IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
Commercial Court
Corporations List
S ECI 2021 04623

IN THE MATTER OF URBAN PROPERTY MELBOURNE PTY LTD (ADMINISTRATORS APPOINTED) (ACN 611 078 892)

BRUNO ANTHONY ROBERT SECATORE and GLENN JOHN SPOONER in their capacity as joint and several voluntary administrators of URBAN PROPERTY MELBOURNE PTY LTD (ACN 611 078 892)	

First Plaintiffs	
		
and		
		
URBAN PROPERTY MELBOURNE PTY LTD (ADMINISTRATORS APPOINTED) (ACN 611 078 892)	
Second Plaintiff	

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JUDGE:	M Osborne J	
WHERE HELD:	Melbourne	
DATE OF HEARING:	15 December 2021	
DATE OF JUDGMENT:	16 December 2021	
CASE MAY BE CITED AS:	In the Matter of Urban Property Melbourne Pty Ltd	
MEDIUM NEUTRAL CITATION:	[2021] VSC 847	

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CORPORATIONS – Voluntary administration – Company that carried on business as trustee of a trading trust – Trustee company now in voluntary administration – Company removed as trustee by reason of ‘ipso facto’ clause in trust deed – Application by administrators for an order pursuant to s 63 of the Trustee Act 1958 (Vic) for orders permitting them to sell trust assets – Application by administrators for relief from liability pursuant to s 1318 of the Corporations Act 2001 (Cth) for past leadings with trust property – Application by administrators for relief from liability pursuant to ss 90-15 and 90-20 of the Insolvency Practice Schedule (Corporations) – Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 – Jones v Matrix Partners Pty Ltd; Re Killarnee Silver & Concrete Contractors Pty Ltd (in liq) (2018) FCR 310 – Cremin, in re Brimson Pty Ltd (in liq) (2019) 136 ACSR 649.

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APPEARANCES:
	Counsel	Solicitors	
For the First and Second Plaintiffs	C T Moller 	Pointon Partners	

