Australia, Nov. 12 -- The Federal Court of Australia issued the following judgement on Nov. 6:
1 On 12 December 2022, Mr Michael Billingsley (the Liquidator) was appointed as liquidator of each of LFI Holdings Pty Limited (in liq) (LFI Holdings) and LFI Ventures Pty Limited (in liq) (LFI Ventures). Until the appointment of the Liquidator, LFI Holdings was the trustee of the LFI Property Trust (Property Trust) and LFI Ventures was the trustee of the LFI Ventures Trust (Ventures Trust).
2 Clause 47 of each trust deed contains a provision automatically terminating the appointment of the trustee upon entry into voluntary liquidation. The Liquidator is not aware of the appointment of a replacement trustee over either the Property Trust or the Ventures Trust. Clause 36 of each of the trust deeds confers on the trustee an express right to be indemnified out of the relevant trust in respect of liabilities incurred by the trustee in that capacity. Clause 27 of each of the trust deeds confers the power on the trustee, among other things, to sell any assets of the trust.
3 The Liquidator's investigations have revealed that:
(a) LFI Holdings carried on a business that primarily owned and managed properties, although the company did not in fact own any properties; and
(b) LFI Ventures carried on a business that acquired shares in other ventures or invested in business opportunities. LFI Ventures does not own any assets in its own right. Rather, the assets owned by LFI Ventures are recorded as assets of the Ventures Trust in the financial reports of the trust.
4 The Liquidator is not aware of any assets owned by the companies in their own right, and the director of each of LFI Holdings and LFI Ventures has confirmed that the companies did not carry on any business in their own right. The creditors of each of LFI Holdings and LFI Ventures appear to be creditors of the trusts.
5 The Liquidator seeks orders appointing himself and Mr Wright as receivers and managers of the property held by LFI Holdings and LFI Ventures in their capacity as trustees pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth).
6 By operation of clause 47 of each trust deed, LFI Holdings and LFI Ventures are bare trustees with powers limited to holding and protecting trust assets, and although the right of exoneration or indemnity persists in favour of the corporate trustee, that right and the associated lien does not confer a power of sale: Re Hughes (in their capacity as joint and several liquidators of Substar Holdings Pty Ltd) [2020] FCA 1863; (2020) 149 ACSR 185 at [26]-[27] (McKerracher J). In those circumstances, if a sale is required, the external administrator of the corporate trustee must seek orders for the sale of the property or orders seeking their appointment as the receiver of the property: Jones v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310 at [44] (Allsop CJ, Siopis and Farrell JJ), The latter is the more common course.
7 The Liquidator and Mr Wright have provided their consent to act as receivers and managers, and, in my view, it is appropriate that they be appointed.
8 As to the costs of the receivership, the evidence indicates that LFI Holdings and LFI Ventures have only ever acted in their capacity as trustees and have not traded or carried on business in their own right. Accordingly, all creditors are trust creditors. The proceeds of the sale of trust assets are to be applied for the benefit of the trust's creditors. This includes the costs of the liquidation (including the Liquidator's remuneration) because such costs constitute debts incurred by the company in discharging the duties imposed by the trust.
9 The consents to act as receivers and managers attach a schedule of charge-out rates to be charged in relation to the appointment which is sought. Those rates appear to me to be reasonable and appropriate.
10 Accordingly, I make orders in accordance with orders 1 to 12 as sought in the amended originating process, subject to the following amendments:
(a) In orders 2 and 8, I add the words after "section 420": "(except for the powers under ss 420(2)(s), (t), (u), (w))";
(b) In orders 4 and 10, I add, at the end of each of those orders, the words "such remuneration to be charged at the rates set out in schedule A to the consents of receivers and managers to act dated 25 October 2024".
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.
*Rest of the document and Footnotes can be viewed at: (https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2024/2024fca1301).
Disclaimer: Curated by HT Syndication.
