Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia (a firm) - [2020] WASC 132

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   DALIAN HUARUI HEAVY INDUSTRY INTERNATIONAL COMPANY LTD -v- CLYDE & CO AUSTRALIA (A FIRM) [2020] WASC 132
CORAM:   KENNETH MARTIN J
HEARD:   23 MARCH 2020 & BY FURTHER WRITTEN SUBMISSIONS OF 30 MARCH 2020 & BY LEAVE ON 6 & 7 APRIL 2020
DELIVERED          :   24 APRIL 2020
FILE NO/S:   CIV 1279 of 2020
BETWEEN:   DALIAN HUARUI HEAVY INDUSTRY INTERNATIONAL COMPANY LTD
Plaintiff
AND
CLYDE & CO AUSTRALIA (A FIRM)
First Defendant
DURO FELGUERA AUSTRALIA PTY LTD
Second Defendant
CLYDE & CO AUSTRALIA (A FIRM)
Plaintiff by Counterclaim
AND
DALIAN HUARUI HEAVY INDUSTRY INTERNATIONAL COMPANY LTD
Defendant by Counterclaim

Catchwords:

Trusts and trustees - Express trust created by contract - International Arbitration - Funds held in controlled moneys account by trustee in Australia to secure enforceability of potential future International Arbitral Award - Success by plaintiff in obtaining substantial award against second defendant - Written direction by Arbitral Tribunal to Trustee to pay Trust Amount as per contract establishing trust to plaintiff - Subsequent appointment of voluntary administrators to second defendant - Trustee seeking court's advice as to trust funds - PPSA security interest considerations - Plaintiff's vested interest in trust funds post written direction of Tribunal to trustee - Trust funds no longer the subject of any residual equitable interest in second defendant - Upon vesting trust funds become property of the plaintiff as security interest perfected

Legislation:

Corporations Act 2001 (Cth)
International Arbitration Act (Singapore)
International Arbitration Act 1974 (Cth)
Personal Property Securities Act 2009 (Cth)
Rules of the Supreme Court 1971 (WA)
Trustees Act 1962 (WA)

Result:

Directions to trustee regarding obligation to make payment of Trust Amount
Trustee directed to pay Trust Amount to plaintiff subject to caveats mentioned

Category: A

Representation:

Original Action

Counsel:

Plaintiff	:	Mr J D MacLaurin SC
First Defendant	:	Mr T J Porter
Second Defendant	:	Ms J Taylor SC & Ms L D Coci

Solicitors:

Plaintiff	:	Squire Patton Boggs (AU)
First Defendant	:	Assured Legal Solutions
Second Defendant	:	Ashurst Australia

Counterclaim

Counsel:

Plaintiff by Counterclaim	:	Mr T J Porter
Defendant by Counterclaim	:	Mr J D Maclaurin SC

Solicitors:

Plaintiff by Counterclaim	:	Assured Legal Solutions
Defendant by Counterclaim	:	Squire Patton Boggs (AU)

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

AKN v ALC [2015] SGCA 18
Christie v Robinson (1907) 4 CLR 1338
Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326; (2014) 49 VLR 86
Ellis v Goulton (1893) 1 QB 350
Flightline v Edwards [2003] 1 WLR 1200
Front Carriers Ltd v Atlantic & Orient Shipping Corp [2006] SGHC 127
Gas Sensing Technology Corporation v ProX Pty Ltd [2019] WASC 10
Grant v O'Leary (1955) 93 CLR 587
H&C S Holdings Pte Ltd v Mount Eastern Holdings Resources Co;, Limited [2015] SGHC 323
Hughes v Pluton Resources Ltd [2017] WASCA 213; (2017) 52 WAR 456
Koolan Iron Ore Pty Ltd v Rizhao Steel Holding Group Co Ltd [No 2] [2010] WASC 386
Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1305
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
Swift-Fortune Ltd v Magnifica Marine SA [2006] SGCA 42
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [No 4] [2014] WASC 405
WA Sherratt Ltd v John Bromley (Church Stretton) Ltd [1985] 1 QB 1038
Wood (as Co‑executor and Trustee of the Will of the Deceased) v Wood [No 5] [2015] WASC 28

Table of Contents

Introduction

The primary issue - the Trust Amount

Procedural history - 12 March 2020 hearing

ARB 2 of 2020

CIV 1279 of 2020

Appearances in CIV 1279 of 2020

Dalian

Clyde & Co

Duro

Leave to proceed against Duro

Orders 1 and 2 - leave to proceed against Duro granted

The position of Clyde & Co

Other directions and orders

Narrowing of issues for the trial

Foreshadowed breach of trust claims

Primary issue relief

The expedited trial (23 March 2020)

Written submissions

The trial affidavit evidence

Dalian's trial affidavit evidence

Duro's trial affidavit evidence

Clyde & Co's position at the trial

Appearance

Relevance objections towards evidence by Clyde & Co

Clyde & Co's counterclaim for advice as a trustee pursuant to s 92 of the Trustees Act (WA)

Concerns over the counterclaim's terminology as filed

Form of the counterclaim

Entitlement to approach the court

Facts found

The arbitration

Chronology following PO 15 at 30 September 2019

The Singapore International Arbitration Act

Section 12(1)(g)

The Trust Agreement

Recitals and PO 15

Clauses

Execution

Construction of trusts

Consideration

Some preliminary observations

The nature of the funds held on trust

The consensual nature of the Trust Agreement

No undertakings by Dalian

Relief in the action - jurisdiction of this court

Evaluation of the arrangements under which the Trust Amount was held in trust

Duro's submissions: PPSA post 28 February 2020

'Property' and 'security interest' - Corporations Act and PPSA

Perfection under the PPSA

Duro's status quo submissions

First basis

Second basis

Third basis

Section 440B of the Corporations Act

Duro's penultimate written submissions of 30 March 2020

Clyde & Co advice as a trustee

Some further matters

Publication and orders

Section 71 Trustees Act application by Clyde & Co

KENNETH MARTIN J:

Introduction

This was an electronic trial heard urgently on Monday, 23 March 2020 in the face of COVID-19 considerations.
The action concerns the fate of $AUD27 million still held in a controlled moneys account in Sydney, New South Wales, under the control of, and on trust by, the first defendant ('Clyde & Co') in circumstances I will come to explain ('Trust Amount').
By its originating summons filed in this court on 25 February 2020 commencing the current action, the plaintiff ('Dalian') seeks relief, in effect, to compel Clyde & Co, as trustee of the Trust Amount, to pay the $AUD27 million to its own lawyers' trust account in Western Australia - being Squire Patton Boggs ('SPB').
Clyde & Co does not resist the court issuing orders dealing with the Trust Amount (subject to certain qualifications I will enumerate). In fact, pursuant to the urgent orders and directions I issued on 12 March 2020 affording it leave to counterclaim for relief as a trustee, Clyde & Co counterclaims to obtain the court's advice pursuant to s 92(1) of the Trustees Act 1962 (WA) as to it dealing with the Trust Amount. This is on the basis that Clyde & Co is a trustee in respect of those funds and that, as a trustee, is entitled to seek the assistance of the court.
The Trust Amount, as I will explain, is the subject of a written agreement perfected on 23 October 2019, between Dalian, the second defendant ('Duro') and Clyde & Co, which agreement is expressly governed by West Australian law ('Trust Agreement').
I will provide a more comprehensive explanation of the background to the proceedings later in these reasons. However, it is sufficient to presently note that the parties to this proceeding were all, in some way, involved in an international arbitration seated in Singapore ('Tribunal'). It is as a result of various orders and awards made by the Tribunal and subsequent steps taken by the parties that the present disputes have unfolded.
Despite the international context and relatively large sums of money in dispute, the ultimate question to be answered is a simple one - what should happen to the $AUD27 million currently sitting as the Trust Amount? The answer, however, is less simple, as will emerge.

The primary issue - the Trust Amount

The base contention of Dalian is that, pursuant to the terms of the Trust Agreement, the Trust Amount was, and continues to be held absolutely for it by Clyde & Co, as a trustee. Pursuant to the express terms of cl 4 of the Trust Agreement, Dalian submits that the Trust Amount must be immediately paid over to it by Clyde & Co and into an SPB trust account in Western Australia. This is contended on the basis of Dalian, and especially after 24 January 2020, holding an unqualified and fully vested beneficial interest in those funds.
I should note that the perfection of the Trust Agreement and the payment of the Trust Amount into the trust arose in the wake of the Procedural Order 15 ('PO 15') as issued by the Tribunal, on 30 September 2019. By PO 15 the Tribunal granted Dalian's application seeking security for its claim. The Tribunal duly ordered that Duro pay the Trust Amount. However, the Tribunal by PO 15 largely left it to the parties to agree to a process to give effect to its orders. Hence, the execution of the Trust Agreement that followed.
Specifically, cl 4 of the Trust Agreement (relevantly) provides as regards the Trust Amount:
The Trustee [ie, Clyde & Co] may only release or pay the Trust Amount, or any part of the Trust Amount, in accordance with a written direction addressed to the Trustee signed by a below named partner of both Squire Patton Boggs and Clyde & Co or a direction of the Tribunal in the Arbitration ... (my emphasis in bold)
Following the execution of the Trust Agreement in October 2019, funds were paid to Clyde & Co shortly thereafter, to be held by it as trustee. Subsequently, Dalian was successful before the Tribunal in that international arbitration (seated in Singapore), obtaining a substantial monetary award against the second defendant, Duro. On 19 December 2019, the Tribunal issued a first partial final award of $US32,898,858.18 (translating at, say, $US1 = $AUD1.61730 (at 31 March 2020) = $AUD53,243,957.22) in Dalian's favour against Duro ('First Partial Final Award').
That award has not yet been enforced in Australia, but that event is pending. Another proceeding, also pending before me, filed by Dalian in this court as ARB 2 of 2020 against Duro, seeks, pursuant to s 8(2) of the International Arbitration Act 1974 (Cth), to enforce that First Partial Final Award in Australia, as if it were a judgment of this court. However, no substantive orders have issued to date in ARB 2 of 2020, as I explain later.
By its originating summons commencing this action, Dalian primarily seeks relief, it says, as against Clyde & Co as named first defendant and as trustee of the Trust Amount.
Dalian's originating summons in the present action relevantly seeks:
1.As arising from the First Defendant's failure or omission to, under clause 4 of a Trust Agreement executed 23 October 2019 (Trust Agreement), pay to the Plaintiff moneys held on trust in the sum of AUD27,000,000 (Trust Moneys) that are required to be so paid in accordance with a direction dated 24 January 2020 of an Arbitral Tribunal in an arbitration held in the Seat of Singapore, and pursuant to section 94 of the Trustees Act 1962 (WA) Order 58 rule (2), section 16(1)(d)(i) of the Supreme Court Act 1935 (WA) or in this Honourable Court's inherent jurisdiction:
a)a direction or order that the First Defendant pay the Trust Moneys to the Plaintiff forthwith; and
b)a declaration that the Trust Moneys ought to have been paid by the First Defendant to the Plaintiff on 24 January 2020 and that the Plaintiff is entitled to a payment of interest from the First Defendant on the Trust Moneys from that date until payment at such rate as to this Honourable Court may seem just.
2.That the Defendants pay the Plaintiff's costs of this originating summons on such basis as to this Honourable Court may seem just.
3.Such further or other orders as to this Honourable Court may seem just.
Dalian's originating summons was supported by an affidavit affirmed on 25 February 2020 of Mr Timothy James O'Shannassy, a lawyer of the lawyers of local record in these proceedings for Dalian and who also represent Dalian in the Singapore international arbitration. (Note: in that arbitration Clyde & Co are the lawyers representing Duro).

