RE WESTERN GLASS PTY LTD (IN LIQUIDATION); EX PARTE ROSS STEPHEN THOMSON as liquidator of WESTERN GLASS PTY LTD (IN LIQUIDATION) [2022] WASC 431 (12 December 2022)

Last Updated: 12 December 2022

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : RE WESTERN GLASS PTY LTD (IN LIQUIDATION); EX PARTE ROSS STEPHEN THOMSON as liquidator of WESTERN GLASS PTY LTD (IN LIQUIDATION) [2022] WASC 431

CORAM : HILL J

HEARD : ON THE PAPERS

PUBLISHED : 12 DECEMBER 2022

FILE NO/S : COR 210 of 2022

MATTER : IN THE MATTER OF WESTERN GLASS PTY LTD (IN LIQUIDATION)

EX PARTE

ROSS STEPHEN THOMSON as liquidator of WESTERN GLASS PTY LTD (IN LIQUIDATION)

First Plaintiff

WESTERN GLASS PTY LTD

Second Plaintiff

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 (Corporations) (Cth) s 90-15
Supreme Court Act 1935 (WA) s 25(9)

Result:

Application granted

Category: B

Representation:

Counsel:

First Plaintiff	:	Not applicable
Second Plaintiff	:	Not applicable

Solicitors:

First Plaintiff	:	Edwards Mac Scovell Legal
Second Plaintiff	:	Edwards Mac Scovell Legal

Cases referred to in decision:

HILL J:

1. The first plaintiff is the liquidator of the second plaintiff, Western Glass Pty Ltd (Western Glass). Prior to the first plaintiff being appointed as liquidator, Western Glass was the trustee for the Winship Trust (Trust).
2. On 29 November 2022, the plaintiffs filed an originating process in this court seeking:

   (a) orders that the first plaintiff be appointed as receiver and manager of the property, assets and undertaking held by the second plaintiff in its capacity as trustee of the Trust, pursuant to s 25(9) of the Supreme Court Act 1935 (WA);
   (b) declarations that certain conduct of the first plaintiff is reasonable and justified, pursuant to section 90-15 of the Insolvency Practice Schedule (Corporations) (Cth);
   (c) orders that the first plaintiff 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.

3. The plaintiffs requested the application be determined on the papers.
4. I am satisfied that the sole director and company secretary of Western Glass has been served with the originating process and the affidavit of the first plaintiff,[1] and that the creditors of Western Glass have been provided with notice of the application. No one has given notice to the plaintiffs' solicitors that they wish to be heard on the application.[2]
5. Given the nature of the application and the proposed order that any person affected by the orders is entitled to apply to the court to vary or set aside the orders, I considered it was appropriate to determine the matter without an oral hearing.

Factual background

6. The plaintiffs filed two affidavits in support of its application: an affidavit of the first plaintiff filed 29 November 2022 and an affidavit of service of Jessica Celeste Gordon filed 6 December 2022. This summary is taken from these affidavits.
7. Western Glass was incorporated on 27 June 2012. A current and historical company extract obtained from the records of the Australian Securities and Investments Commission (ASIC) discloses that the sole director, company secretary and shareholder of Western Glass is Jason John Winship.[3] At all material times, Mr Winship was the only nominated beneficiary of the Trust.[4]
8. On 28 September 2022, the first plaintiff was appointed liquidator of Western Glass pursuant to a resolution of the company in accordance with s 491 of the Act.
9. Based on the enquiries undertaken by the first plaintiff to date, the liquidator believes: [5]

   (a) Western Glass was the trustee of the Trust;
   (b) in that capacity, it carried on business as Western Glass;
   (c) it 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.

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 27 June 2012.[6] Pursuant to cl 15.6 of the Trust Deed, on the appointment of a liquidator, Western Glass was automatically removed as trustee of the Trust. It now holds the assets of the Trust as bare trustee.[7]
11. On the basis of the liquidator's investigations to date, Mr Thomson believes:

    (a) there are several creditors who have registered security interests over the personal property of the Company and Trust,[8]
    (b) these registrations were void, were (in fact) unsecured, or applied to property the subject of a notice of disclaimer of onerous property;[9] and
    (c) the draft financial statements show a significant excess of liabilities over assets.