HIS HONOUR:
1	This is an application by originating process by the first plaintiffs, Bruno Anthony Robert Secatore and Glenn John Spooner in their capacity as joint and several voluntary administrators of the second plaintiff, Urban Property Melbourne Pty Ltd (‘the Company’).  The Company is the second plaintiff in the proceeding.  
2	The plaintiffs seek relief pursuant to, inter alia, s 63 of the Trustee Act 1958 (‘the Trustee Act’) and pursuant to ss 90-15 and/or 90-20 of the Insolvency Practice Schedule (Corporations) (‘the IPS’) in respect of certain dealings by the administrators in connection with the business and assets of a trust (the Urban Property Melbourne Unit Trust) (‘the Trust’), of which the Company was formerly the trustee.
3	Specifically, the plaintiffs seek orders enabling them to sell the Trust assets. 
4	The administrators principally rely upon the affidavit of one of the administrators, Mr Spooner, made on 3 December 2021 (‘the Spooner affidavit’).  The need for the making of orders conferring powers on the administrators to sell the Trust assets is urgent.  The Company is trading at a loss and its staff have resigned.  A key staff member has agreed to stay on to assist the sale, but has advised that she will not continue in that position if the sale process is prolonged.
5	The administrators have negotiated a sale of the Company’s principal assets but absent relevant power which can only be obtained by way of orders such as those now sought, they have no capacity to achieve the sale.  
6	The administrators served the originating process and the Spooner affidavit on the Company’s sole director and secretary, who is also the sole director and shareholder of LFL Investments Pty Ltd (‘LFL’).  LFL is the Company’s sole shareholder and the sole unitholder of the Trust.  In addition, the administrators also served Westpac Banking Corporation Ltd (‘Westpac’) which holds a registered security interest over all of the Company’s present and after acquired property, as well as on all creditors of the Company who have lodged a proof of debt.  None of the parties served sought to be heard on the application.  
7	In the circumstances of urgency attending to the application, after hearing submissions from counsel for the administrators, I made orders largely in the terms sought but indicated that I would publish reasons shortly afterwards.  These are those reasons.
8	The administrators were appointed as administrators of the Company on 8 November 2021 upon the resolution of the Company’s sole director.
9	The Company conducts a business as a real estate agent, managing residential apartments in Melbourne’s inner city.  It also manages several owners corporations.  Its primary assets comprise:
(a)	its rent roll (ie, its entitlement to recurring management fees for the properties it manages) (‘the Rent Roll’); and
(b)	its entitlement to owners corporation management fees, in respect of four owners corporations that it manages (‘the OC Rights’).
10	The administrator’s searches and investigations show that as at 17 November 2021:
(a)	the Company owed Westpac $110,628.62 under a business loan with a facility limit of $110,631;
(b)	LFL owed Westpac $1,102,801 under a bank bill business loan with a facility limit of $1,108,005.00 which was secured by a guarantee provided by the Company.
11	Following the administrator’s appointment, they ascertained that the Company director was not able to continue to be involved in conducting the Company’s business due to personal circumstances.  
12	Notwithstanding this, the administrators determined that it was in the best interests of the Company’s creditors to continue to trade the business during the moratorium afforded by the administration so as to achieve a sale of its business and/or assets.  This course was supported by Westpac as the Company’s major secured creditor.
13	Accordingly, shortly after their appointment, the administrators arranged for a business broker, Buxton IQ, to market the business for sale.  Buxton IQ had previously been engaged to sell the Rent Roll and OC Rights.  Despite significant interest, no sale was ultimately entered into.  
14	After discussions with the broker, the administrators decided to attempt to sell the Rent Roll and OC Rights separately rather than as part of the business as a going concern.
15	Four indicative offers have been received from parties interested in acquiring the OC Rights and Westpac’s consent to that sale has also been sought and was obtained on 7 December 2021.
16	Following a marketing campaign, twenty eight expressions of interest in purchasing the Rent Roll were received culminating in seven indicative offers.  The administrators identified the offeror that put forward the most attractive offer as the preferred purchaser and to that end have entered into a contract of sale for the Rent Roll, conditional on the Court making an order to the effect sought in this application.  Assuming the contract becomes unconditional, the purchaser warrants providing services as managing agent for the landlords on the Rent Roll, during the period between the contract taking effect and completion (which is scheduled to take place on 15 January 2022).  Westpac has consented to the proposed sale.
17	On 30 November 2021, the administrators first learned that the Company was the trustee of the Trust.  At that time the administrators were provided with, among other things:
(a)	a copy of the trust deed for the Trust dated 13 April 2016 (‘trust deed’);
(b)	a copy of a deed of variation in respect of the Trust dated 19 October 2018 changing its name; and
(c)	a unit certificate certifying that LFL was the owner of 1,600,000 of 1,600,000 units in the Trust.
18	Prior to 30 November 2021, the administrators were not aware that the Company was the trustee of the Trust.  Mr Spooner deposes to the fact that the former director had not mentioned that matter to them whether before or after their appointment as voluntary administrators.
