Mutton (Liquidator), in the matter of Raftery Creek Pty Ltd (In Liquidation) v Rural Intention Pty Ltd [2020] FCA 1217

Federal Court of Australia

Mutton (Liquidator), in the matter of Raftery Creek Pty Ltd (In Liquidation) v Rural Intention Pty Ltd [2020] FCA 1217 File number: VID 1397 of 2019

Judgment of: ANASTASSIOU J

Date of judgment: 1 September 2020

Catchwords: CORPORATIONS – corporate trustee in liquidation – trust deed provides for removal of trustee in event of liquidation – application by trust unit holder for appointment of alternative trustee – application by trust unit holder for alternative trustee to be appointed receiver over the trust property – application granted

Legislation: Federal Court Rules 2011 (Cth), r 9.21

Cases cited: Hodges v Waters (No 7) [2015] FCA 264; 232 FCR 97

Division: General Division

Registry: Victoria

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Number of paragraphs: 13

Date of last submission: 29 July 2020

Date of hearing: 2 June 2020

Counsel for the Applicants: Mr J. Kohn

Solicitor for the Applicants: Stacks Law Firm

Solicitor for Azana Investments Pty Ltd: Mr A. Green, SBA Law

ORDERS VID 1397 of 2019

BETWEEN: MR DAVID MARK MUTTON, IN HIS CAPACITY AS LIQUIDATOR OF RAFTERY CREEK PTY LTD (IN LIQUIDATION) ACN 145 766 650 First Applicant

RAFTERY CREEK PTY LTD (IN LIQUIDATION) ACN 145 766 650 Second Applicant

AND: RURAL INTENTION PTY LTD ACN 146 022 728 Respondent

order made by: ANASTASSIOU J DATE OF ORDER: 1 september 2020

OTHER MATTERS

Azana Investments Pty Ltd opposed the appointment of the First Applicant (the liquidator) as trustee of the Raftery Creek Unit Trust and proposed instead that 290 High Street Nagambie Pty Ltd ACN 049 810 168 be appointed as trustee of the Trust. 290 High Street Nagambie Pty Ltd ACN 049 810 168, in its capacity as trustee of the Raftery Creek Unit Trust (the "New Trustee"), undertakes to the Court to pay to Mr David Mutton in his capacity as liquidator of Raftery Creek Pty Ltd (In Liquidation) ACN 145 766 650 ("the Company"), on the settlement of the sale of the property at 335 Raftery Road, Kialla, Victoria 3631, and directly from the net sale proceeds which it would otherwise receive: (a) any amounts to which the liquidator is entitled in respect of the Company's right of indemnity as former trustee of the Raftery Creek Unit Trust; and (b) in any event, the sum of at least $312,861.56. If the net sale proceeds are less than $312,861.56, then the New Trustee undertakes to pay the entire amount received from the net sale proceeds.

THE COURT ORDERS THAT:

