FEDERAL COURT OF AUSTRALIA Sapphire (SA) Pty Ltd v Ewens Glen Pty Ltd (No 2) [2011] FCA 714 Citation: Sapphire (SA) Pty Ltd v Ewens Glen Pty Ltd (No 2) [2011] FCA 714 Parties: SAPPHIRE (SA) PTY LTD ACN 076 858 029 TRADING AS RIVER CITY GRAIN CO v EWENS GLEN PTY LTD ACN 098 864 156 File number: SAD 29 of 2011 Judge: BESANKO J Date of judgment: 23 June 2011 Catchwords: CORPORATIONS — Order made pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) appointing liquidators of defendant as joint and several receivers and managers of the property of a trust of which the defendant is trustee — reporting obligations of receivers and managers — whether receivers and managers should provide security or undertaking as to damages HELD: The receivers and managers were ordered to report on the progress of the receivership in 3 months. They were not required to provide security or an undertaking as to damages. Legislation: Federal Court of Australia Act 1976 (Cth) s 57 Federal Court Rules O 26 Cases cited: Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd (Unreported, Nicholson J, 29 July 1998), cited National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277, cited Sapphire (SA) Pty Ltd v Ewens Glen Pty Ltd [2011] FCA 600, cited Date of hearing: 24, 27 May 2011 Place: Adelaide Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 7 Counsel for the Plaintiff on the interlocutory process: Mr S Doyle Solicitor for the Plaintiff on the interlocutory process Minter Ellison IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 29 of 2011 BETWEEN: SAPPHIRE (SA) PTY LTD ACN 076 858 029 TRADING AS RIVER CITY GRAIN CO Plaintiff AND: EWENS GLEN PTY LTD ACN 098 864 156 Defendant JUDGE: BESANKO J DATE OF ORDER: 1 JUNE 2011 WHERE MADE: ADELAIDE THE COURT DIRECTS THAT: 1. It will be appropriate for the liquidators of the defendant not to exercise their power to appoint a new trustee to the Nelson Family Trust ("Trust") until such time as the receivership of the Trust is finalised. THE COURT FURTHER ORDERS THAT: 2. The liquidators of the defendant, Stephen Glen James and John Maxwell Morgan, of Bentleys Corporate Recovery (SA) Pty Ltd, 64 Greenhill Road, Wayville in the State of South Australia be appointed without security joint and several receivers and managers of the property of the Trust ("Trust Property"). 3. The receivers and managers ("Receivers") be authorised to take possession of, preserve, maintain and sell the assets comprising the Trust Property. 4. The Receivers will have the following powers: 4.1 The power to do, in Australia and elsewhere, all things necessary or convenient to be done for or in connection with, or as incidental to the attainment of the objects for which the Receivers are appointed 4.2 The general and specific powers referred to in section 420(2) of the Act, provided that wherever in section 420 the word "corporation" appears it shall be taken that those powers extend to the Trust; and 4.3 The power to require, by request in writing, the Trust and any employee, agent, banker, solicitor, stockbroker or accountant of, or consultant or other professionally qualified person who has provided assistance to the Trust, to provide such reasonable assistance to the Receivers as may be required from time to time. 5. The Receivers shall be paid remuneration on a time basis at a reasonable fee according to the hours for which they, or any employee of the firm Bentleys Corporate Recovery (SA) Pty Ltd, are engaged in work necessary for and relevant to the purpose of the receivership, such remuneration to be calculated at the standard rates of Bentleys Corporate Recovery (SA) Pty Ltd from time to time for work of that nature, together with all reasonable out of pocket expenses. 6. The reasonable costs and expenses of the Receivers incurred in relation to the receivership be paid out of the assets of the Trust. 7. There be liberty to apply. 8. Costs of and incidental to this application be made payable out of the assets of the Trust. 9. Further consideration of the interlocutory process dated 2 May 2011 be adjourned to 1 September 2011 at 9.15 am at which time the receivers and managers shall report by way of affidavit on the progress of the receivership. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 29 of 2011 BETWEEN: SAPPHIRE (SA) PTY LTD ACN 076 858 029 TRADING AS RIVER CITY GRAIN CO Plaintiff AND: EWENS GLEN PTY LTD ACN 098 864 156 Defendant JUDGE: BESANKO J DATE: 23 JUNE 2011 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 I delivered reasons in this proceeding on 1 June 2011: Sapphire (SA) Pty Ltd v Ewens Glen Pty Ltd [2011] FCA 600. Before I made orders I gave counsel for the liquidators the opportunity to address the matters raised in paragraphs 20 and 22 of my reasons. 