Procedural history - 12 March 2020 hearing

The plaintiff's originating summons in this action was first returned for directions before me in chambers on 12 March 2020 ('12 March 2020 hearing'). Also returnable, at the same appointment time, was Dalian's other originating process, ARB 2 of 2020 seeking enforcement of the First Partial Final Award of the Tribunal in this court.

ARB 2 of 2020

As mentioned, in ARB 2 of 2020 Dalian seeks orders pursuant to s 8(2) of the International Arbitration Act to the end that the First Partial Final Award be enforced in this court, as if that award were a judgment or order of this court.
At the 12 March 2020 hearing, Mr MacLaurin SC, representing Dalian, recognising that Duro had been placed into voluntary administration (on 28 February 2020), asked for the proceedings ARB 2 of 2020 to be stood over without substantive orders and with liberty to apply. Such orders were then made uncontroversially in ARB 2 of 2020, with costs reserved.

CIV 1279 of 2020

The present proceeding posed more controversial issues for direction, as Dalian, in effect, wished to urgently proceed against Clyde & Co, on the expressed basis that Clyde & Co controlled the Trust Amount to which Dalian claimed it then enjoyed a fully vested beneficial entitlement in that fund and, unlike for Duro, Clyde & Co was not in voluntary administration.
It was contended for Dalian that Clyde & Co, as regards the Trust Amount, was a trustee then in default vis-à-vis Dalian of an explicit contractual and fiduciary obligation, first under cl 4 of the Trust Agreement in the face of the written direction given to it by the Tribunal to pay the trust funds to Dalian and, second, to remit the Trust Amount to Dalian as the beneficiary, via a payment into SPB's nominated trust account.

Appearances in CIV 1279 of 2020

Dalian

As mentioned, Mr MacLaurin SC appeared for Dalian at the 12 March 2020 hearing (instructed by SPB).

Clyde & Co

At the time of the 12 March 2020 hearing, Clyde & Co had entered a memorandum of conditional appearance, through Sydney lawyers, Assured Legal Solutions. The memorandum of conditional appearance of 12 March 2020, lodged pursuant to Rules of the Supreme Court 1971 (WA) (RSC) O 12 r 6, expressed itself (in part) as follows:
The first defendant reserves its right to enforce an arbitration clause contained within an agreement titled 'Trust Agreement' and dated 23 October 2012 which is the subject of the proceedings.
Subsequent to the filing of the conditional appearance, Clyde & Co took no step within the 14‑day period allowed by RSC O 12 r 6(2) to apply to have the jurisdictional issue raised on the face of the conditional appearance decided. Consequently, by RSC O 12 r 6(2), Clyde & Co's conditional appearance has become and operates as an unconditional appearance.
At the 12 March 2020 hearing Clyde & Co Australia was represented by Mr Porter of counsel (instructed by Assured Legal Solutions).

Duro

At 12 March 2020 there had been no memorandum of appearance filed on behalf of Duro, as the named second defendant. However, I was satisfied by then that Dalian had effected service of its originating summons, plus Mr O'Shannassy's supporting affidavit (exhibit 1), prior to 28 February 2020, under the service acceptance provisions of the Trust Agreement (see cl 10).
At the 12 March 2020 hearing, Mr Mengler, a legal practitioner (instructed by Ashurst Australia) presented at the bar table. Mr Mengler, in effect, then sought leave to speak on behalf of voluntary administrators of Duro, who I was informed had been appointed on 28 February 2020. The administrators in question are Mr Rahul Goyle, Mr Scott Langdon and Mr John Bumbak, all of KordaMentha, a well-known Australia wide insolvency accounting practice.
I duly gave leave for Mr Mengler to address on behalf of the voluntary administrators at that directions hearing. He pointed out, correctly, that the time for the filing of a memorandum of appearance by Duro, in effect, as stipulated on the originating summons of Dalian was 21 days and so at then, the 21‑day period to effect service had not yet fully run.

Leave to proceed against Duro

It was also pointed out by Mr Mengler then that, pursuant to s 440D(1) of the Corporations Act 2001 (Cth), a statutory stay of proceedings against Duro was delivered by reason of s 440D(1). That provision provides:
During the administration of a company, a proceeding in a court against the company or in relation to any of its property, cannot be begun or proceeded with, except:
(a)with the administrator's written consent; or
(b)with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
CIV 1279 of 2020 was commenced on 25 February 2020, prior to Duro appointing voluntary administrators. The question then, by s 440D(1), was whether leave should be given for this proceeding to be 'proceeded with' as against Duro after 28 February 2020, subsequent to when the voluntary administrators were appointed to Duro.
Mr MacLaurin SC, on behalf of Dalian, submitted, in effect, that the primary relief Dalian was seeking, and urgently so, was as regards the Trust Amount that was still held in trust by Clyde & Co, as the first defendant. Mr MacLaurin SC submitted, in effect, that substantive relief against Duro was not being sought. Hence, the submission of Dalian was that the statutory stay by s 440D(1) was not applicable and so, leave to proceed, strictly speaking, was not required as against Duro.
Mr MacLaurin SC further submitted, in effect, that Dalian's action was not being taken against or made then, in relation to Duro's property. That contention, of course, is the hotly contested issue at this trial. The basis of Dalian's submission is primarily advanced by reason of the Tribunal's First Partial Final Award issued in Dalian's favour against Duro. That event is then coupled to and allied with a resulting event -being the written direction as issued by the Tribunal on 24 January 2020, under its Procedural Order No 17 ('PO 17'). PO 17 had ordered and expressly directed Clyde & Co to 'immediately' proceed in accord with cl 4 of the Trust Agreement (to which I earlier referred) and to:
... upon receipt of this written direction, must immediately release the Trust Amount, being AUD27 million, to the [law practice trust account of Squire Patton Boggs Au at the Commonwealth Bank, William Street, Perth branch, with a designated BSB, account number and SWIFT code].
Consequently, the essential submission of Dalian by Mr MacLaurin SC at the 12 March 2020 hearing, was that whatever might have been the position before, that as from 24 January 2020, the position as regards Clyde & Co, and the Trust Amount that it held on trust pursuant to the Trust Agreement was now crystal clear. By reference to the express written direction of the Tribunal issued in accord with cl 4 of the Trust Agreement, from 24 January 2020, there could be no serious dispute that Dalian from then held, in effect (some weeks before the appointment of the voluntary administrators to Duro on 28 February 2020) a fully vested and unconditional beneficial interest in all the trust funds that were held and controlled by Clyde & Co as trustee.
Dalian's submission was that they were not, but that even if the funds comprising the Trust Amount had ever at any prior time been caught under the Personal Property Securities Act 2009 (Cth) ('PPSA') as the property of Duro (with 'property' under the PPSA being defined in that legislation and also in the Corporations Act in extremely wide terms), that following the issuance to Clyde & Co of PO 17, that those funds, at least from then, were no longer arguably Duro's property (viewed under the PPSA, or otherwise). Rather, those trust funds, post 24 January 2020, were held in the full beneficial ownership of Dalian.

Of course, that ownership position was not accepted by the administrators of Duro as being so clear cut. At the 12 March 2020 hearing Mr Mengler, for the voluntary administrators, was relaying that the administrators were still in the early stages of their enquiries, following their appointment on 28 February 2020. Hence, no assumptions or conclusions could or ought then be drawn, it was said, concerning what proprietorial or equitable interests Duro might, or might not, then still hold over the trust funds - which also presented as the significant asset of Duro in the administration at that time.

Orders 1 and 2 - leave to proceed against Duro granted

Given such issues, it may then be seen that the orders 1 and 2 of the orders and directions which I issued on 12 March 2020, attempted to address issues of participation, urgency and the ramifications of s 440D(1) of the Corporations Act as regards Duro. Orders 1 and 2 of 12 March 2020 were that:
1.Time is abridged for the second defendant [ie, Duro] to file its notice of appearance until 4.00 pm (WST) on Friday, 13 March 2020 in this proceeding.
2.There is leave, if necessary, for the plaintiff to proceed against the second defendant under s 440D(2) of the Corporations Act (Cth) by this proceeding.
As regards the effects of s 440D(1) of the Corporations Act and the unconditional leave to proceed against Duro that I granted under my order 2 (by what should, on reflection, be formally corrected to read as a reference to s 440D(1)(b), rather than s 440D(2) as the order currently reads) I accepted, in effect, Mr MacLaurin SC's core submission concerning commercial urgency. Allied to that was Dalian's then demonstrated strong prima facie entitlement to receive the $AUD27 million as was held in trust for it, by Clyde & Co pursuant to the terms of the Trust Agreement. It was also true that the primary relief sought in respect of the funds was directed then by Dalian at Clyde & Co (as trustee and the first defendant) rather than at Duro. Duro had been (properly) joined, essentially, as an interested party as regards those funds. But no other relief was sought against Duro.
I assessed then that leave to proceed against Duro under s 440D(1) of the Corporations Act was appropriate, given Duro was represented by a skilled, well resourced and nationally operative insolvency practice and, of course, by well resourced international commercial lawyers of repute.
Given all that, I saw the, as then, relatively narrow presenting aspects of the urgent dispute over the Trust Amount - to be capable of being dealt with without undue disruption or prejudice to the conduct of an overall administration of Duro.
It was essentially out of an abundance of caution over the issue of whether or not leave was strictly needed to proceed against Duro as the second defendant, that leave to proceed was granted, in the terms as seen. In this context, I had also noted the observations of Hammerschlag J made in Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1305, as regards the issuance of leave under s 440D(1) of the Corporations Act in that context of a recognition and enforcement of a proceeding as regards an arbitral award and an exercise of discretion under those not entirely analogous factually but, nonetheless, instructive observations. I refer particularly to [36] of his Honour's reasons as to discretion, at [38] towards the objects that may be facilitated by a stay of proceedings imposed by s 440D, at [39] concerning circumstances which may warrant a displacement of the stay under s 440D, to the bespoke circumstances presented by each distinct application as referred to in [40] and, finally, as to the scale of curial exercise being weighed, see [49].
A further relevant consideration towards granting leave to proceed under s 440D(1) was that Duro, unlike for some insolvent administration circumstances, did not then appear to be an actively trading entity any longer within Australia. It had, of course, previously been involved as a contractor to Samsung - in the Roy Hill iron ore mine establishment project. Dalian had been a subcontractor to Duro under that project - all giving rise at the end to widespread non‑payment disputes, many of which became the subject of the Singapore seated arbitrations. As the reasons accompanying the Tribunal's PO 15 point out, there had been a settlement of one of the arbitrations, as between Duro and Samsung, resulting in an August 2019 receipt of substantial funds by Duro from Samsung (see the reasons accompanying PO 15 at par 7(3), 15, 33(3), 47, 49 and 56). I should note that no evidence of the quantum of this substantial payment was before the court in this trial. This event was discussed by senior counsel for Dalian at trial (ts 33, 45 - 46), in reference to correspondence passing between the parties' lawyers, wherein SPB had stated they understood from discussions with the Duro's administrators that a transfer of funds from Duro to its Spanish parent corporation, Duro Felguera SA occurred (O'Shannassy affidavit affirmed 18 March 2020, TJO-2 page 7). See also the assertion in Dalian's written submissions of 20 March 2020, par 22(e)(iii), as to an $AUD95,000,000 payment by Duro to its parent corporation. However, there is no evidence that I could locate to sustain that submission of Dalian.
As regards the appearance from Duro, it is a matter of record that on 13 March 2020, a memorandum of unconditional appearance was filed on its behalf - through the voluntary administrators' lawyers, Ashurst Australia. Consequently, that issue was resolved.

