Grant Thornton (WA) RSE Services Pty Ltd
[2012] VSC 428
•18 September 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. SCI 05984 of 2011
| GRANT THORNTON (WA) RSE SERVICES PTY LTD (in its capacity as Acting Trustee of the Brashs Pty Ltd Staff Provident Fund (SFN 137 419 949)) (ACN 115 026 885) | Plaintiff |
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JUDGE: | Pagone J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 July, 1 August 2012 | |
DATE OF JUDGMENT: | 18 September 2012 | |
CASE MAY BE CITED AS: | Grant Thornton (WA) RSE Services Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 428 | |
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TRUST – Dissolution of fund in portions – Proposal to distribute surplus funds to identifiable members – Whether identified members were members remaining at the date on which the fund was dissolved – Whether proposed distribution of funds is reasonable.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G T Bigmore QC with Mr C R Brown | Mills Oakley Lawyers |
| Contradictor | Mr M J Galvin |
HIS HONOUR:
The plaintiff seeks declarations, and the court’s guidance, in relation to the exercise of its powers as trustee of a fund (“the Fund”) established by trust deed executed 22 April 1966. The trust deed was thought to have been amended in 1974 but Warren J (as her Honour then was) determined in BHLSPF Pty Ltd v Brashs Pty Ltd[1] that the provisions of the 1974 amending deed relating to the dissolution of the Fund were invalid and that the corresponding provisions in the 1966 deed had survived and therefore governed the Fund in relation to its dissolution and distribution of any surplus. In particular her Honour held that rr 15 and 18 of the 1966 deed had survived the 1974 amending deed and were exercisable by the trustee.[2]
[1](2001) 8 VR 602.
[2]Ibid 616 [57].
Rule 18 of the deed relevantly confers upon the trustees a broad discretion for distribution of the residue of the Fund remaining “at the date on which the fund is dissolved”. The trustee holds a surplus fund of about $1.49 million which it wishes to distribute amongst the persons who were members of the Fund as at the date of its dissolution in proportions that it considers just and equitable. The purpose of the present application is to obtain the court’s guidance as to when the Fund was dissolved and as to whether the trustee would be justified, or acting reasonably, in distributing the surplus in the manner proposed.
Rule 18 permits the distribution of the residue of the Fund amongst the members remaining at the date on which the Fund was dissolved. Rule 18(a) provides:
18.(a)The fund shall be indefinitely continuing but should the fund or portion thereof be dissolved from any cause whatsoever then subject to the provisions of the trust deed and the rules the trustees shall forthwith:
(i)Either obtain an endowment assurance policy from the Society on the life of each member on the basis of and as provided in such event by the Group Policy and transfer such endowment assurance policy to the member on whose life it is affected [sic] or terminate the benefit on the life of each member and pay to that member that proportion of the amount received from the Society in terms of the Group Policy as is attributable to his interest under the fund.
(ii)Pay to every past member who shall have remained in the service of the Company after the age for retirement all moneys held by them in respect of him and interest accrued thereon.
(iii)Subject to providing for any discretionary benefits as referred to in rule 15 and to the payment of any costs charges and expenses incurred by the trustees as aforesaid divide and distribute the residue of the moneys remaining in their hands amongst the members remaining at the date on which the fund is dissolved in such shares and proportions as the trustees shall consider just and equitable.
Rule 15 gives the trustee a broad discretion to decide how to distribute funds amongst those entitled to benefit, and provides:
15.Subject to the obligations of the trustees under the provisions of the trust deed and rules regarding benefits and benefit moneys the trustee in their absolute discretion may apply any unallocated part or parts of the fund:
(a)In augmenting the benefits to which any members or class of members are entitled.
(b)In providing assistance to any member or ex-member in case of need, sickness or hardship.
(c)In providing assistance to the dependants of any member or ex-member.
(d) In or towards payment of contributions under the fund.
(e)In paying any expenses in connection with the establishment or administration of this fund.
(f) As a refund to the Company of any contributions paid by it.
If the trustees set aside an amount in terms of this rule to augment the benefits of any member they will notify the member of the amount so set aside and will hold such amount in trust until his retirement or death to pay it in the manner and to the persons as specified in the rules. If the member ceases to be in the employment of the Company prior to the age for retirement the amount so set aside will be retained by the trustees for the general purposes of the fund.
Warren J (as her Honour then was) held in BHLSPF Pty Ltd v Brashs Pty Ltd that r 18 was then exercisable on her Honour’s finding that the Fund had dissolved.[3] The issues which now arise for determination are the identification of those amongst whom the residue may be distributed and, for that purpose, the identification of the date of dissolution.
