Jebb v Superior Lawns Australia Pty Ltd
[2017] WASC 335
•20 NOVEMBER 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: PATRICK GERARD GLADWYN JEBB AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST -v- SUPERIOR LAWNS AUSTRALIA PTY LTD [2017] WASC 335
CORAM: KENNETH MARTIN J
HEARD: 21 JULY & 2 OCTOBER 2017 & BY THE DEFENDANT'S FURTHER WRITTEN SUBMISSIONS OF 9 OCTOBER 2017
DELIVERED : 20 NOVEMBER 2017
FILE NO/S: CIV 1179 of 2017
MATTER :An application pursuant to s 78 and s 79 of the Trustees Act 1962 (WA) for a vesting order in respect of the Trafalgar West Investment Trust
BETWEEN: PATRICK GERARD GLADWYN JEBB AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST
Plaintiff
AND
SUPERIOR LAWNS AUSTRALIA PTY LTD
DefendantLIQUIDATORS OF TRAFALGAR WEST INVESTMENTS PTY LTD (IN LIQ)
Interested Party
Catchwords:
Corporations - Trusts - Statutory oppression - Change of trustee - Proposed transmission of shares by law under vesting order - Effect of vesting order made for shares in proprietary corporation - Standing of transmittee shareholder to continue existing statutory oppression litigation - Likely nonsuit of former member in commenced action upon its loss of standing as member post vesting order
Legislation:
Corporations Act 2001 (Cth)
Trustees Act 1962 (WA)
Result:
Reasons published
Category: B
Representation:
Counsel:
Plaintiff: Mr S Standing
Defendant: Mr M L Bennett & Mr D Banda (21 July 2017), Mr A Tharby (2 October 2017)
Interested Party : Mr D W Thompson
Solicitors:
Plaintiff: Zafra Legal
Defendant: Bennett + Co
Interested Party : Cooper Legal
Case(s) referred to in judgment(s):
APT Finance Pty Ltd v Bajada [2008] WASCA 73
Belgravia Nominees Pty Ltd v Lowe Pty Ltd [2017] WASCA 127; (2017) 51 WAR 341
Enviroco Ltd v Farstad Supply A/S [2011] UKSC 16; [2011] 2 All ER (Comm) 269
Kings Quality Homes Ltd v AJ Paints Ltd [1997] 3 All ER 267
Leaney v Olmstead Pty Ltd (1994) 51 FCR 240
Morgan v Banning (1999) 20 WAR 474
Netbush Pty Ltd as Trustee for the Russell Roberts Family Trust v R W Roberts Pty Ltd [2004] WASC 247
Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87
Panfida Ltd v Hartogen Energy Ltd (1988) 51 SASR 404
Re Purkiss [1999] 3 VR 223
Re Spargos Mining NL (1990) 3 WAR 166
Rizeq v The State of Western Australia [2017] HCA 23; (2017) 344 ALR 421
Rodda v Lifestyle Loans Vic Pty Ltd [2015] VSC 628; (2015) 303 FLR 227
Rosen v Georges [2014] VSC 193
Titlow v Intercapital Group (Australia) Pty Ltd (1996) 65 FCR 449
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 2] [2013] WASC 143
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 6] [2014] WASC 278
Trafalgar West Investments Pty Ltd v LCM Litigation Management Pty Ltd [2016] WASC 159
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [2012] WASC 460
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 3] [2012] WASC 319
Treadtel International Pty Ltd v Cocco [2016] NSWCA 360
KENNETH MARTIN J:
Introduction
Mr Patrick Jebb, the plaintiff, seeks a vesting order pursuant to the Trustees Act 1962 (WA) over 345 ordinary shares and one D class share (the Shares) in Superior Lawns Australia Pty Ltd (Superior Lawns), which property is held on trust for the Trafalgar West Investments Trust (Trafalgar Trust).
A subterranean question that lurks in the shadows behind the application is whether the vesting order, if made, would allow Mr Jebb, by reason of s 234(d) of the Corporations Act 2001 (Cth), to be substituted as a replacement plaintiff for Trafalgar West Investments Pty Ltd (in liq) (T Co) in COR 59 of 2011, another pending proceeding in this court, so as to allow Mr Jebb to continue that pending litigation to a trial outcome.
As will be seen from these reasons, an answer to that subterranean question cannot be definitively provided. But all parties uniformly seek guidance from this court at this time towards that issue on the present application. That being the case, I would, as I seek to explain in these reasons, assess the subterranean question, at a high degree of certainty, as carrying a negative long term prospective outcome for Mr Jebb.
Overview of the background facts
Mr Jebb's present vesting order application is opposed by Superior Lawns - the entity in which the Shares are currently held by T Co as recorded on the shareholders' register of Superior Lawns.
There is a lot of background underlying the present application that is necessary to canvass.
COR 59 of 2011 is a s 233 Corporations Act statutory oppression action that has been pending in this court for some years now. It is currently stayed pursuant to s 471B of the Corporations Act - in the wake of the liquidation of T Co (as at 8 February 2017). I have been the CMC List case manager of that COR 59 of 2011 litigation since (almost) its inception.
In COR 59 of 2011, T Co, as plaintiff added the description of itself in the title of that litigation as being the 'trustee for the Trafalgar West Investments Trust'. But since December 2016, T Co is no longer the trustee for the Trafalgar Trust. There is a new trustee, Mr Jebb.
The first defendant in COR 59 of 2011 is Superior Lawns. The second through sixth defendants are five other members of the Flugge family. They are natural persons associated with the management of Superior Lawns - a family company run by Flugge family members.
As regards the Shares, T Co has been (with a period of interruption across 2011 - 2013 that I will explain) and remains presently, the relevant member shareholder recorded in the Superior Lawns' share register.
The Superior Lawns' register of members is maintained pursuant to s 169 of the Corporations Act. T Co is recorded as the shareholder for the Shares.
When COR 59 of 2011 was commenced back in March 2011, T Co was then, relevantly, a shareholder and, therefore, was a member of Superior Lawns - for the purpose of meeting the criteria of s 234(a) of the Corporations Act.
There have been some pre‑trial setbacks for T Co as plaintiff along the way in COR 59 of 2011. That action is still some distance away from being ready for a trial, notwithstanding its 2011 inception in this court.
In 2011, T Co voluntarily transferred the Shares in Superior Lawns to Mr Jebb.
In consequence, I then ruled, in effect, that T Co had then lost its required standing as a 'member' of Superior Lawns to continue to pursue that action. I granted a temporary stay at the time: see Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169 (delivered 29 May 2012).
Later, T Co became re‑registered as the relevant member of Superior Lawns for the Shares. Consequently, I next ruled that since T Co had properly been a member at the time it commenced that action and then had later regained the necessary standing as a member of Superior Lawns - that T Co could viably continue to pursue that statutory oppression litigation: see Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 2] [2013] WASC 143 (delivered 29 April 2013). That was a final determination, so evaluated at the behest of the parties at that time: see [8(a)].
In the end, I was satisfied that T Co's reacquisition of the Shares in Superior Lawns was a sufficient basis to lift the temporary stay and to allow that action by T Co to proceed: see observations at [26] ‑ [28] and [31].
Some further matters now need to be recorded as regards T Co upon Mr Jebb's present application to have the Shares vested in him - an application carrying some worrisome elements of déjà vu in 2017.
Mr Jebb has been and remains at all material times the sole director of T Co. All relevant decisions made by T Co are attributable to him.
Mr Jebb also holds the position of appointor under the Trafalgar Trust deed. That trust deed instrument may be found as attachment PGJ3 to Mr Jebb's affidavit sworn 2 February 2017 in support of Mr Jebb's present application.
By T Co's notice of resignation as trustee dated 13 December 2016, Mr Jebb caused it to resign as trustee of the Trafalgar Trust, effective that day: see attachment PGJ1 to Mr Jebb's affidavit of 2 February 2017.
By a deed of 9 December 2016 entitled 'Deed of Discharge of Trustee and Appointment of New Trustee' Trafalgar West Investments Trust, Mr Jebb took the step of appointing himself as the new trustee of the Trafalgar Trust: see attachment PGJ2 to Mr Jebb's affidavit of 2 February.
The circumstances which led to those removal and replacement of trustee events may be extracted from the deed's recitals G - K.
In essence, the insolvency and a threatened winding up of T Co precipitated T Co's resignation as trustee of the Trafalgar Trust in December 2016 and then the appointment of Mr Jebb as replacement trustee.
The date of the deed as 9 December 2016, however, is curious - given that the resignation by T Co (by reference to PGJ1) looks to have occurred four days later on 13 December 2016. Nevertheless, the deed says:
J.By this Deed Trafalgar West Investments Pty Ltd wishes to be discharged as Trustee and the Appointor has consented to the discharge with Mr Jebb being appointed the new Trustee.
K.The parties acknowledge that the trust property vests in Mr Jebb as sole Trustee of the Trust and agree to do all things necessary to give effect to the vesting of all trust property in the New Trustee.
