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The Presbyterian Church of Queensland Incorporated by Letters Patent v Attorney-General for the State of Queensland[2021] QSC 136

The Presbyterian Church of Queensland Incorporated by Letters Patent v Attorney-General for the State of Queensland[2021] QSC 136

SUPREME COURT OF QUEENSLAND

CITATION:

The Presbyterian Church of Queensland Incorporated by Letters Patent v Attorney-General for the State of Queensland [2021] QSC 136

PARTIES:

THE PRESBYTERIAN CHURCH OF QUEENSLAND INCORPORATED BY LETTERS PATENT

(Applicant)

v

ATTORNEY-GENERAL FOR THE STATE OF QUEENSLAND

(Respondent)

FILE NO/S:

BS 5437 of 2021

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

10 June 2021

DELIVERED AT:

Brisbane

HEARING DATE:

9 June 2021

JUDGE:

Brown J

ORDER:

The order of the Court is as per the draft order.

CATCHWORDS:

CHARITIES – TRUSTEES OF CHARITIES – ADMINISTRATION AND CONTROL BY COURT – GENERALLY 

CHARITIES – CHURCHES AND RELIGIOUS ASSOCIATIONS – CONSTITUTION, MANAGEMENT AND POWERS – CHURCH PROPERTY AND TRUSTS – DISPOSITIONS OF, AND DEALINGS WITH, CHURCH PROPERTY

CORPORATIONS – RECEIVERS, CONTROLLERS AND MANAGERS – POWERS – TO APPLY TO COURT FOR DIRECTIONS

EQUITY – TRUSTS AND TRUSTEES – POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES – PRESERVATION, INSURANCE, REPAIR AND IMPROVEMENT OF TRUST PROPERTY – DUTY TO PRESERVE TRUST PROPERTY

CORPORATIONS – RECEIVERS, CONTROLLERS AND MANAGERS – DUTIES AND LIABILITIES – DUTIES – GENERALLY – where the Applicant is a body corporate established by letters patent issued under the Religious Educational and Charitable Institutions Act 1861 (Qld) – where receivers have been appointed on an interlocutory basis with a power of sale where property is the subject of charitable trusts – where the receivers and managers have been appointed as receivers and managers, of the assets, property and undertaking of the Applicant – where the receivers and managers of the assets, property and undertaking of the Applicant seek directions – whether the receivers and managers are justified in completing pre-appointment contracts (as varied) in relation to the sale of three aged care facilities – whether the receivers and managers are justified in entering into supplementary agreements, which have been agreed by the receivers with the purchaser subsequent to their appointment – whether the receivers and managers are justified in taking all steps necessary or convenient to complete the pre-appointment contracts (as varied) – whether the receivers are justified in entering into the contracts

Religious Educational and Charitable Institutions Act 1861 (Qld)

Trusts Act 1973 (Qld)

ASIC v Commercial Nominees Australia Ltd (2002) ACSR 240

Attorney-General v The South Sea Company (1841) 4 Beav 453

Australian Industry Development Corp v Co-operative Farmers and Graziers Direct Meat Supply Ltd (1978) 3 ACLR 543

Bailey v The Uniting Church in Australia Property Trust (QLD) [1984] 1 Qd R 42

Grain Technology Australia Limited v Rosewood Pty Ltd [2019] NSWSC 1111

Empire (Aust) Nominees Pty Ltd (in Liq) v Vince (2000) 35 ACSR 167

James Cook University v Townsville City Council [2011] QSC 209

In the matter of the Assemblies of God In Australia (Ayr Assembly); Sirris v Malamoo & Ors (unreported, Supreme Court of Queensland (FC), 12 August 1985

Mariconte v Batiste (2000) 48 NSWLR 724

President and Scholars of the College of St Mary Magdalen, Oxford v Attorney-General (1857) 6 HLCas 189 at 205

Re Cape Tribulations Reef Experiences Pty Ltd [2007] QSC 115

Re Octaviar [2020] QSC 353

COUNSEL:

A M Pomerenke QC, with S J Webster and M J Hafeez-Baig for the Receivers and Managers of the assets, property and undertaking of the Applicant

A Wheatley QC with B McEniery for the Respondent

C J Mills (sol) for the Applicant

SOLICITORS:

Allens for the Receivers and Managers of the assets, property and undertaking of the Applicant

