McGrathNicol pair refused receivership trust bid

While the law around how insolvency practitioners deal with trust assets has evolved exponentially in recent years, circumstances peculiar to a particular appointment can still confound appointees’ aims when it comes to asset pursuit, as Jamie Harris and Rob Kirman know very well.

“Without determining the question, I would make the point that if an application to be appointed receivers became necessary in the course of litigating the claims, the present plaintiff’s would have to consider carefully whether persons other than them would be most appropriately appointed as receivers.” Master Craig Sanderson.

The way it’s told in Whitby Land Company Pty Ltd (In Liquidation) (Receivers and Managers Appointed) – v – 89 Burswood Road Pty Ltd (ACN 130 015 619) [2022] WASC 387, the McGrathNicol duo were recently refused in their application to be appointed receivers and managers without security over all of the assets of the Whitby Trust, save for certain property already in the hands of HLB Mann Judd WA principal Kim Wallman.

For those unfamiliar with the tribulations of West Australian property developers, the Whitby Trust was an entity created to enrich Perth property mogul, Allen Caratti and his nominees.

Since 2015 the affairs of Caratti and various Caratti family members have been at the centre of a $100 million probe conducted by the Australian Tax Office (ATO).

As part of that investigation the ATO obtained orders in September 2017 appointing Harris and Kirman as liquidators of the Whitby Trust’s former corporate trustee, Whitby Land Company (WLC) and provided the pair with a limited but lavish indemnity to pursue WLC’s rights.

As a consequence of that appointment Kirman and Harris are now liquidators appointed jointly and severally to five Caretti-linked entities and Kirman is sole liquidator of a sixth.

According to the November 15 judgment of WA Supreme Court judge Craig Sanderson, the pair have identified potential “indemnity/contribution” claims against obligors to the security agreements entered into with the lenders that appointed Wallman and which have already received significant distributions as a consequence of Wallman’s efforts.

In an email to iNO Wallman said:” the Liquidators have not indicated to me that they are trying to reverse any payments of proceeds that I have realised for the benefit of my appointors”.

To pursue the claims they believe they’ve identified Kirman and Harris apparently believed they needed to be appointed receivers and managers.

The Whitby Trust’s current trustee, 89 Burswood Road Pty Ltd, disagreed, saying WLC was not a trading trust at the time Kirman and Harris commenced their proceedings, that they are not so much looking to sell assets as they are to commence proceedings and that because the indemnity/contribution claims are claims “personal to WLC at law and in equity, the liquidators can commence and prosecute the alleged causes of action in the name of the company. There is no impediment either at law or under the Corporations Act to the liquidators taking that course”.

As it turned out, 89 Burswood’s arguments proved decisive, with the judge refusing Kirman and Harris and in summing up he also canvassed an issue 89 Burswood helpfully raised in respect of a potential conflict Kirman and Harris would have if they were appointed receivers, with his honour implying that a court might look dimly upon them as receivers pursuing claims involving property over which they had placed caveats in the capacities as liquidators.

“It was the defendant’s position the plaintiffs, as liquidators, had a conflict of interest as to whether or not the assets which were sold gave rise to the payments said to be the subject of the claims were in fact assets of the trust,” the judge said.

“It was said this conflict arose because the plaintiffs, as liquidators of MN(WA) Pty Ltd, have lodged a caveat over the Whitby land claiming the land is beneficially owned by MN(WA) Pty ltd.

“It is unnecessary for me to deal with this issue in any detail. However, I note that during the course of his submissions, counsel for the plaintiffs indicated the caveat over the Whitby land would be removed.

“However, this still leaves a real question as to whether or not the present plaintiffs would have a conflict of interest if they were to be appointed receivers.

“Without determining the question, I would make the point that if an application to be appointed receivers became necessary in the course of litigating the claims, the present plaintiff’s would have to consider carefully whether persons other than them would be most appropriately appointed as receivers.” Circumstances peculiar.