The position of Clyde & Co

On 12 March 2020 it was evident through the submissions of Mr Porter for Clyde & Co Australia that the stance then articulated for that firm saw it effectively seeking to 'interplead', as regards the Trust Amount, under the terms of the Trust Agreement.
As named trustee of the Trust Amount as trust property, it was foreshadowed by Mr Porter that Clyde & Co as a trustee would be seeking advice from the court as to those funds, in accord with s 92 of the Trustees Act, within Pt 7 div 3 thereof, so as, in effect, to be protected as regards a dealing with the funds (see s 95).
At the time, Clyde & Co was essentially faced with conflicting demands for the Trust Amount. As already seen, Dalian was claiming the funds, on the basis that it held an absolute beneficial entitlement to all those funds under the circumstances I have now described. But, at the same time, after 28 February 2020, Clyde & Co was receiving a contrary message from the administrators of Duro, effectively seeking to maintain the status quo over the funds, while the voluntary administrators conducted their enquiries.
The voluntary administrators' lawyers had requested Clyde & Co not to disburse the $AUD27 million to Dalian. Part of the expressed concern by the voluntary administrators as to paying the funds over to Dalian's Australian lawyers, SPB, was concern over an anticipated future inability to ever recover those funds, if they were likely to be remitted by SPB to their client, Dalian, in the People's Republic of China.
The administrators' recovery concern, essentially, arose out of the potential eventuality wherein Duro could not trade out of administration and Dalian, for whatever reason, was paid the Trust Amount. Thus, it would follow that Duro would then need to be wound up. There may then follow a liquidator's claim to the Trust Amount made on various possible bases, such as those funds being received by Dalian as an unfair preference payment over other of Duro's unsecured creditors, or on a basis that Dalian's claim to the Trust Amount was later found to be cut down by Australian law on a basis, say, of being an unregistered and unperfected 'security interest' assessed under the provisions of the PPSA. For those hypothetical circumstances, it was argued that recovery steps by future liquidators towards Duro's assets for creditors generally would then be frustrated. Hence, the administrators told Clyde & Co that they wished the Trust Amount to continue to be held within the controlled moneys account, until at least the time that an administration period was effectively completed.
As regards such putative future unfair preference arguments, Mr MacLaurin SC for Dalian advanced a submission (at the trial) to the effect that, based on various assembled debt and liability information emerging at an early creditors' meeting, a potentiality of Dalian ever being assessed as unfairly preferred as a creditor over other creditors of Duro, was remote (ts 44 - 45). However, at this stage, on what is only very early and sketchy information, I am not at all prepared to speculate to render any undue preference assessments over that issue.
Given the foreshadowing by Clyde & Co to Dalian, of a pursuit of curial advice under s 92 of the Trustees Act, it seemed to me to be both convenient and expeditious to allow Clyde & Co to urgently seek that advice by way of a counterclaim in these same proceedings. I held a concern, however, that because the current proceeding had been commenced by originating summons, there was insufficient procedural scope for a defendant to formally counterclaim.
I addressed that potential procedural concern for Clyde & Co's s 92 advice application as a trustee, by order 3 outlined below.

Other directions and orders

On 12 March 2020, I also ordered an expedited trial, without pleadings or discovery, to be conducted on the basis of exchanged affidavits and within as short a timeframe as then, looked to be feasible.
I set out below my further orders 3 through 8 as issued in chambers on 12 March 2020:
3.Proceeding CIV 1279 of 2020 being originally commenced by Originating Summons shall henceforth proceed and be treated as if it had been commenced by Writ and shall so proceed as an action without pleadings or discovery to an expedited trial to be conducted on exchanged affidavit evidence as outlined in order 7 below.
4.Within CIV 1279 of 2020 leave is granted to the first defendant (ie, Clyde & Co Australia) to counterclaim for relief as a trustee, pursuant to provisions of Pt 7 Div 3 of the Trustees Act 1962 (WA).
5.A trial is to proceed by exchanged affidavits with the plaintiff and all defendants to file and serve:
(a)any further affidavit materials relied upon for trial by 4.00 pm (WST) on Tuesday, 17 March 2020; and
(b)any reply affidavit material by 4.00 pm (WST) on Wednesday, 18 March 2020.
6.The parties shall mutually file and serve:
(a)written submissions for trial to be relied upon (including case authorities) in support of their positions and for the relief sought by 4.00 pm (WST) on Thursday, 19 March 2020; and
(b)any further written submissions in reply by 4.00 pm (WST) on Friday, 20 March 2020.
7.The matter is listed for an expedited trial on Monday, 23 March 2020 at 11.30 am in respect of the primary issue relief as outlined in the plaintiff's minute of proposed orders dated 11 March 2020 and any relief counterclaimed brought by the first defendant pursuant to order 4 above.
8.The costs of today's directions hearing are reserved.

Narrowing of issues for the trial

By order 7 above, I was, in effect, accepting Mr MacLaurin SC's proposal on behalf of Dalian, that the principal issue of urgency needing to be addressed at first, was Dalian's claim to obtain the Trust Amount from Clyde & Co in the not insignificant amount of $AUD27 million.

Foreshadowed breach of trust claims

However, it was also apparent on 12 March 2020 from the materials in Mr O'Shannassy's affidavit that Dalian was also articulating some strong potential grievances against Clyde & Co. These particularly concerned Clyde & Co not acting much earlier, to remit the Trust Amount to SPB, first in the aftermath of the Tribunal's 19 December 2019 First Partial Final Award (which had then ordered Duro to pay Dalian $US32,898,858.18) and then, by defying the Tribunal's PO 17 written direction as regards remitting the Trust Amount to Dalian via SPB. Secondly, Dalian was also expressing a grievance that Clyde & Co as trustee under the Trust Agreement, suffered a severe conflict of interest, in terms of it still apparently continuing to act as lawyers for Duro within the Singapore arbitration before the Tribunal and, notwithstanding that Clyde & Co was also to act as the named trustee of the Trust Amount, governed by the terms of the Trust Agreement.
By cl 9, which I detail later in my reasons, the Trust Agreement was expressly stated to be governed by the laws of Western Australia (see [161]). Clause 4 envisaged the named trustee releasing the 'Trust Amount', upon a written direction addressed to the trustee, either signed jointly by the as named partners of SPB and Clyde & Co, subsequent to 19 December 2019, or otherwise, by a fallback position, as was also as provided for by cl 4 (see [10]). Repeated efforts, as might be expected, had been made by Dalian post 19 December 2019 to obtain the co‑signature of the identified partner of Clyde & Co (Mr Glen Warwick), so that a joint SPB and Clyde & Co co‑signed written direction could be issued to the trustee (Clyde & Co) under cl 4, for Clyde & Co as trustee to then release the funds to Dalian. However, despite repeated efforts of SPB made through Mr O'Shannassy and others, nothing had come of all those efforts, in the period between 19 December 2019 and to mid‑January 2020.
In consequence, Dalian at mid-January 2020 had needed to resort to obtaining a direction of the Tribunal invoking, in effect, the fallback position as was expressly contemplated by cl 4, to obtain a viable written direction to cause the trustee to remit the fund to Dalian via SPB.
Ultimately, by its PO 17 issued on 24 January 2020, the Tribunal did then order and expressly direct Clyde & Co as trustee in accord with cl 4 of the Trust Agreement, to immediately release the trust amount to the nominated law practice trust account of SPB (ie, for Dalian).
Contemporaneous reasons as issued by the Tribunal to support its PO 17 (see attachment TJO‑19 to Mr O'Shannassy's 25 February 2020 affidavit), display that Dalian's application to the Tribunal was made at 13 January 2020, but was then resisted by Clyde & Co, acting on behalf of Duro. Submissions were then filed with the Tribunal by Clyde & Co for Duro resisting that relief by a way of a written direction. In particular, a 15-day adjournment had then been sought, so that Duro could 'confirm its position'. All that is apparent from the face of the reasons of the Tribunal underlying its PO 17 of 24 January 2020.
It is not necessary to elaborate any further on the history of that opposed application for a written direction of the Tribunal to engage with cl 4 of the Trust Agreement.
Then, notwithstanding the PO 17 express direction of the Tribunal to Clyde & Co, it was not actioned. The remainder of January 2020, then almost all of February 2020, passed before, on the very last day of that month, voluntary administrators were appointed to Duro. Across all that time Clyde & Co had not remitted the Trust Amount, as was directed by the Tribunal at 24 January 2020.
The Tribunal's written direction of 24 January 2020 to Clyde & Co to 'immediately' pay over the funds to Dalian's lawyers (SPB) is still not acted upon as at trial.
Consequently, Dalian also foreshadows, via Mr O'Shannassy's affidavits, a breach of trust claim against Clyde & Co pursuing damages, particularly lost interest on $AUD27 million which Dalian contends, in effect, it has lost by reason of the Tribunal's PO 17 not being acted upon immediately, or at all by Clyde & Co. That is said for circumstances where the Trust Agreement explicitly provides as regards the interest under cl 5 favouring Duro (not Dalian) by providing:
Any and all interest accrued on the Trust Amount shall be paid to Duro.
Axiomatically, if the Trust Amount funds had been remitted to Dalian via SPB, there would seem to follow the correlative interest earning opportunities for Dalian, rather than to Duro.
Needless to say, however, these breach of trust grievances as articulated and foreshadowed by Dalian as against Clyde & Co, present as something of a lesser order of priority. The greater focus of Dalian at 12 March 2020 was to obtain the Trust Amount, and sort such other matters out later.