[3]Ibid 615 [53].
The word “dissolution” is not given a special or defined meaning in the deed or under its rules. Rule 18 was expressly provided to operate where there was dissolution of either the Fund as a whole or a portion of the Fund. The opening words in r 18(a) identifies, as a condition of its operation, that “the fund or portion thereof be dissolved”. Other provisions of the trust deed at the time of its creation similarly contemplated partial dissolutions of the Fund. Clause 10(a) provided:
10.(a)If the Principal Company or any Associated Company shall from any cause whatsoever cease to carry on business or an order be made or an effective resolution passed for the winding up of the Principal Company or of such Associated Company (unless such winding up shall be for the purpose of reconstruction or amalgamation and the new company then formed shall have the necessary power and shall agree with the trustees to take the place of the Principal Company or of such Associated Company in the fund) so that the employment of some or all of the members of the fund would thereby be terminated that portion of the fund which relates to the members whose employment has been terminated as aforesaid shall from the date of the happening of such event be dissolved and all moneys and other assets held by the trustees in respect of the said portion of the fund shall be distributed in accordance with the provisions of this deed and of the rules and every member whose employment is terminated as aforesaid shall accept such benefit allotted to him by the trustees in full discharge of all claims in respect of the fund and shall have no further claims whatsoever in respect of any rights or benefits under this deed or otherwise in connection with or arising out of the fund and all decisions of the trustees in respect of any such benefit shall be final and conclusive.
Clause 10(a) is no longer operative but it was part of the trust deed when r 18 was drawn and may, therefore, relevantly inform the construction of r 18. Clause 10(a) contemplated, and required, a partial dissolution of the Fund when certain events occurred involving the cessation of business leading to the termination of employment of some or all members of the Fund.
The way in which the trustee proposes to exercise the discretion conferred by r 18 depends upon there having been not one single dissolution of the whole Fund but, rather, partial dissolutions of the Fund over time. The trustee submitted that there were a number of events which had occurred between the appointment of administrators on 2 May 1994 and the date of the sale of the last relevant business on 25 May 1998 which had resulted in partial dissolutions of the Fund over that time. That view depends in part upon whether those events were contemplated by cl 10 as involving partial terminations of businesses.
Brashs Holdings Ltd (“BHL”) and associated entities carried on business before May 1994 as retailers of recorded music, musical products and consumer electronics from 189 stores across Australia. On 2 May 1994 administrators were first appointed to BHL and other companies in the then Brashs group. Before then the group had interests in the book selling businesses of “Angus & Robertson”, “Bookworld”, “Angus & Robertson Bookworld” and “Angus & Robertson the Bookshop” which, on 29 November 1993, were sold to Sesta Pty Ltd. As at May 1994 the Brashs group employed some 3000 individuals, approximately half of whom were employed full time. The trustee has formed the view that as at 1 November 1993 the Fund had 93 defined benefit members and 15 members entitled to death and disablement benefits or superannuation guarantee charge accounts only. That view is based on an actuarial report but the trustee has been unable to identify the extent to which the members may have been affected by the November 1993 transaction or whether the transaction resulted in a dissolution of any part of the Fund at that time. Between 5 November 1993 and 18 April 1994 18 members left the Fund in circumstances that the trustee has not been able to determine.
The appointment of the first administrators on 2 May 1994 were to BHL, Brashs Pty Ltd, Allans Publishing Pty Ltd, Hi Fi Nominees Pty Ltd and Electronic Imports Pty Ltd. The other members of the group at that time had ceased trading but remained under the control of their directors. The trustee estimates that the Fund had approximately 90 members immediately prior to the period of the first administration. Between 2 May 1994 and 5 July 1994 the administrators closed approximately 32 Brashs stores terminating over 200 employees, 16 of whom were members of the Fund. Around 5 July 1994 Brashs, Electronic, Hi Fi and Allans entered into a Deed of Company Arrangement. On 21 July 1994, BHL also entered into a Deed of Company Arrangement which, collectively, may be referred to as the First Deed of Company Arrangements. Under the First Deed of Company Arrangements, BHL undertook to transfer all of its shares in Brashs for a subordinated loan of $40 million to Hotel Properties Ltd and Reef Holdings Pty Ltd. Brashs took over the assets of BHL, Electronic, Hi Fi and Allans and assumed their respective liabilities. Brashs assumed the responsibility for the employment of the employees of BHL, Electronic, Hi Fi and Allans and was substituted for BHL as the Principal Company under the Fund. The deed administrators were charged with realising the assets of other companies in the Brashs Group including Brashs Imports Pty Ltd, Daletto Pty Ltd, Brashs (Hong Kong) Limited, and Allans Pty Ltd (including its subsidiaries), Brashs NSW Pty Ltd, Herbert Dodd Unit Trust and Bookworld Stores Pty Ltd.
