CB Darvall & Darvall v Moloney (No 2) - [2007] QSC 337

SUPREME COURT OF QUEENSLAND

CITATION:

CB Darvall & Darvall v Moloney & Anor (No 2) [2007] QSC 337

PARTIES:

AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION
(applicant)
v
ATLANTIC 3 FINANCIAL (AUST) PTY LTD
(first respondent)
and
FREDERICK MICHAEL ACKER
(second respondent)
and
GERILYN MARIE POLANSKI
(third respondent)

CB DARVALL & DARVALL (A FIRM)
(appellant/respondent)
v
GREGORY MICHAEL MOLONEY and PETER IVAN FELIX GEROFF AS COURT APPOINTED LIQUIDATORS AND TRUSTEES OF THE UNREGISTERED MANAGED INVESTMENT SCHEMES KNOWN AS THE MACKAY LEAGUES CLUB LIMITED SCHEME, THE NUMINKO PTY LTD SCHEME AND THE CLEARVIEW PROPERTIES SCHEME, FORMERLY CONDUCTED BY ATLANTIC 3 FINANCIAL (AUST) PTY LTD ACN 056 262 723 (IN LIQUIDATION)
(respondents/applicants)

FILE NO:

S4426 of 2003

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

Reasons given on 16 November 2007
Orders made on 19 November 2007

DELIVERED AT:

Supreme Court, Brisbane

HEARING DATE:

6 July 2007

JUDGE:

Wilson J

ORDER:

1. That the application by CB Darvall & Darvall filed on 14 February 2006 and amended on 29 May 2006 (“the application”) be dismissed.

2. That CB Darvall & Darvall pay the Liquidators’ costs of and incidental to the Application, including reserved costs, to be assessed on the standard basis.

3. That CB Darvall & Darvall pay the Liquidators’ costs of and incidental to the application filed by the Liquidators on 26 April 2007, including the reserved costs of 15 May 2007, to be assessed on the standard basis.

CATCHWORDS:

CORPORATIONS – MANAGED INVESTMENT SCHEMES – PROOFS OF DEBT REJECTED BY LIQUIDATORS – APPEALS AGAINST LIQUIDATORS’ DECISIONS – the liquidators of a company which was trustee of unregistered managed investment schemes rejected the proofs of debt of a solicitors’ firm – the firm appealed against those decisions – whether the appeal should be dismissed

EQUITY – TRUSTS AND TRUSTEES – POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES – INDEMNITY, LIEN AND REIMBURSMENT – GENERAL PRINCIPLES – the solicitors’ firm seeks to exercise a right of subrogation to the trustee’s right to be indemnified for costs out of the trust property – the trust sustained losses due to the trustee’s breach – it is a precondition to the trustee exercising its right of indemnity (and therefore to the firm exercising a right of subrogation to that right) that it make good any losses caused by the breach of trust – whether that precondition extends to costs incurred before the breach of trust was committed

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – SUMMARY JUDGMENT – the solicitors’ firm brought an application under Chapter 13 Part 5 of the Uniform Civil Procedure Rules 1999 (Qld) for the determination of preliminary questions – the applicant liquidators seek an order under that Part of the UCPR, consequential on the determination of the preliminary questions – the consequential order sought is that the appeal be dismissed – such an application is akin to an application for summary judgment – whether to dismiss the appeal

Corporations Act 2001 (Cth), s 601ED(5), s 601EE

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: [2007] QSC 337
Decision Date: 19 November 2007

CaseChat Overview and Summary

The liquidators of a company, which was the trustee of unregistered managed investment schemes, rejected the proofs of debt submitted by a firm of solicitors. The solicitors' firm appealed against the liquidators' decisions. The firm sought to exercise a right of subrogation to the trustee's right to be indemnified for costs out of the trust property. The trust sustained losses due to the trustee's breach. It was a precondition to the trustee exercising its right of indemnity (and therefore to the firm exercising a right of subrogation to that right) that it make good any losses caused by the breach of trust. The firm argued that this precondition did not extend to costs incurred before the breach of trust was committed. The liquidators brought an application under Chapter 13 Part 5 of the Uniform Civil Procedure Rules 1999 (Qld) for the determination of preliminary questions, seeking an order that the appeal be dismissed.

The court considered the legal issues to be whether the solicitors' firm's appeal against the liquidators' rejection of the proofs of debt should be dismissed and whether the firm could exercise a right of subrogation in relation to costs incurred before the breach of trust was committed. The court found that the appeal was an attempt to re-litigate issues that had already been determined by the liquidators. The court held that the liquidators were entitled to reject the proofs of debt and that the firm's appeal was without merit. The court also found that the firm's right of subrogation was subject to the condition that it make good any losses caused by the breach of trust, including costs incurred before the breach of trust was committed.