Crown Law for the Respondent

Neumann & Turnour for the Applicant

  1. [1]
    Michael Owen and Philip Carter were appointed as joint and several receivers and managers to all of the assets, property and undertaking of the applicant (“Receivers”), The Presbyterian Church of Queensland Incorporated by Letters Patent (“PCQ”) including the assets of the property and undertaking of PresCare by an order of this Court made on 12 May 2021.They seek directions from the Court in respect of the sale of three aged care facilities including the real property on which the aged care facilities are located.
  2. [2]
    PCQ is a body corporate established by letters patent issued under the Religious Educational and Charitable Institutions Act 1861 (Qld) (“RECI Act”).  It is, broadly speaking, a repository of property held on trust for the uses and purposes of the unincorporated association known as the Presbyterian Church of Queensland (“the Church”).[1]  It is the trustee of a charitable trust (or charitable trusts).
  3. [3]
    In approximately 1998 the Church established a ministry division known as “PresCare”.  It carries out the social mission responsibilities of the Church. Although not a separate legal entity, PresCare is the trading name for the operating business associated with aged care, has its own ABN, constitution and governing board. According to Mr Carter, PresCare appears to have been operated as a separate business insofar as the books and records record loans between PCQ and PresCare, and it maintains its own financial reports and bank accounts. According to Mr Carter, the investigations by the Receivers reveal that there is a distinction adopted within PCQ between the property of PCQ that was used for the PresCare businesses, and the remaining property of PCQ.
  4. [4]
    PresCare presently operate five residential aged care facilities, which includes Alexandra Gardens at North Rockhampton; Yaralla Place at Maryborough and Groundwater at Granville. I will refer to these properties as the packaged businesses using the same language as the Applicants. PCQ is the registered proprietor of the land on which the three aged care businesses operate.
  5. [5]
    There are two other aged care facilities, Vela and Protea, with registered leases where the lessors are entities in the Catalyst Group.  There are present 459 residents in the five aged care facilities which are staffed by some 566 employees. 
  6. [6]
    The facilities and operator assets of the packaged businesses, together with the real property on which the facilities are located, are the subject of three sale agreements with Apollo.[2] The sale agreements were entered into by PCQ and Apollo on 28 April 2021, prior to the appointment of the Receivers, for the sale of the packaged businesses. They are yet to be completed. The time for completion has been extended twice since the appointment of the Receivers. The Receivers seek directions in relation to the completion of those sale agreements.
  7. [7]
    Since their appointment, the Receivers have negotiated further agreements with the purchaser, which are referred to as Side Deeds which vary the sale agreements (“Side Agreements”). The Side Agreements are conditional upon this Court making an order that the Receivers are justified in entering into them. The Receivers also entered into three agreements to effect the sale and facilitate completion of the packaged businesses, referred to as the completion agreements. All the agreements entered into by the Receivers are referred to as the “supplementary agreements”.
  8. [8]
    The Receivers seek directions that they are justified in:
    1. (a)
      Completing the sale agreements (as varied after the Receivers’ appointment by the Side Agreements) in relation to the sale of three aged care facilities;
    2. (b)
      Entering into supplementary agreements, which have been agreed by the receivers with the purchaser subsequent to their appointment; and
    3. (c)
      Taking all steps necessary or convenient to complete the pre-appointment contracts (as varied).
  9. [9]
    The date for completion of the pre-appointment contracts has been extended until 11 June 2021.  This judgment therefore has been prepared on an urgent basis. Following receipt of supplementary submissions, I was satisfied that it was appropriate to make the order in accordance with the draft order provided, which was supported as being appropriate by the Attorney-General of Queensland and consented to by PCQ.  Given the urgency, I made the order and stated I would provide the reasons for my decision shortly after. These are my reasons.
  10. [10]
    The Receivers seek directions from this Court on the basis that: first, there are limitations on circumstances in which a trustee of a charitable trust can exercise its power of alienation of property and the Receivers  are concerned not to cause PCQ to complete the contracts without first taking the prudent step of obtaining the sanction of the Court; secondly, the fact that the Receivers have been appointed on an interlocutory basis, albeit with a limited power of sale where the property is the subject of charitable trusts; thirdly, that the supplementary agreements are expressly subject to and conditional upon this Court making an order that the Receivers are justified in entering into them; and fourthly, that there is some uncertainty in relation as to extent of the Receivers power of sale under the order made on 12 May 2021 (“the Order”).
  11. [11]
    When Receivers are appointed by the Court, the Court has a general equitable jurisdiction to give its opinion, advice or direction to a receiver it has appointed. The receiver is an officer of the Court and it is recognised that the receiver may resort to the Court for necessary guidance.[3] It is a broad power unconfined by statute. The guidance sought by Receivers may extend not only to matters of law but relate to  the propriety or reasonableness of the contemplated exercise of discretion.[4]  The Court has recognised such directions can be given in relation to the sale of property.[5] The Court has also provided directions where Receivers are uncertain as to the scope of their power under a Court order. [6]
  12. [12]
    It is not, however, the role of this Court to determine the commercial wisdom of entering a proposed arrangement.[7]
  13. [13]
    The nature of the matters upon which the Receivers seek directions would generally fall within the Court’s power. However, I sought further submissions in relation to the power of the Court to give the directions in relation to the Receivers completing the sale agreements to effect the sale of the packaged businesses, given the contracts were entered into by PCQ on 29 April 2021. The power of the Court to give directions to Receivers is to provide protection to Receivers so as to enable the Receivers to carry out their functions without exposing themselves to a real risk of litigation.[8] While it may have been open for PCQ to seek such directions from the Court, pursuant to s 96 of the Trusts Act 1973 (Qld) in relation to entry into the sales agreements, they did not do so.
  14. [14]
    A further matter is whether a retrospective direction was sought. In Re Octaviar,[9] in relation to directions to a liquidator, Justice Bond noted that the Court will generally not give advice retrospectively to a liquidator where they had already acted on advice.[10] In the present case, the contracts of sale had been entered into by PCQ, not the Receivers.
  15. [15]
    The terms of the proposed Order provides that the Receivers are justified in causing the Receivers to complete the contracts to effect the sale of the repackaged businesses “as amended by the documents referred to in paragraph 2(a)- (c) below.” In the present context, the last words are significant. The documents in 2(a) to (c) refer to the Side Agreements which vary the terms of the contracts of sale to, inter alia, provide for an adjustment to the payment of the purchase money so part of the money is to be held in escrow to be released on 23 June 2021, although the net payment is not materially different from that payable under the original contract. The Side Agreement for the sale of the facilities assets provides for a waiver by Apollo of a Funding Condition.[11]
  16. [16]
    Given  that the Receivers have negotiated additional agreements which vary the contracts of sale, which are each “subject to, conditional upon and take effect from  this Court making an order that the Receivers are justified in entering into” the Side Agreement in question,[12] I am satisfied the direction sought does not seek retrospective advice. If the Court does not make the Order, the Side Agreements are of no effect. Given that the Side Agreements seek to vary the sale agreements, and the direction sought from the Court relates to the completion of the Sales Agreements as varied, even though the Court must consider the evidence as to the entry into the sale agreements, I am satisfied that it is a matter upon which the Receivers can properly seek directions. In the circumstances, as the direction does encompass the acts of the Receivers and relates to future acts, I do not need to consider whether there is a power to give such directions for a past act and in particular whether the Court could give such a direction when PCQ had originally entered into the sale agreements.
  17. [17]
    The Receivers also raised a further argument in support of the fact that the direction is not merely a retrospective approval of the sale agreements. It was contended that the Receivers were not bound to effect completion of the sale agreements if there was a breach of trust, and the Court can give directions to Receivers in relation to their preferred choice. Given the sale agreements involve the transfer of trust property, and the breadth of the order would extend to a chose in action and may permit termination of the sales agreement where a breach of trust has occurred, the argument is not without merit. However, I do not need to consider it further given my determination above which is further supported by when the risk and title pass.
  18. [18]
    The Receivers have also directed the Court to the provisions in each of the sale agreements which provide, until Completion, the title to, property in and risk of the Business and the Facilities Assets and the Business and Operator assets remain with the seller. In relation to the Land Sale Agreement legal title in the land does not pass until the instrument of transfer has been registered. Thus, completion is a future act which involves the transfer of title. That is a further basis upon which the Court can be satisfied that the direction relates to a future act rather than merely seeking ratification of a past act.
  19. [19]
    I am satisfied that the application for directions is within the Court’s power to give directions and that the Receivers have sought those directions on a proper basis.

