Adam Bernard Preiner in capacity as Liquidator of Rockway Pty Ltd (in Liq) in Its Own Capacity and in Its Capacity as the Former Trustee of the Zambia Trust v Structrite Pty Ltd as trustee for the Zambia Trust
[2019] WASC 367
•17 OCTOBER 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: ADAM BERNARD PREINER in capacity as LIQUIDATOR OF ROCKWAY PTY LTD (IN LIQ) IN ITS OWN CAPACITY AND IN ITS CAPACITY AS THE FORMER TRUSTEE OF THE ZAMBIA TRUST -v- STRUCTRITE PTY LTD as trustee for THE ZAMBIA TRUST [2019] WASC 367
CORAM: MASTER SANDERSON
HEARD: 27 JUNE 2019
DELIVERED : 17 OCTOBER 2019
FILE NO/S: COR 46 of 2019
BETWEEN: ADAM BERNARD PREINER in capacity as LIQUIDATOR OF ROCKWAY PTY LTD (IN LIQ) IN ITS OWN CAPACITY AND IN ITS CAPACITY AS THE FORMER TRUSTEE OF THE ZAMBIA TRUST
Plaintiff
AND
STRUCTRITE PTY LTD as trustee for THE ZAMBIA TRUST
Defendant
Catchwords:
Corporations law - Obligation to confer before issue of originating process under corporations law
Legislation:
Civil Dispute Resolution Act 2011 (Cth)
Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)
Supreme Court (Corporations) (WA) Rules 2004
Result:
No obligation to consult
Category: A
Representation:
Counsel:
| Plaintiff | : | Mr CS Gough |
| Defendant | : | Mr F Carles |
| Interested Party | : | Mr A Logan |
Solicitors:
| Plaintiff | : | Mills Oakley |
| Defendant | : | Carles Solicitors |
| Interested Party | : | Tottle Partners |
Case(s) referred to in decision(s):
Vaucluse Hospital Pty Ltd v Phillips [2006] FMCA 44
MASTER SANDERSON:
By originating process filed 11 March 2019 the plaintiff sought the following orders:
1.A direction pursuant to section 90-15 of Schedule 2 of the Corporations Act that the Liquidator is justified and acting reasonably in proceeding on the basis that the Company carried on business only in its capacity as trustee of the Zambia Trust.
2.A direction pursuant to section 90-15 of Schedule 2 of the Corporations Act that the Liquidator is justified and acting reasonably in proceeding on the basis that all of the creditors of the Company, to the extent their debts are admitted by the Liquidator, are properly characterised as creditors of the Zambia Trust (Zambia Trust Creditors).
3.A declaration that the Company's right of indemnity against the assets of the Zambia Trust to satisfy the claims of the Zambia Trust Creditors be secured by way of a lien over the following property which lien shall rank in priority to the claim of any other creditor or beneficiary of the Zambia Trust:
a.Any amounts payable to the Company pursuant to the terms of the 'Development and Project Management Agreement' entered into between Rockway Pty Ltd ATF Zambia Trust and Phillip Street Custodian Pty Ltd (Phillip Street) executed on 6 December 2013 (Phillip Street Agreement); and
b.Any amounts payable to the Company pursuant to the terms of the 'Development and Project Management Agreement' between 'Rockway Pty Ltd ATF Zambia Trust' and Sonia Shanxu Chen (Chen) executed on 12 November 2013 (Chen Agreement),
(together the Priority Zambia Trust Property).
4.An order pursuant to section 90-15 of Schedule 2 of the Corporations Act that the Liquidator is justified and otherwise acting reasonably in proceeding on the basis that:
a.the Liquidator is entitled to be paid his remuneration, as approved pursuant to section 60-10 of Schedule 2 to the Corporations Act, and his costs and expenses (together, Zambia Remuneration and Expenses) from the Priority Zambia Trust Property; and
b.the Liquidator is entitled to be indemnified out of, and have an equitable lien over, the Priority Zambia Trust Property for all of his Zambia Remuneration and Expenses.
5.Pursuant to section 477(2B) of the Corporations Act, an order approving nunc pro tunc the plaintiff's entry into the Funding Agreement.