The court dismissed the solicitors' firm's appeal and ordered that the firm pay the liquidators' costs of and incidental to the appeal. The court held that the liquidators were entitled to reject the proofs of debt and that the firm's appeal was without merit. The court also held that the firm's right of subrogation was subject to the condition that it make good any losses caused by the breach of trust, including costs incurred before the breach of trust was committed. The court dismissed the appeal and ordered that the solicitors' firm pay the liquidators' costs of and incidental to the appeal.

Orders

Orders of the court

1. That the application by CB Darvall & Darvall filed on 14 February 2006 and amended on 29 May 2006 (“the application”) be dismissed.

2. That CB Darvall & Darvall pay the Liquidators’ costs of and incidental to the Application, including reserved costs, to be assessed on the standard basis.

3. That CB Darvall & Darvall pay the Liquidators’ costs of and incidental to the application filed by the Liquidators on 26 April 2007, including the reserved costs of 15 May 2007, to be assessed on the standard basis.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

CITATION:	CB Darvall & Darvall v Moloney & Anor (No 2) [2007] QSC 337
PARTIES:	AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION (applicant) v ATLANTIC 3 FINANCIAL (AUST) PTY LTD (first respondent) and FREDERICK MICHAEL ACKER (second respondent) and GERILYN MARIE POLANSKI (third respondent) CB DARVALL & DARVALL (A FIRM) (appellant/respondent) v GREGORY MICHAEL MOLONEY and PETER IVAN FELIX GEROFF AS COURT APPOINTED LIQUIDATORS AND TRUSTEES OF THE UNREGISTERED MANAGED INVESTMENT SCHEMES KNOWN AS THE MACKAY LEAGUES CLUB LIMITED SCHEME, THE NUMINKO PTY LTD SCHEME AND THE CLEARVIEW PROPERTIES SCHEME, FORMERLY CONDUCTED BY ATLANTIC 3 FINANCIAL (AUST) PTY LTD ACN 056 262 723 (IN LIQUIDATION) (respondents/applicants)
FILE NO:	S4426 of 2003
DIVISION:	Trial Division
PROCEEDING:	Application
DELIVERED ON:	Reasons given on 16 November 2007 Orders made on 19 November 2007
DELIVERED AT:	Supreme Court, Brisbane
HEARING DATE:	6 July 2007
JUDGE:	Wilson J
ORDER:	1. That the application by CB Darvall & Darvall filed on 14 February 2006 and amended on 29 May 2006 (“the application”) be dismissed. 2. That CB Darvall & Darvall pay the Liquidators’ costs of and incidental to the Application, including reserved costs, to be assessed on the standard basis. 3. That CB Darvall & Darvall pay the Liquidators’ costs of and incidental to the application filed by the Liquidators on 26 April 2007, including the reserved costs of 15 May 2007, to be assessed on the standard basis.
CATCHWORDS:	CORPORATIONS – MANAGED INVESTMENT SCHEMES – PROOFS OF DEBT REJECTED BY LIQUIDATORS – APPEALS AGAINST LIQUIDATORS’ DECISIONS – the liquidators of a company which was trustee of unregistered managed investment schemes rejected the proofs of debt of a solicitors’ firm – the firm appealed against those decisions – whether the appeal should be dismissed EQUITY – TRUSTS AND TRUSTEES – POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES – INDEMNITY, LIEN AND REIMBURSMENT – GENERAL PRINCIPLES – the solicitors’ firm seeks to exercise a right of subrogation to the trustee’s right to be indemnified for costs out of the trust property – the trust sustained losses due to the trustee’s breach – it is a precondition to the trustee exercising its right of indemnity (and therefore to the firm exercising a right of subrogation to that right) that it make good any losses caused by the breach of trust – whether that precondition extends to costs incurred before the breach of trust was committed PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – SUMMARY JUDGMENT – the solicitors’ firm brought an application under Chapter 13 Part 5 of the Uniform Civil Procedure Rules 1999 (Qld) for the determination of preliminary questions – the applicant liquidators seek an order under that Part of the UCPR, consequential on the determination of the preliminary questions – the consequential order sought is that the appeal be dismissed – such an application is akin to an application for summary judgment – whether to dismiss the appeal Corporations Act 2001 (Cth), s 601ED(5), s 601EE