from office.
The Liquidator’s investigations have not revealed that any other entity has been appointed as trustee of the Trust. In the circumstances it appears unlikely that another Trustee will be appointed and/or consent to act.
Jabaluka had procured various financial accommodation from ANZ which has been and/or is currently secured against its assets. The Liquidator deposes that Jabaluka appears to be indebted to the ANZ in the amount of approximately $527,000 as at 30 September 2021. The Liquidator identifies Anthony Morgan and Blair Morgan and their respective spouses as creditors in a number of capacities. First, as priority creditors for employee entitlements pursuant to s 556 of the Corporations Act2001 (Cth); secondly, as unsecured creditors for other employee entitlements; and thirdly, as unsecured creditors for beneficiary loans. The ATO is also an unsecured creditor, as is Akulabaj, a related entity of Jabaluka. The Liquidator deposes to his conclusion that all of the liabilities of Jabaluka were incurred in its capacity as Trustee of the Trust.
The Liquidator’s investigations cause him to conclude that the total value of creditors’ claims is approximately $3,212,000 and that there will be insufficient funds realised in the liquidation to pay each of the creditors in full. Accordingly, the Liquidator seeks appointment as a Receiver in order to deal with the assets of Jabaluka as quickly as possible, to pay out the secured debt owing to ANZ in order to minimise interest accruing against the ANZ facilities, to maximise the return to creditors and to facilitate such further investigations as he may undertake into the solvency of Jabaluka at different points in time.
APPLICABLE PRINCIPLES
Appointment of Liquidator as Receiver of Trust Property
The Court may, at any stage of a proceeding, appoint a receiver on such terms and conditions as it thinks fit if it is just and convenient to do so: s 57(1) of the Act.
I recently summarised the applicable principles in Ward, in the matter of PIC Lindfield 19 Pty Ltd (in liquidation) v Zhu [2021] FCA 1526 at [18]:
18In a recent decision of this Court, McKerracher J set out the principles applicable to an application for the appointment of a liquidator of a corporate trustee as receiver of trust property: Re Hughes (in their capacity as joint and several liquidators of Substar Holdings Pty Ltd (in liq)) and Anor [2020] FCA 1863; (2020) 149 ACSR 185 at [26] to [29]. I respectfully adopt his Honour’s summary of the principles in Re Hughes and note the following principles which are drawn from the authorities cited by his Honour and are relevant in the current context:
(1)the corporate trustee has a right of indemnity or exoneration out of trust assets secured by an equitable lien or charge over those assets. It follows that a liquidator of a corporate trustee is entitled to apply the assets of the trust to satisfy debts properly incurred by the company in the performance of its duties as trustee: Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 at [14] (Gordon J);
(2)where a corporate trustee, as is the case in the present application, is removed by operation of a disqualification clause, the right of indemnity or exoneration persists as does the trustee’s right to hold the assets: Re Brereton (in their capacities as joint and several voluntary administrators of MyHouse (Aust) Pty Ltd (admins apptd)) [2020] FCA 610 at [30] (Farrell J). However, the powers of the now bare trustee do not extend to a power of sale to realise its right of indemnity: Re Cremin (in his capacity as liquidator of Brimson Pty Ltd (in liq), Kane Retail Group Pty Ltd (in liq) and Teal Retail Group Pty Ltd (in liq)) [2019] FCA 1023; (2019) 136 ACSR 649 at [49] (Moshinsky J) and the cases cited therein;
(3)in those circumstances, if a sale is necessary, the liquidator or administrator must obtain a court order permitting the sale or otherwise seek an order for the appointment of a receiver: In Amirbeaggi (in her capacity as liquidator of Simpkiss Pty Ltd (in liq)) v Simpkiss Pty Ltd (in liq) [2018] FCA 2121 at [28] (Markovic J);
(4)the common course is to appoint the liquidators as receivers over all trust property for the purpose of realising the assets for the benefit of creditors: Re Hughes at [29] (McKerracher J) citing Cremin at [50] (Moshinsky J).
CONSIDERATION
Jabaluka was the Trustee of the Trust pursuant to the Trust Deed with an entitlement to indemnification from the trust assets in relation to liabilities incurred as Trustee.
Jabaluka was disqualified as Trustee by the terms of the Trust Deed on the Liquidator’s appointment and was thereafter a bare trustee.
Jabaluka has liabilities which it incurred in its role as Trustee, including the debt due to ANZ. Other creditors include employees for their entitlements, Akulabaj and the ATO.
The Liquidator has control of funds in the Liquidation account that would seem to be trust property and that is available to be realised for the benefit of trust creditors (including by funding such investigations into solvency as the Liquidator considers necessary) and in payment of his remuneration. The Liquidator seeks the appointment for these purposes and in order to deal with the assets of Jabaluka as quickly as possible to pay out the secured debt owing to ANZ in order to minimise interest accruing against the ANZ facilities with a view to maximising the return to creditors.
In these circumstances, it is in my view appropriate to make an order that the Liquidator be appointed without security as receiver and manager over the assets of the Trust. It is also appropriate to make an order specifying the powers of the receiver and manager, and that the costs, expenses and remuneration incurred by the Liquidator in acting as the receiver and manager be paid from the property of the Trust.
I will make orders accordingly.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman. Associate:
Dated: 2 September 2022
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