Bratovic v SBM Argentinian Bar and Grill Pty Ltd - [2005] SASC 431

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
BRATOVIC v SBM ARGENTINIAN BAR AND GRILL PTY LTD & ORS
Reasons of Judge Lunn a Master of the Supreme Court
18 November 2005
PROCEDURE
Action in ordinary jurisdiction of the court - interlocutory process filed by defendant under R 2.2(1) of Corporations Rules 2003 seeking winding up of a party - held application contrary to Corporations Rules and incompetent.

EQUITY - TRUSTS AND TRUSTEES
Application for removal of trustee and appointment of a new trustee - corporate trustee unable to function properly due to disputes between its two directors - held in the interests of the beneficiaries to remove the trustee and appoint new trustees.

BRATOVIC v SBM ARGENTINIAN BAR AND GRILL PTY LTD & ORS
[2005] SASC 431

JUDGE LUNN As an urgent determination of the applications before the Court is needed these Reasons are confined to the facts which are essential for the orders to be made. There are numerous and substantial factual disputes between the parties which cannot be resolved on the affidavit evidence. However, the present applications can be determined on facts which are not in dispute and by rulings of law. The plaintiff and the second defendant were acting as trustees, but this can be ignored for the purpose of the present rulings.
The plaintiff and Norberto Spagnolo (“Norberto”) are the only two directors of the first defendant. Of its two hundred issued shares 98 are held by the plaintiff and 102 by the second defendant. The second defendant is controlled by Norberto and the third defendant. The third defendant is the wife of Norberto and the secretary of the first defendant.
The first defendant is the trustee of the Restaurant Unit Trust (“RUT”). There is a dispute about who is entitled to the issued units in RUT but they are held generally by the second defendant, the plaintiff and allegedly his father. The first defendant is the lessee of premises at 46 Port Road, Hindmarsh on which the first defendant as the trustee of RUT conducts the business of “Norbert’s Argentinian Bar and Grill”. The business opened in February 2005 and continues to trade. Norberto and the third defendant work in the restaurant business. The first defendant spent in the region of $700,000 to convert the premises into a restaurant and to set it up. The source of part of this sum of about $700,000 is in dispute between the parties. It is alleged that some of the money has been borrowed at a very high rate of interest.
On 10 October 2005 the plaintiff instituted this action seeking an order under s 36 of the Trustee Act that the first defendant be removed as the trustee of RUT and that two independent accountants, Messrs Hall and Heard, be appointed as trustees in its place. The plaintiff filed a large affidavit alleging many disputes between himself, Norberto and the third defendant about the affairs of the first defendant and the running of the restaurant business. On…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2005] SASC 431
Decision Date: 18 November 2005

CaseChat Overview and Summary

The application in Bratovic v SBM Argentinian Bar and Grill Pty Ltd was brought before the court by Mr Bratovic, who sought the removal of the existing trustee of a trust and the appointment of new trustees. The trust in question was established by the shareholders of SBM Argentinian Bar and Grill Pty Ltd, who had appointed the company as the trustee. The dispute arose due to disagreements between the two directors of the company, which prevented it from effectively managing the trust. The court had to determine whether it was appropriate to remove the existing trustee and appoint new trustees in the interests of the beneficiaries.

The primary legal issue before the court was whether the existing trustee, SBM Argentinian Bar and Grill Pty Ltd, could continue to function effectively in light of the internal disputes between its directors. The court considered whether the inability of the corporate trustee to act coherently and efficiently warranted its removal and the appointment of new trustees. The court also had to assess whether the proposed new trustees were suitable and capable of managing the trust in a manner that would best serve the interests of the beneficiaries.

The court held that the existing trustee was unable to function properly due to the disputes between its directors, which had rendered it ineffective in managing the trust. The court found that it was in the best interests of the beneficiaries for the existing trustee to be removed and for new trustees to be appointed. The court considered the suitability of the proposed new trustees and concluded that they were capable of managing the trust effectively. The court therefore ordered the removal of the existing trustee and the appointment of the proposed new trustees, directing that the new trustees take immediate steps to ensure the proper management of the trust.

In making its orders, the court emphasised the importance of the trust being managed in a manner that best served the interests of the beneficiaries. The court noted that the disputes between the directors of the existing trustee had created an environment in which the trust could not be effectively administered. The court concluded that the removal of the existing trustee and the appointment of new trustees was necessary to ensure that the trust was managed in a way that protected the rights and interests of the beneficiaries. The court's orders provided a clear direction for the new trustees to take immediate action to ensure the proper functioning of the trust.

Orders