Bernard Henricus Lamers as trustee for the Ben and Debra Lamers Family Trust v Arvind Pty Ltd [No 2]

[2019] WASC 491

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST -v- ARVIND PTY LTD [No 2] [2019] WASC 491

CORAM:   HILL J

HEARD:   13 DECEMBER 2019

DELIVERED          :   13 DECEMBER 2019

PUBLISHED           :   26 JUNE 2020

FILE NO/S:   CIV 2404 of 2017

BETWEEN:   BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST

Plaintiff

AND

ARVIND PTY LTD

First Defendant

SARO VINZI  CARBONE

Second Defendant

BRIGHT IMAGE DENTAL PTY LTD

Third Defendant

Catchwords:

Practice and procedure - Application for interlocutory injunction - Serious question to be tried - Balance of convenience - Appointment of receivers and managers - Whether another remedy is appropriate - Application for appointment of receivers and managers dismissed - Interlocutory injunction granted

Legislation:

Supreme Court Act 1935 (WA)

Result:

Application for receiver and manager dismissed
Application for interlocutory injunction granted

Category:    B

Representation:

Counsel:

Plaintiff	:	Mr T Darbyshire
First Defendant	:	Mr G E Metaxas
Second Defendant	:	Mr G E Metaxas
Third Defendant	:	Mr G E Metaxas

Solicitors:

Plaintiff	:	Kott Gunning
First Defendant	:	Metaxas Legal
Second Defendant	:	Metaxas Legal
Third Defendant	:	Metaxas Legal

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

Marshall v Charteris [1920] 1 Ch 520

Martyniuk v King [2000] VSC 319

Metropolitan Petar v Mitreski [2012] NSWSC 16

National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386

Pittorino v Pittorino [2005] WASC 97

HILL J:

(These reasons were delivered extemporaneously at the conclusion of the hearing.  They have been edited from transcript to correct matters of grammar and so as to include complete references in the form of footnotes.)

1. On 29 November 2019, the plaintiff filed a chamber summons for urgent ex parte relief. The matter came before me on an urgent basis that afternoon.  At the hearing, I adjourned the chambers summons until 2.15 pm on 2 December 2019, to enable notice of the application to be given to the defendants.  On that date, the defendants indicated they would provide a written undertaking not to access or withdraw funds from the NAB bank account until 5.00 pm on 13 December 2019, so that this matter could be heard and determined.

2. The plaintiff seeks orders that Gregory Bruce Dudley and Jerome Hall Mohen be appointed as joint and several receivers and managers of the property of the first defendant.  Specifically, they seek orders for the receivers and managers to have the power to take control of the property of the first defendant, including real property at 404 Ranford Road, Canning Vale (Property).

3. The plaintiff also seeks orders to take control of and have the authority to operate all bank accounts in the name of the first defendant, including National Australia Bank account number 086334614938650 (NAB Bank Account) and to manage the business of the first defendant, being the rental of three commercial units at the Property.

4. The application is opposed by the defendants.

5. The plaintiff has filed three affidavits in support of its application, being an affidavit of Bernard Henricus Lamers sworn on 29 November 2019, an affidavit of Dordije Golub, sworn on 29 November 2019 and an affidavit of Jerome Hall Mohen, sworn on 29 November 2019. The defendants filed four affidavits in opposition to the application, being an affidavit of Mario Antonio Silipo, sworn 9 December 2019, an affidavit of Saro Vinzi Carbone, sworn 9 December 2019, a further affidavit of Saro Vinzi Carbone, sworn 11 December 2019 and an affidavit of Joe Filardi, sworn 9 December 2019.

6. The plaintiff's application for the appointment of the receivers and managers is advanced on the basis that the first defendant, through its conduct, has demonstrated that it is not acting impartially or in accordance with its duties as a trustee and that, as a consequence, the property of the trust is at risk.  The plaintiff relied primarily on three matters which, in their submission, evidenced this conduct.  First, the first defendant has made a number of payments from the NAB Bank Account, which are not related to or for the benefit of the trust.  Second, the first defendant has failed to make any trust distributions to the plaintiff since April 2019 and has indicated that it does not intend to make any further such payments.  And third, the first defendant has failed to take steps to lease unit 3 at the Property since the tenant vacated in or about August 2019.