Primary issue relief

As seen, order 7 of my orders and directions of 12 March 2020 above directed an expedited trial only in respect of the 'primary issue relief'. It refers to the relief as outlined in Dalian's minute of proposed orders of 11 March 2020. That minute had read in the following terms:
1.The First Defendant pay to the Plaintiff, by payment to the Plaintiff's solicitors' trust account, the sum of AUD27,000,000 being trust moneys under a Trust Agreement executed 23 October 2019 (Trust Agreement) that are required to be so paid under clause 4 of the Trust Agreement.
2.Other issues arising under the Originating Summons including:
(a)whether there should be a declaration that the Trust Moneys ought to have been paid by the First Defendant to the Plaintiff on 24 January 2020 and that the Plaintiff is entitled to a payment of interest from the First Defendant on the Trust Moneys from that date; and
(b)any further or other consequential orders,
be programmed for hearing in such manner as this Honourable Court may seem just.
Consequently, the primary issue to be determined at the trial, is only that as is described under par 1 of the above minute. For Dalian, that is all that I am presently concerned with. Apart from Clyde & Co's counterclaim seeking advice from the court about the funds it still holds as a trustee, the other issues as seen described under par 2 of Dalian's minute, including as to interest and, as part of that any alleged breaches of trust by Clyde & Co Australia (as trustee), all remain for another day.
Given the potential seriousness of foreshadowed breach of trust allegations related to a claim against Clyde & Co as trustee, I will, of course, later require that all contentions of breach of trust by Dalian be explicitly articulated, prima facie, under pleadings with full particulars. It also goes without saying, almost, that there should also be a full opportunity for Clyde & Co as trustee to respond and to answer all such residual issues in due course, if they are persisted with. The process would undoubtedly take some time to unfold. At this time, that is less urgent than the primary issue to be confronted under par 1 of the orders as seen in Dalian's minute above.

The expedited trial (23 March 2020)

As I have already mentioned, the trial of these now identified issues (see RSC O 32 r 4) was ordered on an expedited basis. Given concerns regarding the subsisting COVID-19 pandemic, the trial was eventually conducted wholly by audio-link and by written submissions.
Of course, the primary trial issue concerns the Trust Amount of $AUD27 million. On the face of the terms of the Trust Agreement (and the ostensible engagement of cl 4 thereof), and under circumstances where on 24 January 2020, the Tribunal has ordered and directed (by PO 17) that Clyde & Co immediately release the Trust Amount to SPB, and where that written instruction had not been acted upon at the time of trial - my assessment was that those facts essentially meant that Duro (acting now under the direction of its voluntary administrators) ought provide some rationale for why Dalian (via its lawyers SPB) was not presently entitled to receive the Trust Amount (via SPB).

Written submissions

Extensive written submissions were exchanged as between all parties under the expedited trial programming orders made on 12 March 2020. To that end I came to receive:
(a)Dalian's primary written submissions of 19 March 2020 (electronic document 16);
(b)Duro's primary submissions opposing the relief sought by Dalian of 19 March 2020 (electronic document 17);
(c)Clyde & Co's written submissions for hearing of 19 March 2020 (electronic document 14);
(d)Dalian's submissions in response to Duro of 20 March 2020 (electronic document 19);
(e)Dalian's submissions in reply to Clyde & Co of 20 March 2020 (electronic document 22);
(f)Duro's submissions in reply to Dalian of 20 March 2020 (electronic document 20); and
(g)Clyde & Co's reply submissions of 20 March 2020 (electronic document 24).

After the trial, by leave, I also received tranches of further written submissions from Dalian and Duro on 30 March 2019, to address, first, some greater background as to s 12(1)(g) of Singapore's International Arbitration Act (Cap 143A, 2002 Rev Ed) ('SIAA'). The other aspect of the post trial written submissions concerned the PPSA and sought to address further the distilled question arising at the trial over whether or not what might once have been viewed as a PPSA s 12 'security interest' held by Dalian, in the Trust Amount at before 24 January 2020, had changed character and was ended, as a result of the Tribunal's PO 17 direction to Clyde & Co, to then immediately pay the Trust Amount over to Dalian. The refined question to be evaluated post 24 January 2020 was whether Dalian's vested interest in the Trust Amount was then caught by the PPSA? At the trial, Ms Taylor SC for Duro had asked for some further time to address that refined question. Given its importance, I allowed more time to all parties for it to be addressed further. On my assessment, that question presents as the determining issue as regards the ultimate fate of the Trust Amount.
Later still, on 6 April 2020, I gave further leave for the parties to file some short further written submissions as against each other over further issues said to require rebuttal or clarification. I received a last wave of submissions from Duro on 6 April 2020 and from Dalian on 7 April 2020.

The trial affidavit evidence

Only Dalian and Duro (by its administrators), filed, read and relied upon affidavit evidence at the trial. I will mention it all briefly below.

Dalian's trial affidavit evidence

Regarding Dalian's trial evidence I have already referred to the first affidavit of Timothy James O'Shannassy, affirmed 25 February 2020. It became exhibit 1 at the trial. For the purposes of the action, in accord with my directions for an expedited trial on affidavits, Mr O'Shannassy later affirmed three (3) further affidavits, respectively of 12 March 2020 (electronic document 7), which became exhibit 2, of 17 March 2020 (electronic document 10), which became exhibit 3, and of 18 March 2020 (electronic document 13), which became exhibit 4.
There was no cross‑examination at the trial, sought or conducted, in respect of any of this affidavit material. Further, no hearsay objections were raised against the contents of these O'Shannassy affidavits despite their affirmation largely on the basis of secondary evidence from a party's lawyers and even though final relief is sought at the trial. That largely makes up the underlying evidence relied upon at the trial - subject to a further augmentation as explained below.
Although filed with the court as part of another affidavit of Mr O'Shannassy, affirmed on 25 February 2020 (attachment TJO‑1) the reasons of the Tribunal as to the First Partial Final Award are not before the court at this trial. That affidavit was filed in ARB 2 of 2020.
The Tribunal provided, as might be expected, very extensive reasons for their First Partial Final Award of 19 December 2019, ultimately favouring Dalian against Duro, and ultimately ordering Duro to pay Dalian $US32,898,858.18, as the 'First Award Sum'.
Ultimately, there was no controversy at the trial over that award amount favouring Dalian against Duro being accepted as a fact for the purposes of this trial, and thereby alleviating any need to formally receive the 200 plus pages of reasons of the Tribunal given in support of its award.
There was also no controversy at trial over the character of the Tribunal's award to Dalian against Duro as essentially money due for goods provided, or as damages for non-payment, payable to Dalian by Duro. However, nothing about that money liability of Duro to Dalian suggests that Dalian was, as the liability was incurred by Duro, anything beyond an unsecured creditor for that money claim, there being no suggestion of Dalian enjoying any elevated secured creditor status arising from out of the nature of that claim. Even if that award amount is ultimately registered to be enforced in this court as if it were a judgment, Dalian was at best an unsecured judgment creditor of Duro for that sum. It was not until PO 15 issued in Dalian's favour at 30 September 2019 by the Tribunal that it held a partial level of security for its money claim to the extent of the $AUD27 million when paid by Duro to abide the terms of the Trust Agreement.

Duro's trial affidavit evidence

Duro, of course, presently acts under the control of its administrators. In that respect, one of the administrators, Mr Rahul Goyal, filed for the trial a brief affidavit sworn 17 March 2020 (electronic document 11), dealing with some issues from the perspective of the conduct of the administration. Mr Goyal's affidavit was received as exhibit 5.
By his affidavit, Mr Goyal explains that he is a chartered accountant and a registered liquidator based in Sydney, New South Wales. He was, along with Mr Bumbak and Mr Langdon, appointed as the joint and several administrators of Duro, on 28 February 2020. Their notification to the Australian Securities and Investments Commission (ASIC) of that day is annexed to Mr Goyal's affidavit (RG-1).
The balance of Mr Goyal's affidavit essentially refers to appended documentation.
Part of those documentary materials includes a communication from Clyde & Co detailing even greater funds as are currently held by it in trust. As regards Dalian, reference is made (see attachment RG‑2, page 8 of the affidavit of Mr Goyal) to the amount of $AUD27,036,633.97 as currently held in 'Controlled Money Account'. A breakdown of that amount as regards funds of $AUD27 million 'pursuant to trust agreement dated 23/10/2019 - 30/10/2019' is mentioned, along with the amounts of interest accruing at monthly dates as identified therein.
At RG‑2, page 17, as regards the Clyde & Co trust account, further information is given there concerning Clyde & Co's receipt of $AUD27 million - seen as a credit amount on 17 October 2019 and described under a Reasons/Comments column as:
On account of funds pursuant to the freezing order made by the tribunal pursuant to procedural order 15.
Also seen there is a subsequent debit amount entry for the same sum on 24 October 2019 and referring to it as paid to 'Clyde & Co CMA ITF Duro Felguera Australia Pty Ltd ... Money on Account'. A Reasons/Comments column referring to that debit amount entry, says:
Payment of transfer of funds to CMA [which I interpolate means Controlled Moneys Account] as per trust agreement dated 23.10.19 to Clyde & Co CMA ITF [which I interpolate to be In Trust For] Duro Felguera Australia Pty Ltd ...
and giving a reference then to a BSB and account number that I do not need to relate in these reasons.
Then, by his attachment RG-3, Mr Goyal refers to an email sent by a senior associate of Ashurst Australia on behalf of the administrators to Mr Glen Warwick, the relevant partner at Clyde & Co. The email had attached a letter directed to Mr Warwick and advising him of the appointment of the three administrators on 28 February 2020. The letter and email are both of 3 March 2020.
The letter had requested that Clyde & Co not transfer, or otherwise make any payment of any Duro related amounts held in any trust accounts as controlled by it in relation to Duro trust sums, 'pending completion of' the administrator's investigation of the affairs of Duro and the identification of Duro's assets.
The letter also requested Mr Warwick provide at least seven days' written notice to Ashurst Australia if Clyde & Co intended to transfer or otherwise deal with, or make any payment of the trust sums as identified in that communication. The Ashurst letter concluded, seeking that Clyde & Co agree to comply with the request.
I interpolate that Clyde & Co does appear subsequently to have adhered to the request of the voluntary administrator's lawyers of 3 March 2020. It is established as a fact that the $AUD27 million remains held in the controlled moneys account established by Clyde & Co. That remained the position at the time of trial.
Finally, by an email of 17 March 2020, Mr Warwick of Clyde & Co communicated with a Ms Clemente of Ashurst Australia (RG-5). This letter was seeking advice as to the status of the voluntary administrator's investigations and as to the voluntary administrator's position in respect of other trust funds controlled by Duro, as were listed in the 3 March 2020 letter. Mr Warwick now advised (page 31):
We will endeavour to provide as much notice as practicable prior to making any payment out of funds held in trust ...
He also advised of a perceived obligation at then to pay out certain amounts falling due on 20 March 2020 to certain named persons who were acting (I infer as arbitrators) in another arbitration then being conducted in Australia as between Trans Global Projects Pty Ltd (in liq) ('TGP') and Duro.