On 8 February 2017, liquidators were appointed to T Co. Mr Bryan Hughes, Ms Renee O'Driscoll and Mr Daniel Bredenkamp, all members of Pitcher Partners, were appointed as joint and several liquidators of T Co.
This appointment of liquidators carried the statutory repercussion of staying COR 59 of 2011 from 8 February 2017 pursuant to s 471B of the Corporations Act.
A new trustee and the Shares
The appointment of Mr Jebb as the new trustee to the Trafalgar Trust in December 2016 did not of itself effect any transfer or disposition of the legal ownership of the Shares.
A transfer of the legal ownership of the Shares from T Co to Mr Jebb would need to be effected either voluntarily by Superior Lawns, or be effected consequent upon some other legal mechanism - such as by a vesting order made by a court holding jurisdiction to bring about that outcome as regards the legal ownership of the Shares.
On my assessment of all the materials, there does not appear to have been an express request issued on behalf of Mr Jebb to Superior Lawns asking that corporation to register a change of share ownership and to issue new share certificates for the Shares in Mr Jebb's name, or to effect a transfer of the legal ownership over the Shares to Mr Jebb.
According to correspondence appended to Mr Jebb's affidavit of 2 February 2017 Zafra Legal, lawyers acting for T Co at the time (in COR 59 of 2011), corresponded with Bennett + Co (see PGJ6) on 15 December 2016. They advised of T Co's resignation as the trustee on 13 December 2016 from the Trafalgar Trust and, as well, of Mr Jebb's appointment as the trustee 'in its stead'. Bennett + Co were provided with a copy of the deed to that end.
Next, Zafra Legal, expressing itself as also acting for Mr Jebb as (new) trustee of the Trafalgar Trust, advised Bennett + Co:
Consequent on that change, Trafalgar no longer has any connection to the Trust other than retaining a right of indemnity from the Trust assets for Trafalgar's costs incurred on behalf of the Trust.
…
In the circumstances, Mr Jebb will now commence proceedings seeking:
1.a vesting order pursuant to section 78(2)(b) [presumably a reference to the Trustees Act 1962 (WA) as amended] vesting the shares in Superior Lawns Australia Pty Ltd held by Trafalgar, on behalf of the Trust, in Mr Jebb as the new trustee;
2.consequent upon the vesting order, registration of the transmission of shares (by operation of law) from Trafalgar to Mr Jebb; and
3.the substitution of Mr Jebb as plaintiff in COR 59 of 2011 pursuant to Order 18 Rule 7 on the basis that Mr Jebb is a person to whom shares have been transmitted by operation of law for the purposes of s 234(d) of the Corporations Act.
The communication from Zafra Legal to Bennett + Co also added that 'Trafalgar consents to these orders being made'.
That is all background to Mr Jebb's present application seeking vesting orders over the Shares, as against Superior Lawns as defendant.
By an originating motion commencing the present action, Mr Jebb seeks:
1.345 ordinary shares and 1 'D' class shares in Superior Lawns Australia Pty Ltd presently registered in the name of Trafalgar West Investments Pty Ltd as trustee for the Trafalgar West Investments Trust be vested in Patrick Gerard Gladwyn Jebb as trustee of the Trafalgar West Investments Trust.
2.The Secretary of Superior Lawns Australia Pty Ltd do forthwith register the transmission of the shares vested by order 1 in the name of Patrick Gerard Gladwyn Jebb as trustee of the Trafalgar West Investments Trust.
3.There be liberty to apply generally.
The vesting orders sought are opposed by Superior Lawns.
Relevant legislation
The Trustees Act 1962 (WA)
Albeit unstated by his motion, the basis of Mr Jebb's vesting order application looks to be grounded on s 78(2)(b) or (c) of the Trustees Act 1962 (WA) (as amended).
Relevantly, s 78(1) and (2) of the Trustees Act provide:
(1)The Court may make an order, in this Act called a vesting order, that has effect as provided in section 85.
(2)The vesting order may be made in any of the following cases, namely -
…
(b)where a new trustee has been appointed out of Court under any statutory or express power; or
(c)where a trustee retires or has retired.
A basis for this court to grant a vesting order to Mr Jebb pursuant to s 78(2) may be seen as arising from either the voluntary resignation (essentially, retirement) as trustee by T Co (s 78(2)(c)) or, alternatively, from the subsequent appointment of Mr Jebb as a new trustee appointed out of court (s 78(2)(b)) by Mr Jebb under his express powers as appointor of the Trafalgar Trust.
It is also necessary to note s 79(1) of the Trustees Act:
(1)A vesting order may vest the property in such person, in such manner and for such estate or interest as the Court may direct, or may release or dispose of any contingent right to such person as the Court may direct.
Section 85 of the Trustees Act addresses the effect of vesting orders. More specifically, as regards ramifications of a vesting order towards shares held in a proprietary limited corporation, s 85(4)(b) provides in the following terms:
(4)In the case of -
…
(b)any security that is transferable only in books kept by a corporation, company or other body, or in manner directed by or under any Act, whether of this State or otherwise,
a vesting order vests in the person named in the order the right to transfer or call for a transfer of the property or security.
See also s 85(6).
Consequences of a vesting order made as regards shares were discussed by Master Sanderson in Netbush Pty Ltd as Trustee for the Russell Roberts Family Trust v R W Roberts Pty Ltd [2004] WASC 247. At [13], the learned Master said:
[T]here may be succession to shares otherwise than by transfer from their former owners. These other types of succession are called transmission. A vesting order made under s 78 of the Trustees Act which has effect as provided by s 85 of the Trustees Act, vests ownership by operation of law and operates as a transmission and not a transfer: see Andco Nominees Pty Ltd v Lestato Pty Ltd & Ors (1995) 17 ACSR 239 at 258.
I also discussed the characteristics of vesting orders in Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [2012] WASC 460.
A vesting order under s 78 of the Trustees Act is discretionary. Where shares the subject of equitable ownership via a trust are concerned, the replacement of a former shareholder who was once trustee by the new trustee of that trust would typically suggest, prima facie, the existence of circumstances under which a vesting order could be expected.
However, the present circumstances are far from typical, as will be seen.
Concluding these background observations, I will simply observe that if this court were to issue vesting orders as now sought by Mr Jebb in respect of the Shares in Superior Lawns, then once such orders were operative, the Shares would be transmitted to Mr Jebb by operation of law.
That legal conclusion as to a transmission by law is significant in another context. It bears upon a potential fulfilment by Mr Jebb of the criteria of s 234(d) of the Corporations Act.
Statutory oppression actions under the Corporations Act: Pt 2F.1
For convenience, I will set out below s 234(a), (c) and (d) of the Corporations Act. In essence, the section provides for the person or persons who may apply for orders under s 233, on a basis of that person establishing conduct that is contrary to either s 232(d) or (e) of the Corporations Act.
Section 234 relevantly says:
An application for an order under section 233 in relation to a company may be made by:
(a)a member of the company, even if the application relates to an act or omission that is against:
(i) the member in a capacity other than as member, or
(ii) another member in their capacity as a member; or
…
(c)a person who has ceased to be a member of the company if the application relates to circumstances in which they ceased to be a member; or
(d)a person to whom a share in the company has been transmitted by will or by operation of law.
Supposed repercussions of a vesting order
The potential repercussions of vesting orders now sought by Mr Jebb towards the T Co's presently stayed COR 59 of 2011 litigation are both novel and somewhat challenging.
On the submission of Superior Lawns, the effect of such vesting orders over the Shares, if made, would effectively non‑suit T Co as an ongoing viable plaintiff in that litigation.
That result would follow, it is put, on the basis that T Co would then have ceased to be a member (ie, shareholder) of Superior Lawns. Beyond that, Superior Lawns says that whilst the effect of such vesting orders on the Shares could (other problems aside) entitle Mr Jebb to commence fresh statutory oppression application proceedings against it (and the Flugge family defendants) via s 234(d) as a relevant 'person', such vesting orders will not enable Mr Jebb to properly replace T Co as a substituted plaintiff in COR 59 of 2011. Superior Lawns says that, if he has one, Mr Jebb's cause of action obtained via s 234(d) would not be the same cause of action as that pursued in COR 59 of 2011 by T Co arising by reason of its alleged statutory oppression. Put another way, Superior Lawns is arguing that s 234(d) only allows a relevant person with standing to commence proceedings - not to take over existing litigation midway - after the litigation has been validly commenced by a distinct person (member).
Superior Lawns argues that the criterion of registered membership (ie, the legal ownership of shares) set down under Pt 2F.1 of the Corporations Act (with some limited augmentations upon the base criteria of required membership via s 234(d)), pays no heed to, and is not concerned with notions of equitable ownership over shares.
Superior Lawns submits, therefore, that for the purposes of Pt 2F.1 a vesting order as sought, would only see Mr Jebb present as a different person to T Co - as the relevant member of Superior Lawns (legal owner of the Shares) who commenced that statutory oppression litigation in 2011.