The trustee estimates that the Fund had 79 members as at the commencement of the First Deed of Company Arrangement. On 7 February 1998 the directors of Brashs appointed new administrators to the company which constituted an event of default under the First Deed of Company Arrangement. Forty Brashs stores had been closed between 5 July 1994 and 7 February 1998 which the trustee estimates resulted in 68 members of the Fund ceasing to be members and 10 new members having joined. At the time of the second administration each of Allans Publishing, Electronic, Hi Fi, Geoffrey Button Sales Pty Ltd and Bixulo Pty Ltd had continued to be wholly owned subsidiaries of Brashs. At that time it had 91 stores and 1869 employees across Australia. On 27 April 1998 a Creditors Trust Deed was executed for the benefit of the creditors under the First Deed of Company Arrangement which was thereupon terminated.
The second administrators entered into an agreement on 17 April 1998 for the sale of the Allans music publishing business to LeCorporte Pty Ltd with effect from 6 April 1998. The purchaser agreed to offer employment to all 145 employees in the business with Brashs agreeing to pay accrued wages, salary and allowances. The purchaser, however, was to assume liability for long service leave, annual and other entitlements in consideration for a reduction of the purchase price. The trustee has identified six members of the Fund who were transferred to the purchaser with the Allans business. Their entitlements in the Fund were to be transferred to the purchaser’s superannuation fund.
The second administrators sold and assigned various assets of Brashs comprising the Sanity business on 4 May 1998 to Palm Lake Pty Ltd. The purchaser agreed to offer employment to all 192 employees of the business and to assume liability for their long service leave, annual and other entitlements. The trustee has been unable to identify how many of the transferring employees were members of the Fund. It was a term of the sale agreement that the purchaser would offer superannuation arrangements to the employees on terms which were no less favourable than those prescribed by any relevant legislation. The entitlements of those employees who were members of the Fund were to be transferred to the purchaser’s superannuation fund. The trustee estimates that the Fund had between 17 and 21 members as at the commencement of the second administration. Eighty-nine stores were closed during the period of the second voluntary administration between 7 February 1998 and 8 May 1998. The employment of 600 employees of Brashs was terminated of whom 15 were members of the Fund.
On 8 May 1998 a Second Deed of Company Arrangement was entered into by Brashs. The trustee describes this as a “quasi-liquidation of the remaining assets of Brashs”. On 18 May 1998 the second administrators sold the assets relating to the retail sale of consumer electronic goods to The Muirs Electrical Company Pty Ltd. The assets sold included the rights to the name “Brashs”, associated goodwill, plant and equipment, stock, intellectual property, leases, contracts, records and cash. The second administrators entered into similar arrangements for the transfer of employees and employee entitlements as had been entered into in relation to the sales connected with the Allans and Sanity businesses and assets. The trustee believes, however, that none of the 73 employees connected with the sale to Muirs was a member of the Fund.
On 29 May 1998 the administrators of the Second Deed of Company Arrangement sold the Brashs business known as the “Sony Shop” to Douglas Hi-Fi and Video. The agreement provided for the purchaser to take over the employment of selected staff. The trustee calculates that the Fund had between two to six members as at the commencement of the Second Deed of Company Arrangement. In the period between 8 May 1998 and 30 September 1998 the deed administrators closed 29 Brashs stores and terminated the employment of 701 Brashs employees of whom eight were members of the Fund.
The overall position of the forgoing narrative is that the trustee has identified a total of 107 members of the Fund who have ceased employment over three distinct periods. It may be summarised in the following table:
Period No. of Members of the Fund
who Ceased EmploymentFirst Administration
2 May 1994 to 5 July 199416 First Deed of Company Arrangement
6 July 1994 to 6 February 199868 Second Administration and
Second Deed of Company Arrangement
7 February 1998 to 7 January 200823 Total 107
Of these 107 people the trustee has been able to identify 95 (“the identifiable members”) of whom 92 have located. Three of the 95 have been identified but their contact details appear no longer to be current and have not been found. The remaining 12 (“the unidentifiable members”) of the 107 have not been identified sufficiently to be found. Ten of those have been identified only by surname, first name initial and date of birth, and 2 have been identified only by surname and first name.