Clyde & Co's position at the trial

Appearance

I have earlier mentioned Clyde & Co's conditional appearance (see [22] - [23]). At the trial on Monday, 23 March 2020, Clyde & Co was again represented by Mr Porter of counsel (acting on the instructions of Assured Legal Solutions). At no point of the trial was any issue raised verbally or by writing against this court's jurisdiction to issue orders concerning the Trust Amount, as sought by Dalian. I will return to this point later in greater detail. Consequently, any potential issue over jurisdiction as had once been raised by the memorandum of conditional appearance of Clyde & Co as originally filed, may be put to one side, as no longer relevant.

Relevance objections towards evidence by Clyde & Co

Given the truncated range of issues for final resolution at the expedited trial entered under order 7 of the 12 March 2020 directions, Mr Porter, for Clyde & Co, objected (only on the basis of irrelevance) to many paragraphs within the submitted affidavits of Mr O'Shannassy, as tendered at trial on behalf of Dalian and ultimately received by the court. Clyde & Co, given the regime of current determination, did not file any evidence of its own by the way of answering Dalian's foreshadowed breach of trust grievances.
Under urgent circumstances, it was not necessary for me to render a line by line formal relevance ruling against the Dalian affidavit materials of Mr O'Shannassy, insofar as they also direct criticisms in the nature of breach of trust allegations at Clyde & Co. But Mr Porter's relevance objection was well taken. It is plain that Clyde & Co, in all the circumstances, has not yet had a sufficient or viable opportunity to answer or address such breach of trust allegations. None are admitted. As stated, such matters are all for a later day, if pressed.
Obviously, Clyde & Co should have a full opportunity to answer those matters in due course, once all such grievances of Dalian are assembled, pleaded and particularised.
The evidentiary materials received from Dalian upon the present application have been received only to the extent of addressing the primary issue concerning the $AUD27 million rival claims to that Trust Amount and for resolving Clyde & Co's counterclaim that seeks the advice of the court as trustee.

Clyde & Co's counterclaim for advice as a trustee pursuant to s 92 of the Trustees Act (WA)

As was envisaged by order 7 of my 12 March 2020 directions, on 18 March 2020 a counterclaim was lodged on behalf of Clyde & Co by its New South Wales based lawyers of record, Assured Legal Solutions.
The counterclaim as filed then read in the following brief terms:
The First Defendant (Clyde & Co) applies for directions pursuant to s 92(1) of the Trustees Act1962 (WA) addressing the following matter:
If Clyde & Co is the trustee of a trust of which the plaintiff [Dalian] is a beneficiary, then, subject to Clyde & Co's right of reimbursement under s 71 of the Trustees Act 1962 (WA):
1.Is Clyde & Co obliged to pay the sum of $27 million, presently held by it (Fund) to [Dalian] by reason of cl 4 of the Agreement between [Dalian], the Second Defendant (Duro) and Clyde & Co dated 23 October 2019, and order 2 of procedural order 17 dated 24 January 2020?
- and -
2.Does Clyde & Co's obligation continue in circumstances where a voluntary administrator has been appointed to Duro?

Concerns over the counterclaim's terminology as filed

It will be observed in respect to the initial iteration of Clyde & Co's counterclaim, that its chapeau reads as somewhat equivocal, as regards its trusteeship. This issue was raised during the trial. In the first place, Clyde & Co's written submissions unequivocally accept that it was, and remained a trustee in respect of the Trust Amount (see the written submissions of 19 March 2020). It, of course, articulates no beneficial claim of its own to, or over them. Nor has it ever done.
By par 13 of its reply written submissions (electronic court document 25) of 22 March 2020, Clyde & Co had said:
As to [55(a)] of [Dalian's] submissions, there is no question that Clyde & Co holds the Trust Amount as trustee. Clyde & Co either holds the money on trust for Duro, or it holds it on trust for [Dalian]. Clyde & Co does not advance a case as to which of those options is correct. That is a matter as between the administrators and [Dalian]. The counterclaim is framed on the basis advanced by [Dalian], which appears to be that it is the beneficiary of the trust. But Clyde & Co seeks the Court's guidance regardless of who is the beneficiary. To make this plain Clyde & Co moves to amend the first line of the counterclaim so that it reads:
'If Clyde & Co is the trustee of the trust of which the Plaintiff [Dalian] or the Second Defendant (Duro) (or both), is a beneficiary ... '
The problematic terminology of the proposed to be amended chapeau still left Clyde & Co's status as trustee as equivocal - putting that status at issue by use of the precatory word, 'If'. Yet the very basis of Clyde & Co holding standing to (uniquely) approach a court to obtain its advice in a non-adversarial environment (as I discussed in Wood (as Co‑executor and Trustee of the Will of the Deceased) v Wood [No 5] [2015] WASC 28) is wholly predicated upon the court being asked to assist a trustee: see Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66. Clearly, the word 'If' must go.
Another problem arises to be addressed. The proposed counterclaim's further reference by the chapeau to s 71 of the Trustees Act, as regards a right of reimbursement by the trustee against trust assets, is also problematic, as regards seeking the advice of the court.
If Clyde & Co is, indeed, a trustee and if it can show that it has, as trustee, properly engaged with the terms of s 71, then s 71 of the Trustees Act would then be engaged. The section provides in the following terms:
A trustee may reimburse himself for or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers.
Future problems might no doubt loom over Clyde & Co engaging with the phrase 'reasonably incurred', as seen used in s 71. Plainly, on the materials filed to date, Dalian foreshadows grievances against Clyde & Co's conduct as a trustee. But, as also seen, these are matters all to be resolved at a later time.
I will say for the record that for the purposes of this expedited trial, Clyde & Co filed brief written submissions essentially of an interpleader position character. But Clyde & Co has not to date filed any answering affidavit material seeking to answer or engage with Dalian's criticisms, arguments or contentions concerning its conduct as a trustee. Under all the circumstances, that was the correct stance to take, given I am presently concerned only with the Clyde & Co counterclaim and with the primary issue over the ultimate destination of $AUD27 million.

Form of the counterclaim

Across the course of the trial over Monday, 23 March 2020, I had discussed with Mr Porter, for Clyde & Co, some potential amendments to the form of the questions as were posed under Clyde & Co's counterclaim -to cater for the issue raised under Clyde & Co's foreshadowed amendment, but also to address the problematic concerns I have now outlined above.
After some discussion, I suggested some further amendments to the terms of the questions for the court by the advice counterclaim, ultimately to the following essential form (see ts 75 - 76), namely:
1.Is Clyde & Co as a named trustee under the written Agreement made between Dalian, the second defendant (Duro) and Clyde & Co dated 23 October 2019, and order 2 of the Procedural Order number 17 dated 24 January 2020, obliged to pay the sum of $AUD27 million presently held by Clyde & Co (fund), to Dalian, or to Duro?
2.If so, from when was Clyde & Co so obliged?
3.Does Clyde & Co's obligation continue in circumstances where voluntary administrators have been appointed for Duro on 28 February 2020?
It may be seen from what has been canvassed to date that the essential controversy at the trial is as regards the destination of $AUD27 million. That primary issue sees Clyde & Co essentially declaring that it abides by the court's eventual determination to be rendered as between Dalian and Duro over that issue.

Entitlement to approach the court

I mentioned earlier the correctly taken irrelevance objection by Mr Porter on behalf of Clyde & Co to materials within Mr O'Shannassy's affidavits going beyond addressing the primary issue (or counterclaim). Mr MacLaurin SC for Dalian had attempted by a response to submit that the O'Shannassy paragraphs criticising, in effect, the conduct of Clyde & Co as trustee, were both legitimate and relevant - on the basis that Dalian was submitting that Clyde & Co by past conduct, was disqualified and no longer entitled to approach the court to obtain advice pursuant to s 92 of the Trustees Act (and, in that process, potentially gain the immunity protections allowed for a trustee as conferred by s 95 of the Trustees Act).
I should record that s 95 of the Trustees Act (WA) provides in the following terms:
(1)Any trustee acting under any direction of the Court shall be deemed, so far as regards his own responsibility, to have discharged his duty as trustee in the subject-matter of the direction, notwithstanding that the order giving the direction is subsequently invalidated, overruled, set aside or otherwise rendered of no effect, or varied.
(2)This section does not indemnify any trustee in respect of any act done in accordance with any direction of the Court if he has been guilty of any fraud or wilful concealment or misrepresentation in obtaining the direction or in acquiescing in the Court making the order giving the direction.
I rejected the submission of Dalian by senior counsel to the effect that it was too late, or was inappropriate for Clyde & Co to make application to the court as a trustee for direction, under s 92 of the Trustees Act concerning trust property and its management or administration of that property as trustee. Whatever the past, the underlying advice issue is still relatively young in its emergence and is as well important, urgent and, I assess, still proper for a consideration by the court under present circumstances.
I am also satisfied that all persons potentially interested in the application under the requirements of s 92(2) of the Trustees Act, have been served with and are participating in the present proceedings, and particularly the counterclaim as regards the fate of the funds.
I was and remain of the view that, in the presenting circumstances, it is appropriate and still open to Clyde & Co as a trustee, particularly whilst is is still the holder of significant trust funds the subject of rival claims, to approach the court to obtain urgent advice in the revised questions for advice as I have now identified.

Hence, I propose to proceed and answer the as revised three counterclaim advice questions seen above. I repeat, however, that none of that suggests I am dealing with or resolving any further issues the subject of par 2 of Dalian's minute of proposed orders of 11 March 2020, as seen earlier set out.

Facts found

By reference then to the four received affidavits of Mr O'Shannassy and the one affidavit of Mr Goyal, essentially, what stands fundamentally in issue as between Dalian and Duro at the present trial is a legal dispute, rather than a dispute of fact.
Nonetheless, as a matter of formality towards collecting and assembling the underlying core facts established at trial, I must next set out briefly, but working largely from a helpful chronology of events as was provided by Dalian's lawyers, the essential factual environment which is the setting for the present disputes.
I will commence with a brief background to the arbitration and Dalian's application for provisional relief, resulting in the Tribunal issuing PO 15 on 30 September 2019.

