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 [No 2] - [2021] WASC 355

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

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 [No 2] [2021] WASC 355
CORAM:   MASTER SANDERSON
HEARD:   28 SEPTEMBER 2021
DELIVERED          :   21 OCTOBER 2021
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
First Defendant

PHILLIP STREET CUSTODIAN PTY LTD as trustee for THE PHILLIP STREET UNIT TRUST
Second Defendant

Catchwords:

Corporations law - Liquidator seeking directions - Turns on own facts

Legislation:

Corporations Act 2001 (Cth)

Result:

Directions given

Category: B

Representation:

Counsel:

Plaintiff	:	No appearance
First Defendant	:	A F Carles
Second Defendant	:	N J Wallwork

Solicitors:

Plaintiff	:	Mills Oakley
First Defendant	:	Carles Solicitors
Second Defendant	:	Larri Legal

Case(s) referred to in decision(s):

Nil

MASTER SANDERSON:

These reasons concern a number of unresolved issues as between the first defendant and the second defendant. The proceedings began life as an application for directions by the liquidator/plaintiff. Essentially, the present controversy remains an application by the liquidator in the context of a liquidation. However, the liquidator takes a neutral position as between the first defendant and the second defendant. The liquidator appropriately was not represented at the hearing. The submissions which defined the contest were filed by the first and second defendants.
To put this dispute in context, it is necessary to say something about the background facts. What follows is largely taken from the revised submissions filed by the second defendant on 24 September 2021. The dispute between the defendants largely relates to the proper interpretation of a contract. That being so, these background facts are uncontroversial.
On 6 December 2013, the second defendant, as owner of a property located in Phillip Street, Maddington (the property), entered into a development agreement (the Philip Street Agreement) with Rockway Pty Ltd (Rockway) pursuant to which Rockway would develop the property. Since December 2013, the property has been divided into 42 lots and most of those lots have been sold. On 26 March 2018, the plaintiff was appointed liquidator of Rockway pursuant to s 491 of the Corporations Act 2001 (Cth). The Phillip Street Agreement provides that:
(1)the second defendant, as owner, would contribute the property for development and was entitled to an 'Owner's Fee' of $3,500,000 to be paid with priority from the sale proceeds; and
(2)Rockway, as developer, would develop the property; would meet all financial and legal obligations resulting from the development, and in consideration, was entitled to retain all sale proceeds in respect of $3,500,000.
At the time the agreement was executed, the sole director and shareholder of Rockway was Mr Robert Auguste. Rockway entered the Phillip Street Agreement in its capacity as trustee of the Zambia Trust. On 12 March 2018, Rockway resigned as trustee of the Zambia Trust and was replaced by the first defendant (Structrite).
The parties now seek to have four questions determined. They are as follows:
(1)is Rockway liable under the Phillip Street Agreement for rates, taxes and water charges payable in respect of the development lots;
(2)is Rockway required to indemnify the second defendant in respect of payments made by the second defendant to Watsons Property Group (or its nominee) for the National Rent Affordability Scheme (NRAS) credits for the development lots;
(3)is the second defendant liable to reimburse Rockway or Structrite for the $8,250 NRAS payment paid from the proceeds of Lot 828;
(4)are the second defendant's costs of the proceedings assessed on an indemnity basis, to be taxed if not agreed, and be treated as an unsecured debt in the liquidation of Rockway.
This final question was not really in dispute between the parties. It was accepted by the first defendant (and by the liquidator), the second defendant's costs assessed on an indemnity basis ought be paid from the assets of Rockway. That leaves the remaining three questions to be resolved.
By way of overall comment, I accept submissions by counsel for the second defendant that the structure of the deal between the second defendant and Rockway amounted to a deferred payment arrangement. That is to say, rather than simply selling the property to Rockway so Rockway could undertake the development, the second defendant agreed to defer payment of the purchase price until the development was completed. In other words, the second defendant was in no way to be regarded as a developer of the property; even less was it to be seen as a partner with Rockway. Of course, the actual terms of the contract are paramount. The presumed intention of the parties cannot override what the contract actually says. But it is clear from the way the deal was structured, the second defendant was not to be responsible for development costs.