Background to the matter

1. Before dealing with the substance of the application, I note that these proceedings have been on foot since August 2017.  The pleadings were most recently amended in May 2019 in respect of the statement of claim and June 2019 in respect of the defence.  The submissions filed by the defendant foreshadow a further amendment.  The plaintiff in its statement of claim raises a number of issues against the defendants.

2. The claim concerns whether the Property is held by the first defendant on trust, the terms of any trust, and whether there have been breaches of the duties and obligations owed by the first defendant as trustee to the plaintiff.  The plaintiff also raises claims based on estoppel and breaches of fiduciary duty.  The plaintiff seeks equitable compensation, an account of profits, an order for the removal and replacement of the trustee or alternatively, an order for the winding up of the trust.  The claims against the second and third defendant are essentially accessorial claims.

3. All matters, including whether the Property is held by the first defendant on trust, are in dispute between the parties.  I note that the defendants assert that it was an implied term of the agreement between the parties that, when the construction of the showrooms was completed, the trustee would apply for strata titles to be issued and that the title for one showroom would be transferred to the plaintiff and two showrooms would be transferred to the third defendant.  The defendants assert that the parties agreed that the plaintiff is to have unit 3 transferred to him and that the third defendant is to have units 1 and 2 transferred to it.  The defendants assert that this oral agreement overrides any obligations that it owes to the plaintiff.

Appointment of receiver

1. Pursuant to s 25(9) of the Supreme Court Act 1935 (WA), the court is empowered to appoint a receiver in all cases where it appears to be just and convenient. That said, it is acknowledged that the power to appoint a receiver is drastic, harsh and dangerous and is only to be exercised with utmost care and caution and only where the court is satisfied there is imminent danger of loss if it is not exercised.[1]

   [1] National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386, 541.

2. If there has been misconduct, waste or improper disposition of assets or a trust is in a state of disarray, or if it appears that the trust property has been improperly managed or is in danger of being lost, or if it can be satisfactorily established the parties in a fiduciary position have been guilty of a breach of duty, there is sufficient foundation for the appointment of a receiver.[2]

   [2] Martyniuk v King [2000] VSC 319.

3. In determining whether a receiver should be appointed, the court must be satisfied of two further matters.  First, that the case in favour of appointment of a receiver is a strong one. However, in assessing the risk to the trust, the court must apply a qualitative judgment.  Second, the receiver will be appointed to preserve the benefit of a person who has an interest in trust property.[3]

   [3] Pittorino v Pittorino [2005] WASC 97 [50].

4. That said, no court will make such an order unless convinced of its necessity.  A case with some kind and degree of interlocutory relief may be made out, which falls short of this extremely drastic remedy.  For example, the court may not be satisfied – and it is of course for the applicant to persuade the court that nothing less than what he seeks will do – that in all the circumstances, it should do more than grant an injunction.  At times the court will be induced to refuse the remedy of a receiver by undertakings offered by the defendant.[4]

   [4] National Australia Bank Ltd v Bond Brewing Holdings Ltd, 540.

5. However, receivers and managers should not be appointed on a disputed claim, where the effect of the appointment would be to, in substance, give judgment in the action on an interlocutory basis.[5]

   [5] Marshall v Charteris [1920] 1 Ch 520.

Disposition

Payments from the bank account

1. The solicitors for the plaintiff inspected the accounts of the first defendant on 7 November 2019.  As a consequence of this inspection, the solicitors raised concerns in respect of a number of payments that had been made from the NAB Bank Account.  These payments can be characterised into two groups; first, payments described in the accounts as loans to the second defendant or associated entities and second, payments for legal expenses of the defendants incurred in these proceedings.

2. The defendants admit that these payments have been made but deny that they have been made in breach of trust.  In respect of the payments described as loans, the defendants contend that these payments are distributions to the third defendant as a unit holder and have been properly accounted as such.  In respect of the payments for legal expenses, the defendants rely on the terms of the trust, specifically cl 68 of the Trust Deed, that the trustee is entitled to be indemnified out of the assets of the trust, in respect of any liability incurred in connection with acting as trustee of the trust.[6]

   [6] Defendants' outline of submissions filed 11 December 2019 [10].

3. The defendants referred me to authorities, which support their submission that it is not a breach of trust to resort to trust assets to fund the defence of litigation brought against the trustee.[7]  The defendants submit that, before the outcome of these proceedings is known, it is not possible for me to make a finding that the first defendant has committed a breach of trust by paying the legal costs from the NAB Bank Account.