Limitations upon PCQ as a trustee of a charitable trust and an RECI Act Corporation

  1. [20]
    The alienation of trust property should also accord with the limitations upon PCQ’s ability to alienate land in the RECI Act. In particular, section 1 of the RECI Act relevantly provides that PCQ can:

“and to mortgage charge or alienate all or any of the said messuages lands tenements hereditaments goods chattels gifts or benefactions provided such a mortgage charge or alienation be not contrary to the gift grant or dedication of the original donor or of the constitution of such body or association of persons and that the moneys to be raised thereby shall be applied to the same uses and purposes…”

   (emphasis added)

  1. [21]
    As is made clear by the wording of section 1, PCQ holds its property on trust for certain charitable purposes.[13]
  2. [22]
    As the Receivers have been appointed to property impressed with a charitable trust, they must respect the charitable purposes and any limitations upon the power of alienation that they entail in effecting completion of the sale agreements.
  3. [23]
    As a result of PCQ’s status as a trustee of a charitable trust, the power of alienation may only be exercised to promote and maintain the purposes of the trust.  In Attorney-General v The South Sea Company (1841) 4 Beav 453 at 457, Lord Langdale MR stated:

“It is the duty of the trustees of a charity so to manage and dispose of the property intrusted to them as may best promote and maintain the charitable purposes of the founder.”

  1. [24]
    In alienating property, trustees of a charitable trust must be guided by what is in the “lasting interest” or “permanent interest” of the charity.[14]  Preserving the property of a charitable trust would normally be the best way to promote the permanent and lasting interests. According to Lord Cramworth in President and Scholars of the College of St Mary Magdalen, Oxford v Attorney-General,[15] it would be rare that the sale of charity land can be justified, having regard to the perpetual nature of a charitable trust and the purpose of people gifting property to a charitable trust.
  2. [25]
    It has, however, been recognised that the purposes of the charity may be best sustained and promoted by alienating specific property.
  3. [26]
    In appropriate circumstances the courts have, with a view to promoting the permanent interest of charities, sanctioned the alienation of property.[16] In particular Lord Langdale MR in The South Sea Company stated:

“It is plain that, in ordinary cases, a most important part of this duty is to preserve the property; but it may happen that the purposes of the charity may be best sustained and promoted by alienating the specific property.”