The trustee’s proposal is to distribute the surplus of the Fund to the identifiable members by distributing directly to those members who have been found and by payment to the Registrar of Unclaimed Money the proportion of the Fund referable to those members who had been identified but not found. The trustee considers that the 12 members described as unidentified are not able to be identified for the purposes of the distribution of the surplus and, therefore, does not propose to distribute any of the surplus to them. Mr Fitzgerald has filed a lengthy and detailed affidavit with supporting exhibits detailing the efforts which have been made to identify and find the members of the Fund. He is a director of the trustee and a registered liquidator and an official liquidator. His efforts have not been able to identify the 12 members described as the unidentifiable members. I am satisfied that diligent steps have been taken by the trustee to identify the people who cannot be identified but that it has not been possible for them to be identified reliably for the purpose of any distribution.
The trustee’s proposed distribution would have the effect of distributing the surplus to as wide a group of former members of the Fund as appears practically possible. The fundamental question, however, is whether the group identified by the trustee comes within the entitlement to benefit in the residue of the Fund as contemplated by r 18. Rule 18 requires that any residue be distributed amongst the “members remaining at the date on which the fund is dissolved in such shares and proportions as the trustees shall consider just and equitable”. The trustee has a wide discretion with respect to distribution once the identify of the relevant members has been determined, but the identification of the members who are entitled to benefit under r 18 must first be undertaken as a matter of legal entitlement. Mr Galvin of counsel, appearing as controverter or amicus curiae,[4] submitted that the information available to the trustee did not warrant the trustee’s view of partial dissolutions of the Fund, but that Brashs continued to trade until the sale of the Sony Shop business on 29 May 1998. On that assumption there are many fewer members who are eligible under r 18 to benefit from a distribution than those who would benefit under the trustee’s proposal.
[4]Mr Galvin of counsel was appointed by Mukhtar AsJ on 6 March 2012 as contradictor but Mr Galvin submitted that his role is more properly characterized as amicus curiae. The trustee, in contrast, submitted that Mr Galvin of counsel was appointed to represent an unidentified class of members by providing a contrary argument to that of the trustee. No issue before me turns upon whether Mr Galvin appeared as amicus curiae or as contradictor, although in the absence of him appearing for a nominated party his role might more correctly be described as that of an amicus curiae charged to act as contradictor to the trustee for the assistance of the court.
The construction of r 18 is not without difficulty. It contemplates the dissolution of the Fund in whole or in part. Clause 10 also contemplated the whole or a partial dissolution of the Fund, and identified events upon which the Fund was to be dissolved in part. Neither cl 10 nor r 18 effected a dissolution. Clause 10 identified events which required the Fund’s dissolution but did not itself purport to effect a dissolution upon the occurrence of the event. Clause 10(a) said that upon the occurrence of certain events the Fund (or a portion) “shall … be dissolved”. Clause 10(c), similarly, spoke of the portion of the Fund “which is to be dissolved”. The language of cl 10 contemplated that the occurrence of events would trigger steps to bring about a dissolution of the Fund rather than that the occurrence of the events would themselves constitute or effect the dissolution. Rules 15 and 18 would then apply to the Fund which had been dissolved, with the surplus being distributed under r 18 to the members of the Fund who were members on the date of dissolution. For that purpose “the date on which the fund is dissolved” does not refer to the date upon which the final payment may be made before distribution of the surplus but to the time at which the process of dissolution commenced. Such a construction accords with the nature of a dissolution of a fund which necessarily involves a process over time to identify the entitlements and the funds available, to receive and pay funds, to liquidate assets and investments, to pay expenses and to receive income and, at some point in that process, to identify a surplus separate from the entitlements which may in part have been paid out and in part may yet to be paid.
The contradictor accepted that r 18 may operate upon partial dissolutions but submitted that the only relevant partial dissolution was a partial dissolution brought about by Brashs entities ceasing to trade before or at the commencement of the first administration with the direct result of termination of the employment of Fund members. This view depends upon limiting the circumstances of dissolution of the portion of a Fund to those in which there has been the cessation of a business. In my view the construction urged by the contradictor gives too narrow an interpretation of the dissolution contemplated by r 18 and does not accord with the purpose of r 18 and cl 10 of ensuring a matching of entitlements in the surplus with the members for whose benefit the entitlements accrued in the Fund. The rule speaks of the Fund being dissolved “from any cause whatsoever” and those words should not be given a narrow meaning. The event upon which r 18 operates is the dissolution of a fund and there is no reason to give “dissolution” a narrow meaning. The objective of r 18 was to ensure that any benefit referrable to a portion of the Fund would be enjoyed by those entitled to that portion rather than falling into a general pool for others. The events which might trigger such benefits were not confined but were described at large as the “dissolution” of a portion of the Fund. Clause 10 contemplated a matching of portions of the Fund with entitlements where dissolutions were occasioned by particular events which could reasonably be regarded as the dissolution of an identifiable portion of the Fund. An ongoing fund with identifiable businesses and identifiable employees could sensibly operate to require a matching of a part of a fund with an event requiring a partial dissolution.
