FEDERAL COURT OF AUSTRALIA
Clarke v Sandhurst Trustees Limited [2014] FCA 580
Citation: Clarke v Sandhurst Trustees Limited [2014] FCA 580 Parties: GRAEME CLARKE and MARION CLARKE v SANDHURST TRUSTEES LIMITED (ABN 16 004 030 737) File number(s): QUD 804 of 2013 Judge(s): GREENWOOD J Date of judgment: 5 June 2014 Catchwords: CORPORATIONS – consideration of an application for an order that a trustee for debenture holders described as unsecured deposit notes for the purposes of Ch 2L of the Corporations Act 2001 (Cth) give discovery, for the purposes of r 7.23 of the Federal Court Rules 2011, of particular documents to a prospective applicant in contemplated principal proceedings for relief in the Federal Court against the trustee – consideration of the statutory regime within which the trustee acted – consideration of contended breaches of duty on the part of the trustee Legislation: Corporations Act 2001 (Cth), Chapters 2L, 2M, s 283DA
Federal Court Rules 2011, r 7.23Cases cited: Higginsv Hancock (2011) 199 FCR 393
Reeve v Aqualast Pty Ltd [2012] FCA 679
St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360Date of hearing: 19 March 2013 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 169 Counsel for the Prospective Applicants: Mr D J Campbell QC Solicitor for the Prospective Applicants: Shine Lawyers Counsel for the Prospective Respondent: Mr M Hoffman QC with Mr M Trim Solicitor for the Prospective Respondent: Group Legal Bendigo and Adelaide Bank Limited
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 804 of 2013
BETWEEN: GRAEME CLARKE
First Prospective ApplicantMARION CLARKE
Second Prospective ApplicantAND: SANDHURST TRUSTEES LIMITED (ABN 16 004 030 737)
Prospective Respondent
JUDGE:
GREENWOOD J
DATE OF ORDER:
5 JUNE 2014
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.Within 21 days of the date of this order the prospective respondent, Sandhurst Trustees Limited (“Sandhurst”), give discovery to the prospective applicants in their capacity as trustees of the G & M Clarke Superannuation Fund (the “Superannuation Fund”) of:
(a)the hard copy documents contained in approximately 11 lever‑arch folders referred to in para 15(a) of the affidavit of Mark James Miller filed 27 February 2014;
(b)the documents contained in an electronic folder of documents being approximately 561MB of data in size and called “Wickham” referred to in para 15(b)(v) of the affidavit of Mark James Miller filed 27 February 2014;
such discovery being limited to documents that fall within the category of documents listed in Schedule 1 to these orders and which came into the possession of Sandhurst between 1 June 2005 and 6 February 2013 but excluding the documents listed in Schedule 2 to these orders.
2.The discovery required of Sandhurst by Order 1 is satisfied by either providing electronic copies of the discovered documents to the solicitors for Mr and Mrs Clarke or by making the discovered documents available to their solicitor for inspection.
3.Within 14 days of the date of this order, Mr and Mrs Clarke…
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- AGLC
- Clarke v Sandhurst Trustees Ltd [2014] FCA 580
- Case
- [2014] FCA 580
- Decision Date
CaseChat Overview and Summary
The court considered the statutory framework within which Sandhurst operated, particularly the duties imposed on borrowers like Wickham under the Act, and the obligations to report quarterly. It was noted that Wickham, the borrower, had a duty to report to Sandhurst and ASIC any failures to comply with the terms of the debentures or the Trust Deed, as well as other significant events. The court examined the content of the affidavit material submitted by the applicants, which outlined the basis of their potential claim, including the contention that Sandhurst had breached its duties by not adequately supervising Wickham. The court concluded that, based on the evidence provided, the applicants might reasonably believe that the Trust Deed provisions were not a complete answer to their claims, and that there was a possibility of a contravention of the Act.