  1. [27]
    If a trustee proposed to alienate trust property of a charitable trust, Lord Langdale MR also considered that it would be imprudent for trustees not to obtain the sanction of the Court when exercising the power of alienation given the risk to both the trustees of being in breach of trust and the purchaser. A trustee who alienates property has a positive obligation to demonstrate that it has not done so in breach of trust even when significant time has passed. Such an obligation may also fall upon the purchaser.
  2. [28]
    In The South Sea Company,[17] Lord Langdale MR identified considerations which justified the alienation as follows:
    1. (a)
      “there was no fraudulent contrivance”;
    2. (b)
      the transaction was discussed “publicly” and “frequently”;
    3. (c)
      the proposal “was not adopted until the others had all failed”;
    4. (d)
      “the property was of a nature likely to produce considerable difficulty in the receipt of rent”;
    5. (e)
      rent was “irregularly received” and there were “instances of three or four years’ arrears”;
    6. (f)
      “a steady rental for the charity could not be relied on”;
    7. (g)
      “a considerable outlay for repairs had become necessary”;
    8. (h)
      by the transaction “a greater income was secured to the charity than any ever received, or likely to be received”; and
    9. (i)
      “on the whole … the arrangement was prudent and beneficial to the charity”.
  3. [29]
    Thus, the Court must be satisfied that the proposed completion of the sale and alienation of property of PCQ is justified and promotes the permanent or lasting interests of PCQ.
  4. [30]
    Given PCQ was created by the RECI Act, the Receivers have also raised the possible application of the doctrine of ultra vires being another source of constraint in the alienation of property, given PCQ is a creature of statute. Section 1 of the RECI Act arguably limits the ability of PCQ to alienate property where it serves PCQ’s uses and purposes.
  5. [31]
    There is diverging authority on whether the doctrine of ultra vires applies.[18] However, in the present case, if the alienation of property serves PCQ’s uses and purposes that will not conflict with the trustee’s duty when alienating the property, nor will it offend the doctrine of ultra vires. If the position is to the contrary, then that would provide a basis for the Court to refuse to give the direction.
  6. [32]
    Any transfer can also not be contrary to the purpose of the trust. In the context of a charitable trust, Philippides  J in James Cook University v Townsville City Council,[19] stated that the power of sale is limited in the respect that it cannot be exercised in breach of trust and thus is not exercisable where the very purpose of the trust would be changed or defeated, although her Honour did not ultimately have to consider the exercise of the powers of sale further in that case. Given the aged care facilities will continue to be operated by an experienced and reputable provider where PCQ will continue to provide pastoral care, the transfer would not be contrary to the purpose of the trust.
  7. [33]
    In addition to the Receivers acting consistently with the charitable purposes and the commensurate limitations upon the power of alienation, the completion of the proposed sale by the Receivers must obviously be authorised by the terms of the Order under which they were appointed.
  8. [34]
    As to the Receivers’ specific power of sale:
    1. (a)
      Paragraph 1 of the Order provides that the Receivers are appointed:

to all of the assets, property and undertaking of the Applicant (in any capacity) (Applicant’s Property), which includes all of the assets, property and undertaking of PresCare (PresCare Property)

  1. (b)
    Subparagraphs 2(b) and (c) of the Order provide:

The Receivers:

b be authorised to mortgage or encumber, sell or dispose of all or part of the PresCare Property;

c until further order are not authorised to mortgage or encumber, sell or dispose of any part of the Applicant’s Property that is not PresCare Property (Non-PresCare Property) other than for the purposes of subparagraph ai above …

  1. (c)
    Subparagraph 2(a)(i) provides:

The Receivers … be authorised to take possession of, preserve or maintain, insure and repair the Applicant’s Property and PresCare Property.

  1. [35]
    The Receivers seek a direction so as to protect them against the risk of later assertions that they were not authorised by the Order to complete the sale of the repackaged business, given some possible uncertainty in the order.
  2. [36]
    The Receivers’ concern as to their power to complete the sale arises from the delineation between PresCare property and non-PresCare property and whether the sale falls within paragraph 2(b) of the Order.  While I understand the basis of the concern, in my view the sale is authorised by paragraph 2 (b) of the Order. While PresCare is not a separate legal entity, it does have a separate identity as a separate business unit within the organisation as has been identified by Mr Carter and discussed in paragraph 3 above. That point of distinction has been expressly acknowledged by the terms of the Order given the express reference in the order to “all of the assets, property and undertaking of PresCare Property” being expressly included as part of the property that is the subject of the Order. Given that PresCare is not a separate legal entity, as opposed to PCQ, the reference to PresCare property must, on its proper construction, refer to property used for PresCare’s business and therefore extend to the property relating to the repackaged businesses, including the real property on which the aged care facilities are located.
  3. [37]
    However, even if the sale includes non PresCare property, I accept that the sale of non PresCare property may fall within paragraph 2(c) of the Order. Mr Carter has deposed to the fact that the proceeds of sale will be used to continue operating the other aged care facilities. The sale of the non PresCare property would therefore be for the purpose of preserving or maintaining the “assets, property and undertaking” of the Applicant or PresCare and it would fall within the terms of paragraph 2 (c) of the Order.
  4. [38]
    I find that completion of the proposed sale is authorised under the terms of the Order made on 12 May 2021.

