Austconnect Pty Ltd v Generational Wealth Pty Ltd
[2019] VCC 1996
•5 December 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL CASES LIST
Case No. CI-19-03386
| Austconnect Pty Ltd and Oth8 Holding Company Pty Ltd (atf Oth8 Family Trust) | Plaintiffs |
| V | |
| Generational Wealth Pty Ltd and Beom Seok Shin | Defendants |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF RULING: | 5 December 2019 | |
CASE MAY BE CITED AS: | Austconnect Pty Ltd & Anor v Generational Wealth Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 1996 | |
REASONS FOR RULING
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Subject: PRACTICE AND PROCEDURE
Catchwords: Orders appointing auditor as a single joint expert pursuant to s65L of the Civil Procedure Act 2010 (Vic) – settling instructions to auditor
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HIS HONOUR:
1 This proceeding first came before me in the duty court on 1 October 2019 on the (adjourned) return of the plaintiffs’ summons on originating motion both dated 23 July 2019. By that summons, the plaintiffs sought orders for the inspection and copying of documents comprising the books and records of the Tullamarine United Unit Trust (“Trust”), established by the Fixed Unit Trust Deed dated 15 March 2014 (“Trust Deed”). The summons also sought orders for the appointment of an auditor pursuant to r54.02 of the County Court Civil Procedure Rules 2018 (Vic), alternatively under clause 67 of the Trust Deed.
2 The outcome of the hearing on 1 October 2019 is summarised in the “Other Matters” section of the orders I made that day, as follows:
“a.Clause 67 of the Fixed Unit Trust Deed dated 15 March 2014 creating the Tullamarine United Unit Trust (ABN 24 107 727 006) (“Trust”), provides in effect that unit holders holding at least 25% of the issued units in the Trust may request the trustee to appoint an auditor to audit the books of account of the trust. Clause 67 further provides that the cost of such audit will be paid by the trust fund. Thus it appears from the material that there is no impediment to the appointment forthwith of an auditor to audit the books of account of the trust for at least the last financial year.
b.His Honour indicated to the parties that, given this power existed, it seemed to him that it would greatly assist the resolution of the dispute over what documents and other information was needed from both sides to enable a full assessment of the financial position of the Trust and the entitlements of unit holders, to appoint an auditor, who was likely to need to consider these issues as part of any audit.
c.His Honour suggested that, with the co-operation of the parties and the imprimatur of the court, a better course may be to appoint an auditor agreed to by both parties (rather than just the unit holder seeking the audit) and to spell out in more detail the issues in dispute between the parties that the auditor would need to examine as part of the audit. This would be best facilitated by the appointment of the auditor as a single joint expert pursuant to s65L of the Civil Procedure Act 2010 (Vic).
d.Both parties indicated their willingness to adopt that course, subject to the orders for the appointment allowing them sufficient time to continue discussions that may resolve outstanding issues without the need to incur the expense of appointing an auditor. His Honour indicated that he would make orders accordingly.”
3 My orders (omitting formal matters) were as follows:
“1By no later than 4.00pm on 21 October 2019, the parties are to agree on and submit by email to the chambers of Judge Woodward…, orders for the appointment of an auditor acceptable to all parties as a single joint expert pursuant to s65L of the Civil Procedure Act 2010 (Vic) (“Auditor”), to conduct an audit of the financial affairs of the Trust.
2.[Order 2 set out the details of what the audit should cover, which was essentially repeated in order 2 of the 15 November orders below]
2.
3.Failing agreement as to who should be appointed as Auditor or as to the form of orders (or both), by no later than 4.00pm on 23 October 2019, the plaintiffs and defendant each email to the chambers of Judge Woodward …and the other parties, the names of up to three auditors acceptable to them (together with consents to act in writing from each of those auditors) or the form of orders they seek (or both, as the case may be), together with short written submissions in support. The person to be appointed as Auditor or form of orders (or both, as the case may be) will thereafter be decided on the papers, unless either party seeks to be heard further or the court otherwise directs.”
4 The parties were unable to agree as to who should be appointed as Auditor. After considering correspondence, submissions and details of the auditors proposed by both parties, I made orders on the papers on 15 November 2019 for appointment of an auditor, again including in “Other Matters” a brief explanation of the orders, as follows (omitting formal matters):
“OTHER MATTERS:
a.Further to the orders made on 1 October 2019, the parties were unable to agree on who should be appointed an Auditor.
b.Having considered the submissions and other information provided by the parties, the Court is not satisfied that the auditors proposed on behalf of the defendants have sufficient relevant expertise and experience, essentially for the reasons submitted on behalf of the plaintiffs.
c.Of the auditors proposed by the plaintiffs, the Court is concerned about the costs proposed to be charged relative to the issues in the case. In particular, the costs estimated by Lowe Lippmann are considerably higher than those of the other three auditors proposed.
d.In the circumstances the court proposes that Nick Michael be appointed, but that the parties have an opportunity to seek further directions or orders once Mr Michael has provided his detailed costs estimate as foreshadowed in his letter dated 6 November 2019.
