IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2025 02198

IN THE MATTER OF AN APPLICATION BY GIDEON ISAAC RATHNER IN HIS CAPACITY AS LIQUIDATOR OF MODA PROJECTS (FIT OUT CONSTRUCTION) PTY LTD (IN LIQUIDATION) (ACN 618 271 015)

BETWEEN:

GIDEON ISAAC RATHNER IN HIS CAPACITY AS LIQUIDATOR OF MODA PROJECTS (FIT OUT CONSTRUCTION) PTY LTD (in liquidation) (ACN 618 271 015)	Plaintiff	

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JUDGE:	DELANY J	
WHERE HELD:	Melbourne	
DATE OF HEARING:	23 May 2025	
DATE OF RULING:	23 May 2025 (ex tempore, revised 29 May 2025) 	
CASE MAY BE CITED AS:	Re Moda Projects (Fit Out Construction) Pty Ltd (in liq)	
MEDIUM NEUTRAL CITATION:	[2025] VSC 300	

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CORPORATIONS – Liquidation of trustee company – Company operated exclusively in capacity as trustee – Creditors on notice of remuneration to be sought by the liquidator – No objection or opposition to remuneration – Remuneration approved – Liquidator appointed receiver to enable recovery of debt alleged to be owed to the trust notwithstanding the very modest potential dividend to creditors from any such recovery after the payment of remuneration – Re Cremin (in his capacity as liquidator of Brimson Pty Ltd) (in liq) [2019] FCA 1023; Re Amerind Pty Ltd (receivers and managers apptd) (in liq) [2017] VSC 127; (2017) 320 FLR 118, applied. 