The Receivers’ position

  1. [39]
    A detailed affidavit has been placed before me which analyses the operations of the aged care facilities leading up to the sale, the sale process and the resulting sale agreements, including whether any alternatives are open to PCQ and the intended use of the proceeds. The evidence is relevant to whether the sale agreements and particularly the alienation of the property are in the best interests of PCQ and particularly the permanent and lasting interests of the trust.
  2. [40]
    Mr Carter has been a registered liquidator since 1994 and has extensive experience in the conduct of receivership.  Mr Carter (with whom Mr Owen agrees) has set out the considerations he has had regard to in expressing his professional opinion that in terms of his opinions in the affidavit.
  3. [41]
    It reveals the Receivers have carried out several investigations in the time since their appointment and reviewed affidavit material of Dr Strong as to the financial position of PCQ at the date of the Receiver’s appointment. As Counsel for the Receivers aptly stated, it shows that PCQ was in a financially distressed state at that time.
  4. [42]
    The Receivers’ investigations confirm that the residential aged care facilities have been operating at a net loss and are being supported by funding from the Department of Health.  The Department of Health however has indicated that it will not provide funding after 30 June 2021.  In the event that the three aged care facilities are not sold Mr Carter anticipates that the receivership at PCQ would likely result in an overall decline in resident numbers over time as residents relocate to a facility which holds more certainty in relation to their ongoing care which will then increase the operating losses.  Mr Carter, having reviewed the financial position of PCQ and the aged care facilities, and having regard to the fact that the Department of Health has indicated it will cease funding on 30 June 2021, considers it is in the financial interests of PCQ to sell the package businesses to relieve itself of the present liabilities relating to those businesses including the refundable accommodation deposit liability and employee entitlements, and of future likely overall operating losses of the three aged care facilities, which would need to be wholly funded by PresCare. 
  5. [43]
    In relation to the present sale, the evidence reveals that PCQ had taken steps well prior to the appointment of Receivers to obtain professional advice in relation to the residential aged care operations of PresCare.  In 2020, it engaged McGrath Nicol to perform a detailed assessment of the residential aged care facilities for PCQ, including the saleability of each of the sites, and to then provide advisory services in relation to a sale process.  The Receivers had reviewed the affidavit material of Mr Connelly of McGrath Nicol, who Mr Carter considers is an experienced restructuring accountant. Significantly, that process had been commenced and undertaken in 2020 resulting ultimately in a contracts of sale being entered into between PCQ and Apollo with respect to the repackaged businesses. Mr Carter had further discussions with Mr Connelly and Mr Fressi as to the circumstances of their engagement and the staged sale campaign for the residential care facilities of PresCare, which involved an expression of interest phase, provision for interested parties to access data, provision for nonbinding indicative offers.  That then involved further access to data and provision for revised offers from the nonbinding indicative offers. 
  6. [44]
    Mr Carter’s enquiries reveals the fact that PresCare was going to withdraw from residential aged care services and offer its facilities for sale was a matter that was publicised both in general industry specific media and the general media.  Seventy-six parties were targeted by McGrath Nicol.   Of the 76 parties, 37 signed and returned Confidentiality Deeds to McGrath Nicol and subsequently nonbinding indicative offers were received from five parties and one nonconforming expression of interest.  Feedback was obtained by Mc Grath Nicol from the bidders, which supports the fact that the sale of the packaged business was the most attractive option for the bidders.
  7. [45]
    As a result of the process, Apollo’s revised offer was, at the time, and presently remains, the only offer for the packaged businesses consisting of the three aged card facilities capable of proceeding to a binding agreement.  Apollo has an established reputation as a specialist capital investor and provided of residential care with a corporate leadership team which has a strong background in residential care facilities.  On 28 April 2021 a contract was entered into for the sale of the three aged care businesses which results in net proceeds for PCQ of a significant amount.  It is anticipated that those monies will be used to continue operating the remaining residential aged care facilities, which are presently operating at a loss, in order to ensure those centres may be sold, to try and ensure the residents of the centres do not have to be relocated. 
  8. [46]
    Mr Carter examined alternative courses of action that may be open to PCQ but concluded that none of those courses of action would be in the interests of PCQ. Mr Carter considers that the sales process carried out by Mc Grath Nicol was an open, robust, professional and comprehensive process which resulted in the best price that was reasonably attainable in the circumstances for the packaged business. He does not consider a second sales campaign would achieve a better outcome and may jeopardise Apollo’s involvement, and would likely result in reduced offers given the receivership, increase the costs of receivership, provide further instability for residents and require further funding which may not be readily available given the position of the Department of Health. 
  1. [47]