In summary, in what are wholly unique factual circumstances, Superior Lawns is contending that were I to issue vesting orders to Mr Jebb in the terms he now seeks, that such event would be both:
(a)fatal to T Co as a viable ongoing plaintiff in COR 59 of 2011; and also
(b)provide no legitimate foundation for Mr Jebb to be substituted for T Co as the plaintiff to continue COR 59 of 2011 to trial.
Hence it is put that such a vesting order as sought by Mr Jebb would effectively undermine the whole action currently brought against Superior Lawns in COR 59 of 2011 and deliver no other benefits.
Superior Lawns' opposition, of course, is not advanced out of altruism.
By its opposing stance, Superior Lawns is effectively putting Mr Jebb and the liquidators of T Co on explicit notice as to the contended adverse potential future consequences of Mr Jebb's possible success upon the present vesting order application. Superior Lawns, understandably, does not wish to be accused later on of any waiver or acquiescence surrounding Mr Jebb's proposed vesting orders as presently sought - from a perspective of inhibiting any legitimate future arguments in defending the COR 59 of 2011 litigation. Consequently, Superior Lawns foreshadows at this time the likely adverse repercussions as being destructive of both the present litigation by T Co and negatively against any viable planned future substitution of Mr Jebb as a replacement plaintiff for T Co in the subsisting COR 59 of 2011 litigation.
Mr Jebb's present application under the Trustees Act, of course, is not seeking orders (nor could it) effecting Mr Jebb's substitution as the replacement plaintiff in lieu of T Co in COR 59 of 2011. However, a looming future application by Mr Jebb under Rules of the Supreme Court 1971 (WA) O 18 r 7 (or r 6) for Mr Jebb to be substituted as replacement plaintiff in COR 59 of 2011 has been actively foreshadowed upon the present application as a live future consideration.
The ramifications of a future plaintiff substitution application in COR 59 of 2011 by Mr Jebb have been canvassed by all parties on this application as an expected prospective event, once vesting orders as sought by Mr Jebb are made.
The parties (and the liquidators of T Co who also appear on this application through counsel by leave) have asked me to evaluate the present vesting orders application with an eye to a prospective plaintiff substitution application by Mr Jebb in COR 59 of 2011.
Some procedural matters
The application was first argued before me at a special appointment on 21 July 2017. At the end of that hearing I granted leave for Mr Jebb to file further reply submissions and, as well, for Superior Lawns to respond to those further reply submissions, if it thought it needed to do so.
In due course, I received what were very extensive further written submissions from the plaintiff of 31 July 2017. Superior Lawns' written submissions put in reply to those submissions were received on 7 August 2017.
It was clear from all those written submissions that Mr Jebb sought to raise in them some new and significant points (see pars 1 to 9 of those submissions). Matters went beyond Mr Jebb merely rendering a true reply to Superior Lawns' submissions as put through its counsel (Mr Bennett) on 21 July 2017.
Unsurprisingly, Superior Lawns' by its written submissions then strongly objected to the breadth of the matters newly canvassed under the plaintiff's so‑called written reply submissions.
By my own assessment of the plaintiff's reply submissions, it was clear that pars 1 to 9 went considerably beyond and, indeed, overtook some of the arguments as advanced for Mr Jebb on 21 July 2017.
Given all that, I assessed it as necessary for there to be a short further hearing involving counsel - which I fixed for 2 October 2017.
The relief sought by Mr Jebb had been altered and expanded in his reply submissions. Beyond the relief sought under pars 1 and 2 of the originating motion, Mr Jebb's amended minute of 31 July 2017 now retrospectively sought further orders seeking to vest the Shares in Mr Jebb at a time over 11 years previous. He now sought:
2.The vesting of shares pursuant to paragraph 1 above is to take effect as and from 16 June 2006 (being the date when the shares were registered in the name of Trafalgar West Investments Pty Ltd as trustee for the Trafalgar West Investments Trust).
Retrospective vesting relief towards June 2006 was something not previously canvassed, but was now sought well beyond the original relief.
When the matter was further argued between counsel on 2 October 2017, there was no real dispute that this retrospective relief had been a product of fresh consideration by Mr Jebb and his legal advisers. But the defendant through Mr Bennett maintained strong objection to it - on a basis it carried unforeseen ramifications capable of, in effect, derailing the whole application. I accepted that submission at the time. I could not properly allow such a fresh aspect in the plaintiff's 'reply' to emerge so late, given the potential repercussions for the application.
Save for that retrospective aspect, however, I did agree to deal with the balance of all the new issues as raised under pars 1 to 6 of Mr Jebb's 'reply'. I then allowed the defendant to provide any further written submissions required to address those new issues. Those further written submissions were received from Superior Lawns on 9 October 2017.
Save then for rejecting any retrospective vesting order relief, I will canvass the residue of the materials as ultimately submitted upon the vesting order application of Mr Jebb.
I will as well particularly note and consider the stance as expressed by the liquidators of T Co, to whom I granted leave through their counsel to appear and make submissions upon the present application.
Materials for this application
Pursuant to the Master's directions of 23 February 2017, a timetable was set providing for an exchange of affidavit materials between the parties. At that point, there had been filed Mr Jebb's initial affidavit sworn 2 February 2017 in support of the application, then Mr Jebb's second affidavit sworn 13 February 2017. Mr Jebb's second affidavit essentially advised of an appointment of the joint and several liquidators to T Co on 8 February 2017.
For Superior Lawns, there were three affidavits of evidence read at this application. All were sworn by a legal practitioner engaged with the defendant's solicitors, Mr Alexander Tharby.
Mr Tharby's first affidavit affirmed 7 March 2017 essentially assembled a good deal of background information concerning materials from COR 59 of 2011. In particular, it provided the contemporary pleadings in that action (see attachments AJT1 through AJT5). Mr Tharby also attached a bundle of the published reasons for decision to date (mostly mine) under exhibit 1 to that affidavit.
Mr Tharby noted the defendants in COR 59 of 2011 had applied to increase the existing level of the security for costs to be provided by or on behalf of the plaintiff in that litigation (under a minute of proposed orders of 8 December 2015) at his par 15. The defendant's application for further security in COR 59 of 2011 had not yet been heard - due to intervening circumstances, namely, the appointment of liquidators to T Co on 8 February 2017 and the statutory stay of that action (par 7 of Mr Tharby's first affidavit).
Mr Tharby's second affidavit affirmed 8 March 2017 provided copies of correspondence between Superior Lawns' solicitors to the solicitors of Trafalgar's liquidators, Thompson Downey Cooper.
Mr Tharby's third affidavit affirmed 26 April 2017 addressed circumstances in the lead-up to the appointment of liquidators to T Co. It also canvassed the solicitor/client relationship between Mr Jebb and T Co under attachments AJT25 through AJT27A.
AJT27A shows that on 15 February 2017 Mr Jebb lodged a copy of a formal proof of debt with a Deed of Acknowledgement of Debt of 15 June 2016, claiming payment for his 'legal work' done for T Co (see recital B and par 1.4 of that deed) in the amount of $736,877 plus interest.
Mr Tharby's third affidavit also addressed, by attachments AJT28 through AJT33, the significantly insolvent position of T Co. AJT33 is a report as to the affairs of T Co of 16 February 2017. It identified T Co's unsecured creditors under a schedule H - to the extent of $1,363,338. It lists further contingent liabilities of $510,000 and then provides an assessment of the worth of T Co's contingent assets at $17 million (being an assessment of the suggested worth of T Co's chose in action the subject of COR 59 of 2011 upon a successful end outcome of that litigation).
Schedule I of that report (page 215 of Mr Tharby's third affidavit) lists T Co's contingent assets, identifying what I must assume is the same gross asset with the same attributed worth of $17 million and with the adjacent notation 'Uncertain' under a heading 'Estimated to produce $'.
Schedule H in that document (as do a number of the other Schedules) refers to annexure A, found at page 223 of Mr Tharby's third affidavit. It identifies the largest of T Co's creditors as being Mr Jebb, in an amount of $1,111,877.
Also identified is a secured debt to a litigation funder, LCM Litigation (LCM). This is in the amount of $31,000.
A following section of Mr Tharby's third affidavit is directed at a suggested parlous financial position for Mr Jebb personally: see attachments AJT34 through AJT39.
Attachment AJT37 (see pages 254 - 255) is a copy of a letter from the Australian Taxation Office to Mr Jebb of 7 February 2017. It indicates a payment plan in respect of his income tax account debt in the sum of $9,409.20. The plan shows repayment amounts due of $100 per month across a period from March through July 2017, followed by a payment of $8,909.20 by Mr Jebb on 7 August 2017.
According to Superior Lawns' written submissions put against Mr Jebb's application for vesting orders, Mr Jebb's precarious personal financial circumstances are overwhelmingly established and, it is suggested, this information is negatively relevant against the vesting orders for Mr Jebb as a matter of discretion.