The arbitration

A Singaporean seated Tribunal comprising Sir Vivian Ramsay QC (presiding Arbitrator/Chairman of the Tribunal), Dr Michael Hwang SC (Co-Arbitrator) and Dr Robert Gaitskell QC (Co-Arbitrator) is conducting an international arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law 2010 (UNCITRAL).
The arbitration between Dalian as claimant and Duro as respondent arises out of a subcontract issued to Dalian for the design and supply of mobile stackers, reclaimers, a fixed stacker, car dumper and ship loader for the Roy Hill Iron Ore Project in the Pilbara region of WA under a subcontract of 31 August 2011. Within that arbitration Dalian was claiming ¥223,554,584.25 (Renminbi, the Chinese currency) as moneys payable for goods supplied and delivered under that subcontract.
On 30 September 2019, the Tribunal determined Dalian's application for provisional relief seeking ¥122,471,177.25 (approximately $AUD27 million) as security in that amount, or alternatively for a freezing or asset preservation order preventing Duro from disposing or diminishing the value of any of its assets in Australia, up to that amount.
Dalian's application to the Tribunal for security was made under s 12(1)(g) of the SIAA. It is convenient to set out below s 12(1)(g), (h) and (i) from that Singaporean legislation, which is found cited in PO 15.
The SIAA provisions provide:
Without prejudice to the powers set out in any other provision of this Act and in the Model Law, an arbitral tribunal shall have powers to make orders or give directions to any party for -
...
(g)securing the amount in dispute;
(h)ensuring that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party; and
(i)an interim injunction or any other interim measure.
A fuller background towards s 12(1) of the SIAA is provided later in the reasons (see [129] - [147]).
The Tribunal effectively accepted Dalian's arguments upon its application seeking security for its claim against Duro in that arbitration. See pars 53 - 57 of the arbitral reasons to PO 15 by which the Tribunal weighed the alternatives of issuing an order requiring the amount in dispute in the arbitration to be paid as security under s 12(1)(g) or instead, to otherwise issue a freezing or asset preservation order under SIAA s 12(1)(h) or (i), or under Article 26 of the UNCITRAL rules.
At par 57 of its PO 15 reasons the Tribunal said:
In those circumstances, the Tribunal considers that it should exercise its discretion under s 12(1)(g) of the Act and make an order for security for the following reasons. First, the Tribunal expects to make an award in the near future and any award should be enforceable and enforced. There would be irreparable harm to [Dalian] if it had an award which could not be enforced because assets were not available. Secondly, Duro has received a substantial sum which is more than is needed to satisfy current commitments and it seems likely that funds will be transferred at some stage to Duro Felguera SA in Spain. The Tribunal considers that, despite the statement on behalf of Duro, there is a likelihood of dissipation of assets. Thirdly, whilst the funds under the TGP Freezing Order might become available to [Dalian], it is not certain that they would as the purpose of the TGP Freezing Order was to secure sums that might be awarded to TGP. In those circumstances [Dalian's] right to security should be dealt with separately or by way of an order for security.
At par 58 the Arbitral Tribunal rejected the counter proposal of Duro to increase the financial limit of sums then the object of a Freezing Order issued earlier in respect of TGP. It said this:
Rather, the Tribunal considers that the most satisfactory arrangements, given the current financial position of Duro, is for Duro to provide security in the sum of AUD 27 million.
The Tribunal continued at pars 59 and 60:
The Tribunal, in the first instance, directs that Duro must forthwith take all necessary steps to deposit AUD 27 million in a bank account in the joint names of the solicitors for Duro and (Dalian), to be dealt with in accordance with the agreement of the parties or the direction of the Tribunal. The parties should thereafter be at liberty to agree and/or apply to the Tribunal for another appropriate form of security.
That security is provided on the basis of [Dalian's] cross undertaking in damages. It would be appropriate for the parties to agree the form of that undertaking including the terms of any fortification. In the absence of agreement, the Tribunal will make any necessary orders.
At the end the Tribunal, on 30 September 2019, ordered and directed by order 3 of its PO 15, as follows:
On the basis of a cross undertaking by [Dalian] in damages, that pending further order, Duro must forthwith take all necessary steps to deposit AUD$27M in a bank account in the joint names of the solicitors for Duro and [Dalian], to be dealt with in accordance with the agreement of the parties or the direction of the Tribunal.

Chronology following PO 15 at 30 September 2019

Dalian's chronology of relevant events of 19 March 2020 is a helpful document. It provides event descriptions which may largely be accepted as the established trial facts. For the most part the collected events are cross-referenced to documents to be found within Mr O'Shannassy's 25 February 2020 affidavit. At some places I have elaborated as required towards those now assembled facts:

Date	Event Description	Affidavit Annexure
16 October 2019	Dalian applies to the Tribunal over the form of its cross‑undertaking which it needed to give and duly gave in order to comply with PO 15.	TJO-8 and TJO-9
21 October 2019	The Tribunal issues Procedural Order No 16, giving directions on the form of the cross‑undertaking by Dalian.	TJO-10
23 October 2019	Dalian, Duro and Clyde & Co enter into the Trust Agreement with Clyde & Co identified as acting as Trustee.	TJO-11
28 October 2019	Clyde & Co inform Squire Patton Boggs (SPB) that 'the transfer is complete and AUD27M is now held in the Trust Account.'	TJO-12
19 December 2019	The Singapore Arbitral Tribunal issues the First Partial Final Award (First Award) determining that Duro should pay Dalian $US32,898,858.18 (First Award Sum).	Agreed Fact
23 December 2019	Dalian writes to Duro requesting Duro sign and return an enclosed written direction to Clyde & Co and that Duro also pay the balance of the First Award Sum.	TJO-13
2 January 2020	Dalian writes to Duro requesting Duro immediately comply with the request made in the preceding 23 December 2019 communication.	TJO-14
6 January 2020	Clyde & Co emails SPB informing that due to the Christmas period it was still in the process of seeking instructions from Duro.	TJO-15
8 January 2020	Dalian emails Clyde & Co requesting confirmation that Duro will comply with requests made in the 23 December 2019 and 2 January 2020 communications and provide an update as to its financial position by COB that day.	TJO-15
10 January 2020	Clyde & Co emails SPB advising it was still obtaining instructions from Duro and that it expected to be in a position to respond later that day.	TJO-15
13 January 2020	Dalian writes to the Tribunal noting that Duro had not returned a signed written direction to the Trustee advising the Trustee to release $AUD27 million to Dalian in respect of the First Award.	TJO-16
16 January 2020	Duro writes to the Tribunal requesting a 15 day adjournment to allow Duro an opportunity to confirm its position.	TJO-17
20 January 2020	Dalian writes to the tribunal rejecting the request for an adjournment.	TJO-18
24 January 2020	The Tribunal issues its PO 17 under which it determined, amongst other things, '[t]hat the Trustee, in accordance with clause 4 of the Trust Agreement, upon receipt of this written direction, must immediately release the Trust Amount, being AUD 27 million, to [bank account nominated by the Plaintiff]'.	TJO-19
29 January 2020	Dalian writes to Clyde & Co (as Trustee) requesting that it comply with PO 17 by releasing the Trust Amount to the as nominated SPB bank account.	TJO-20
30 January 2020	Clyde & Co responds to SPB's 29 January 2020 communication, asserting amongst other things that Duro did not hold sufficient funds in Australia to satisfy the First Award Sum and that '… Clyde & Co in its capacity as trustee, is concerned that … a transfer of the [Trust Monies] may expose Clyde & Co (and indeed Dalian) to claims by creditors that would otherwise have benefited from the funds held in trust', and also seeking an undertaking that SPB would hold any trust moneys in its account for a minimum period.	TJO-21
31 January 2020	Dalian responds to Clyde & Co's 30 January 2020 letter.	TJO-22
3 February 2020	Clyde & Co responds to SPB's 31 January 2020 communication. SPB responds to Clyde & Co's communication of the same day.	TJO-23 and TJO-24
6 February 2020	SPB writes to Clyde & Co advising that they hold instructions on behalf of Dalian to commence proceedings against Clyde & Co and Duro.	TJO-25
11 February 2020	Clyde & Co write to SPB referring to a commencement of court proceedings under Trustees Act 1962 (WA).	TJO-26
12 February 2020	SPB responds to Clyde & Co's 11 February 2020 communication seeking further information.	TJO-27
13 February 2020	Clyde & Co emails SPB providing a 'working draft' of an Originating Summons issued pursuant to seeking relief under s 92(1) of the Trustees Act.	TJO-28
14 February 2020	SPB responds to Clyde & Co's email of the previous day commenting on the form of the Originating Summons and requesting urgent attention.	TJO-29
17 February 2020	SPB emails Clyde & Co seeking an update as to its foreshadowed Originating Summons application under s 92(1) of the Trustees Act.	TJO-30
25 February 2020	Dalian via its lawyers SPB commences ARB 2 of 2020 and CIV 1279 of 2020 out of the Supreme Court of Western Australia both supported by affidavits of Mr O'Shannassy.
26 February 2020	Dalian serves the two proceedings immediately mentioned upon Duro and Clyde & Co.
28 February 2020	Mr Goyal, Mr Langdon and Mr Bumbak of KordaMentha appointed a voluntary administrators of Duro.
4 March 2020	KordaMentha issues a Circular to Creditors and Suppliers.
11 March 2020	First meeting of Creditors at KordaMentha's Sydney office.
12 March 2020	First directions hearing in ARB 2 of 2020 and CIV 1279 of 2020 before Martin J. Expedited trial ordered for 23 March 2020.

Given the international context in which the Arbitration leading to this proceeding occurred, it is appropriate to render some further brief observations upon the somewhat unique aspects of the Singaporean legislation (the SIAA) around which the Arbitration took place and which was ultimately utilised by the Tribunal in issuing its PO 15 at 30 September 2019.

The Singapore International Arbitration Act

The SIAA is the legal regime that governs international arbitrations seated in Singapore. The SIAA also governs non-international arbitrations where parties have a written agreement for Part II of the SIAA or the UNCITRAL Model Law on Commercial Arbitrations to apply.
The SIAA was initially enacted in 1994, having been amended several times, with the most recent edition being that of 2002 and which remains in force.
The overarching objective of the SIAA is undisputed. At the fore is the promotion of international arbitration in Sinagpore: see Swift-Fortune Ltd v Magnifica Marine SA [2006] SGCA 42 at [14]. The other critical policy of the SIAA is that of minimal curial intervention in arbitral proceedings: see AKN v ALC [2015] SGCA 18 at [37].
In Swift-Fortune at [14] the former Chief Justice of Singapore, Chan Sek Keong CJ, delivering the judgment of the Court of Appeal, further explained [14]:
We can conclude ... that the purpose of the [S]IAA is to promote the kind of international arbitration that would augment the legal and other kinds of services already available in Singapore, and which is conducive to promoting Singapore as an international arbitration centre.
Whilst the Model Law is explicitly incorporated in the SIAA, from inception the intent of the drafters was to take the SIAA beyond that. Presumably this was done with the hope that doing so would increase the attractiveness of Singapore as a seat of arbitration.
An explicit expansion objective beyond the Model Law was evident from the Law Reform Committee, Singapore Academy of Law, Report of the SubCommittee on Review of Arbitration Laws (1993) ('1993 Report'), being the report of the subcommittee tasked with drafting the SIAA.
By the 1993 Report at par 31, the subcommittee explicitly recommended that the powers of the Arbitration statute of Singapore be substantially increased to enable the proper functioning of international arbitrations in Singapore. The subcommittee had noted at par 30 that although it was generally accepted that an arbitrator has general powers to give directions for the conduct of an arbitration, those powers are necessarily implied by the trilateral agreement between the parties and the arbitrator and not by reason of a statutory power.
The subcommittee had recommended at par 31:
[T]he Model Law provisions should be expanded to include the powers set out in the UNCITRAL Rules, [Singapore International Arbitration Centre] Rules and such other powers as a Court should have, such as:
(a)orders for preservation, interim custody or sale of any property which are the subject matter of the dispute;
(b)orders for securing the amount in dispute;
(c)orders for ensuring that any award which may be made in the arbitration proceedings is not rendered ineffectual by the dissipation of assets by the other party; and
(d)interim injunctions or other interim orders.
Even further than this, the subcommittee identified that there was a 'lacuna' in the Model Law which needed to be filled in by the SIAA, to ensure that final awards, when made, were not merely a 'paper award' (see par 34). The as perceived lacuna was that under the Model Law arbitrators lacked the ability to make enforceable interim procedural orders including, as identified by the subcommittee, 'orders relating to interim preservation of property'. A proposed remedy was to ensure that the orders made under the powers as outlined by par 31 of the 1993 Report be registrable and therefore enforceable by the courts.