19	Clause 15.2 of the trust deed provides:
Automatic termination of appointment of Trustee
The appointment a Trustee terminates automatically if any of the following occurs:
…
(c)	the Trustee enters into compulsory or voluntary liquidation (except for the purposes of amalgamation or reconstruction), or has an administrator, receiver, official manager or receiver and manager appointed to any of its assets.
20	As a result of the operation of clause 15.2(c), often referred to as an ipso facto clause, the Company holds the assets, including the Rent Roll and OC Rights, as bare trustee.  
21	Following the administrators becoming aware that the Company acted as a trustee of the Trust, the administrators made further enquiries as to whether it held all its assets as a trustee of the Trust and in no other capacity.  The investigations undertaken by the administrators have included a review of financial records and documents used in the Company’s business.  Relevantly, these include sample leasing authorities from the Rent Roll which disclose the full name of the rental provider as Urban property Melbourne Pty Ltd t/as Urban Property Melbourne with the ABN ‘46853341442’ (which is the registered ABN of ‘the trustee for Urban Property Melbourne Unit Trust’); a sample owners corporation management agreement which discloses that the name of the manager is ‘the trustee for Urban Property Melbourne Unit Trust t/as Urban Property Melbourne Pty Ltd’; and a copy of the Company’s most recent financial statements which states that they were prepared for the Company in its capacity as trustee of the Trust.  
22	In addition, the guarantee provided by the Company in favour of Westpac states that it has been given in its capacity as trustee of the Trust.  
23	Accordingly, it is clear, and Mr Spooner deposes to the fact, that:
(a)	the Company has only acted as trustee of the Trust and in no other capacity;
(b)	all assets owned by the Company were held by it as trustee of the Trust;
(c)	all liabilities incurred by the Company were incurred as trustee for the Trust; and
(d)	no new trustee has been appointed.
24	As at the date of the appointment of the administrators, the Company had only two employees and one subcontractor.  One of those employees resigned immediately upon appointment of the administrators and the other employee informed Mr Spooner that she will continue her employment on a short term basis only to assist with the sale and will not continue if the sale process is prolonged.  
25	In order to assist with the trading of the Company, the administrators arranged for a temporary property manager to be engaged.  However, Mr Spooner deposes to a backlog of tenant and landlord requests which he anticipates will continue to grow the longer the Company continues to trade with limited staff.  
26	Mr Spooner deposes to the fact that identifying and engaging a property manager on a temporary basis was a difficult process and he is concerned that if the existing employee resigns, it is unlikely that a suitable replacement could be found, at least before the backlog grows further and the Company’s business – and the value of its assets diminishes.
27	Mr Spooner deposes to his concern that if the sale process or trade-on period is further extended, that landlords and owners corporations will become dissatisfied with the service provided by the Company and seek to change managers, leading to a diminution in the value of the Company’s assets including the Rent Roll and OC Rights.
28	Given the matters identified by Mr Spooner, and the anticipated settlement date  of the sale of the Rent Roll on 15 January 2022, the administrators are concerned to finalise the sale of the Rent Roll and OC Rights as soon as possible and accordingly brought this application as a matter of urgency. 
29	Applications not dissimilar to the present case have been brought in many cases, including in several recent decisions of this Court.
30	The necessity for the bringing of the application comes about because of the absence of power to sell the Company’s assets.  As the Full Federal Court explained in Jones v Matrix Partners Pty Ltd; Re Killarnee Silver & Concrete Contractors Pty Ltd (in liq), a liquidator cannot sell trust property without an order of the Court or by the appointment of a receiver over the trust assets.  That is because, as explained by Moshinksy J in Cremin, in re Brimson Pty Ltd, trust assets are not ‘property of the company’ but trust property in which the trustee has proprietary interest by way of lien or charge to secure its right of exoneration.  Thus to the extent that the subject of the sale is the whole of a trust asset (rather than merely the company’s lien or charge over the asset), it is not authorised by the power of sale in s 477(2)(c) of the Corporations Act 2001 (Cth) (‘the Corporations Act’).  As Re Windows on the World Steel Windows Pty Ltd (in admin) illustrates, the same analysis applies to a company in voluntary administration (where the power of sale is found in s 437A(1)(c) of the Corporations Act.  
31	In this case, the position is complicated further by the operation of the ipso facto clause (clause 15 of the trust deed), by which the Company has been removed as trustee and holds the assets as bare trustee only (although it retains the right of indemnity in the accompanying equitable lien).
32	Section 63(1) of the Trustee Act 1958 (Vic) provides that the Court may make an order conferring power on a trustee in circumstances where it is expedient to do so.  The section provides:
Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, expenditure or other transaction, it is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument (if any) or by law, the Court may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose on such terms and subject to such provisions and conditions (if any) as the Court thinks fit and may direct in what manner any money authorised to be expended and the costs of any transaction are to be paid or borne as between capital and income.  