6.An order pursuant to section 1322(4)(a) of the Corporations Act that the Funding Agreement is not invalid by reason of it having being entered into by the plaintiff prior to obtaining the approval of the Court under section 477(2B) of the Corporations Act.
7.An order pursuant to section 1322(4)(d) of the Act extending the period for the plaintiff to make an application for the Court's approval under section 477(2B) of the Act to enter into the Funding Agreement to the date of the approval.
8.An order pursuant to order 67B, rule 5 of the Rules of the Supreme Court 1971 (WA) that annexure 'Confidential AP-28' to the First Preiner Affidavit be kept confidential and not be disclosed without leave of the Court on the ground that the order is necessary to prevent prejudice to the proper administration of justice.
9. An order pursuant to 90-15 of Schedule 2 of the Corporations Act that the Liquidator is justified and otherwise acting reasonably in proceeding on the basis that his realisation and distribution of the Priority Zambia Trust Property be governed by the Funding Agreement and Parts 5.5 and 5.6 of the Corporations Act.
10.An order that the defendant, Structrite Pty Ltd (ACN 124 109 182) in its capacity as trustee for the Zambia Trust:
a.must give notice within twenty four (24) hours to the Liquidator in the event that it ceases to be, or becomes aware of any event which may cause it to cease to be, the trustee of the Zambia Trust;
b.does not incur debts or pay amounts in excess of $250,000 without giving 7 days notice to the Liquidator, such notice to detail the relevant debts incurred and payments to be made;
c.must give notice within twenty four (24) hours to the Liquidator of all monies received by it pursuant to the Phillip Street Agreement and Chen Agreement;
d.must cause not less than 80% of the gross amounts received by it pursuant to the Phillip Street Agreement and Chen Agreement to be paid into a controlled monies account and be restricted from using or otherwise distributing those amounts to any party without an order of this Court or agreement of the Liquidator;
e.must not cause the owners of any of the development lots under the Philip Street Agreement and Chen Agreement, Phillip Street or Chen to pay amounts due to the trustee of the Zambia Trust pursuant to the Phillip Street Agreement and the Chen Agreement otherwise than in accordance with the Phillip Street Agreement, the Chen Agreement and these orders.
11.An order that there be liberty to apply to any person who can demonstrate sufficient interest to modify any directions, orders and/or declarations made pursuant to this Originating Process on not less than 48 hours' notice to the Plaintiffs.
The matter was listed for a special appointment. At the hearing the plaintiff and the defendant appeared by counsel. An interested party, Phillip Street Custodian Pty Ltd (as trustee for the Phillip Street Unit Trust) also appeared by counsel. By that stage the parties had, in large measure, resolved the issues. What remained to be determined was the form of the orders. It is unnecessary to go into detail as to the orders actually made. Suffice it to say they differed significantly from the orders sought by the plaintiff in the originating process. However, they did reflect the essential thrust of the plaintiff's claim and really were varied to allow for certain contingencies.
As a preliminary point during the course of the argument the defendant maintained the plaintiff should have complied with O 59 r 9 of the Rules of the Supreme Court 1971 (WA) (the Rules) before issuing the originating process. This point was argued with some vigour. At the conclusion of the argument I indicated I was not satisfied O 59 r 9 was applicable. Even if it was, I was satisfied there had been discussions between the parties which essentially satisfied the requirements of the Rules. I indicated to the parties I would provide reasons for that decision. These are those reasons.
It is first necessary to say something about the background facts which led to the issue of the originating process. The plaintiff was appointed the sole liquidator of Rockway Pty Ltd on 26 March 2018. He was appointed pursuant to s 491 of the Corporations Act 2001 (Cth). At that time the sole director and shareholder of Rockway was Robert Stephen Auguste. The company's primary business was entering into partnerships with third parties to develop, promote and market for sale empty plots of land around Western Australia. The business appears to have ceased trading in May 2017.