Section 12(1)(g)

In Front Carriers Ltd v Atlantic & Orient Shipping Corp [2006] SGHC 127 at [15], Ang J discussed that the measures within s 12(1) of the SIAA:
[A]re essentially remedies aimed at assisting in the just and proper conduct of arbitration, or in the preservation of property which is the subject matter of the arbitration.
In that context, and as I have previously outlined (see [120]), s 12(1)(g) of the SIAA reads:
Powers of arbitral tribunal
12.- (1) Without prejudice to the powers set out in any other provision of this Act and in the Model Law, an arbitral tribunal shall have powers to make orders or give directions to any party for -
...
(g) securing the amount in dispute;
It should be noted that the terms of the eventual subsection 12(1)(g) were essentially recommended under the subcommittee's draft bill 1993, although then under a different subsection letter.
Perhaps most telling as to a relationship between the drafter's initial objective when drafting the SIAA and that objective's implementation via s 12(1), are the comments of the subcommittee in the 1993 Report, at par 49:
The Committee therefore felt that on balance such procedures as the law allows to provide security for parties engaged in litigation in the curial system should also be made available to parties who chose to arbitrate, rather than litigate, international disputes of a similar nature. As the basic reason for the adoption of the Model Law is to build Singapore as an arbitration centre, the arbitration procedure should not be less attractive than the courts in relation to security for claims. (my emphasis in bold)
Whilst s 12(1) of the SIAA encapsulates Article 17 of the Model Law, it also, as discussed, expands on that generalised position. Article 17 in 1985 had read:
Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute. The arbitral tribunal may require any party to provide appropriate security in connection with such measure.
Although the Model Law was amended in 2006, Singapore did not adopt those amendments into the SIAA (see Henderson, A and Mahendra, V in 'Interlocutory Applications' in The Honourable The Chief Justice Sundaresh Menon and Brock, D (eds) Arbitration in Singapore: A Practical Guide at [11.098]).
To date there has been little discussion by the Singaporean Courts as to the basis on which the specific power to grant security conferred under s 12(1)(g) might be exercised. By their respective further written submissions of 30 March 2020, Dalian and Duro sought to address the position of this provision of the SIAA. As was helpfully identified by senior counsel for Duro, only two case authorities seem to discuss s 12(1)(g), and then only briefly. Those decisions touch upon the provision and do not provide additional insights: see H&C S Holdings Pte Ltd v Mount Eastern Holdings Resources Co; Limited [2015] SGHC 323; and Front Carriers Ltd v Atlantic & Orient Shipping Corp [2006] SGHC 127 at [8].
This position was also recognised by Henderson and Mahendra in Arbitration in Singapore at [11.092]. The editor-in-chief of that volume was the current Chief Justice of Singapore, Menon CJ.
The position as to limited case authority on s 12(1)(g) also, unsurprisingly, applies to Australian case law.
Despite limited curial insights towards s 12(1)(g), Henderson and Mahendra in Arbitration in Singapore (as well as both Dalian and Duro by their respective submissions), contextually recognise that s 12(1)(g) is followed by s 12(1)(h) (prevention of dissipation of assets) and by s 12(1)(i) (injunctive orders akin to Mareva and freezing orders). Thus, when looking to evaluate the power to grant security conferred under s 12(1)(g), its ostensibly stronger and elevated character (distinct from following powers to be seen under (h) and (i)), must be viewed in that surrounding legislative context.
Before next proceeding to evaluate aspects of the respective positions of the parties, I need to say something more about the express terms of the Trust Agreement made then between Dalian, Duro and Clyde & Co.

First basis

First, it was put:
[T]he Funds are held on trust for Duro, albeit subject to a contract (ie, the Trust Agreement). In this event, they are 'property of the company' and are governed by ss 437A and 437D of the Corporations Act, and should be made available to all creditors on a winding up.
The contention is that the Trust Amount held by Clyde & Co was always held on trust, but only for Duro, and for no other person. As I have said earlier, I cannot accept that argument. The argument is, of course, linked to a correlative Duro argument that by PO 15, all the Tribunal had directed, by reference to s 12(1)(g) of SIAA, was an in personam injunction and freezing order situation, rather than afford any elevated security status to Dalian as a potential judgment creditor of Duro. Put more correctly, Dalian was an arbitral award creditor, until the arbitral award received recognition and enforcement by a court. However, as now seen, I have now rejected both those commencing arguments of Duro made by its administrators.
On my view, the Trust Agreement, objectively assessed, was seeking to implement and give effect to PO 15 and with a security over some of the amount in dispute in the arbitration objective, for Dalian, until an outcome of the arbitration then pending before the Tribunal was delivered.
The First Partial Final Award event happened on 19 December 2019. And, as seen, Dalian was successful then as against Duro before the Tribunal in the award amount of almost $US32 million, an award sum very considerably exceeding the amount held as security in trust by Clyde & Co in Australia.
Consequently, Duro's submission to the effect that the Trust Amount was always to be held on trust solely for Duro and for no-one else cannot, in the end, be accepted. That outcome would be a position contrary to the text and surrounding context (being chiefly PO 15 and the Tribunal's reasons and, indeed, directly contradicting the objective of an order for security issued under s 12(1)(g) of the SIAA). Moreover, it would be a result against overall commerciality and the consequent consensual arrangements as later perfected under the Trust Agreement for the Trust Amount. The object of those arrangements was from then to afford a realistic conferral of security for some of the amount in dispute in the arbitration to Dalian, and was to be achieved by the Duro payment of the $AUD27 million to Clyde & Co at 28 October 2019.

Second basis

Duro's second general argument was to the effect that:
[T]he Funds are charged in favour of [Dalian], either as a security interest within the meaning of the PPSA, or by reason of a charge arising at general law. In this event, the Funds are governed by s 440B of the [Corporations Act], and the Court should not order that they be paid forthwith to [Dalian] during the course of the administration.
This, I assess, is the pivotal argument potentially favouring Duro upon the present application. I will return to discuss s 440B of the Corporations Act further in due course. But, as indicated, if Dalian held a PPSA security interest under the PPSA before 24 January 2020, then on my assessment that security interest came to be perfected well before 28 February 2020 by reason of the written direction of the Tribunal in PO 17 on 24 January 2020. From that time, Duro no longer held any residual equitable rights to the Trust Amount. Correspondingly, Dalian, through the possession of the funds from then held on its exclusive behalf by the trustee, from then enjoyed unqualified fully vested equitable ownership in the Trust Amount fund.
The situation post 24 January 2020 can be expressed even more simply. The Trust Amount as from then, for PPSA purposes (and for Corporations Act purposes as regards 'property'), was now the property of Dalian, not the property of Duro.

Third basis

A third alternate position contended on behalf of Duro was that:
[T]he funds are held on trust for [Dalian] ... Even if this is so, the Funds are still the property of [Duro] within the meaning of ss 9 and 437D [of the Corporations Act], or property 'used or occupied by, or in the possession of, [Duro]' and are subject to the restrictions in the meaning of s 440B of the [Corporations Act].
So seen, a heavy component of the second and third related residual arguments put on behalf of Duro is grounded upon s 440B of the Corporations Act. Thus, it is necessary to look more closely to scrutinise the terms of that provision found in div 6 of Pt 5.3A.

Section 440B of the Corporations Act

During the course of oral arguments at the trial, no relevant case authority was cited about s 440B of the Corporations Act. Nor was anything by way of relevant extrinsic materials put as to s 440B in its present form. The section appears to have been substituted in 2010 by amending Act 96 of 2010 s 3 sch 1, effective from 30 January 2012.
Section 440B(1) now reads in terms:
During the administration of a company, the restrictions set out in the table at the end of this section apply in relation to the exercise of the rights of a person (the third party) in property of the company, or other property used or occupied by, or in the possession of the company, as set out in the table.
A note to s 440B(1) reads:
The property of the company includes any PPSA retention of title property of the company (see section 435B).
Then, s 440B(2) simply says that the restrictions in a table at the end of the section do not apply in relation to the exercise of third party rights in property, if the rights are exercised either with the administrator's written consent or with the leave of the court. Neither exception is applicable here, at least yet.
Yet it is possible, theoretically, that I could give leave for the funds to be paid over to Dalian, even if I were to conclude that the funds had otherwise met some part of the expansive definition of the 'property' (of Duro) under the Corporations Act.
Next, s 440B(3) deals with possessory security interests. It says:
If a company's property is subject to a possessory security interest, and the property is in the lawful possession of the secured party, the secured party may continue to possess the property during the administration of the company.
So seen, s 440B(3) poses a question concerning whether or not the trust amount is a possessory security interest. The further question is whether or not it is in the lawful possession of Dalian, in which case Dalian can continue to possess the funds during a voluntary administration.
The enquiry posed out of s 440B(3) is whether under present circumstances, by which I assess Clyde & Co as holding the Trust Amount post 24 January 2020 as a fully vested beneficial interest upon an express trust for Dalian and without any residual qualifications (in light of the Tribunal's PO 17) is this: is that Trust Amount (as a chattel) to be assessed as being in the lawful possession of Dalian. As earlier discussed, especially given s 24(2) of the PPSA, that indeed is my end assessment, because Clyde & Co since 24 January 2020 holds the Trust Amount solely on behalf of Dalian and not for Duro. On no view, of course, does Clyde & Co hold those funds for itself beneficially.
Where personal property (ie, money) is held under an express trust, by a trustee for an absolutely entitled beneficiary, the beneficiary should be considered as being in a lawful possession of that property.
But even if I were wrong about the engagement of s 440B(3) favouring Dalian, the s 440B(1) argument put by senior counsel for Duro was only put by reference to item 1 of the s 440B table. That provision relevantly reads as regards the restrictions placed upon an exercise of third party rights - interpolating that the relevant third party would be Dalian. Hence, item 1 of the s 440B table would read:
If the third party is ... a secured party in relation to property of the company [ie, Duro], and is not otherwise covered by this table, then ... the third party [ie, Dalian] cannot enforce the security interest. (my emphasis in bold)
Clearly, a strong status quo asset protective legislative intent during any administration underlies s 440B (and, indeed, the whole of Pt 5.3A of the Corporations Act). That objective must be fully recognised and respected, so far as the text permits. Section 440B is a provision that seeks to deliver a status quo retention over the corporation's property while an administration unfolds. To that end, the terminology used describing the items in the s 440B table is extraordinarily wide.
Even so, on my assessment, there is a problematic obstacle here for Duro, arising from the text of s 440B(1) and then also, in the terminology in item 1 of the table.
The problem for Duro arises by way of what I assess is a relevant textual non-engagement for Duro, against the term 'property of the company' (ie, property of Duro). Nor does item 1's further terminology of 'in relation to' help Duro. That is not met. This is because, under s 440B(1), the reference is to an exercise of rights of a person (the third party, ie, Dalian) 'in property of the company', ie, again relevantly here, in the property of Duro.
My view as to 'property of the company' not being engaged by Duro for s 440B(1) purposes would seem to align with some observations of Allanson J in Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [No 4] [2014] WASC 405. There, Technomin was in voluntary administration. Beforehand it had made a payment into court as security (for Xstrata's costs). Later the costs of Xstrata had been taxed as successful party. Xstrata sought an order for payment out of those security moneys in court. His Honour at [24] said this:
The result, in my opinion, is that on the entry of judgment in January 2013, at the latest, the money in court was charged in favour of the defendants. Technomin had an interest that the money should be held and paid out only in accordance with the orders made by the court. But it had no right to the money itself, and could not call for it to be paid to it or at its direction. I doubt that, in those circumstances, the money could be regarded as the property of the company so that payment out would be a transfer or other disposition of its property, or would be a payment made by it. (my emphasis)
By my assessment, no part of s 440B(1) looks to be engaged here for Duro. That is, once again, because on Clyde & Co's receipt of the Tribunal's PO 17 at 24 January 2020, the Trust Amount funds, as the subject of the Trust Agreement, from then, were no longer in any way to be potentially to be viewed as property of Duro (howsoever widely defined the word 'property' is stretched by the PPSA, or by the Corporations Act - unless it were to be defined, say, as the company's formerly owned property - a bridge too far, I suggest).
Consequently, some six weeks on from 24 January 2020, when Duro had then entered voluntary administration, still with Clyde & Co as trustee of the funds, not acting on the written direction of the Tribunal of 24 January 2020, the inaction of the trustee is essentially not to the point, as regards s 440B. Upon Clyde & Co's undoubted receipt of the Tribunal's PO 17 written direction of 24 January 2020, there was no longer a basis to say that Duro then held any level of 'property' interest in the trust amount, even taking the concept of (personal) 'property' to be widely extended by definition or otherwise, under the Corporations Act, or by the PPSA.
On that basis, I must necessarily reject, as a result, all of Duro's arguments that s 440B(1) is engaged here. The Trust Amount funds were no longer the property of Duro, after 24 January 2020. Correlatively, those funds were from then possessed by Clyde & Co as trustee for Dalian, by reason of Dalian's fully vested and unqualified beneficial right to those funds.