Subsequent to the exchange of that affidavit material, Mr Jebb, shortly before the hearing on 21 July 2017, filed a third affidavit with annexures PGJ12 through PGJ21. His affidavit was incorrectly sworn. It was subsequently re‑sworn on 20 July 2017 by Mr Jebb (with par 27 not read due to objection).
From that third affidavit Mr Jebb now related a recent receipt of a conditional offer of litigation funding from a UK based litigation funder, Balance Legal Capital LLP (BLC). The funding proposed was subject to Mr Jebb being 'substituted as the proper plaintiff' in COR 59 of 2011 (par 2).
Mr Jebb related that he had accepted the conditional offer of funding. He attached a heavily redacted copy of a litigation funding contract with BLC (attachment PGJ12) that he said he had agreed to and had signed on 4 July 2017.
In fact PGJ12 is so heavily redacted, particularly as regards some applicable conditions precedent to funding at par 2, that very little beyond the most perfunctory of information can be gained from the redacted document - as Mr Bennett for Superior Lawns pointed out during his argument.
Nevertheless, Mr Jebb's third affidavit identifies the conditional offer of some possible litigation funding as a suggested relevant change in circumstances - beyond those as earlier set out at par 56 of his first affidavit (where Mr Jebb had then said he did not have the funds to lend more money to T Co, or to pay for independent legal representation for himself in a suggested capacity of trustee of the Trafalgar Trust, being the plaintiff in COR 59 of 2011).
In his first affidavit, Mr Jebb related he had personally spent in excess of $200,000 supporting T Co's oppression action. He also said that LCM, T Co's first litigation funder, had spent over $800,000 supporting the claim 'until the funding agreement was terminated' (par 51).
Mr Jebb explained that as a former trustee, T Co held a right of indemnity pursuant to cl 12.2 of the Trafalgar Trust deed from the Trafalgar Trust for all costs and liabilities incurred (to date) in respect of the COR 59 of 2011 action, which he noted was 'the only activity of the Trust' (par 54).
It also appeared to be being suggested at 2 February 2017 that Mr Jebb, who is a local legal practitioner, might once again seek to resume a most unsatisfactory position as the solicitor of record for himself as the substituted plaintiff in the COR 59 of 2011 action, in the event of a vesting order in his favour being made in the present application. I have adversely commented in the past about the conflict position for Mr Jebb.
Mr Jebb asserts in his third affidavit a claim of legal professional privilege and confidentiality as the basis for withholding the heavily redacted parts of the litigation funding contract with BLC (see par 6 of his affidavit).
Mr Jebb's third affidavit advances to relate that he engaged Zafra Legal some time after 19 July 2016 to act for T Co in COR 59 of 2011. He says that Zafra Legal acted for the former trustee until 8 February 2017, when the liquidators were appointed. However, the court's record shows that Zafra Legal currently remains as the legal representatives of record for T Co in COR 59 of 2011.
PGJ20 to Mr Jebb's third affidavit provides another list of T Co's creditors at 8 June 2017, prepared by a Ms Black on behalf of the liquidators. This list shows T Co's total projected indebtedness, inclusive of Mr Jebb's personal claims, at $1,823,896.84.
LCM may be seen listed as a T Co creditor for $31,000. But that amount would just appear to be in respect of T Co's exposure to LCM on an unmet adverse costs order: see Trafalgar West Investments Pty Ltd v LCM Litigation Management Pty Ltd [2016] WASC 159. There is also the $800,000 said to have been spent by LCM so far in addition to whatever else more it may be claiming ‑ which is not clear to me on the present materials.
Zafra Legal is also noted as a creditor of T Co for $66,383.84.
Mr Jebb swore a fourth affidavit on 20 July 2017. He attaches as PGJ22 thereto a copy of a letter of support from LCM - now indicating that LCM supported Mr Jebb's present vesting order application and his foreshadowed future plaintiff substitution application in COR 59 of 2011. The letter also indicated LCM's support for future litigation funding from BLC.
Attachment PGJ23 to Mr Jebb's fourth affidavit provides a copy of a deed of variation of guarantee and indemnity executed on 20 July 2017. It varies the earlier deed of guarantee and indemnity of 8 February 2017 between the liquidators of T Co and Mr Jebb (see AJT20 to Mr Tharby's third affidavit).
The deed of guarantee and indemnity of 8 February 2017 identified an obligation to meet the liquidator's fees (par 2.1): see also par 3.1 of the deed of variation of guarantee and indemnity of 20 July 2017.
However, a reordered hierarchy of claimants and creditors can be seen as between various creditor claimants of T Co under cl 3 of the deed of variation of 20 July 2017. It looks to proceed on a basis of a descending order of pay out obligations (for Mr Jebb as the new trustee of Trafalgar Trust) to first pay the liquidators' fees - in an initial amount of $30,000, payable within 14 days of all conditions precedent to the litigation funding agreement with Balance REV Ltd (which I understand to be BLC) being satisfied or waived. A balance of (unstated) liquidator's fees is then said to be payable on the determination of COR 59 of 2011.
Next and after that, the liquidators by this deed of variation acknowledge (par 4.1) that security over any recovery for the repayment of fees was made subject to securities held by BLC (as the conditional litigation funder) and, as well, by the former litigation funder, LCM.
The extent of payments potentially due to the two litigation funders is not stated. Mr Jebb previously noted that LCM had expended $800,000. But that says nothing about the potential quantum of an 'event of success fee'. Likewise, nothing is said concerning the quantum of an 'event of success fee' potentially payable to BLC.
Following those ordered payout entitlements, pars 4.2.1 through 4.2.5 of the deed of variation provides an ordering of residual payment entitlements, being: (i) the balance of the liquidator's fees and disbursements; (ii) to the liquidator for the payment of T Co creditors (other than to Mr Jebb); (iii) in payment of creditors of the new trustee; (iv) in payment of debts owed by T Co to Mr Jebb; and (v) by distributions to beneficiaries of the Trafalgar Trust.
The defendant submitted that this hierarchy of claimant ordering is relevant to a negative exercise of my discretion on this vesting order application.
The parties' positions
Having now assembled all evidence, I will discuss further the successive tranches of written submissions received by the court.
Mr Jebb's position
Mr Jebb's claimed position commenced with his written submissions filed 30 May 2017. In terms of legal principles applicable to vesting orders under s 78(2) of the Trustees Act, reference was made to a comprehensive assembly of those principles by Warren J (as she then was) in Re Purkiss [1999] 3 VR 223 [16] - [21]. Reference was also made to my decision in the related matter of COR 105 of 2012: see Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [2012] WASC 460 [50], [58], particularly as regards a court's discretion concerning the making of a vesting order. None of that is controversial.
But a significant component of Mr Jebb's first tranche of written submissions was directed at the suggested repercussions of s 7(6) of the Trustees Act which, within the overall framework of the arguments subsequently advanced by Mr Jebb, needs to be seen in full.
Section 7(6) says:
Every new trustee appointed under this section has the same powers, authorities, and discretions and may in every respect act, as if he had originally been appointed a trustee by the instrument (if any) creating the trust, both before and after all the trust property becomes by law or by assurance or otherwise vested in him.
See also s 7(1) and s 7(3).
Mr Jebb's reply written submissions of 31 July 2017 appeared to contend that the significance of s 7(6) was that it had an interrelationship with s 234(d) of the Corporations Act in the COR 59 of 2011 litigation.
COR 59 of 2011 was commenced by T Co on a basis then of its standing as a member (ie, shareholder of the Shares) of Superior Lawns. That litigation may be seen as a fairly clear exercise by this court of federal jurisdiction conferred on it as regards an application of a federal body of laws, namely, the statutory oppression provisions of the Corporations Act.
There is need for some caution in the exercise of that federal jurisdiction. Issues bearing on the exercise of federal and state jurisdiction were recently addressed by the High Court of Australia in Rizeq v The State of Western Australia [2017] HCA 23; (2017) 344 ALR 421. I will address Rizeq and its implications, if any, in the present application in a discrete section later in these reasons.
In Mr Jebb's first tranche of submissions, it was submitted (par 26.3) that vesting orders would be appropriate in an exercise of discretion, applying principles identified in Purkiss. This was because there was need for the relief sought and it was submitted:
[I]t is clear that the relief sought is required. The vesting order is opposed by the defendant (which is the company which has to register the transfer of the shares), and without the vesting order, there will be no transmission by law (Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd at [59]) and the trustee would not be able to pursue the oppression action, to the detriment of the beneficiaries and creditors of the trust.
The assumption inherent in that submission is that Mr Jebb, as the new trustee of the Trafalgar Trust, might properly be substituted as plaintiff in COR 59 of 2011, once a vesting order has been made in his favour. Substitution would enable Mr Jebb, it is put, to advance that litigation as an exercise of his powers as trustee for the benefit of the Trafalgar Trust's beneficiaries.