1. Raftery Creek Pty Ltd (in liquidation) ACN 145 766 650 is removed as the trustee of the Raftery Creek Unit Trust. 2. Pursuant to section 48(1) of the Trustee Act 1958 (Vic) 290 High Street Nagambie Pty Ltd ACN 049 810 168 is appointed as the trustee of the Raftery Creek Unit Trust. 3. Pursuant to section 51(1) of the Trustee Act 1958 (Vic) all property of the Raftery Creek Unit Trust is vested in 290 High Street Nagambie Pty Ltd ACN 049 810 168 as trustee of the Raftery Creek Unit Trust. 4. The Applicant's costs, being the costs of and incidental to this proceeding, be costs in the winding up of Raftery Creek Pty Ltd (in liquidation). 5. The proceeding is otherwise dismissed. 6. There be no further order for costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ANASTASSIOU J: 1 The First Applicant, Mr Mutton, is the Liquidator of the Second Applicant, Raftery Creek Pty Ltd. On 17 August 2010 the Raftery Creek Unit Trust was established, pursuant to a Trust Deed of that date. Raftery Creek was appointed trustee under and pursuant to the Trust Deed. 2 The Trust has effectively one asset, namely, it is the registered proprietor of 335 Raftery Road, Kialla VIC 3631 (more properly described as Lot 1 on Plan of Subdivision 132988, Volume 08992, Folio 786 (the Property)). The Property is encumbered by a mortgage. 3 Raftery Creek's plan, which ultimately failed, was to develop the Property into 506 subdivided lots forming a housing estate. To achieve this, between August 2010 and November 2012 Raftery Creek entered into "Put and Call Option Agreements" with prospective purchasers of the lots in exchange for a premium. The premiums varied in value between $1.10 and $28,000, depending on the lot in question. The Liquidator estimated that around $2.5 million was raised by Raftery Creek in total from the receipt of premiums. The subdivision did not come to fruition, and ultimately, on 31 May 2019 orders were made by this Court winding up Raftery Creek and appointing the Liquidator. Clause 57.2 of the Trust Deed provided that if a corporate trustee was wound up, it would cease to be the Trustee. Accordingly, Raftery Creek ceased to be the Trustee upon being wound up, with the result that the Liquidator was a bare trustee only of the Trust assets. 4 By originating process filed 20 December 2019, the Liquidator applied to be appointed as the receiver of the Trust's assets. The Liquidator sought orders that it be so appointed invoking the representative procedure under r 9.21 of the Federal Court Rules 2011 (Cth). Pursuant to that procedure, the Liquidator sought orders that the first respondent, Rural Intention Pty Ltd, be appointed as a representative respondent to the application on behalf of the prospective purchasers pursuant to r 9.21(1) of the Rules. Ultimately, for reasons to become apparent, the relief in the originating process was not pressed. 5 The orders were originally sought on an ex parte basis. I declined to make such an order and directed that the Liquidator serve the application materials, which it did so on 14 May 2020. One such party served was Azana Investments Pty Ltd. Azana holds 15% of the units in the Trust. Azana opposed the relief sought by the Liquidator, and in its place pressed for the following orders: (1) Raftery Creek be removed as the trustee of the Trust; (2) Pursuant to section 48(1) of the Trustee Act 1958 (Vic) 290 High Street Nagambie Pty Ltd ACN 049 810 168 be appointed as trustee of the Trust; and (3) Pursuant to section 51(1) of the Act all property of the Raftery Creek Unit Trust is vested in 290 High Street as trustee of the Trust. 6 Ultimately the form of orders to be made was agreed between the parties, though formally the Liquidator neither consented nor opposed the orders sought by Azana. 7 I am satisfied that orders in the agreed form should be made. 8 I note that 75% of the unit holders in the Trust consented to the appointment of 290 High Street as trustee of the Trust. The only unit holder that has not effectively consented is Bigroc Investments Limited (Bigroc), which holds 25% of units in the Trust. As explained in Azana's written submissions: Bigroc has been struck from the register of companies of the British Virgin Islands, the consequence of which appears to be that Bigroc, and the directors, members and any liquidator or receiver thereof may not: (a) commence legal proceedings, carry on any business or in any way deal with the assets of Bigroc; (b) defend any legal proceedings, make any claim or claim any right for, or in the name of, Bigroc; or (c) act in any way with respect to the affairs of Bigroc. Nevertheless, … the sole director of Bigroc … and its sole shareholder, at least in equity, … has also given his consent to the appointment of 290 High Street as the trustee of the Trust. 9 It is necessary that a new trustee be appointed by court order as the Trust Deed does not contain any presently applicable provision to enable the calling of a meeting of unitholders, or to enable the appointment of a new trustee without a unitholders' meeting being called. The position was explained in Azana's submissions: …It has not been possible for Azana to convene a meeting of the unitholders of the Trust as the power to do so resides with the trustee or the "Advisory Committee" – clause 17 of the trust deed. As matters stand there is no person who can act as the trustee of the Trust, and no "Advisory Committee" has been constituted. 10 As a result there is presently a practical absence of power to appoint a new trustee. In such circumstances, the appointment of a new trustee pursuant to section 48(1) of the Act is necessary to remedy the lacuna in the present circumstances. I am satisfied this Court has the jurisdiction to exercise the power conferred under that section: see, by analogy, what was said by Perram J at [50]-[52] in Hodges v Waters (No 7) [2015] FCA 264; 232 FCR 97. 11 For the reasons referred to above, Raftery Creek is a mere bare trustee and accordingly it is appropriate that it be removed as trustee and be replaced by a trustee able to exercise the powers to deal with the Trust assets under and in accordance with the Trust Deed. 12 Further, in the present circumstances it is expedient in the interests of the efficient administration of the liquidation of Raftery Creek that the Court make the orders sought. 13 For the above reasons, I shall make the orders in the form as agreed. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anastassiou.

Associate: Dated: 1 September 2020