Failure to pay distribution to the plaintiff

[7] See Metropolitan Petar v Mitreski [2012] NSWSC 16 [114].

1. It is not in dispute between the parties that no distribution has been made to the plaintiff from the trust this financial year.  The evidence before me is that in August 2019, the first defendant made a distribution of $10,000 to the third defendant.  The second defendant's evidence in relation to this matter is unsatisfactory.  His original evidence was that the last payment that was made to the third defendant was in January 2019.  This was amended in an affidavit filed 11 December 2019.  The defendant's submissions concede, in my view quite properly, that this payment was made.

2. The defendant's evidence is that the first defendant does not intend to make any further distributions to either the plaintiff or the third defendant, as it intends to retain any funds received by the first defendant, for payment of legal costs in these proceedings.

3. It is apparent from the correspondence that has passed between the solicitors for the parties, that the defendants contend that the plaintiff is only entitled to receive a distribution from rent received in respect of unit 3 of the property.  In contrast, the plaintiff's position is that rental income received from all units at the property should be distributed to unit holders, in proportion to their unit holding. I note that the question of which of these positions is correct is one of the ultimate issues to be determined in the proceedings.

The Property

1. It is not in dispute that unit 3 at the Property is currently vacant.  The plaintiff contends that the first defendant has failed to advertise or re‑let the unit because of the position they take in respect of distributions and that as a consequence, the failure to re‑let the unit does not cause them any detriment.  The evidence before me is that the unit is not currently advertised for lease and that it is vacant and has been since or about August 2019.

2. On 26 November 2019, the solicitors for the defendants sent an email to the solicitors for the plaintiff, inquiring whether the plaintiff wanted the first defendant to sell unit 3 or to retain the unit for leasing.  The evidence before me is that the plaintiff's solicitors have not responded to that email.

3. To adopt the test laid down by the Victorian Court of Appeal in National Australia Bank Ltd v Bond Brewing Holdings Ltd, the question to be determined is whether no other avenue, apart from the appointment of a receiver and manager, is available to the plaintiff.[8]

   [8] National Australia Bank Ltd v Bond Brewing Holdings Ltd, 543.

4. I am not satisfied on the evidence before me that there is no other avenue currently available to the plaintiff. In respect of the bank account, I am not satisfied that the only order that can be made to address the concerns of the plaintiff is the appointment of a receiver and manager.

5. Dealing first with the payment of legal expenses, on the evidence before me, I accept that the payments have been made from the trust bank account to the solicitors for the defendants and that that is authorised by the Trust Deed.

6. In respect of the other payments made, I am not satisfied that these payments cannot be properly characterised as distributions to the third defendant as a unit holder of the trust.  I accept that these payments are not described in this way and that the description of these payments gives rise to a question as to whether they are payments made in accordance with the trust and raises a serious question to be tried as to the accuracy of the books and records of the trust.  I am also satisfied that there is a serious question to be tried as to the basis upon which the first defendant is distributing rental payments received in respect of the Property and whether the plaintiff is entitled to one third of all rental receipts or only 100% of the rental receipts from unit 3 of the Property.

7. I consider that the balance of convenience supports orders being made to preserve the trust property and to prevent the first defendant from making any distributions or payments to unit holders until after these proceedings have been heard and determined.  That said, I am not satisfied that this issue can only be dealt with by appointment of a receiver and manager.

8. In my view, a less drastic order that would address the concerns raised by the plaintiff, is an order that the first defendant be restrained from dealing with the trust Property, except in the ordinary course of the trust business, or making any payments or distributions to unit holders from the NAB Bank Account, until after judgment in these proceedings.

9. In respect of the leasing of the Property, I accept that unit 3 is vacant and that no steps have been taken by the first defendant to lease this unit since it became vacant in or about August 2019.  Had this been the only evidence before me, I may have been satisfied that there was no other avenue available to the plaintiff, other than the appointment of a receiver and manager.  However, the evidence before me is that, on 26 November 2019, the defendant's solicitors wrote to the plaintiff, inquiring whether they wished unit 3 to be sold or leased, to which they have received no response. In my view, the plaintiff has another avenue open to it, namely, to respond to the defendant's solicitor's email.

10. Until this has occurred, and a reasonable time has elapsed after a response has been provided, I am not satisfied that the failure to lease unit 3 can only be dealt with, at this stage, by appointment of a receiver and manager.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

MG
Research Orderly to the Honourable Justice Hill

26 JUNE 2020