The events which occurred to this Fund, from the appointment of the first administrator, brought about the cessation of one or more business units coupled with the termination of one or more employees involved in the operation of those business units who were also members of the Fund. Those events are readily enough capable of falling within the general words in r 18 of a portion of a fund having been dissolved “from any cause whatsoever”. The appointment of the first administrators led to the closure of several stores, the termination of several employees, including members of the Fund and the winding up of several associated entities. The appointment of the second administrators, similarly, led to the closure of further stores either by sale or cessation of business, the transfer or termination of employment of employees, including members of the Fund, the sale of several remaining associated entities and the quasi-liquidation of the Brashs business through the second deed of company administration. The events necessarily involved, and expressly contemplated, the termination of businesses of a kind contemplated by the partial dissolutions provided for in r 18.
On that view I consider the trustee’s proposal for distribution of the surplus to be within the power of r 18 and to be appropriate in the circumstances. The events which have occurred between the appointment of the first administrators on 2 May 1994 and the date of the sale of the last relevant business on 29 May 1998 demonstrate a gradual and partial dissolution of the Fund over those years. They are events constituting partial dissolutions for the purpose of r 18. They are also all events of a kind contemplated by cl 10 as events requiring the partial dissolution of the Fund had cl 10 been operative.
It is also appropriate for the surplus to be distributed to the 95 individuals identified by the trustee in the manner proposed because it is not possible to identify any part of the surplus referable to any one or more within that group. There is no information available that allows the trustee to identify the quantum of the surplus at the time of each partial dissolution. Indeed, it is likely that such information would not have been available in any event because the surplus at any point in time was dependent upon the payment of benefits to remaining members and the receipt of income on investments continuing to accrue with the continued payment of ongoing expenses. The actuarial reports in 1994 and 1997 disclose that the surplus of the Fund from before the first administration was between $2.2 and $2.6 million. From this it can be concluded that the current surplus is traceable to the period before the first administration and therefore attributable to employer contributions made on behalf of the Fund before the first administration. In those circumstances it is appropriate to conclude that the surplus for distribution is referable to all of the individuals as proposed by the trustee.
Accordingly, the orders will be:
A. A declaration that there was a partial dissolution of the Brashs Pty Ltd Staff Provident Fund (SFN 137 419 949) (“the Fund”) on each of the following dates for the purpose of r 18(a)(iii) of the Trust Deed, resulting in a complete dissolution of the Fund on the final date:
(a) 2 May 1994, being the date of appointment of the first voluntary administrators;
(b) 5 July 1994, being the date of execution of the first Deed of Company Arrangement;
(c) 7 February 1998, being the date of the appointment of the second voluntary administrators;
(d) 17 April 1998, being the date of the sale of the musical products division;
(e) 4 May 1998, being the date of completion of the sale of the recorded music business;
(f) 8 May 1998, being the date of the execution of the Second Deed of Company Arrangement; and
(g) 29 May 1998, being the date of the sale of the Sony Shop.
BThe answer “yes” to the question of whether the trustee is justified, and would be otherwise acting reasonably, in distributing the surplus assets held by it in its capacity as acting trustee of the Fund equally amongst all identifiable persons who were members of the Fund between 2 May 1994 and 29 May 1998 pursuant to r 18 of the Trust Deed.
CA declaration that where the trustee has identified persons who are entitled to a distribution of the surplus assets of the Fund but who the trustee, after making reasonable efforts, has been unable to identify address or other contact details (“the lost members”), the trustee is justified and would otherwise be acting reasonably by paying the distributions payable to lost members to the Registrar of Unclaimed Money pursuant to s 12(1) of the Unclaimed Money Act 2008 on or before 15 November 2012.
DA declaration that where any members’ distributions remain unclaimed as at 15 February 2013, the trustee is justified and would otherwise be acting reasonably by paying the distributions payable to such members to the Registrar of Unclaimed Money pursuant to s 14(1)(b) of the Unclaimed Money Act 2008.
EA declaration that where the trustee makes a payment to the Registrar of Unclaimed Money in accordance with C or D above, and where such payment would ordinarily be in breach of ss 11 and 12 of the Unclaimed Money Act 2008, the trustee has a reasonable excuse pursuant to ss 17 and 18 of the Unclaimed Money Act 2008 to the extent that the trustee has failed to comply with the requirements of ss 11 and 12 prior to the date of this declaration.
F The costs of the Contradictor be paid out of the Fund.
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