In the matter of Bevillesta Creditors' Trust

[2013] NSWSC 162

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Bevillesta Creditors' Trust [2013] NSWSC 162
Hearing dates:	22 February 2013
Decision date:	22 February 2013
Jurisdiction:	Equity Division
Before:	Gzell J
Decision:	Leave to file amended summonses. Defendants' notices of motion dismissed.
Catchwords:	PROCEDURE - Summary Termination - proof of debt be admitted by trustees of trust for former creditors of company - abuse of process - Uniform Civil Procedure Rules 2005 Pt 13, r 13.4(1)(c), Pt 14, r 14.28(1)(c) - time limit for lodgement of proofs - no power to extend - amended summons sought order giving trustees power to extend time under the Trustee Act 1925, s 81(1)
Legislation Cited:	Corporations Act 2001 (Cth) Corporations Regulations 2001 (Cth) Trustee Act 1925 (NSW) Uniform Civil Procedural Rules 2005
Cases Cited:	Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Domer v Gulf Oil (Great Britain) Ltd (1975) 119 Sol Jo 392 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Ku-ring-gai Municipal Council v Attorney-General (1954) 55 SR (NSW) 65 Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 628 Penthouse Publications Ltd v McWilliam (Court of Appeal, 14 March 1991, unreported) Riddle v Riddle (1952) 85 CLR 202 Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004; (2006) 64 ATR 325
Category:	Interlocutory applications
Parties:	Clio Natural Life Pty Ltd (Plaintiff) Hobbysew Australia Pty Ltd (Plaintiff) Dawa Development & Investment Pty Ltd (Plaintiff) The Greater Union Organisation Pty Ltd (Plaintiff) Beba Enterprises Pty Ltd (Plaintiff) Pumpkin Patch Originals Limited (Plaintiff) Peter Krejci as Joint Trustee of the Bevillesta Creditors' Trust (First Defendant) Martin John Green as Joint Trustee of the Bevillesta Creditors' Trust (Second Defendant) Top Ryde Funding Pty Ltd (Third Defendant)
Representation:	Counsel: S Duggan (Plaintiffs) A Bulley (Defendants) Solicitors: Gilbert + Tobin (Plaintiffs) Bridges Lawyers Pty Ltd (Defendants)
File Number(s):	2012/273228; 2012/273221; 2012/275292; 2012/273209; 2012/279816; 2012/275882

EX TEMPORE Judgment

1. Six plaintiffs have each individually commenced proceedings in this court challenging the defendants' decision, as trustees of a fund for the benefit of former creditors of Bevillesta Pty Ltd, rejecting their proofs of the debt.

1. In each summons a declaration was sought that the decision made by the first and second defendants in their capacity as trustees of the Creditors' Trust to disallow the claim of $44,000 in the case of Clio Natural Life Pty Ltd, and differing amounts in the other five matters, was made in error and an order was sought that the plaintiff's proof of debt in the amount of $44,000 be admitted in full.

1. The defendants filed a notice of motion in each proceeding seeking orders that the proceedings be dismissed or the summons be struck out as an abuse of process.

1. Uniform Civil Procedural Rules 2005, Pt 13, r 13.4(1)(c) provides, that if it appears to the court that in relation to the proceedings generally the proceedings are an abuse of process of the court, the court may order that the proceedings be dismissed generally.

1. The pursuit of proceedings that have no prospect of success is an abuse of process. Proceedings that are doomed to fail because there is no tenable cause of action are an abuse of process: see Domer v Gulf Oil (Great Britain) Ltd (1975) 119 Sol Jo 392.

1. The alternative claim which is based again on the abuse of process is Pt 14, r 14.28(1)(c) which provides that the court may order that the whole of the pleading be struck out if the pleading is an abuse of process of the court. The trustees say that the proceedings are doomed to fail because they are out of time. Clause 9.1(b) of the Creditors' Trust Deed reads as follows:

"The Trustees shall call for formal proofs of debt in support of any Trust Claims from Trust Beneficiaries pursuant to the those parts of the Corporations Act and Corporations Regulations incorporated into this Deed by clause 9.2 of this Deed for the purpose of deciding whether to admit that Trust Claim pursuant to this Deed as an Admitted claim".

1. Clause 9.1(d) provides:

"A Trust Beneficiary has 21 days from being notified of the Trustees' decision under clause 9.1(b) of this Deed to file with the Court and serve on the Trustees any appeal or other application in relation to the Trustees' decision. The Trustees will not pay a Final Dividend until the Court appeal or application has been determined."

1. Regulation 5.6.54 of the Corporations Regulations 2001 (Cth) provided in sub-reg (2) as follows:

"A person may appeal against the rejection of a formal proof of debt or claim within:

(a) the time specified in the notice of the grounds of rejection; or

(b) if the Court allows - any further period."

1. By clause 9.2 of the trust deed various provisions of the Corporations Act 2001 (Cth) were written into the trust deed, but that particular reg 5.6.54 was specifically excluded as were a number of other regulations.

1. The trustees say that the 21 day period to which I have referred expired on 27 August 2012. Each of the six plaintiffs commenced proceedings beyond that date; Clio Natural Life Pty Ltd, Hobbysew Australia Pty Ltd, and The Greater Union Organisation Pty Ltd commenced their proceedings on 31 August 2012. Dawa Developments & Investments Pty Ltd commenced proceedings on 3 September 2012; Pumpkin Patch Originals Limited on 4 September 2012, and Beba Enterprises Pty Ltd on 7 September 2012.