    He considered a second sales campaign would involve considerable cost which would be unlikely to result in a higher purchase price in circumstances where the Department of Health has indicated it would not be willing to fund the three aged care facilities beyond 30 June 2021 to facilitate an additional sale process.  In addition, he considers that a sale of facility assets and operator assets without land would be unlikely to be achieved, given the feedback from bidders that bidders preferred the aged care facilities with freehold land, and because of the substantial liabilities associated with the packaged businesses. A second sales campaign at considerable cost would be required, which he considers would likely result in a discounted purchase price, given the purchaser would have to meet ongoing rent payments. He also considers it would be likely that PCQ would have to pay the purchaser a significant amount of money for the refundable accommodation deposits and employee entitlements, and it would not result in any net return to PCQ. 
  2. [48]
    Closure of the business would result in relocating residents and PCQ still having the refundable accommodation deposit liability, and the liability for employee entitlements.
  3. [49]
    Mr Carter did not consider any of the alternative courses of actions were in the best interests of PCQ or its stakeholders.
  4. [50]
    Mr Carter therefore expresses the opinion that in his professional judgment that it is in the best interests of PCQ and its stakeholders for the Receivers to cause PCQ to complete the sale agreements for the packaged businesses and for PCQ to be bound by the Side Agreements and completion documents. He states that this is because:
  1. “(a)
    although the transaction involves the sale of real property, it is real property which is associated with businesses which, taken together, are loss-making and have substantial liabilities and where, in my opinion, the business cannot practically be sold without the real property also being sold;
  1. (b)
    the sale is the result of a diligent sale process and represents market value;
  1. (c)
    the sale will result in continued care being provided to the residents of the aged-care facilities by an experienced operator with sound management;
  1. (d)
    PCQ will continue to provide pastoral care services to residents of the Packaged Businesses;
  1. (e)
    the sale is taking place in a context in which PCQ is in a poor cash position;
  1. (f)
    the sale will result in cash being available to continue to operate the two remaining operational RACFs; and
  1. (g)
    the sale is, assessed as a whole and given the current financial position of PCQ, prudent and beneficial to PCQ and its financial position.”
  1. [51]
    It is submitted on behalf of Counsel appearing for the Receivers that the Receivers’ professional judgement was supported by a number of features. They have been identified as follows.
  2. [52]
    First, the businesses associated with the three properties are, considered together, loss making.[20]  This is so even with funding from the Commonwealth Department of Health (DoH).  However, the funding from DoH is expected to cease on 30 June 2021.[21]  Absent a sale, this will likely result in further operating losses after 30 June 2021.[22]
  3. [53]
    Secondly, the businesses are presently subject to significant liabilities in respect of:[23]
    1. (a)
      refundable accommodation deposits;
    2. (b)
      employee entitlements.
  4. [54]
    A sale will relieve PCQ of these liabilities,[24] when PCQ is otherwise in a poor cash position.[25]
  5. [55]
    Thirdly, the sale process undertaken was adequate and appropriate and has resulted a price that represents market value.  As to this:[26]
    1. (a)
      The process was conducted in accordance with the recommendations of, and ultimately by, McGrathNicol, a firm suitably qualified and experienced for the task.
    2. (b)
      The sale campaign proceeded through appropriate stages, with appropriate parties being targeted, and was otherwise publicised.
    3. (c)
      At the conclusion of the process, Apollo’s (revised) offer was the only offer capable of proceeding to a binding agreement.
  6. [56]
    Fourthly, the purchaser (Apollo) is a well credentialled counterparty capable of providing continued care to residents.[27]
  7. [57]
    Fifthly, PCQ has made arrangements with Apollo to permit PCQ to continue to provide pastoral care to residents after completion.[28]
  8. [58]
    Sixthly, DoH has indicated that it is supportive of the sale to Apollo.[29] 
  9. [59]
    Seventhly, the sale proceeds will contribute to the continued operation of other PresCare aged care facilities.[30]
  10. [60]
    Eighthly, the alternatives (addressed in paragraphs 86-98 of Mr Carter’s affidavit) are (objectively) unpalatable. In particular Mr Carter has examined the possibility of not proceeding with completion of the sale and the possible alternatives that may be open to PresCare and PCQ.
  11. [61]
    I am satisfied that the above features are supported by the evidence placed before the Court.
  12. [62]
    As to the supplementary agreements agreed by the Receivers and Apollo:
    1. (a)
      The Side Agreements (with effect conditional on court sanction) vary the timing and arrangements for completion.  The Completion Agreements have been executed to facilitate completion.
    2. (b)
      The primary effect of the Side Agreements is to place into escrow part of the net settlement proceeds until 25 June 2021.[31]  The net proceeds received by PCQ under the original sale agreements as opposed to the funds received under the Side Agreements are not materially different. The Side Agreements do not appear to change the overall character of the transaction or represent a substantial detriment to PCQ.  The Receivers consider that executing the Side Agreements is in the best interests of PCQ.[32]
    3. (c)
      The Completion Agreements deal with matters relating to intellectual property, transitional services and management rights which, in the Receivers’ experience:
      1. have been concluded on commercial terms;
      2. are agreements of a kind which are conventionally executed on the completion of the sale of assets such as the Packaged Businesses;
      3. do not impose any unusual or onerous obligations on PCQ; and
      4. do not expose PCQ to any unusual or substantial liabilities or risks.
    4. (d)
      The Receivers consider that entering into the Completion Agreements is in the best interests of PCQ.[33]