33	Under s 37 of the Supreme Court Act 1986 (Vic) (‘the Supreme Court Act’), the Court may, by order, whether interlocutory or final, appoint a receiver if it is ‘just and convenient’.  
34	There is no bright line about whether the preferable course is to confer power under the Trustee Act or to appoint a receiver under the Supreme Court Act. 
35	In Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd (‘Caterpillar’), Gordon J explained that orders under s 63 of the Trustee Act would be appropriate where:
(a)	the company has become a bare trustee of the assets of the trust upon the appointment of the liquidator;
(b)	the company had acted only as trustee of the trust and in no other capacity;
(c)	all assets owned by the company were held by it as trustee and all liabilities incurred by it were incurred in its capacity as trustee; and
(d)	no new trustee had been appointed.
36	In the present case, it is necessary for the administrators to sell the company’s business and/or assets quickly lest the value of the assets further diminish or the preferred purchasers walk away from the proposed sale.
37	In the present circumstances, in order to do so, they need to have conferred upon them the power to effect the sale.  In my view, it is appropriate in the present circumstances to make orders under s 63 of the Trustee Act conferring the necessary power on the administrators.  Each of the matters referred to by Gordon J in Caterpillar have been satisfied.  
38	The only other matter that required consideration was the request by the administrators for an order that ‘the first plaintiffs be excused for any breaches, failures or omissions relating to the administration of the second plaintiff in dealing with the Trust property in the period between their appointment and the making of these orders’. 
39	In seeking such an order, the administrators relied on s 1318 of the Corporations Act which reads: 
(1)	If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit.
(2)	Where a person to whom this section applies has reason to apprehend that any claim will or might be made against the person in respect of any negligence, default, breach of trust or breach of duty in a capacity as such a person, the person may apply to the Court for relief, and the Court has the same power to relieve the person as it would have had under subsection (1) if it had been a court before which proceedings against the person for negligence, default, breach of trust or breach of duty had been brought.
40	Although there have been some cases where orders in this or similar form have been made, I am not prepared to make such an order in the present case. 
41	First, on the present facts there is no basis to consider that the administrators have engaged in any past conduct from which they may wish or need to be excused in relation to their dealings with the Trust assets.  Whilst the administrators did continue operating the business during a period where they were unaware that the Company traded only as trustee (and as a consequence of the ipso facto clause 15.2) had been removed as trustee under the trust deed, this appears to be unattributable to any fault on the part of the administrators. 
42	Secondly, it appears that the conduct of the administrators during this period has been prudent and in the interests of the creditors.  The secured creditor and the sole unitholder have been aware of, and acquiesced and approved of, the administrators’ actions.  Neither the sole unitholder nor the creditors oppose the relief sought.  It can scarcely be doubted that the decision to keep the Company operating was in the interests of the creditors.  
43	Thirdly, the proposed order is cast in extremely wide terms. 
44	After raising these matters with counsel for the plaintiffs, counsel chose not to press for the order.
45	Of course, the fact that I was not willing to make an order at this time in no way prevents the administrators from raising a defence as per s 1318 of the Corporations Act in any proceedings that may be commenced against them.
46	Accordingly, the orders I made were as follows:
1.	The first plaintiffs are justified, now for then, in conducting the voluntary administration and any winding up of the second plaintiff on the basis that the business conducted by the second plaintiff under Australian Business Number 46 853 341 and the property used in that business are held by the second plaintiff in its capacity as trustee of the Urban Property Melbourne Unit Trust (Trust).
2.	The following powers are conferred on the second plaintiff: 
(a)	the power to carry on the business of the Urban Property Melbourne Unit Trust ABN 46 853 341 442 (Trust); 
(b)	the power to sell the assets of the Trust; 
(c)	the power to pay the creditors of the Trust from the proceeds of sale in accordance with the priorities prescribed under the Corporations Act 2001 (Cth); and 
(d)	the power to execute any contracts, tax returns, financial statements or other documents relating to the Trust or its assets. 
3.	The first plaintiffs are justified: 
(a)	in relying on their statutory powers under s 437A(1) of the Corporations Act 2001 to take all of the steps in order 2 above; and
(b)	in paying from the Trust property: 
	(i)	the costs and expenses of administering the Trust (including their remuneration); and 
	(ii)	the creditors of the Trust. 
4.	The costs, expenses and remuneration incurred by the first plaintiffs in relation to the Trust property, whether incurred as administrators or liquidators of the second plaintiff be paid from the Trust property.
5.	There be liberty to apply generally to the first plaintiffs and in addition to any person who can demonstrate sufficient interest to modify or discharge paragraphs 1 to 4 above.
6.	The costs of this application otherwise be costs in the administration of the second plaintiff.