In support of the application the plaintiff affirmed an affidavit on 8 March 2019. Paragraph 12 of that affidavit reads as follows:
On the 23 March 2018 I had my initial telephone discussion with Auguste (Initial Auguste Discussion). During the Initial Auguste Discussion Auguste informed me that:
(a)the company operated in two capacities, on its own and also as trustee of the Zambia Trust and a further (unnamed) trust that did not operate;
(b)the trust deed for the Zambia Trust could not be found;
(c)the Zambia Trust had entered into joint ventures in its business dealings and would shortly be entitled to up to $4 million, after the joint venture partner had been paid;
(d)the future income was not related to the Company's business and the Company had no assets and no future expected income;
(e)the Zambia Trust was the owner of an unencumbered property valued at $400,000 which was on the market to be sold;
(f)the Zambia Trust had two creditors totalling $172,000;
(g)the Company had no right of indemnity out of the assets of the Trust; and
(h)on 12 March 2018 the Company was removed as trustee of the Zambia Trust and the Defendant became the new trustee of the Zambia Trust.
In the course of his investigations the plaintiff came across two documents. The first was titled 'Development and Project Management Agreement' entered into between Rockway Pty Ltd as trustee for the Zambia Trust and Phillip Street Custodian Pty Ltd. This is referred to as the 'Phillip Street Agreement'. The second document is titled 'Development and Project Management Agreement' and was between Rockway Pty Ltd as trustee for the Zambia Trust and Sonia Shanxu Chen and was executed on 12 November 2013.[1] Both Agreements are broadly similar and both anticipate the development of certain property. As a consequence of the developments the plaintiff became entitled to payments. For present purposes the amount of those payments is not of concern.
[1] Affidavit of Adam Bernard Preiner affirmed 8 March 2019, par 16.
The plaintiff found that the company had unsecured creditors in an amount of approximately $1,400,000.[2] In broad terms, Mr Auguste maintained the unsecured creditors were creditors of Rockway Pty Ltd and were not entitled to be paid out of the assets of the trust.
[2] Affidavit of Adam Bernard Preiner affirmed 8 March 2019, par 23.
Clearly in this Mr Auguste was mistaken. That mistake had been rectified by the time of the hearing of the special appointment. It was the position of counsel for the defendant the position was so clear, had discussions taken place between solicitors, the matter could have been resolved without the need to issue proceedings. On that basis it was submitted the plaintiff ought be derived of his costs in making the application.
Counsel for the defendant filed detailed and comprehensive submissions dealing with this issue.[3] Counsel referred to the procedure in the Federal Court which requires the filing of a 'genuine steps statement' pursuant to s 6 of the Civil Dispute Resolution Act 2011 (Cth). There is, of course, no such equivalent State legislation. Accordingly the decision of Riethmuller FM in Vaucluse Hospital Pty Ltd v Phillips [2006] FMCA 44 is of no relevance.
[3] Defendant's outline of written submissions filed 30 May 2019.
Matters relating to corporations are commenced under the Supreme Court (Corporations) (WA) Rules 2004. Those Rules are silent on discussions which should take place before an originating process is issued. Once that process is issued then it is determined, first in accordance with the Corporations Rules, and second, in conformity with the Rules of the Supreme Court 1971 (WA). That means that if an interlocutory process is issued the requirements of O 59 r 9 must be observed. But there is nothing in the Corporations Rules which requires discussions prior to the issue of an originating process. It is an open question whether this court, or indeed a State government, could mandate a regime prior to issuing process under a Federal statute. Be that as it may, there is nothing to require discussion between parties or indeed between solicitors prior to the issue of an originating process.
That said, there will doubtless be occasions when plainly on the facts discussions should have taken place. If such discussions do not take place then that may affect a liquidator's right to costs. In this case discussions did take place between the plaintiff and Mr Auguste. Counsel for the defendant points out the only discussions which took place were those of 23 March 2018. Those discussions took place some 12 months before the originating process was issued. It was counsel's submission those discussions could not possibly have satisfied the plaintiff that 12 months later Mr Auguste's position was unchanged. It was submitted on that basis alone further discussions were required.
That argument is not without some merit. However, there is nothing in the evidence to suggest Mr Auguste had altered his position. Furthermore, faced with Mr Auguste's opposition to the plaintiff obtaining an indemnity from the assets of the Trust the liquidator was wise to seek a direction from the court. Although the law on this issue is reasonably well settled there is some room for doubt and the fact the plaintiff sought directions is a decision which cannot reasonably be criticised.
For these reasons I am satisfied that the orders made should allow for the costs of the plaintiff be paid from the assets of the Trust. There is nothing in the plaintiff's conduct which would disentitle him from the usual order.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TG
Court Officer17 OCTOBER 2019
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