Sydney Exotic Aquariums - Case Update

The Federal Court has issued another decision in the provisional liquidation of Sydney Exotic Aquariums et al., appointing receivers over assets held in four discretionary trusts associated with the companies over concerns that the trust assets were at risk.

We last wrote about this matter a couple of weeks ago, when the Court awarded indemnity costs against the companies’ principal following his failure to attend a court-ordered examination. The companies are accused of engaging in an illegal tax avoidance scheme in the years leading up to the liquidator’s appointment, resulting in the diversion of at least $5.3 million in PAYG taxes from the ATO.

Peter Krejci of BRI brought an ex parte interlocutory application seeking to appoint himself and Jonathon Keenan as receivers to various trusts, expressing concerns that the trust assets were at risk of dissipation. The urgency stemmed from the risk that ipso facto clauses in the trust deeds—triggered by insolvency events—could result in the automatic removal of the corporate trustees and a corresponding loss of control over the trust assets. Without this control, the liquidators would have limited power to recover or manage trust property, potentially jeopardising creditor recoveries. In addition, there was a risk that a new trustee could be appointed, who could then call for the assets of the trust.

Justice Moore approved the appointment of receivers, finding credible evidence of past failures to provide records, non-cooperation by directors, and attempts to dispose of trust property—specifically, a sale contract for a property in Windeyer, NSW. Justice Moore emphasised that the appointment of receivers was appropriate to preserve assets and simplify the administration of the companies, providing for the trust’s business and assets to be under the same control as the corporate trustee. The orders prohibited the receivers from disposing of or distributing trust assets without further court direction, and provided a mechanism for interested parties to challenge the orders since they were made ex parte.

Read the decision HERE.

Professionals involved: Michael Rose of 9 Wentworth Chambers (instructed by ERA Legal) for Peter Krejci of BRI as liquidator