The position of the other parties

  1. [63]
    The Attorney-General for the State of Queensland did not oppose the Orders sought and considered they were appropriate. Counsel for the Attorney-General agreed with the analysis contained in the submissions. Amongst other things, Counsel for the Attorney-General emphasised that the position was supported by the financial difficulties being suffered by PresCare in respect of the aged care facilities, the Side Agreements had been entered into after an arm’s length process, the sales process supported the fact that the sale was at market value and there was a net benefit to PCQ as a whole, and that considerable costs would be incurred to engage in a further sales process and given the position in relation to funding from the Department of Health would likely result in detriment to PCQ.

Should the directions be given?

  1. [64]
    In the circumstances, I am satisfied that the Receivers have engaged in a proper and careful reasoning process to determine completion of the sale is in the best interests of the trust which respects the charitable purposes and limitations upon the power of alienation that they entail. The factors that have led the Receivers to conclude that the completion of the sale agreements are in the best interests of the trust accord with the considerations identified by Lord Langdale MR in The South Sea Company that would justify alienation that the sale is in the lasting and permanent interests of the trust and which furthers the uses and purposes of the trust.
  2. [65]
    The evidence supports the fact that the sales process prior to entry into the sales agreements was well publicised, and a robust process was carried out to obtain an offer to reflect market value, resulting in a reputable party experienced in aged care purchasing the properties as aged care facilities which will minimise disruption to the residents. The social mission of PCQ will be continued with PCQ continuing to provide pastoral care services to the residents and the proceeds of sale otherwise permitting the remaining aged care facilities to continue to operate, at least until a decision is made as to what approach should be adopted for them in the future. The sale will be to the benefit of PCQ as a whole. The sale will result in PCQ having significantly reduced liabilities and the net proceeds paid to PCQ will be utilised to continue the operations of the other aged care facilities of PresCare while the Receivers assess the options available in relation to those facilities.
  3. [66]
    In particular, the Receivers have engaged in an assessment of the aged care facilities and PCQ’s position as a whole to determine that the sale is in the best interests of PCQ both from the point of view of its immediate financial interests and its long term sustainability. Proper consideration has been given to the alternative courses of action that might be available to PCQ other than the sale of the repackaged businesses. The evidence supports the Receivers conclusions that none of those alternatives are in the best interests of the trust. The evidence supports the fact continued operation of the packaged businesses is loss making and is not sustainable by PCQ and would be to the overall detriment of the trust’s lasting and permanent interests. The alternative options to separate the sale of the facilities together from the real property, conduct a second sales process or close the aged care facilities have been carefully considered and support the view of the Receivers that none of those options are in the best interests of PCQ and the trust and will  not be in the lasting and permanent interests of the trust. Nor will a sale of just the facilities without the real property generate sufficient return to PCQ and relieve it of its liabilities such that it would be in the trust’s permanent and lasting interests.
  4. [67]
    The evidence further supports the fact that the Side Agreements maintain the benefits under the original sales agreements and reduce the risk of completion not occurring.
  5. [68]
    I am satisfied on the basis of the affidavit material and the detailed submissions provided that the Receivers are justified in causing PCQ to complete the sales agreements as varied and entering into the Side Agreements.
  6. [69]
    The completion agreements negotiated by the Receivers have been entered into to effect the completion of the sale. Given I have concluded that the Receivers are justified in causing PCQ to complete the sale agreements and the Receivers’ view that they have been concluded on commercial terms and are of the kind conventionally executed in a sale such as the present without exposing PCQ to any onerous obligations or substantial liabilities I am satisfied entry into those agreements by the Receivers is justified. Consistent with my determination that the completion of the sales agreements as varied is justified, I am further satisfied that the Receiver is justified in taking all steps that are necessary or convenient to complete the sale agreements, consistent with my conclusion above that the  decision of the Receivers to complete the contracts of sale as varied is justified. In that regard I considered whether the Order in [3] of the Order was necessary and appropriate to make in light of the Orders in [1] and [2]. I am satisfied it is appropriate to make that order given the limitations upon the alienation of property of charitable trusts.
  7. [70]
    I am therefore satisfied that the Court should give the directions sought in the proposed order.

Confidentiality

  1. [71]
    Confidentiality orders were sought in relation to Affidavit material of Mr Carter affirmed on 7 June 2021 and Ms McCracken sworn 8 June 2021 which provided for the originals to be placed in a sealed envelope and redacted versions to be placed on the Court file. Counsel for the Attorney-General provided very helpful submissions supporting the orders sought in relation to confidentiality. 
    1. (a)
      The redactions remove from those affidavits information concerning:
      1. purchase prices, or constituent parts thereof, identified in various contracts of sale and other contracts in respect of which the Receivers seek the Court’s sanction to exercise their powers of sale conferred by the Orders made on 12 May 2021;
      2. other financial information; and
      3. the identities of other offerors engaged in the sale process.  
  2. [72]
    I am satisfied that the material sought to be redacted is information that is properly characterised as “commercial-in-confidence” and should be restricted from public access in accordance with the relevant principles set out by Jackson J in Velocity Frequent Flyer Pty Ltd v BP Australia Pty Ltd [2019] QSC 29 at [26]-[31].
  3. [73]
    The filing of the redacted versions ensure that the affidavits are open to public view ensuring the principles of open justice are served.
  4. [74]
    I am satisfied that:
    1. (a)
      disclosure of this information to potential rivals (if these contracts are not completed) could be damaging commercially because a rival in the market place who obtains access to it may turn the material to the advantage of that rival and to the disadvantage of the Applicant, whose interest the Receivers seek to protect by seeking to keep it secret;
    2. (b)
      the information is very recent (and therefore for that reason does not lack commercial significance);
    3. (c)
      striking a fair balance between the legitimate concerns of those for whom the information is commercially valuable favours redacting the documents; and
    4. (d)
      redacting the information will not affect the intelligibility of reasons delivered by the Court because the figures sought to be redacted are not themselves a central plank in the ultimate resolution of the proceeding, and thus will not jeopardise the administration of justice.
  1. [75]
    It is therefore in the public interest and in the interests of the administration of justice to make the orders sought.
  2. [76]
    Conscious of the issues of confidentiality these reasons will be made available to the parties to review to ensure they do not reveal any of the commercial in confidence information. If the parties do not notify me that they contain any commercial in confidence information that needs to be redacted by 9 am on Monday morning I will publish the reasons on the Supreme Court Library Queensland website.