The future plaintiff substitution in COR 59 of 2011 assumption, of course, remains fundamentally in dispute.
It may be seen from Mr Jebb's submissions that he effectively seeks to inject the interests of trust beneficiaries into a plaintiff substitution scenario he foreshadows. Yet it is clear that the right to pursue a statutory oppression action, as afforded under s 234 of the Corporations Act, is something given to members (ie, registered shareholders of the corporation), former members or, by s 234(d), to persons to whom shares have passed by will or have been transmitted by operation of law.
The regime of the Corporations Act particularly Pt 2F.1 is seen to be directed at shareholders, ie, to members, or, relevantly here, to persons who obtain legal ownership of shares by a transmission of law - for the purpose of pursuing an application for relief under s 233 of the Corporations Act.
Mr Jebb's attempts at a suggested linkage of the Trafalgar Trust's equitable ownership of the Shares as somehow being a relevant consideration to the Corporations Act's regime of registered member rights ‑ is not readily apparent. Nor is that attempted linkage proposition rendered any more welcoming via Mr Jebb's invocation of and his reliance upon getting assistance from state legislation like s 7(6) of the Trustees Act, which, as seen, addresses the powers, authorities and discretions of new trustees. A state law like s 7(6), given the clear exercise of federal jurisdiction by the court in COR 59 of 2011, cannot bear upon Pt 2F.1 or, more specifically, on expanding the range of permissible plaintiffs under s 234, as Mr Jebb appeared to be submitting.
Superior Lawns' position
In response to Mr Jebb's written submissions, Superior Lawns' submissions of 6 July 2017 raised a number of matters. Those submissions commenced from a premise as stated at par 13:
Superior Lawns accepts that the appointment of a new trustee may (and in most cases would) be a sufficient and proper basis for the making of vesting orders. However, any new trustee must be capable of discharging its obligations as trustee for the benefit of the whole of the trust and must satisfy the Court that it is appropriate. This imports the discretionary considerations.
Numerous submissions followed concerning the suggested inappropriateness of Mr Jebb appointing himself as the new trustee of the Trafalgar Trust. It was said Mr Jebb was seeking vesting orders to effectively circumvent, so it was put, the effects of T Co being in liquidation.
Many submissions by Superior Lawns were directed at suggested discretionary considerations concerning a likely prejudice to the suggested interests of T Co's creditors (with Superior Lawns being a member of the class of T Co's creditor).
Submissions were also made concerning T Co's rights of indemnity against trust assets as a former trustee and T Co's creditors' rights of subrogation being diminished under the vesting orders sought by Mr Jebb.
Superior Lawns said the vesting orders now sought by Mr Jebb would destroy T Co's lien over those assets - to the detriment of T Co's creditors, albeit a loss of that lien would not affect T Co's rights of indemnity against trust assets. I do not accept the submission concerning the T Co's lien since, by my assessment, the character of such a lien is not possessory in its legal character.
The impecuniosity of Mr Jebb as a new trustee was also raised as a negative discretionary factor against the making of a vesting order, allied to his admitted inability (then) to fund independent legal representation (referring to par 56 of Mr Jebb's first affidavit, which I have already mentioned). It was also submitted Mr Jebb (as a substituted plaintiff in COR 59 of 2011) would have no prospect of meeting any further uplift in the level of security for legal costs in that proceeding. That would likely render him to a 'hopeless financial position'.
More submissions from Superior Lawns were directed at the suggested unacceptable progress to date of COR 59 of 2011. This is said to be relevant to the propriety of Mr Jebb's conduct (as sole director and decision maker for T Co) to date, once again, as a discretionary factor against making vesting orders. In particular, it was contended T Co (under Mr Jebb's control) had not taken any active step in those proceedings since an inspection of discovered documents was undertaken in November 2015. There had been a payment of costs security amount into court on 30 May 2016, but that was hardly progress, it was submitted.
Mr Jebb's rendering of invoices to T Co for his legal fees was also raised by Superior Lawns in its written submissions of 18 July 2017, as being a breach of a previous undertaking that he had given not to charge T Co for his legal services.
All this conduct was raised by Superior Lawns as bearing against my exercise of discretion to issue the vesting orders sought by Mr Jebb on the present application.
But whilst relevant to note and to weight, none of those matters concerning the conduct of Mr Jebb as advanced by Superior Lawns, either alone or in combination, would be enough to persuade me as a matter of discretion not to issue the vesting orders presently sought to Mr Jebb, were they otherwise appropriate. Necessity and the lack of any other viable alternative really dictates that conclusion here.
However, the considerations of substance against these vesting orders being made emerged at par 36 to par 38 of Superior Lawns' 6 July 2017 written submissions:
36.If the vesting orders are made Trafalgar will no longer hold shares in Superior Lawns and will thereby lose standing to maintain the oppression proceedings. Mr Jebb admittedly seeks to substitute himself as plaintiff in the oppression proceedings on the basis that the substitution will be 'in name only' because the shares are beneficially held for the [Trafalgar Trust]. However, … the Corporations Act does not distinguish between legal and beneficial ownership in conferring rights on a 'member' (which rights include the right to sue for oppressive conduct). If vesting orders are made, Trafalgar will be non-suited.
37.The 'substitution application' is also likely to fail: Mr Jebb could not have commenced and maintained the proceedings in March 2011. While it would be open to him to commence fresh proceedings his position as a 'member' would be different to that of Trafalgar.
38.This consideration weighs strongly, if not determinatively, against the making of vesting orders.
Superior Lawns' submissions concluded by suggesting Mr Jebb's vesting order application was a first step towards him seeking to substitute himself as the plaintiff in COR 59 of 2011 but for which role he had, it was put, neither the funding, nor the appropriate independence. This consequence is, in effect, suggested to be prejudicial to T Co's liquidators, to creditors and to the Trafalgar Trust's beneficiaries, with all this supporting, in the end, an exercise of the court's discretion to refuse vesting orders.
Superior Lawn's further written submissions of 18 July 2017 addressed s 234(d). That was for circumstances where, as I have earlier indicated, if vesting orders were to be made as sought on Mr Jebb's present application, that situation would then seem to fit a description of Mr Jebb being a 'person' for the purposes of s 234(d) of the Corporations Act to whom the Shares had been 'transmitted by operation of law', once the vesting orders took effect.
T Co's liquidators' position
The position of the liquidators of T Co also needs to be closely considered, bearing in mind the potential ramifications suggested by the parties as regards the statutory chose in action (ie, COR 59 of 2011). That chose is effectively the only trust asset against which T Co's rights of indemnity as former trustee of Trafalgar Trust, might viably be exercised.
To that end, the liquidators of T Co submitted a statement to the court on 20 July 2017.
T Co's liquidators said:
4.The previous litigation funder, LCM Litigation Management Pty Ltd ('LCM') claims to hold security over the proceeds of the oppression proceedings, and claims to be secured for some $800,000.
…
7.… It is clear that the right of indemnity is unaffected, and that the Company's lien does not depend on possession, being a species of equitable charge: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; Chief Commissioner of Stamp Duties (NSW) v Buckle (1988) 192 CLR 226.
T Co's liquidators also noted Mr Jebb's contention that the former trustee was not able to advance the oppression litigation. This was accepted as correct as a practical matter (par 9).
It is not uncommon for entities in liquidation, once having obtained the leave from the court, to advance existing litigation to completion. But as a matter of pragmatism, for such circumstances, usually the liquidators will have obtained funding and will likely have provided a level of security for costs to the defendants.
Here, the liquidators of T Co presently hold no capacity to proceed on that basis due to a lack of funding.
The present position is that until a vesting order is made favouring Mr Jebb, T Co remains registered as the relevant member of Superior Lawns and as the legal owner of the Shares.
The liquidators' submissions observed that T Co had been trustee of the Trafalgar Trust. However, the liquidators observed at par 10, and by reference to my decision in Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] that:
[T]he issue of the equitable ownership of shares is irrelevant to the question of standing to sue under s 232 of the Corporations Act 2001.
The liquidators continued:
If that is the case, the mention of the Trust in the heading for the action is meaningless, and an order for the amendment of that heading by deletion of those words would make no difference to any person's interests or entitlements, be they trustee, beneficiary, or trust creditor. It is doubtful whether the statutory right to take oppression proceedings is property at all ‑ it does not appear to be assignable. It does not necessarily follow, however, that such fruits as the claim may bear are not Trust property.
I agree with those observations.
The liquidators then submitted at par 12:
From the Liquidators' point of view the important question is whether vesting the Shares in Mr Jebb will non-suit the Plaintiff in the oppression proceedings. That would remove the oppression claim as a potential source of funds to pay creditors. If vesting the Shares would have that effect, as a matter of law, then the Liquidators are duty-bound to oppose the applications for vesting orders.
