Supreme Court New South Wales Medium Neutral Citation: In the matter of Double Bay Property Management Pty Ltd (in liq) [2020] NSWSC 203 Hearing dates: 3 March 2020 Date of orders: 03 March 2020 Decision date: 03 March 2020 Jurisdiction: Equity - Corporations List Before: Gleeson J Decision: Receiver and manager appointed over trust property Catchwords: CORPORATIONS – winding up – company in creditors' voluntary liquidation – where business of company conducted in capacity of trustee – where company removed as trustee upon winding up by ipso facto clause in trust deed – liquidators seek to be appointed receivers and managers of assets and undertaking of the trust – Supreme Court Act 1970 (NSW) s 67 and Court's inherent jurisdiction – ex parte application – where urgent circumstances justifying appointment – whether Court should make appointment nunc pro tunc Legislation Cited: Corporations Act 2001 (Cth), s 494 Supreme Court Act 1970 (NSW), s 67 Cases Cited: Jones (in his capacity as liquidator of Killarnee Civil & Concrete Contractors Pty Ltd) v Matrix Partners Pty Ltd [2018] FCAFC 40; (2018) 354 ALR 436\ Re Clarke [1898] 1 Ch 336 Re Gramarker Pty Ltd; Sanderson (as liquidator of Gramarker Pty Ltd) v Kerr [2014] NSWSC 243 Re Hercules Car Parking Systems (Victoria) (Pty Ltd) [2018] NSWSC 409 Texts Cited: Kerr and Hunter on Receivers and Managers (Sweet & Maxwell, 20th ed, 2018) Category: Principal judgment Parties: Jonathan Philip Henry and Katherine Sozou in their capacity as joint and several liquidators of Double Bay Property Management Pty Ltd (in liq) (First plaintiff) Double Bay Property Management Pty Ltd (in liq) (Second plaintiff) Representation: Counsel: D Krochmalik (Plaintiffs) Solicitors: HWL Ebsworth Lawyers (Plaintiffs) File Number(s): 2020/69233 Judgment 1. GLEESON J: Application is made by Jonathan Henry and Katherine Sozou as joint and several liquidators of Double Bay Property Management Pty Ltd (in liquidation) (the company) under section 67 of the Supreme Court Act 1970 (NSW) and in the Court's inherent jurisdiction for an order that they be appointed jointly and severally as receivers and managers, without security, of the property assets and undertakings of the trust known as the Property Management Unit Trust. The application has been made on an urgent ex parte basis in the following circumstances. 2. On 5 February 2020, the company was wound up by resolution of its sole shareholder Danatjes Pty Ltd (Danatjes) and Mr Henry and Ms Sozou were appointed as liquidators of the company. As no declaration of solvency was signed by Mr Albert Sassoon, the sole director of the company, the liquidation has proceeded as a creditors' voluntary winding up: Corporations Act 2001 (Cth) s 494(1). Prior to that date the company had carried on business as a real estate property manager of residential property in the eastern suburbs of Sydney. In substance, the main asset of the company is its rent roll, being the property management agreements with property owners. 3. The company was trustee of the Property Management Unit Trust, which had been established by a trust deed dated 21 June 2007, as varied by a deed of variation dated 5 May 2014, which variations included changing the name of the trust, and the name of the trustee to the present name of the company. The trust deed contained an ipso facto clause which had the effect that the company was removed as trustee immediately upon the resolution being passed for the winding-up of the company on 5 February 2020: cl 20.3(b)(v) of the trust deed. 4. Following their appointment, the liquidators have taken steps towards the realisation of the company's main asset, being its rent roll. The liquidators have negotiated a proposed sale transaction with an interested party, and it is anticipated may be in a position to exchange a contract for sale within the next week. The difficulty which has arisen is that it has come to the liquidators' attention that the company is the former trustee of the Property Management Unit Trust. Copies of the relevant trust instruments were provided to the liquidators by Mr Albert Sassoon, the sole director of Danajtes, on 25 February 2020. Shortly prior to that date, the liquidators had become aware from company records and documents, that the business of the company, or at least part of the business, appeared to have been conducted in its capacity as trustee of the Property Management Unit Trust. 5. As Brereton J explained in Re Hercules Car Parking Systems (Victoria) (Pty Ltd) [2018] NSWSC 409 at [3], by a procedure which is now well established, the liquidator of the trustee company applies to be appointed receiver of the trust assets of which the company was formerly trustee, by way of enforcement of the former trustee's right of indemnity against trust assets, which survives the removal of the trustee and operates in favour of a former trustee. 6. Although one of the liquidators, Mr Henry, deposes that he cannot say with certainty that the entirety of the business of the company was carried on by the company in its capacity as trustee of the Property Management Unit Trust, it seems from the liquidators' investigations to date that the description of the company as trustee of the Property Management Unit Trust on the overwhelming majority of the property management agreements with owners, supports the conclusion that the business, or at least for the most part, was carried on and owned by the company in its capacity as trustee of the Property Management Unit Trust. 