In the matter of Parkway One Pty Limited (No 2)

HER HONOUR: The liquidator of Parkway One Pty Ltd (in liquidation), Andrew Scott of PricewaterhouseCoopers, seeks orders that he be appointed as receiver and manager to all property, assets and undertakings owned by the Parkway One Unit Trust, in particular, three properties located in Ashfield, Newcastle and Cooks Hill.

These properties are described in In the matter of Parkway One Pty Ltd (in liquidation) [2019] NSWSC 1495, where I refused an application by Fiona Page, sole shareholder of Parkway One, to terminate the winding up including by reason of concerns as to ‘commercial morality’: at [96]-[103]. Since that judgment was handed down on 1 November 2019, the tenants in the Ashfield and Newcastle properties have stopped paying rent. Although termination notices have been served on these tenants, neither has made any further rental payments nor vacated the properties. The secured creditor, National Australia Bank Limited – which is owed some $3.4 million – has issued various enforcement notices. It is therefore likely in the near future that the liquidator will need to issue writs of possession for the Ashfield and Newcastle properties and sell some or all of the properties in order to pay the National Australia Bank and other creditors.

For completeness, the liquidator reports that, since my first judgment, his attempts to investigate the affairs of the company have continued to be frustrated. Mr Scott’s concerns in respect to the inaccuracies of the company’s accounts remain; examples were given of unexplained accounting entries. Rent on the Cooks Hill property appears to have been systematically overstated for at least three years, intercompany loan accounts between the company and related entities have not been reconciled, nor has the liquidator received any evidence of security which it is said that Ms Page and Harmat Nominees Pty Ltd (a related entity) hold over the company’s assets. Nor has he received any evidence that amounts attributed to rent for the Ashfield and Newcastle properties were in fact paid by the tenants.

Parkway One was incorporated on 29 November 2012 and, the same day, appointed trustee of the Parkway One Unit Trust. So far as the liquidator’s enquiries reveal, the only business of Parkway One was to be the trustee and the company only incurred debts in that capacity. The original unit holders in the Parkway One Unit Trust were Potencia Holdings Pty Ltd as trustee for the Potencia Unit Trust, Harmat Nominees Pty Ltd as trustee for the Harmat Trust and DMXS Holdings Pty Ltd as trustee for the DMXS Trust.

It might have been thought that this application was not necessary because the trust deed does not contain an ipso facto clause which would have the result that, on Parkway One going into liquidation, it would automatically cease to be the trustee of the Parkway One Unit Trust. Rather, clause 16 of the trust deed provides:

This application has become necessary by reason of the following events. On 2 December 2019, Ms Page advised the liquidator that she wished to bring a second application to terminate the winding up and offered to pay $40,000 in satisfaction of the costs order made in the liquidator’s favour in In the matter of Parkway One. The liquidator agreed but no payment was made. On 3 December 2019, Ms Page filed a second application to terminate the winding up. On 9 December 2019, however, Ms Page abandoned that application and Black J ordered her to pay Mr Scott’s costs.

Instead, on 11 December 2019, a replacement trust deed was executed by only one of the three unit holders in the Parkway One Unit Trust, being Harmat Nominees. Ms Page is the sole director and shareholder of that company. The liquidator gave evidence that the books and records of Parkway One do not contain any material which suggests that there has been a transfer or sale of units in the Parkway One Unit Trust with the effect that Harmat Nominees would be the sole remaining unit holder.

On 17 December 2019, Ms Page executed a “Deed appointing a new trustee of the Parkway One Unit Trust” on behalf of Harmat Nominees. The new trustee was Zapato Pty Ltd. The sole director, secretary and shareholder of Zapato is Theo Baker, also referred to In the matter of Parkway One at [14], [15], [60] and [65].

On 19 December 2019, the liquidator wrote to Zapato’s solicitors requesting information in respect of its appointment, particularly in circumstances where the replacement trust deed had only been signed by one of three unit holders and thus, on the face of it, was not a valid replacement deed. Further, as only one unit holder had appointed Zapato, the new appointment was not valid having regard to the requirements of clause 16 which was likely to continue to dictate the position given the apparent invalidity of the replacement trust deed. The liquidator’s solicitor suggested:

Zapato was granted leave to be heard on this application but has since informed the Court that it neither consents nor opposes the orders sought by the liquidator and would not be appearing today.

As already mentioned, the trust deed does not contain any requirement to notify the trustee in the event that it has been removed and a new trustee appointed. The suggestion that Zapato is now the trustee of the Parkway One Unit Trust gives rise to ambiguity and uncertainty as to the liquidator's position, that is, whether Parkway One remains the trustee of the three properties and is entitled to take steps to obtain vacant possession and sell the properties. That ambiguity must be eliminated so that the company can be wound up in an orderly manner for the benefit of creditors and other stakeholders. In these circumstances, the liquidator seeks to also be appointed as receiver and manager of the property of the trust to mitigate any uncertainty as to his power to deal with the trust assets.

In the event that Mr Scott is appointed as receiver of the trust property, Mr Scott proposes to sell the properties and, after paying his remuneration, costs and disbursements and the bank, to pay the balance into a separate bank account for the benefit of the trust pending further order of the Court. He proposes to approach the Court seeking appropriate directions and orders as to the manner in which he should deal with the net sales proceeds.

The principles underpinning the appointment of a receiver in circumstances such as the present were identified by Gleeson J in Hosking, In the matter of Business Aptitude Pty Ltd (in liquidation) [2016] FCA 1438 (at [17]-[22]) as follows:

It seems to me that, as submitted by the liquidator, the relief sought is necessary and appropriate as his appointment as receiver will enable the liabilities of the company to be met to the extent possible, with proper recourse to the trust assets. This is necessary to enable Mr Scott to fulfil his statutory function and “get in” the assets of the company. Those assets include its right of exoneration and lien with respect to debts incurred in the proper administration of the trust.

Further, uncertainty persists regarding the office of the trustee. To the extent that the company may have been removed and replaced, it is proper and necessary that Mr Scott be appointed receiver, as the company's powers under the trust deed will have been extinguished.

In addition, the appointment of Mr Scott will address difficulties that may arise if a replacement trustee is appointed at an unknown time in the future without notice to Mr Scott. Given the apparent need to sell the properties to administer the liquidation of the company, a contract for sale could be frustrated by the ill-timed replacement of the company as trustee in the future.

To remove uncertainty as to the liquidator's powers and to enable the liquidator to bring in the assets and pay the debts of the company in an orderly fashion, the liquidator should be appointed as receiver and manager to all the assets of the Parkway One Trust Unit. The interests of creditors will likely be best served by the appointment of Mr Scott as receiver of the trust assets, such that creditor claims can be paid in an orderly fashion, thereby facilitating the proper winding up of the affairs of the company. In the exercise of my discretion under section 67 of the Supreme Court Act 1970 (NSW), I am satisfied that it is appropriate to make the orders sought in Prayers 1 to 5 of the Interlocutory Process filed on 20 December 2019.