The court found that the applicants had demonstrated a reasonable cause of action and ordered Sandhurst to provide specific documents to the applicants for inspection. The order specified that the documents must be within certain categories, exclude specific items, and pertain to documents in Sandhurst's possession between certain dates. The court also mandated that Sandhurst could provide electronic copies or allow inspection of the documents. Furthermore, it directed both parties to submit further submissions on the costs associated with the discovery and the potential costs of providing the documents. This decision highlights the importance of trustees adhering to their statutory obligations and the court's role in facilitating potential litigation by ordering the discovery of relevant documents.
Orders
Orders of the court
1. Within 21 days of the date of this order the prospective respondent, Sandhurst Trustees Limited (“Sandhurst”), give discovery to the prospective applicants in their capacity as trustees of the G & M Clarke Superannuation Fund (the “Superannuation Fund”) of:
(a) the hard copy documents contained in approximately 11 lever‑arch folders referred to in para 15(a) of the affidavit of Mark James Miller filed 27 February 2014;
(b) the documents contained in an electronic folder of documents being approximately 561MB of data in size and called “Wickham” referred to in para 15(b)(v) of the affidavit of Mark James Miller filed 27 February 2014;
such discovery being limited to documents that fall within the category of documents listed in Schedule 1 to these orders and which came into the possession of Sandhurst between 1 June 2005 and 6 February 2013 but excluding the documents listed in Schedule 2 to these orders.
2. The discovery required of Sandhurst by Order 1 is satisfied by either providing electronic copies of the discovered documents to the solicitors for Mr and Mrs Clarke or by making the discovered documents available to their solicitor for inspection.
3. Within 14 days of the date of this order, Mr and Mrs Clarke and Sandhurst file any further submissions they may wish to make in relation to any orders as to the disposition of the costs of the application and as to the question of whether any particular orders ought to be made in relation to the costs of providing discovery the subject of Orders 1 and 2.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
All of these matters would no doubt be highly contentious questions to be resolved in prospective litigation. Subject to the content of the admissible evidence on the present application identified in the affidavit material as to the foundation of the contended cause of action, to which I will turn later in these reasons, a prospective applicant might objectively form a reasonable belief that the provisions of the Trust Deed identified by Sandhurst are not necessarily a complete answer to a contended right to relief based upon a contended contravention of, for example, cl 12.1. The Corporations Act, Chapter 2L - Debentures As to the Corporations Act, these matters, apart from the matters mentioned at [4] to [6] of these reasons, are relevant. A “borrower” such as Wickham required to enter into a trust deed under s 283AA has the duties imposed by Pt 2L.2 within Ch 2L of the Act (s 283BA). Wickham’s general duties are set out at s 283BB. Section 283BF requires Wickham to give the trustee a quarterly report within one month after the end of each quarter (and lodge a copy with Australian Securities and Investments Commission (“ASIC”)) that sets out the information required by s 283BF(4). By s 283BF(4), each quarterly report must include details of any failure by Wickham (and each guarantor) to comply with the terms of the debentures or the provisions of the Trust Deed or Ch 2L during the quarter; any event that has occurred during the quarter that has caused, or could cause, any amount deposited with Wickham or lent to Wickham to become immediately payable, or the debentures to become immediately enforceable, or any other right or remedy under the terms of the debenture or provisions of the Trust Deed to become immediately enforceable (s 283BF(4)(a) and (b)). The report must also include information about any circumstances that have occurred during the quarter that materially prejudice Wickham, any of its subsidiaries or any of the guarantors, or any security interest included in or created by the debenture or the trust deed (s 283BF(4)(c)). The report must also include information concerning any substantial change in the nature of Wickham’s business or that of its subsidiaries or any guarantor that has occurred during the quarter (s 283BF(4)(d)) and whether any of the stipulated s 283BF(4)(e) events have occurred relevant to a guarantor. The report must also set out the s 283BF(4)(f) stipulated information concerning the net amount outstanding on any advances in relation to any security interest (s 51A effective 30 January 2012) at the end of the quarter. Each quarterly report must also identify any other matter that may materially prejudice any security interest or other interests of the debenture holders (s 283BF(4)(g)). Section 283BI provides that Wickham commits an offence if it intentionally or recklessly contravenes identified provisions of Pt 2L.2 including s 283BB setting out its general duties and s 283BF in relation to the provision and content of the quarterly reports.