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	R N Malone 	KKI Lawyers 	

HIS HONOUR:
The application
1	On 23 July 2024 Gideon Isaac Rathner (‘Liquidator’) was appointed liquidator of Moda Projects (Fit Out Construction) Pty Ltd ACN 618 271 015 (in liquidation) (‘the Company’) pursuant to a resolution of the Company’s members at a general meeting under s 491 of the Corporations Act 2001 (Cth) (‘Act’).
2	From 29 March 2017 to 23 July 2024, the Company was the corporate trustee for a trust called the Shabley Trust (‘Trust’) established by a Trust Deed (‘Deed’) executed on that date. 
3	The Liquidator brings this application under s 63(1) of the Trustee Act 1958 (Vic) (‘Trustee Act’) and r 39.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) seeking orders appointing him as receiver over the Trust (‘application’).
4	In support of the application the Liquidator relies on: 
(a)	the Originating Process dated 24 April 2025;
(b)	the first affidavit of the Liquidator affirmed 28 April 2025; 
(c)	the second affidavit of the Liquidator affirmed 21 May 2025;
(d)	affidavits of Madelane Panna affirmed 20 May 2025 and 27 May 2025, deposing to service on the beneficiaries;
(e)	the third affidavit of the Liquidator affirmed 27 May 2025; and
(f)	submissions dated 21 May 2025.
5	The solicitors acting for the specified beneficiaries have been notified of the application and of the hearing.
6	The principles to be applied on such an application and also the evidence required to substantiate the relief sought by the liquidator are well-established.
The criteria for appointment of the liquidator as receiver
7	In Re Cremin (in his capacity as liquidator of Brimson Pty Ltd) (in liq), Moshinsky J said:
…It is now settled that the liquidator of an insolvent (former) corporate trustee cannot sell the trust’s property without order of the Court, or by appointment of a receiver over the trust assets…The rationale for this position is that, on a proper understanding, the trust assets are not the ‘property of the company’, but are instead trust property in which the corporate trustee has a proprietary interest by way of lien or charge to secure its right of exoneration…
The courts are generally willing, upon an appropriate application, to make orders permitting the liquidator of a (former) corporate trustee to sell trust assets.  In situations where the property of the trust will be exhausted following its sale and subsequent distribution to creditors, it may be appropriate merely to give the liquidator a power of sale…The more common course is, however, for the liquidator of the insolvent (former) corporate trustee to apply to be appointed a receiver for the purpose of selling the trust assets and distributing the proceeds among trust creditors…
The evidence required
8	In Re Amerind Pty Ltd (receivers and managers apptd) (in liq), Robson J listed factors that have been taken into account when determining whether the evidence establishes that the company in question traded in its own capacity or traded as trustee of a trust:
(a)	the existence of constituent trust documents which establish a trust, including any draft trust documents which cross-reference one another;
(b)	whether accounts were maintained separately to the company’s operational expenditure accounts and/or the company’s own property;
(c)	whether the company’s name in its capacity as trustee was noted on key employment documents, such as letters of employment and tax file declarations;
(d)	whether invoices rendered by the company in question were issued by the company in its capacity as trustee of the trust;
(e)	whether company meeting minutes disclosed the existence of a trust, or disclosed that the company was operating as a trust;
(f)	whether expenses were accounted as receipts of the company as trustee; and
(g)	whether records, contained in the general ledger of the company, recorded activity consistent with the operation of a trust, such as the issue of units. 
The evidence relied on by the Liquidator 
9	When the matter was first listed the evidence filed in support of the application failed to address the matters referred to in Re Amerind, apart from the existence of the trust documents.  Following email communications from my Chambers drawing attention to that decision the third affidavit of the Liquidator was filed.  That affidavit satisfactorily addresses the evidentiary matters to which Robson J referred.
10	The Deed provides that the trustee has broad powers to manage and deal with the Trust assets, including the power to advance funds, enter into loan arrangements and distribute income and capital at its discretion.
11	The specified beneficiaries of the Trust are Duncan Sibley and Heidi Shaw. 
12	The evidence now filed reveals that the Trust operated as a vehicle for managing and dealing with assets of the Company and was structured as a discretionary trust. 
13	The evidence discloses that accounting records for the business were maintained in the name of the Trust, not in the name of the Company in its own right.  The balance sheet and accounting records extracted from Xero are recorded in the name of the Trust.
14	The bank accounts of the company were held in the name of the company as trustee of the Trust.  Invoices rendered by the Company were issued in its capacity as trustee of the Trust.  There is no evidence of any separate operational expenditure accounts or property held by the Company in its own right.
15	The annual compliance documents for the Trust for the financial year ending in June 2023, including the 2023 Distribution Resolution, expressly refer to the Trust and to the Company as trustee.
16	The financial statements of the Trust record activity consistent with the operation of a discretionary trust, including recording of beneficiary accounts and trust distributions.