Service on ASIC

12. I am satisfied that ASIC has been served with copies of the originating process and the affidavit of the first plaintiff a reasonable time before the hearing of the application,[10] as required by rule 2.8 of the Supreme Court (Corporations) Rules 2004 (WA). ASIC did not seek to be heard on the application.

Legal principles for appointment of receiver

13. Where a corporate trustee enters into 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, but the liquidator of the Company does not have the power to sell those assets to satisfy that indemnity absent intervention by the Court.[11]
14. Pursuant to s 25(9) of the Supreme Court Act 1935 (WA), the court can 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 has already occurred.[12]
15. 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.[13]
16. 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, and that aids in the vindication of the trustee company's right of indemnity out of the trust's assets.[14]
17. Once the sale of the Trust's assets has been effected, 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.[15] This includes the costs of the liquidation.

Disposition

18. On the evidence before me, I accept that by reason of cl 15.6 of the Trust Deed, on the appointment of the first plaintiff as liquidator, Western Glass was automatically removed as Trustee of the Trust. As a consequence, Western Glass 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.
19. I accept that the proposal to appoint the first plaintiff as receiver of the trust without security is in accordance with the legal principles outlined above and will protect the trustee company's right of indemnity as well as the position of creditors.
20. In these circumstances, I accept that there are advantages with the proposal that the first plaintiff as liquidator be appointed as receiver and manager of the Trust. These include that he is subject to the regulatory regime applicable to insolvency practitioners, he has professional indemnity insurance and is subject to the continued supervision of the court.
21. I also accept Mr Thomson's evidence that the Company has acquired assets and incurred liabilities only as Trustee of the Trust and that it is appropriate to make orders appointing the first plaintiff as receiver and manager of the Trust's assets with the powers that a receiver and manager has in respect of the business and property of a company under s 420 of the Act as if the reference in that section to 'property of the corporation' is a reference to the 'property of the Trust'. This includes, without limitation, the power to do all things necessary and convenient to secure the assets of the Trust.
22. In relation to the costs of the application, the plaintiffs sought orders for the costs of the application be costs in the winding up. I consider this to be the appropriate costs order and make that order.
23. For these reasons, I consider it appropriate to make orders in terms of 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

12 DECEMBER 2022

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[1] Affidavit of Jessica Celeste Gordon filed 6 December 2022 [14] - [16].
[2] Affidavit of Jessica Celeste Gordon filed 6 December 2022 [17].
[3] Affidavit of Ross Stephen Thomson filed 29 November 2022 'RST2'.
[4] Affidavit of Ross Stephen Thomson filed 29 November 2022 [9(f)].
[5] Affidavit of Ross Stephen Thomson filed 29 November 2022 [33], [35].
[6] Affidavit of Ross Stephen Thomson filed 29 November 2022 'RST3', p 65.
[7] Affidavit of Ross Stephen Thomson filed 29 November 2022 [36] - [38].
[8] Affidavit of Ross Stephen Thomson filed 29 November 2022 [50].
[9] Affidavit of Ross Stephen Thomson filed 29 November 2022 [51] - [55].
[10] Affidavit of Jessica Celeste Gordon filed 6 December 2022 [2] - [4].
[11] See Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310 at [44], [85] - [91] (Allsop CJ), [139], [142] (Siopis J) and [198] (Farrell J); Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 at [22] - [28] (Gordon J).
[12] Re Killarnee [91], [152], [198].
[13] See In the matter of Hercules Car Parking Systems (Victoria) Pty Ltd [2018] NSWSC 409 (Brereton J).
[14] See In the matter of Mecfab Holdings Pty Ltd [2015] NSWSC 46 at [9].
[15] See Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20 at
[55] - [58] (Kiefel CJ, Keane and Edelman JJ), [95] - [97] (Bell, Gageler and Nettle JJ), [171] (Gordon J).