By my assessment, essentially for the same reasons that underlay my decision in Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] (leading to temporary stay orders I issued at that time), any vesting of the Shares in Mr Jebb would indeed give rise, in effect, to what would be a non‑suit consequence as regards T Co in COR 59 of 2011.
Yet T Co's pursuit of the COR 59 of 2011 action is presently unviable, given its position. The greater question then is whether Mr Jebb could be viably substituted for T Co as plaintiff to take over the COR 59 of 2011 litigation, if a vesting order is made and takes effect.
Upon this greater issue the liquidators submit (par 13):
If, alternatively, the vesting of the Shares in Mr Jebb will not result in a non‑suit, and will not affect the Company's rights of indemnity as a former trustee of the Trust, then the oppression claim in Mr Jebb's hands may be a source of funds for creditors. In that case, the Liquidators would support Mr Jebb's applications, subject to his financial capacity to see the litigation through (a matter put in issue in Mr Jebb's application for vesting orders).
The liquidators offer some observations concerning the priority of the former trustee's right of indemnity (par 14) by reference to s 477(2B) of the Corporations Act. They foreshadow their need to obtain either creditor or court approval for the proposed arrangements as regards such a distribution of funds and priorities.
The liquidators' submissions conclude (par 15):
The Liquidators therefore view the question of the effect of the vesting order sought by Mr Jebb as a threshold question, and one upon which, if Mr Jebb had not actually brought this application, they might have had to seek guidance from the Court. Central to that threshold question is Mr Jebb's argument regarding s 234(d). The Liquidators take the view that the issue has been sufficiently canvassed in the submissions filed by the persons who are actually party to this application. They do not wish to add anything to those arguments, but they do submit that the possibility of a non‑suit is a matter the Court should consider in the exercise of its discretion under s 78 of the Trustees Act 1962 (WA), and that it is an extremely important factor in the exercise of that discretion.
I accept the force of a request for direction upon the present application from T Co's liquidators, albeit the correct emphasis I believe has, as a result of the arguments, shifted somewhat away from the non-suiting of T Co in COR 59 of 2011 and so now, at assessing the viability of Mr Jebb as a future substituted plaintiff in that action.
My earlier reasons bearing upon these parties presently
Two core propositions emerge from previous decisions I have made concerning these same parties that bear materially on the present vesting order application.
The first proposition is an assessment I rendered in a number of those decisions - to the effect that in order to viably prosecute a statutory oppression action under Pt 2F.1 of the Corporations Act to a trial, a plaintiff needs, as a matter of necessary standing, to fall within one or other of the specified categories under s 234 of the Corporations Act and then to remain so until completion of the action. The most straightforward of the s 234 categories for that standing is that of the plaintiff being a 'member' (ie, shareholder) at the commencement of a statutory oppression action. The requirement is uncontroversial and is now well established.
In a number of my decisions concerning these same parties, I discussed a pivotal decision of Murray J made in Re Spargos Mining NL (1990) 3 WAR 166, 171 ‑ 172, and discussed how his Honour had distinguished Panfida Ltd v Hartogen Energy Ltd (1988) 51 SASR 404. More importantly, however, and underlying the rationale for a temporary stay that I issued in COR 59 of 2011 on 29 May 2012, was the allied requirement that the commencing plaintiff in a statutory oppression action should remain as the plaintiff up to any trial and, indeed, up to a point of that party seeking to move for judgment.
The second key proposition emerging from earlier reasons is a recognition of the overall supremacy of the share register kept, recording a corporation's members, in terms of the Corporations Act's regime as regards any pursuit of a statutory oppression action under Pt 2F.1. Considerations emerging from the equitable ownership of shares through trusts or the like, simply do not present as considerations of materiality in that corporate regulatory environment.
Those two propositions have been canvassed across five prior decisions I delivered concerning these parties, which I will mention briefly.
The first is Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2]: see my observations at [14] ‑ [16], [28], [34], [53], [59] ‑ [61], [63], [74] ‑ [75]. As I have said, those reasons led to my temporary stay of T Co's action.
The next decision is Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 3] [2012] WASC 319 (delivered 11 September 2012) in COR 138 of 2010 and COR 76 of 2011. It essentially concerned costs outcomes, but I referred to certain propositions of relevance here at [1] and [15].
The third decision is Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd (delivered 30 November 2012) in COR 105 of 2012. The context was a refusal by Superior Lawns to voluntarily transfer the Shares from Mr Jebb back to T Co. That arose in the aftermath of my 29 May 2012 COR 59 of 2011 reasons. An application for a vesting order under the Trustees Act had been brought, but was rejected as inappropriate in those circumstances.
I did, in the end, however, issue transfer orders requiring the Shares to be transferred back to T Co, pursuant to s 1071F(2) of the Corporations Act: see [75]. It can be seen from those reasons that T Co had then been reappointed by Mr Jebb as trustee of the Trafalgar Trust on 30 May 2012.
The fourth decision concerned a futility and dismissal application Superior Lawns advanced against T Co, by reason of the 2012 hiatus in T Co's Superior Lawns membership status, over the period canvassed under the previous decisions. That was my Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 2] decision in COR 59 of 2011: see observations at [1], [3], [8(a)], [8(c)], [10], [12] ‑ [16].
In the end, I then accepted that T Co's reacquisition of the Shares in Superior Lawns had rehabilitated its standing, sufficiently to permit it to continue as a viable plaintiff in COR 59 of 2011. In terms of the supremacy principle concerning the corporate membership register, see observations at [27(c)], [28], [31].
The last decision I will mention is Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 6] [2014] WASC 278 (delivered 1 August 2014). Those reasons were delivered in a context of me evaluating a strike out application by Superior Lawns brought against T Co's pleadings. I refer in particular to observations at [72] ‑ [76], where I again discussed Re Spargos Mining (which was delivered over three and a half months after the Full Court of the South Australian Supreme Court delivered its reasons in Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87 - albeit Murray J's reported reasons do not appear to discuss that decision and it may be he was not referred to it).
It is convenient to revisit [80] ‑ [86] of that last mentioned decision of mine as regards the register supremacy proposition. I discussed there a number of cases also canvassed on the present application, as regards the irrelevance as a consideration of the equitable ownership of shares through trusts. I also discussed a later decision of Lehane J in Titlow v Intercapital Group (Australia) Pty Ltd (1996) 65 FCR 449. That decision applied Niord. So also did subsequent decisions Leaney v Olmstead Pty Ltd (1994) 51 FCR 240 and Rosen v Georges [2014] VSC 193.
At [86] I acknowledged the force of Niord in terms of those reasons casting something of a prima facie pall over the notion of an equitable shareholder in the context of that person advancing a cause of action for statutory oppression. I then said [80] - [86]:
As regards standing under s 320(1), White J appears to have taken a somewhat different view. His Honour observed '[i]t was crucial to Niord's standing under s 320(1) that it be registered at the time of issuing the summons' (103): see also Titlow v Intercapital Group (Australia) Pty Ltd (1996) 65 FCR 449, 451 (Lehane J) (citing Niord to that effect). At least in that context, White J considered (103):
'Niord could not rely for standing or right to sue upon an equitable interest. Niord was nothing but an intermeddler, an outsider desperately seeking to throw itself into the way of being oppressed within the meaning of s 320.' (original emphasis)
The decision in Niord was subsequently cited as authority for the inadequacy of an 'equitable interest' to confer standing under s 260 of the Corporations Law (which succeeded s 320 as the oppression provision) in Leaney v Olmstead Pty Ltd (1994) 51 FCR 240; see also Rosen v Georges [2014] VSC 193, referring to Niord as regards the current legislation. In Leaney Branson J struck out as unarguable a statement of claim pleading only that the plaintiff had 'agreed' to become a member. But, like Niord, Leaney was basically concerned with 'standing to seek relief' (241).
Some distinguishing factors therefore present. In the first place, Niord was decided under the old Companies Code. Giles JA amply addressed the distinction between that legislation and the terms of s 232 now applicable in Campbell v Backoffice. Second, the only contravention complained of was significantly confined in a temporal sense. Third, not only was Niord not a member when the alleged contravention took place, it was also not a member when it commenced proceedings:
'Niord was not a member (not a registered shareholder) of Adelaide at the time when the Notice went out on 6 April 1989 calling the shareholders' meeting for 28 April 1989. It is also clear that Niord was not registered as a member of Adelaide when these proceedings in the Supreme Court of South Australia were commenced on 24 April 1989. Finally, it is clear that Niord only became registered as a member of Adelaide on 28 April 1989, the day of the meeting, which was four days after the date on which these proceedings were issued.'(92) (emphasis in original)
As White J commented, Niord had no 'completed cause of action' when the action began.
Finally, it is impossible to ignore the substratum of facts in that decision which showed, to quote:
'there was extrinsic evidence which indicated quite clearly that Poseidon was using Niord as an agent (or instrument or puppet or front company) to camouflage the reality that any perceived aggrievement was that of [non-member] Poseidon and not Niord.' (106).
Such matters had led a Master to strike out Niord's claim as an abuse of process.