Footnotes

[1]Bailey v Uniting Church in Australia Property Trust (Qld) [1984] 1 Qd R 42 at 46-7.

[2]Apollo Care Operations Pty Ltd, Apollo Care Properties Pty Ltd and Calvin Aged Care Limited.

[3]ASIC v Commercial Nominees Australia Ltd (2002) ACSR 240 at [11] per Barrett J.

[4]Mariconte v Batiste (2000) 48 NSWLR 724 at [76] where Austin J stated that the function of the Court in relation to a receiver appointed under statutory provisions is analogous to its function with respect to a provisional liquidator.

[5]Grain Technology Australia Limited v Rosewood Pty Ltd [2019] NSWSC 1111 at [17] where Slattery J found an application of Receivers for directions came “well within the Court’s powers to provide directions to the Receiver” where the Receiver sought directions that it would be justified in not selling the subject property nor taking any steps to dispose of the property, although it did not ask the Court to make a commercial decision.

[6]In Australian Industry Development Corp v Co-operative Farmers and Graziers Direct Meat Supply Ltd ( 1978) 3 ACLR 543 at 552-3 Marks J found that the receivers did not have the authority to sell the property in question under the order pursuant to which they were appointed and therefore had to seek leave of the Court to do so. It is not clear that was done by reference to the Court’s power to make directions.

[7]Re Cape Tribulations Reef Experiences Pty Ltd [2007] QSC 115 at [30].

[8]Mariconte v Batiste (2000) 48 NSWLR 724 at [76].

[9][2020] QSC 353 at [76].

[10]His Honour however stated at [77] that the rule was not absolute by reference to a decision of Bradley J in Re Octaviar Limited (in liq). Although I was referred to the decision of Empire (Aust) Nominees Pty Ltd(in Liq) v Vince (2000) 35 ACSR 167 at [2] and [13] where approval was given pro nunc tunc it was in the context of an agreement entered into by a liquidator pro nunc tunc.

[11]Thus reducing the risk of termination of the contract if it could not be satisfied.

[12]The same condition is included in the other supplementary agreements.

[13]Bailey v The Uniting Church in Australia Property Trust (QLD) [1984] 1 Qd R 42 at 46-7.

[14]Attorney -General v Kerr (1840) 2 Beav R 420 at 428.

[15](1857) 6 HLCas 189 at 205.

[16]Attorney-General v The South Sea Company (1841) 4 Beav 453 at 416.

[17]Attorney-General v The South Sea Company (1841) 4 Beav 453  at 459-461.

[18]Cf In the matter of the Assemblies of God In Australia (Ayr Assembly); Sirris v Malamoo & Ors (unreported, Supreme Court of Queensland ( FC), 12 August 1985) where McPherson J considered that an RECI Act corporation equates with a common law corporation established by charter from the Crown such that the doctrine does not apply, a matter which his Honour considered had escaped attention in the course of enactments introduced in 1967 particularly s 4B of the RECI Act.

[19][2011] QSC 209 at [13].

[20]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 31 and 32(f).

[21]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 27.

[22]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 34(b).

[23]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 30.

[24]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 34(a).

[25]Affidavit of Philip Carter affirmed 7 June 2021 at paragraphs 29 and 99(e).

[26]Affidavit of Philip Carter affirmed 7 June 2021 at paragraphs 35 – 54.

[27]Affidavit of Philip Carter affirmed 7 June 2021 at paragraphs 55 – 58.

[28]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 59.

[29]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 67.

[30]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 71.

[31]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 81(b) and (c).

[32]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 99.

[33]Affidavit of Philip Carter affirmed 7 June 2021 at paragraph 99.

Close

Editorial Notes

  • Published Case Name:

    The Presbyterian Church of Queensland Incorporated by Letters Patent v Attorney-General for the State of Queensland

  • Shortened Case Name:

    The Presbyterian Church of Queensland Incorporated by Letters Patent v Attorney-General for the State of Queensland

  • MNC:

    [2021] QSC 136

  • Court:

    QSC

  • Judge(s):

    Brown J

  • Date:

    10 Jun 2021

  • Selected for Reporting:

    Editor's Note

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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