The Hophouse in Mittagong used to be a major beer brewery. It operated from the 1930s through

Fantastic news! We've Found the answer you've been seeking!

Question:

The Hophouse in Mittagong used to be a major beer brewery. It operated from the 1930s through to the end of the 1980s. The property was owned by Hophouse Pty Ltd (Hophouse). The brewery itself was closed down, and the buildings remained mostly empty for twenty years until leased on a thirty-year lease to Azith Pty Ltd (Azith) for the purposes of an art gallery. The renovations of the buildings cost more and took longer than expected, but nevertheless, the gallery was able to open in early 2018 even though there was still construction work going on. There were two main buildings. Block A and Block B. Block A was the main part of the gallery, and Block B is the caf, restaurant and reception centre. Block A was five floors high, and Block B was two floors high. The Block B caf, restaurant and reception centre were sublet for $2,000 per month by Azith to Toque of the Town Pty Ltd, which is allowed for in the lease, who fitted out the space and ran the business. They had installed a kitchen which included $500,000 worth of commercial ovens, commercial refrigeration, sinks and stainless-steel work benches. They also had $250,000 invested in furniture and cooking utensils. Because both Blocks were still subject to some renovation, there were signs of ongoing building work. Block A was surrounded by five stories of scaffolding. It had been there for two years. The scaffolding was being rented from Babel Scaffolding, and they had also built the scaffold. The terms were quarterly and automatically renewable unless 30 days' notice was given. The scaffold installation took an entire week, and it would take another week to dismantle it once the rental agreement was terminated. Between Block A and Block B was a pile of old scaffolding that had been used in a previous attempt at renovation by a prior tenant of the land. Azith had had future plans to re-use the scaffolding to save money on renovations. This scaffolding belonged to Citadel Scaffolding, who had lost track of it during the changes of leaseholders over the previous decade. The scaffolding was identified by each part of the scaffolding having a red paint swatch and a CS stencil on it. This scaffolding was worth $10,000. In the art gallery itself, there was a range of world-famous contemporary artists on display. There was a selection of paintings from Timo Wolf, who consigned his paintings to the gallery. If any of his paintings were sold, the gallery would claim a 40% commission and pay him the balance. For example, his painting The Clouded Realms sold for $50,000 in February. The gallery passed 30,000 to Timo Wolf after deducting $20,000 as the commission. It was still on display and awaiting delivery to a new owner. The commission was paid into the Azith account held by Big Bucks Bank. The total funds in the account came to $25,000. There were ten paintings by Fiorina D'Amore, which were commissioned by the art gallery and were being paid off over a period of two years. They were planned to be part of the permanent exhibition. A different D'Amore painting, The Ghost Continent, not part of the permanent exhibition, had been sold at auction in the previous year for $100,000. The value of the commission was negotiated prior to this sale, so it appears to have represented a wise investment. In the basement of Block B, some of the old brewing equipment was still on display. There were copper vats and 20 metres of copper piping. The vats were bolted to the basement's concrete floor for stability, and the copper piping weaved in and out of vats and led to some stainless steel kegs. And while no longer in use the copper was very valuable. A condition of the lease was the old brewing equipment needed to be preserved. Azith kept it clean and incorporated the equipment as part of the gallery experience. The gallery was partially funded by regular payments from a fixed trust. The trust assets were mainly shares in cryptocurrency brokerage houses but not cryptocurrencies. There was an express arrangement between the trustee, Vaporcoin Holdings and Azith. The gallery also relied on a $500,000 from Shark Finance secured by a floating charge over all Azith chattels. There was also another $500,000 loan from Big Bucks Bank secured by an equitable charge over all the Fiorina D'Amore paintings. Cedric is both the director and CEO of Azith. He doesn't know much about art but has a reputation for having an incisive business mind. The chief curator of the gallery is Frieda who has a master's degree in fine art. She is also a prominent art influencer in the socials, and because of her reputation, she sometimes gets called by news organisations to comment on art issues that may have arisen during the week. In gallery exhibition openings Cedric always introduces Frieda as his number one employee. In March this year, Frieda negotiated a sale of a Fiorina D'Amore painting, The Night Moon, for $50,000 to art lover Faizah. The problem is the painting could be worth $100,000 and the painting was meant to be part of the permanent exhibition (one of ten paintings by Fiorina D'Amore mentioned above). There is an obligation under the Australian Resale Royalty scheme to pay an artist 5% of a sale price as a royalty if the sale is over $1,000 and sold by a commercial gallery. One night in April this year, the Wolf painting The Clouded Realms was stolen and not recovered. The thief broke a reinforced tempered glass window to get the painting. Alarms sounded included a back-to- base alarm but security arrived too late to prevent the theft. There was insurance over the paintings but in Cedric's name only. Because the gallery was in a small country town with insufficient day trippers and passing trade to sustain it, it was ultimately not successful and ended up in liquidation. The Block B businesses had to close because of the Azith insolvency under the conditions of both the head lease and the sub-lease.

1. Identify for the partner the potential issues that might arise with determining the property of Azith Pty Ltd, which is capable of being realised for distribution to its creditors.

2. Assess the different items of property for your partner's consideration and identify the issues that might arise affecting whether or not it is property of the insolvent business which is available.