Turning then to the Phillip Street Agreement itself, pursuant to cl 3.1(7), Rockway must meet all financial and other legal obligations resulting from the development of the property. The second defendant says rates, taxes, water and other charges which have been paid by the second defendant since the property was subdivided, are the responsibility of Rockway and the second defendant is entitled to an indemnity for those costs. Since the date of subdivision, the second defendant has paid $44,742.54 to the City of Gosnells for rates, $5,638.40 in land tax to the Office of State Revenue and $11,330.56 in water charges.
Pursuant to cl 3.1(7), Rockway must pay all 'Development costs' and meet all financial and other legal obligations resulting from the development. The term 'Development costs' is defined by cl 19.1(6) to be 'the costs (including GST) properly incurred by the Developer in carrying out its duties as set out in cl 3 during the course of the Development'. The second defendant accepts that rates, taxes and water charges are not 'Development costs' as contractually defined. The second defendant says these charges are 'financial or legal obligations resulting from the development'. On the second defendant's case, the key phrase is 'resulting from' - the second defendant says none of these charges would have arisen had the subdivision not taken place - thus, they resulted from the development.
The basis upon which the first defendant resists the claim is somewhat difficult to follow. As I understand it from the written and oral submissions, it is said the second defendant did not actually incur any liability and if it had chosen to do so, it could have declined to make payment of all of the charges. Presumably, those charges will then have passed to Rockway. Having chosen to make payment of charges for which it was not liable, the second defendant could not now recover the amount paid.
In my view, the issue is beyond doubt. Under the terms of the Agreement, Rockway was obliged to indemnify the second defendant for liabilities incurred as a result of the development. The property remained in the name of the second defendant and there is nothing to suggest it was not liable for all of the charges it incurred. Even if that were not the case, in making the payments it did, the second defendant incurred a liability resulting from the development. It is entitled to an indemnity for those costs.
It is convenient to take questions two and three together. NRAS is a Commonwealth scheme administered by the Department of Social Securities that aims to increase the supply of new and affordable rental dwellings by providing an annual financial incentive for up to 10 years. On 20 December 2014, the second defendant and Rockway entered into an agreement pursuant to which the second defendant authorised Rockway to purchase 25 NRAS credits at a price of $10,000 per credit and Rockway agreed to indemnify the second defendant against any loss or liability for the fees associated with the purchase of the NRAS credits (the NRAS Indemnity Agreement). It is the second defendant's position that after it entered into the NRAS Indemnity Agreement with Rockway, it did not concern itself with the NRAS scheme. The second defendant felt it was adequately protected and the NRAS credits did not impact the net sale proceeds to which the second defendant was entitled under the Phillip Street Agreement.
The NRAS credits came to the attention of the second defendant in 2018. It was presented with an invoice for $115,500 by Questus Capital Solutions Pty Ltd (Questus) in respect of the NRAS credits issued to the second defendant. The second defendant made payment and now seeks reimbursement.
The issue of the NRAS credits has a rather tortured history. It is covered in detail in the affidavit of Ian Greenwood Palmer affirmed 30 April 2021. Mr Palmer is a director and shareholder of the second defendant. It is unnecessary to detail these events precisely. What is clear is that the NRAS Indemnity Agreement protected the second defendant against any liability it incurred in relation to the NRAS credits. Any liability was the responsibility of Rockway. There can be no suggestion of the second defendant having made some payment which it was not obliged to make. It made various payments in relation to the NRAS credits because had it not have done so, it would have been sued and given the way the scheme worked, it would have undoubtedly have been liable. Thus, it is entitled to be fully reimbursed.
Once again, it is difficult to ascertain precisely what argument is put by the first defendant in response to the second defendant's claim. The first defendant relies on an affidavit of Mr Auguste sworn 1 June 2021. As I understand the evidence, it is said that there was some form of overpayment to an entity known as Watson's Property Group, which acted as a middleman between the second defendant and Questus. Counsel for the second defendant in both his written and oral submissions described Mr Auguste's contentions as 'nonsensical'. With respect, I would agree.
For these reasons, the second defendant has made good its position. I will make orders which reflect the position advanced by the second defendant. On publication of these reasons, the parties ought confer as to the precise form of the orders. If no agreement can be reached, the matter can be relisted in chambers for further argument.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AH
Associate to Master Sanderson
21 OCTOBER 2021