7. Notice of the application has been given to Danatjes, which seems, subject to a possible qualification to which I will refer, to be the sole unit holder and appointor of the trust. Mr Sassoon, the director of Danatjes, has indicated that he has no objection to the application. 8. Counsel for the liquidators has taken the Court to various documents in exhibit JPM1, which on one view might suggest the possibility that some units in the trust might be held by an entity other than Danatjes. Even if that were the case, the consequence would be that the relevant appointor under the trust deed would be Danatjes and that other person or entity: cl 20.4 and the Ninth Schedule, Trust Deed. The important point is that, on the material available, it seems that no step has been taken to appoint a replacement trustee to the Property Management Unit Trust. 9. Given the urgency of the application, notice of the application has not been given to creditors, although the application was foreshadowed in correspondence dated 25 February 2020 with the solicitors for Ms Simons, who claims to be a substantial creditor of the company, in its capacity as trustee of the Property Management Unit Trust. Whilst Ms Simons was not given notice of the date on which this application has been made, the evidence shows that her solicitors did not respond to correspondence from the liquidators' solicitors of 28 February 2020 replying to Ms Simon's request, among other things, that the liquidators defer taking steps to sell the assets of the company. The liquidators' solicitor's letter gave compelling reasons why the sale of the assets should not be deferred. Those reasons were verified by the affidavit of one of the liquidators, Mr Henry. In short, any delay in the sale process carries the real risk of the negotiations with the potential purchaser falling through and as time passes, there is an increased risk of additional property management agreements with property owners being terminated by those property owners given the liquidation of the company. 10. The proposed form of orders provide creditors, such as Ms Simons, with an opportunity to make application within a short period of time to seek to set aside the orders should they be so advised. 11. Two further matters should be mentioned briefly. The first concerns the extent of powers to be conferred upon the receivers. The proposed orders confer power on the receivers to distribute the proceeds of sale of assets beneficially held by the trust and to distribute any surplus thereafter to the beneficiaries of the trust. Those powers are subject to a qualification, consistent with the approach taken in more recent authorities, such as Re Hercules Car Parking Systems at [5], which requires the receivers to return to the Court to obtain leave to distribute the proceeds to creditors and beneficiaries. See also Re Gramarker Pty Ltd; Sanderson (as liquidator of Gramarker Pty Ltd) v Kerr [2014] NSWSC 243 at [9]. 12. The second matter concerns proposed order 3, which was expressed to have the appointment of receivers and managers operate nunc pro tunc, which I understood means in the present case to operate as from the date of the appointment of Mr Henry and Ms Sozou as liquidators of the company. My attention was drawn by counsel for the liquidators to statements in Jones (in his capacity as liquidator of Killarnee Civil & Concrete Contractors Pty Ltd) v Matrix Partners Pty Ltd [2018] FCAFC 40; (2018) 354 ALR 436 at [91] (Allsop CJ) and at [146] and [152] (Siopis J], which contemplated power to make a nunc pro tunc appointment. Against this there are statements in the leading texts which suggest that an appointment of receivers and managers by the Court never relates back to the date of the application: Kerr and Hunter on Receivers and Managers (Sweet & Maxwell, 20th ed, 2018) at [6-10], citing Re Clarke [1898] 1 Ch 336 at 339 (Lindley MR). 13. On one view, the remarks by the Full Court of the Federal Court of Australia in Jones v Matrix Partners might be considered to be obiter. In any event, those remarks, assuming them to be correct, and I express no view as to that matter at present, are arguably distinguishable from the factual circumstances in the present case. In Jones v Matrix Partners the liquidator, who it turned out was also dealing with assets of a trust, had sold trust property without the benefit of a court order appointing the liquidator as receiver and manager of the trust assets before doing so. That was the context in which the Full Court indicated that should the liquidator in that case apply to the court to be appointed as the receiver to sell the remaining unsold trust property a nunc pro tunc order might be made in respect of trust property which had already been sold by the liquidator. 14. Given that this application is ex parte, I am not persuaded that it is appropriate to make a nunc pro tunc order in the absence of a contradictor at the present time. I am otherwise satisfied that it is appropriate to appoint the liquidators as receivers and managers, without security, of the property assets and undertakings of the Property Management Unit Trust, subject to the following addition to the proposed form of orders: 1. the addition of order 9.3, adding the words "Tytanya Holdings Pty Ltd by post"; and 2. an additional order 11, "These orders be entered forthwith". 1. The Court makes orders in accordance with the short minutes of order, as amended, which I will initial and date and place with the file. ********** Amendments 10 March 2020 - [12] - amend typographical error DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 March 2020