2 As to the reporting obligations of the receivers and managers, counsel referred me to the reporting obligations in the Corporations Act 2001 (Cth) ('Corporations Act') and he suggested that I make an order that the receivers and managers report to the Court on the progress of the receivership by affidavit in three months' time. That seemed to me to be an appropriate course and I included in the orders I made on 1 June 2011 an order that further consideration of the interlocutory process dated 2 May 2011 be adjourned to 1 September 2011 at 9.15 am at which time the receivers and managers shall report by way of affidavit on the progress of the receivership. 3 As to whether the receivers and managers should provide security, counsel for the liquidators submitted that this was a case where the Court should otherwise order within the terms of Order 26 of the Federal Court Rules. He referred to the decision of Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd (Unreported, Nicholson J, 29 July 1998). 4 In my opinion, this is an appropriate case to otherwise order and not require the receivers and managers to provide security. The receivers and managers are joint and several liquidators of the defendant and they are subject to obligations under the Corporations Act. They are official liquidators under s 1283 of the Act. It is clear enough I think that the trust assets will have to be sold to meet the liabilities of the defendant as trustee (see paragraphs 5, 6 and 16 in my earlier reasons). In the circumstances, it is appropriate to order that the liquidators be appointed receivers and managers without security. 5 As to whether the receivers and managers should be required to provide an undertaking as to damages, I think for similar reasons I have given for not requiring security, that it is not necessary to require an undertaking as to damages. I do not think there is the type of risk which calls for an undertaking: National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277. 6 As to the matter identified in paragraph 22 I considered a direction in the following terms was appropriate: 1. It will be appropriate for the liquidators of the defendant not to exercise their power to appoint a new trustee to the Nelson Family Trust ("Trust") until such time as the receivership of the trust is finalised. 7 I considered that to be an appropriate direction because having regard to the appointment of the liquidators as receivers and managers there will be little for a trustee to do and, as I say in paragraph 18 of my earlier reasons, there is no obvious person or entity who could be appointed as the new trustee of the trust. The direction and orders I made on 1 June 2011 were as follows: 1. It will be appropriate for the liquidators of the defendant not to exercise their power to appoint a new trustee to the Nelson Family Trust ("Trust") until such time as the receivership of the Trust is finalised. 2. The liquidators of the defendant, Stephen Glen James and John Maxwell Morgan, of Bentleys Corporate Recovery (SA) Pty Ltd, 64 Greenhill Road, Wayville in the State of South Australia be appointed without security joint and several receivers and managers of the property of the Trust ("Trust Property"). 3. The receivers and managers ("Receivers") be authorised to take possession of, preserve, maintain and sell the assets comprising the Trust Property. 4. The Receivers will have the following powers: 4.1 The power to do, in Australia and elsewhere, all things necessary or convenient to be done for or in connection with, or as incidental to the attainment of the objects for which the Receivers are appointed 4.2 The general and specific powers referred to in section 420(2) of the Act, provided that wherever in section 420 the word "corporation" appears it shall be taken that those powers extend to the Trust; and 4.3 The power to require, by request in writing, the Trust and any employee, agent, banker, solicitor, stockbroker or accountant of, or consultant or other professionally qualified person who has provided assistance to the Trust, to provide such reasonable assistance to the Receivers as may be required from time to time. 5. The Receivers shall be paid remuneration on a time basis at a reasonable fee according to the hours for which they, or any employee of the firm Bentleys Corporate Recovery (SA) Pty Ltd, are engaged in work necessary for and relevant to the purpose of the receivership, such remuneration to be calculated at the standard rates of Bentleys Corporate Recovery (SA) Pty Ltd from time to time for work of that nature, together with all reasonable out of pocket expenses. 6. The reasonable costs and expenses of the Receivers incurred in relation to the receivership be paid out of the assets of the Trust. 7. There be liberty to apply. 8. Costs of and incidental to this application be made payable out of the assets of the Trust. 9. Further consideration of the interlocutory process dated 2 May 2011 be adjourned to 1 September 2011 at 9.15 am at which time the receivers and managers shall report by way of affidavit on the progress of the receivership. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate: Dated: 23 June 2011