Duro's penultimate written submissions of 30 March 2020

Duro's penultimate tranche of written submissions, filed by my leave granted at the trial, had sought to further address the implications of the Tribunal's written direction of 24 January 2020 issued under its PO 17 to Clyde & Co. It will be remembered that the direction was to 'immediately' pay the Trust Amount to SPB's identified Perth trust account (on behalf of SPB's client Dalian). The lawyers for Duro now sought at the end to invoke various other provisions of the Corporations Act in seeking to have the court, in effect, order Clyde & Co not to remit the Trust Amount to Dalian, as Dalian seeks, during the pendency of the administration (pars 14 - 43 of Duro's submissions of 30 March 2020).
Specifically, Duro seeks to invoke to that end a desired Trust Amount status quo, arising under the Corporations Act and, in particular, from div 7 of Pt 5.3A thereof and, specifically, s 441AA - s 441D.
Provisions such as s 441D(2) would require a formal application made to the court by the administrator. It is the case that no such application has yet been made, albeit foreshadowed, if needed, by Duro's penultimate submissions. Naturally, I would allow the administrators some time to file such an application, were I to be of a view that such a procedural requirement were the only significant inhibition against status quo relief as is sought over the Trust Amount. But Duro's difficulties extend someway beyond the merely procedural.
The written submissions of Duro of 30 March 2020, towards a submission that the court not allow the Trust Amount to leave Australia, duly invoke, in somewhat omnibus fashion, a contended potential engagement favouring Duro (by its administrators) to secure the status quo over the trust amount for a time, of provisions of the Corporations Act list below, including:
(i)s 441AA;
(ii)s 441A;
(iii)s 441B;
(iv)(presumably not s 441C, dealing as it does with perishable property); and
(v)s 441D which, by subsection (1) makes reference internally to 'act' under s 441B(1) and hence to the s 440B Table - which I have addressed earlier in the reasons.
However, towards all these status quo retention submissions concerning the Trust Amount by Duro, an underlying and repeated difficulty I invariably encounter, is by reason of Duro's inability to satisfy the 'property of the company' (ie, property of Duro) textual threshold premise (post 24 January 2020).
Thus, once the cl 4 Trust Agreement, written direction of the Tribunal of 24 January 2020 issued and was received by Clyde & Co as trustee, as regards the trustee remitting the trust amount to Dalian 'immediately', then, as I have now assessed matters as from that time:
(a)There was no longer any interest, equitable or otherwise, in those funds that can arguably be then validly described as the property of Duro.
(b)Correlatively, Dalian from that time now held a fully vested beneficial entitlement over the trust amount.
(c)Furthermore, Dalian no longer held an unperfected PPSA 'security interest' in those funds. Dalian's beneficial entitlement to those funds was now wholly unqualified and was perfected by the possession of the funds held for Dalian by Clyde & Co. Hence, Dalian, from 24 January 2020, enjoyed full beneficial ownership of the funds. Dalian was no longer, from then, a PPSA 'security holder'. Nor was Dalian, from then, a holder of a PPSA 'security interest'. Dalian was now entitled to those funds as if they were its own property and no-one else's. Clyde & Co from 24 January 2020, as trustee of the funds, possessed them for Dalian and was under an unqualified obligation to remit them to Dalian as it had been directed by the Tribunal under cl 4 of the Trust Agreement.
(d)The position might alternatively be evaluated from a PPSA security interest perspective as the possessory engagement and perfection by Dalian with s 21 of the PPSA by perfection, by reason of possession (by Clyde & Co on Dalian's behalf for s 24(2) PPSA purposes).
(e)Alternatively, even further, s 440B(3) Corporations Act was engaged in the circumstances by Dalian.
(f)Consequently then, none of s 440B(1), s 441AA, s 441A, s 441B nor s 441D was, or is, relevantly engaged, given the absence at 28 February 2020 (and since 24 January 2020) of any security interest in the Trust Amount capable of being so regarded as the property (then) of Duro. At that time, the Trust Amount was to be regarded as the property of Dalian and no‑one else.
Consequently, Duro's submissions as regards maintaining the status quo by a court order over the funds during the pendency of the voluntary administration cannot be accepted by reference to any of these provisions.

Clyde & Co advice as a trustee

As already indicated, the position as ultimately articulated for Clyde & Co as trustee at the trial, effectively, was to interplead as regards the Trust Amount that it holds and to seek the advice of the court - in terms of the questions which have earlier been identified, by reference to the amended questions under Clyde & Co's counterclaim: see [105].
In that counterclaim context, the answers to the questions ultimately posed for advice to Clyde & Co as trustee, as the reformulated questions, must follow as being essentially self-evident from the conclusions I have now reached vis-à-vis the arguments I have herein resolved as between Dalian and Duro. Consequently, then, the three (3) questions may be answered as follows.
Question 1:
Is Clyde & Co as the named Trustee under the written Agreement made between Dalian, the second defendant (Duro) and Clyde & Co dated 23 October 2019, and order 2 of the Procedural Order number 17 dated 24 January 2020, obliged to pay the sum of $AUD27 million presently held by Clyde & Co (fund), to Dalian or to Duro?
Answer: 'Yes, to Dalian.'
Question 2
If so, from when was Clyde & Co so obliged?
Answer: From the time of Clyde & Co's receipt of a written direction the subject of (PO 17) issued by the Tribunal on 24 January 2020, upon a timeous ascertainment and verification that such written instruction was given in accord with cl 4 and cl 6 of the Trust Agreement (as it was), then from that time Clyde & Co was so obliged as regards Dalian.
Question 3:
Does Clyde & Co's obligation continue in circumstances where voluntary administrators have been appointed for Duro on 28 February 2020?
Answer: In the circumstances, as further discussed by these reasons below, the answer is 'Yes, subject to [270] - [277] that follow.'

Some further matters

Publication and orders

In the event that I did reach a conclusion adverse to the contentions of Duro (put on its behalf by its administrators), as I now have, it was requested I refrain from issuing orders or, in effect, to stay my orders for a reasonable period, so as to allow Duro by its administrators to consider its position.
In the somewhat unpreceded circumstances of an international pandemic and a somewhat complex evaluation as now undertaken, I am of the view that that is not an unreasonable request.
Consequently, I will simply publish these reasons to the parties and otherwise refrain from issuing any orders giving effect to the reasons for a period to be discussed as between the parties, following their publication.
Given the current COVID-19 pandemic, I would provisionally assess that a period of two weeks (14 days from publication) should suffice. But I will hear the parties about that if necessary.

Section 71 Trustees Act application by Clyde & Co

One further complication arises as regards the position as expressed by Clyde & Co as a trustee. This is in circumstances where Clyde & Co foreshadows exercising rights under s 71 of the Trustees Act, as regards protecting itself by retaining a portion of the Trust Amount, so that it might effectively reimburse itself in respect of its legal expenses as trustee anticipated to be incurred by it in future. This would arise by Clyde & Co potentially facing future claims by Dalian for breach of trust, including for lost interest, by reason of Clyde & Co failing to remit the Trust Amount to SPB's trust account (as agent for Dalian) at or more proximately to 24 January 2020, as directed by the Tribunal.

Absent some explicit indication from Dalian of no future breach of trust claims being made against Clyde & Co (other than to a lost interest claim for the period between shortly after 24 January 2020 and the time that Dalian actually receives the benefit of the funds), I regret I will need to hear the parties further on this issue. A hearing would need to canvass the amount of a retention amount sufficient to cover Clyde & Co's future legal costs, in the event that it needs to defend itself against contentions of breach of trust. This sum will be based on a hypothesis that Clyde & Co would ultimately be successful in resisting those claims, or at least in persuading a court it has not acted unreasonably as a trustee in terms of conducting itself in a fashion that justifies the removal or denial of a trustee's orthodox indemnity rights against trust assets.
During the course of arguments at the trial a figure of $AUD500,000 was canvassed. Subject to hearing the parties, I am inclined to think that if Dalian does not equivocally resile from pursuing future breach of trust challenges against Clyde & Co, that funds of at least that amount ought to be preserved in Australia and so, not be remitted to Dalian - so that the trustee might then still hold some viable indemnity amount of trust assets accessible in Australia, if Clyde & Co is ultimately vindicated.
In any event, I will need to hear the parties about all that, if it remains an issue in contention. The parties should communicate their respective positions about this further issue being determined within the 14‑day period that I have otherwise mentioned in [273] of these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
RB
Secretary
30 NOVEMBER 2020