1. The trustees say there is no power in them or in the court to extend time, the six sets of proceedings are without remedy, and the proceedings are an abuse of process.

1. An applicant for summary termination has a high onus. The case must be very clear to justify the prevention of a plaintiff submitting a case for determination in the usual way (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91).

1. The court's powers of summary dismissal should not be exercised to deny a plaintiff access to the courts unless the lack of a cause of action is clearly demonstrated (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129). It is for the applicants to demonstrate that the summonses are beyond saving by legitimate amendment (Penthouse Publications Ltd v McWilliam (Court of Appeal, 14 March 1991, unreported) citing Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 631).

1. The notice of motion which has been returned instanter seeks leave to file an amended summons, claiming amongst other things, an order giving the trustees power to extend the time in cl 9.1(b) of the trust deed under s 81 of the Trustee Act 1925 (NSW). The first prayer for relief is in the following terms:

"To the extent necessary, an order pursuant to s 81 of the Trustee Act 1925 (NSW) or otherwise enlarging the time for the Plaintiffs to institute proceedings in relation to the decision by the First and Second Defendants as the Trustees of the Creditors' Trust of Bevillesta Pty Ltd (Receivers and Managers Appointed) (Creditors' Trust) to disallow a claim made by the First Plaintiff under the Creditors' Trust on 7 July 2011 (the Trust Claim), and/or conferring upon the Trustees of the Creditors' Trust the power to enlarge time for the institution of these proceedings."

1. Section 81(1) of the Trustee Act is in the following terms:

"Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the instrument, if any, creating the trust, or by law, the Court:

"(a) may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries, as the Court may think fit, and

(b) may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne as between capital and income."

1. The plaintiffs in each of the proceedings say that s 81 is wide enough for the court to give the trustees power to extend the time for lodgement of any appeal or other proceedings in the court. It has been said that s 81 is of wide import. In Riddle v Riddle (1952) 85 CLR 202 at 214, Dixon J said this:

"Section 81 is a provision conferring very large and important powers upon the Court which depend upon the Court's opinion of what is expedient, a criterion of the widest and most flexible kind."

1. In Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004; (2006) 64 ATR 325 at 333 [45]-[46], Campbell J said this:

"Of the types of dealing listed in s 81(1), in the phrase beginning 'any sale, lease...', the only noun capable of applying to the present situation is 'transaction'. 'Transaction', in s 81, extends to amendment of the trust deed: Re Philips New Zealand Ltd; Re Bowmil Nominees Pty Ltd (as Trustee of the Williamson Superannuation Fund); James N Kirby Foundation v Attorney- General (NSW).

Thus the type of power that Mr Stein seeks to have conferred on the trustee is within the scope of s 81."

(references omitted)

1. In that case, his Honour was prepared to allow an amendment to a discretionary trust deed to move the vesting date from 23 December 2007 to a much later date. And in Riddle, the court utilized the power to allow the trustees to invest in investments other than those specified at s 14 of the Trustee Act being shares quoted on a stock exchange.

1. The trustees say that in his review of a series of cases in Stein, Campbell J had regard to the New South Wales Court of Appeal decision of Ku-ring-gai Municipal Council v Attorney-General (1954) 55 SR (NSW) 65 at 74 when the court said:

"In order to invoke the provisions of s 81 it must be shown that a question has arisen in the management or administration of property vested in a trustee and that the making of an order such as the section authorizes is expedient - that is, expedient in the management or administration of the property."

1. Campbell J went on at [43] to say there had to be a question which had arisen in the management or administration of property vested in a trustee. It was submitted that in the circumstances of this matter, there was no relevant question in order to invoke the court's power under s 81. There was no question that the trustees in each of the proceedings have power to adjudicate the trust claims submitted in accordance with the terms of the trust deed; and furthermore, there is no question that there is no power available pursuant to the terms of the trust deed to extend the 21 day period in which any appeal to the court must be brought.

1. I disagree. The question is whether the proofs of debt of the six plaintiffs in these proceedings should be accepted.

1. On the question of expediency, the trustees say that each of the plaintiffs are seeking to rely on s 81 to gain for themselves an indulgence not properly available to them under the terms of the trust deed. In addition, each of the plaintiffs is seeking, it is submitted, to advantage themselves over those trust beneficiaries who had their trust claims rejected by the trustees and have not commenced proceedings.

1. In my view, it is highly arguable that a court would find it expedient to empower the trustees to extend the time for the commencement of proceedings under cl 9.2 by, for example, an amendment to cl 9(1)(d) of the trust deed to insert the words "or such further time as the trustees allow" after the numerals and word "twenty-one (21) days" because the purpose of the trust is to enable former creditors of the company with legitimate claims to become beneficiaries and to share rateably in any distribution. Part of that process is to enable a person who is dissatisfied with the rejection of a claim by the trustees to apply to the court.

1. In my view, the plaintiffs in each case have demonstrated that by legitimate amendment the summonses are saved. In those circumstances, there is no need for me to deal with the other arguments raised by the plaintiffs in their written submissions. The court gives leave to each of the plaintiffs to file in court the amended summonses. The defendants' notices of motion are dismissed.

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Decision last updated: 05 March 2013