Niord casts a prima facie pall over any notion of an 'equitable shareholder' in an oppression context. However, in light of the factors I have discussed above, I would not go so far as to assess that decision as excluding all possibility of a s 232 cause of action as arguable with respect to pre-membership conduct, particularly where the underlying facts were, as discussed, quite different.
Other relevant case authorities
As regards what is an in principle rejection of any relevance in an equitable shareholder's position in the statutory oppression environment, two further decisions need to be added to this body of authority as discussed in earlier cases which I mentioned in reaching those conclusions, particularly Niord and cases that later followed Niord.
To that body of case authority can be added a decision of Sifris J in Rodda v Lifestyle Loans Vic Pty Ltd [2015] VSC 628; (2015) 303 FLR 227.
Rodda is in turn discussed in a subsequent decision of the Court of Appeal of New South Wales, Treadtel International Pty Ltd v Cocco [2016] NSWCA 360 (Gleeson & Leeming JJA, Barrett AJA). The lead reasons in that appeal were delivered by Barrett AJA, with whom Leeming JA agreed. Gleeson JA also agreed with Barrett AJA and added some further comments in relation to one matter.
Treadtel reversed the decision of a trial judge allowing a Mr Cocco as applicant to amend his statement of claim - to contend for relief under Pt 5.4A and Pt 2F.1 of the Corporations Act. Mr Cocco had not been recorded in the register of members of the appellate corporation. His pursuit of orders seeking the rectification of the appellate corporation's share register was assessed by Barrett AJA as being insufficient to afford Mr Cocco the requisite standing to viably pursue statutory causes of action, including for statutory oppression. In particular, I note Barrett AJA's observations concerning the series of cases his Honour discussed at [68], including Niord and Titlow - and as to which it was observed:
[T]he view was taken that, for the purposes of forerunners of Pt 2F.1, a person was a 'member' only if their name appeared in the register of members.
See also Barrett AJA's observations as regards the required standing under Pt 2F.1 at [91] ‑ [101], in particular, his Honour's application of the approach of Sifris J from Rodda at [100].
In essence, Mr Cocco failed because he had not pleaded any matters establishing his 'present and immediate standing as a "member" under s 233': Treadtel [101] (Barrett AJA).
Of key interest from the Treadtel reasons relevantly to the present arguments concerning the share registers kept by corporations and the significance of membership in that context, are the observations by Barrett AJA at [99]. At [98] his Honour referred to a decision of the Supreme Court of England and Wales, Enviroco Ltd v Farstad Supply A/S [2011] UKSC 16; [2011] 2 All ER (Comm) 269 [37] - [38] and observations of Lord Collins who had said:
Ever since the Companies Clauses Consolidation Act 1845 and the Companies Act 1862 membership has been determined by entry on the register of members. The companies legislation proceeds on that basis and would be unworkable if that were not so.
See also Barrett AJA's application of international case authority indicating that same underlying sentiment from Malaysia at [95], and noting as well in his Honour's observations at footnote 43, support of a concluding observation at [97] that the (three) cases earlier discussed 'tell decisively against any attempt by Mr Cocco to obtain access to that statutory regime through some extending meaning of "member"'.
Court's approach
On one view, Mr Jebb, as an applicant for vesting orders, and holding the benefit of what is obviously considered legal advice (Mr Jebb himself being a legal practitioner), might be thought well capable of undertaking a proper risk assessment about the potential outcomes, if the vesting orders as sought are made and all likely legal consequences if and when, in turn, Mr Jebb later applies to substitute himself as a replacement plaintiff in COR 59 of 2011. So, should a court interfere with such a considered decision by a litigant in these circumstances?
Ordinarily, a carefully considered decision made with the benefit of legal advice would be a powerful consideration. Mr Jebb, with the benefit of his legal advice on novel points, still presses resolutely for these vesting orders.
The opposing stance of Superior Lawns is hardly an altruistic position, in the circumstances.
On one view, Superior Lawns would be the winner, in the long term, if Mr Jebb pursues this course but a court ultimately holds there is no legitimate basis for him to be viably substituted as a plaintiff to continue the COR 59 of 2011 litigation to a trial.
So in those circumstances, should I simply issue the vesting orders if otherwise appropriate, to let Mr Jebb find out what lies ahead in future at his potential peril?
Against that course however, the liquidator's submissions urge me to give strong present consideration to the non-suit and substituted plaintiff issues ‑ bearing in mind wider interests of potential creditors of the former trustee and, indeed, all possible ultimate beneficiaries from a realisation upon the statutory chose in action that is the subject of COR 59 of 2011.
My view, at the end, is that I should afford these looming issues a strong degree of present consideration, albeit I cannot obviously resolve anything about COR 59 of 2011 finally, within the confined context of these distinct vesting order application proceedings.
Rizeq v The State of Western Australia
Mr Jebb contended that s 7(6) of the Trustees Act held an interrelationship with the Corporations Act. Accordingly, it is necessary to address the High Court's decision in Rizeq.
The phenomenon of state laws that apply of their own force within an exercise of federal jurisdiction, by contrast to other state laws which are picked up and then applied as federal law via s 79 of the Judiciary Act 1903 (Cth), was considered by the High Court of Australia in Rizeq. It is convenient to work from the reasons of Edelman J within that decision. His Honour, albeit reaching the same conclusion as the plurality, took a different view of a possible meaning of s 79(1) of the Judiciary Act (see [109] of those reasons). His Honour had indicated preference for what he called a 'third' constructional approach - over what was contrasted as a 'second' constructional approach by the plurality (see [111]). Edelman J noted a conceptual difference between the two constructions of s 79:
The second construction assumes that all courts exercising federal jurisdiction are effectively federal courts. The third construction assumes only that all authority by which courts exercise federal jurisdiction is federal authority [110].
His Honour did not, in the end, need to express a final preferred view as between the second and third preferred constructions towards s 79: see [111].
For present purposes, that conceptual degree of distinction upon the meaning of s 79 of the Judiciary Act does not bear on my evaluation of present issues, as regards Mr Jebb's foreshadowed plaintiff substitution application, by his future suggested reliance on s 234(d) of the Corporations Act as regards COR 59 of 2011, if or when vesting orders as sought over the Shares are made.
Rizeq explains, commencing at [199], the significance of laws 'directed to the regulation of jurisdiction [in the sense of authority to decide]'. Edelman J had said:
It will not always be a simple exercise to determine whether a State law is one which is binding on a court, involving the regulation of the court's authority to decide (ie regulation of the court's exercise of existing powers), or whether the law is one which is binding on a person or persons. However, at the core, some simple examples can be given. Laws concerning procedure, evidence, and the competency of witnesses all regulate the general manner of the court's authority to decide over its subject matter. In relation to State courts, they are laws which explain how State courts' powers should be exercised. They are not concerned with the rights or duties of persons. Section 114(2) of the Criminal Procedure Act 2004 (WA), which permitted the jury in the appellant's trial to return a verdict upon which 10 or more jurors were agreed, is one such law. Without s 79(1) of the Judiciary Act, the State court exercising federal jurisdiction would not be regulated by this law [200].
As a further example of state laws that would be picked up and applied as federal laws by s 79 of the Judiciary Act, his Honour referred to a limitation of action provision at [201]. His Honour noted what was expressly recognised by s 79(3)(a) of the Judiciary Act and, consequently, laws falling within s 79(1) of the Judiciary Act. Likewise, s 79(1) would capture laws which regulated the personal dimension of a court's authority to decide, including laws determining the persons who can appear before a court, or deal with the power to grant a stay of proceedings (see [203]).
His Honour contrasted another genre of distinct state laws, not captured under s 79(1):
On the other hand, laws which regulate a court's authority to decide will not usually include the general corpus of law which establishes the rights, privileges, powers, immunities, duties, disabilities, and liabilities of persons. This includes orders of a court, which usually give effect to these rights and duties. Section 6(1)(a) of the Misuse of Drugs Act 1981 (WA), upon which [Mr Rizeq] was convicted, is a law which created the duty to which he was subject. [Such a law was] … not concerned with the regulation of a court's authority to decide. It is a law binding on persons, not a law binding on courts … Since s 79(1) did not apply to these provisions, [Mr Rizeq's] trial was not for offences against a law of the Commonwealth. Section 80 of the Constitution was not engaged and conviction by a unanimous jury was not required [204].
I would observe as regards Mr Jebb's submissions towards a possible interrelationship as between federal (the Corporations Act) and state (the Trustees Act) legislation working somehow together in tandem, that I do not, for the purposes of COR 59 of 2011, assess s 7(6) of the Trustees Act as falling within the genre of laws that would be picked up and applied as federal law via s 79(1) of the Judiciary Act.
Section 7(6) of the Trustees Act is not a law which explains how a court's powers should be exercised. Rather, it is a state law that is explicitly concerned with the rights and duties of a new trustee. It operates in a substantive way as regards personal rights, rather than in a procedural or regulatory fashion.