17	During his investigations the Liquidator formed the view that Mr Sibley was indebted to the Company as trustee for the Trust in the amount of $97,326.00 (‘the debt’), on the basis that drawings from his loan account exceeded payments to the loan account by that amount. 
18	On 4 September 2024, the Liquidator sent a letter of demand to Mr Sibley demanding repayment of the debt amount to reimburse the claimed loan account indebtedness within 7 days.
19	The alleged debt has not been paid and Mr Sibley denies the debt.
Disposition
20	Clause 48 of the Deed states that the appointment of a trustee automatically terminates if the trustee enters into liquidation (except in the case of an amalgamation or reconstruction).  Upon termination, the former trustee ceases to have any power to deal with the Trust assets, except to the extent necessary to facilitate the transfer of control to a new trustee.
21	The Company is no longer the trustee of the Trust.  Due to the operation of clause 48 of the Deed, the Liquidator cannot deal with the Trust assets including so as to pursue the recovery of the debt alleged to be owed to the Trust.
22	Unless the Liquidator is appointed receiver as is his application or unless an order is made pursuant to the to the Trustee Act entitling the Liquidator to deal with the assets, the duties powers and rights of the company are limited to protecting the Trust assets.
23	I accept that the evidence now filed shows that the Company only ever acted as trustee of the Trust.  I accept that the Liquidator cannot progress the liquidation or discharge his duties properly, without being appointed as receiver of the Trust, due to the operation of clause 48 of the Deed. 
24	The Liquidator’s statutory report, exhibited to the second affidavit of the Liquidator, identifies the estimated liabilities of the Company to be $239,934 with minimal assets.  The only substantive asset of the Company appears to be the debt. 
25	The Liquidator has sought approval of its remuneration of $50,568.50 for the period 23 July 2024 to completion.
26	Have regard to the amount of remuneration sought by the Liquidator, if the Liquidator recovers the debt the estimated dividend to creditors will at best be approximately 20 cents in the dollar, on any view a very modest dividend. 
27	Notwithstanding the very modest potential dividend to creditors I am prepared to make the orders sought by the Liquidator. 
28	I have reviewed the remuneration approval report and the discussion of the costs of the liquidation referred to in the statutory report by Mr Sweeney, previously the joint liquidator of the Company together with Mr Rathner.  Although I have some misgivings about exercising the Court’s discretion to appoint the Liquidator receiver in circumstances where there will at best be a very moderate modest return to the creditors, it is clear from the report and its annexures that both Liquidators and their staff have undertaken substantial work.  It is also the case that on 26 September 2024 the then joint liquidator, Mr Sweeney, gave notice that creditors’ approval would be sought to approve remuneration for work performed up to 22 September 2024 of $30,568.50 and for the approval of a further $20,000 plus GST to cover work for the period 23 September 2024 to completion.  There is no evidence of any objection by any creditor or by any other person to that remuneration.
29	In the circumstances I consider it appropriate to approve remuneration of $50,568.50 for the period 23 July 2024 to completion.
30	I will make orders as sought by the Liquidator in the following terms:
1.	Pursuant to s 37 of the Supreme Court Act 1986, Gideon Isaac Rathner be appointed as receiver (‘the Receiver’) of the business and assets of The Shabley Trust established by Deed of Trust dated 29 March 2017 (‘the Trust’) for the purpose of realising those assets and distributing them in accordance with the priorities contained in pt 5.6 of the Corporations Act 2001 (Cth). 
2.	The need for the Receiver to give security in the form of a guarantee in Form 39A, and to file that guarantee, pursuant to r 39.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), be dispensed with.
3.	The Receiver shall have, in respect of the assets of the Trust, the powers that a receiver has in respect of the business and property of a company under s 420 of the Corporations Act 2001 (Cth) as if the reference in that section to ‘the corporation’ were a reference to The Shabley Trust (ABN 87 346 304 057), including without limitation, the power to do all things necessary or convenient to:
(a)	take control of and manage the Trust assets, including but not limited to recovering any debts owed to the Trust;
(b)	demand the books and records of the Trust from any person;
(c)	investigate transactions made using funds derived from the assets of the Trust;
(d)	resolve the loan account dispute between the Trust and Duncan Sibley;
(e)	execute any necessary documents on behalf of the Trust, including to facilitate the settlement of the loan account and related matters;
(f)	sell any assets of the Trust;
(g)	distribute or apply the Trust assets in accordance with the terms of the Deed of Trust dated 29 March 2017 and any applicable legal requirements; 
(h)	take any further action required to ensure the proper administration and management of the Trust assets; and
(i)	determine and make payment of claims against the assets of the Trust
4.	The remuneration, costs and expenses of the plaintiff as liquidator of Moda Projects (Fit Out Construction) Pty Ltd (in Liquidation) (ACN 618 271 015) and as the receivers of the assets of the Trust, be paid from the assets of the Trust. 
5.	The Receiver may apply to the Court for orders discharging and releasing themselves as receiver of the assets of the Trust on 7 business days’ notice by sending an email to the Commercial Court Registry.
6.	Any persons who can demonstrate sufficient interest to modify or discharge any of these orders have liberty to apply on 48 hours’ notice to the plaintiff.
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