Federal Court of Australia Sampson (Administrator), in the matter of PWUO Trading Pty Ltd (Administrators Appointed) [2020] FCA 1746 File number: NSD 1264 of 2020 Judgment of: YATES J Date of judgment: 2 December 2020 Catchwords: CORPORATIONS – application by administrators for appointment as receivers of trust property Legislation: Corporations Act 2001 (Cth) s 437A Federal Court Rules 2011 (Cth) rr 14.21, 14.22 Cases cited: Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103 Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; 260 FCR 310 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 10 Date of hearing: 2 December 2020 Counsel for the Plaintiff: Mr M Rose Solicitor for the Plaintiff: Thomson Geer ORDERS NSD 1264 of 2020 IN THE MATTER OF PWUO TRADING PTY LTD (ADMINISTRATORS APPOINTED) ACN 624 567 871 DAVID HENRY SAMPSON AND DAVID ANTHONY HURST IN THEIR CAPACITY AS ADMINISTRATORS OF PWUO TRADING PTY LTD (ADMINISTRATORS APPOINTED) Plaintiff order made by: YATES J DATE OF ORDER: 2 DECEMBER 2020 THE COURT ORDERS THAT: 1. The plaintiffs be appointed, without security, as receivers of the assets and undertaking (Trust Assets) of the PWUO Trading Unit Trust (the Trust) created by the Unit Trust Deed dated 5 March 2018, between PWUO Investments Pty Ltd as trustee for PWUO Investments Discretionary Trust, as the Initial Unit Holder, and PWUO Trading Pty Ltd (administrators appointed) (the Company), as the trustee, with the powers conferred on an administrator by s 437A of the Corporations Act 2001 (Cth), as if references in that section to "the company" were a reference to the Trust. 2. The requirement for receivers to file a guarantee under r 14.21 and r 14.22 of the Federal Court Rules 2011 (Cth) be dispensed with. 3. The plaintiffs, as receivers, not distribute the Trust Assets without the direction of the Court. 4. The costs, expenses and remuneration incurred by the plaintiffs in acting as receivers of the Trust Assets, including the costs of the application filed on 25 November 2020, be paid from the Trust Assets. 5. If the identity of the unit holders of the Trust becomes known to the plaintiffs, the plaintiffs take all reasonable steps to notify the unit holders of these orders as soon as reasonably practicable. 6. The plaintiffs take all reasonable steps to notify the creditors of the Company of these orders, within two business days of the date of these orders. 7. Any creditor of the Company, or other person who can demonstrate sufficient interest to vary the orders sought, have liberty to apply to vary these orders upon 3 days' notice to the plaintiffs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Revised from transcript) YATES J: 1 The plaintiffs are the joint and several administrators of PWUO Trading Pty Ltd (administrators appointed) (the company). They were appointed on 12 November 2020. 2 The company's financial records for the year ended June 2019 signify that it is the trustee of the PWUO Trading Unit Trust (the Unit Trust). The Unit Trust was established by a deed dated 5 March 2018 (the Deed). In the Deed, the company is named as the trustee of the Unit Trust. PWUO Investments Pty Ltd, as trustee of the PWUO Investments Discretionary Trust, is named as the "Initial Unit Holder". In the course of submissions today, I was informed that PWUO Investments Pty Ltd has been deregistered. The current unit holder(s) of the Unit Trust are not presently known. 3 The company's financial statements and the Deed only came to the plaintiffs' attention on or about 18 November 2020. At the time of their appointment, they were not aware of the fact that the company was, apparently, acting as a trustee. As a result of further investigations, the plaintiffs now believe that the only business activities undertaken by the company, prior to their appointment, were in its capacity as trustee of the Unit Trust. 4 These activities are the retailing of sports apparel and footwear under the name "Paul's Warehouse USA Outlet" from premises at 1 Market Street, Rockdale, New South Wales. The company also has administrative and warehouse facilities at leased premises at 125–127 Parramatta Road, Homebush, New South Wales. 5 The plaintiffs are of the view that it is in the best interests of creditors that the company continue to trade with a view to the business being sold as a going concern. However, clause 17.11(b) of the Deed provides: The office of trustee is determined and vacated: … (b) if the Trustee, being a company, enters into liquidation, whether compulsory or voluntary (not being a voluntary liquidation for the purposes of amalgamation or reconstruction), or have an administrator, receiver or official manager or receiver and manager appointed. 6 This clause has been triggered by the plaintiffs' appointment as administrators. As no other person has been appointed as trustee of the Unit Trust since the plaintiffs' appointment, the consequence is that the company now holds the property of the Unit Trust as a bare trustee, with limited powers in respect of that property. 7 It is doubtful that, in their role as administrators, the plaintiffs' powers under s 437A of the Corporations Act 2001 (Cth) (the Act) extends to that property. Further, although the company will have rights of indemnity (reimbursement and exoneration) out of the trust property, those rights of indemnity in respect of non-cash property do not confer on the company any right of sale. The company's rights of indemnity out of the trust property are only enforceable by a court order for sale or by the appointment of a receiver with a power of sale: Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103 at [45]; Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; 260 FCR 310 at [44]. 8 Given the apparent limitations on their present powers, the plaintiffs seek their own appointment as receivers of the assets and undertaking of the Unit Trust, with the powers conferred on an administrator by s 437A of the Act. I am satisfied that this is an appropriate course. It will facilitate the administration of the company and protect its proprietary interest in the trust property arising from its rights of indemnity. 9 Two claimed creditors of the company—Rita Stephan and Wade Richardson—each gave notice to the plaintiffs on 25 November 2020 that they wished to be heard on this application. Although invited to appear today, they have not appeared. Their concerns about the present application were variously expressed but, I think, boil down to questioning, in the interests of avoiding unnecessary expenditure of scarce resources, whether the present application is necessary. I am satisfied that the present application is necessary, for the reasons I have given. 10 For these reasons, I will grant the relief sought in prayers 1, 2, 4, 6, 7, 8 and 9 of the originating process dated 25 November 2020. The balance of the relief claimed will stand over for later determination, if necessary. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates. Associate: Dated: 3 December 2020