THE COURT ORDERS THAT:
1.Mr Nick Michael of ShineWing Australia, Accountants and Advisers is appointed as a single joint expert pursuant to s65L of the Civil Procedure Act 2010 (Vic) (“Auditor”), to conduct an audit of the financial affairs of the Tullamarine United Unit Trust (ABN 24 107 727 006) (“Trust”).
2.The Auditor will:
a.audit the financial affairs of the Trust for each financial year since its creation, and to determine the assets and liabilities of the Trust as at the date of the audit;
b.that the audit include (without limitation) the identification by the Auditor of:
i.any sums distributed, lent or otherwise paid or advanced to either or both of the defendants, and the basis for such advance (that is, whether it is a distribution of capital, a temporary advance etc);
ii.the sums paid by each of the plaintiffs and the second defendant to the Trust, whether as a capital contribution, loan, advance or otherwise, the nature of such payment, and the documents that support the claim that a payment was made by a party;
iii.whether any of the documents referred to in paragraph 12 of the affidavit of Sining Wang affirmed 1 October 2019 (and, if so which) were necessary for the purpose of conducting the audit;
iv.whether there are any other documents that were not made available to the Auditor by any of the plaintiffs or defendants that would have assisted the Auditor in undertaking the audit in accordance with these orders;
v.where the funds of the Trust are held as at the date of the audit, the value of the entitlements of each unit holder (taking into account any distributions already made) and the amounts then available for distribution to the unit holders in the Trust;
vi. such other matters as the parties agree,
c.the costs of the audit be paid in the first instance by the Trust, but such payment is without prejudice to any application by the plaintiffs or the defendants for orders that all or part of those costs be borne by the opposing parties.
3.By no later than 4.00pm on 25 November 2019, the parties are to consult and agree on the form of the instructions and the documents to be given to the Auditor, for the purposes of order 2 above.
4.The instructions and documents agreed under order 3 above must be provided to the Auditor as soon as practicable after they are agreed, with a request that the Auditor provide the parties a detailed estimate of his costs, as foreshadowed in his letter dated 6 November 2019, within 7 days of the delivery of instructions and documents.
5.Failing agreement under order 3 above, by no later than 4.00pm on 28 November 2019, the plaintiffs and defendant each email to the chambers of Judge Woodward…and the other parties, the form of instructions and document they propose, together with short written submissions in support. The instructions and document will thereafter be decided on the papers, unless either party seeks to be heard further or the court otherwise directs.”
5 The parties were unable to agree on the form of the instructions and the documents to be given to the Auditor. The plaintiffs’ submissions and form of letter of instruction to the Auditor were provided on 29 November 2019. The defendants’ submissions and form of letter are dated 2 December 2019. In my view, the letter of instruction proposed by the plaintiffs is uncontroversial, and the defendants’ objections to it are unwarranted.
6 In particular:
(a) The defendants object to paragraph 3 of the plaintiffs’ proposed letter on the basis that it is “irrelevant and highly prejudicial”. Paragraph 3 is no more than a high-level and essentially neutral summary of the allegations by each of the parties in the proceeding.
(b) The defendants object to paragraph 4 of the plaintiffs’ proposed letter on the same basis. Paragraph 4 merely recite the fact that I made certain orders on 15 November 2019.
(c) The defendants object to paragraph 5 and 6 of the plaintiffs’ proposed letter on the basis that the orders are clear on their face and no further explanation is required. In my view, the explanations provided are uncontroversial. Having said that, I am inclined to agree that it is unnecessary to add to the orders and propose that the last sentences of each of paragraphs 5 and 6 be deleted from the plaintiffs’ letter of instruction.
(d) In relation to the documents that the plaintiffs propose be provided to the Auditor, the defendants assert that the court documents will not assist the Auditor “and are likely to be highly prejudicial”. I disagree. Indeed, my orders of 15 November 2019 comprising the proposed instructions to the Auditor make specific reference to one of the court documents.
(e) Finally, on the issue of “Communications” and “Submissions” I see no difficulty with making provision for the Auditor to interview any person in relation to the affairs of the Trust and to seek submissions from the parties, should he consider it appropriate to do so. Further, in my view, the plaintiffs’ proposals for managing those steps seem to me to be appropriate.
7 I note that the defendants have also included in their submissions further information and a curriculum vitae concerning one of the auditors proposed by them for the purposes of my orders made on 15 November 2019. Their submissions do not explain why this has been provided at this time, notwithstanding my earlier orders appointing the Auditor. I have therefore disregarded this material.
8 In the circumstances, I will make orders on the papers in the form delivered with these reasons.
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Certificate
I certify that these 6 pages are a true copy of the reasons for decision of His Honour Judge Woodward delivered on 5 December 2019.
Dated: 5 December 2019
Shakti Nambiar
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