Hence, s 7(6) of the Trustees Act presents, on my assessment, as a law binding new trustees, rather than as a law binding courts per se in the exercise of their authority to decide. So, s 7(6) would not be picked up and applied as a federal law under s 79 of the Judiciary Act.
Nor, on my assessment, is s 7(6) of the Trustees Act a state law that could apply of its own force to bear upon, augment, qualify or detract from s 234 of the Corporations Act operatively towards issues arising in COR 59 of 2011 - where federal jurisdiction is being exercised by this court.
Thus, Mr Jebb's arguments as to s 7(6) bearing upon a future application by him to substitute himself as plaintiff for T Co in COR 59 of 2011, look to me to be highly problematic. I can see no application of s 7(6) in that environment.
Discussions and determinations
A number of issues have emerged under the submissions received on the present vesting order application by Mr Jebb. In addressing these issues I will set out my ordered conclusions, some of which require elaboration.
First, upon the present vesting order application of Mr Jebb, I am of the view that I am exercising exclusively state, not federal, jurisdiction.
Second, that position may be contrasted to the other subsisting COR 59 of 2011 litigation in this court. For COR 59 of 2011 the court will be exercising federal jurisdiction bestowed upon it which enables this court to grant relief pursuant to Pt 2F.1 of the Corporations Act when addressing the contended statutory oppression conduct that is complained of.
Third, the express conferral of federal jurisdiction upon a Supreme Court of a state in respect of civil matters arising under the Corporations Act, is delivered by s 1337B(2)(a) of that legislation.
Fourth, in the federal jurisdiction context for COR 59 of 2011, scope for the additional application of state law, such as s 7(6) of the Trustees Act, within federal jurisdiction, say, via s 79 of the Judiciary Act, or even by that state law's own force ‑ raises an issue of some complexity. An immediate distinction must be noted with the facts in Rizeq. Here, the civil relief sought is via the Corporations Act federal law presenting in COR 59 of 2011 for alleged statutory oppression. Rizeq, in contrast, was concerned with state drug offence laws, namely, s 6(1)(a) of the Misuse of Drugs Act 1981 (WA). That was a substantive state law affecting personal rights which was at issue.
Here, however, towards COR 59 of 2011 at least, the substantive rights which are the subject of the alleged statutory oppression cause of action pursued by T Co as a member (ie, shareholder) of Superior Lawns, is grounded exclusively upon federal statute law (ie, the Corporations Act).
Within COR 59 of 2011 there may be scope for s 79 of the Judiciary Act to 'pick up', and thereby confer, the character of federal law, upon some state laws. But not all state laws are picked up to be applied by s 79(1). That, in effect, had been the failed submission of Mr Rizeq on that appeal - and which Edelman J identified as a first potential construction towards s 79(1) - but a construction which all members of the High Court in Rizeq unanimously rejected: see [115].
Fifth, in a context of Mr Jebb's foreshadowed application seeking his future substitution as the plaintiff for T Co in COR 59 of 2011, provisions of the Rules of the Supreme Court that are applicable to a joinder or substitution of parties seem to fall within the class of (state) laws picked up and applied as federal laws via s 79(1) (upon either the second or third constructions towards 79(1) of the Judiciary Act, as explained by Edelman J in Rizeq). But there is a necessary clarification required. What is clearly seen as the procedural subject matter of O 18 of the Rules of the Supreme Court, as regards party joinder, must not be inconsistent with the substantive federal (Corporations Act) laws under direct application. In other words, provisions of the Rules of the Supreme Court if applied via s 79 of the Judiciary Act can have no effect, if assessed as inconsistent with the provisions of Pt 2F.1 of the Corporations Act in COR 59 of 2011. That would be an instance of a substantive federal law having 'otherwise provided', vis-à-vis the state procedural law.
Sixth, state procedural rules of a court that are potentially capable of being picked up and applied as federal laws via s 79(1) of the Judiciary Act within a state court's exercise of federal jurisdiction in a statutory oppression litigation ‑ must be contrasted to what is a different genre of substantive state law like s 7(6) of the Trustees Act (WA). That state law on its face is directed at a conferral or acknowledgement of private rights on a new trustee. Section 7(6), on my evaluation at this time, would seem to be dealing with private rights. Hence, for the purpose of assessing its potential to be picked up and applied as a federal law via s 79 of the Judiciary Act (Cth), the position looks decidedly bleak. Section 7(6) looks to be a state law more directed at delivering substantial rights, rather than applying to a court for a purpose of elucidating how the state court might go about the task of exercising its jurisdiction.
So s 7(6) of the Trustees Act would not likely on my assessment, be 'picked up' in COR 59 of 2011 via s 79(1) of the Judiciary Act as a federal law potentially applicable under this court's exercise of federal jurisdiction in that action.
Seventh, a significant component of the arguments advanced on all sides of the present vesting order application of Mr Jebb (in the context of an exercise of state jurisdiction) were directed at forecasting potential consequences once a vesting order was made favouring Mr Jebb in respect of the Shares in Superior Lawns (which remain registered in the Superior Lawns register in the name of T Co). Arguments were made with an eye to a foreshadowed future substitution of Mr Jebb as plaintiff for T Co in COR 59 of 2011 (ie, proceedings where the court will be exercising federal jurisdiction).
In the event the vesting orders were to be made favouring Mr Jebb, it is foreshadowed he will then apply (albeit he is currently not a party to COR 59 of 2011) to seek to be substituted as plaintiff in lieu of T Co ‑ with that corporation being in liquidation as from 8 February 2017. T Co, of course, has also ceased to be a trustee of the Trafalgar Trust by its 13 December 2016 resignation from that office.
Eighth, I am of the view that, for the purpose of evaluating the present application, I can direct attention, as all parties and the T Co liquidators seek, in effect, towards a foreshadowed future plaintiff substitution application by Mr Jebb and the potential consequences of that event within COR 59 of 2011. However, the two actions are clearly separate exercises of jurisdiction and it is not possible for me to presently issue binding rulings in COR 59 of 2011.
Ninth, one of the arguments advanced by Superior Lawns against vesting orders favouring Mr Jebb is that such orders would, on taking effect, immediately non-suit former trustee, T Co, as being a viable ongoing plaintiff in COR 59 of 2011. This is because the effect of such orders would be that T Co would no longer be a member of Superior Lawns for the purposes of further pursuing the COR 59 of 2011 litigation. On my assessment, that submission is correctly made towards T Co, upon vesting orders taking effect in the terms currently pursued. Indeed, this is a likely propositional outcome which looks to have been ultimately accepted in Mr Jebb's 'reply' written submissions of 31 July 2017 (par 49).
Mr Jebb also says at par 49, that T Co would need to be reappointed as trustee of the Trafalgar Trust for T Co to viably pursue the COR 59 of 2011 action. I do not accept that submission. For T Co to viably pursue COR 59 of 2011 it must remain as a member of Superior Lawns. T Co's position as a trustee or otherwise is simply an irrelevant consideration to that litigation. T Co, in order to possess requisite standing to pursue COR 59 of 2011, first needed to be a shareholder (member) of Superior Lawns at the commencement of the action in 2011 (as it was). Second, T Co as well, on my assessment, needs to remain a member of Superior Lawns until the prosecution of COR 59 of 2011 to an outcome. I reached a similar conclusion in earlier interlocutory decisions concerning these same parties. No new argument made on the present vesting order application has persuaded me to alter views I earlier expressed about that ongoing standing requirement for the trial.
Tenth, accepting that Mr Jebb's vesting order application would, by my assessment, carry the likely consequence of such orders effectively non-suiting T Co as plaintiff within COR 59 of 2011, after the vesting orders take effect, that result may be viewed as sufficiently prejudicial by the liquidators of T Co to influence them to oppose the present application. Consequently, were I minded to issue vesting orders favouring Mr Jebb, which as I will explain I otherwise would, on the present application, the proper course seems to be to merely publish these reasons to that end. I will then withhold any issuance of orders upon the reasons for a time to allow all parties, including the liquidators of T Co, to reconsider their positions.
Eleventh, were I to issue the vesting orders sought by Mr Jebb as regards the Shares, I would next be likely satisfied that, after taking effect, such orders would render Mr Jebb, from then, to be a person falling within the textual ambit of s 234(d) of the Corporations Act - by reason of the transmission by law of the Shares to him. That scenario would also likely meet a description under the proviso to s 232 and under the scenarios as identified under s 233(1)(d) and (g).
Once the Shares were transferred to Mr Jebb and his name entered as a member on the Superior Lawns share register, Mr Jebb would then, of course, also meet s 234(a).
Twelfth, Mr Jebb is and has been trustee of the Trafalgar Trust since 13 December 2016, when he replaced T Co. Notwithstanding multiple adverse discretionary considerations all raised against Mr Jebb by Superior Lawns in opposing the present vesting order application, I would, in the end, still evaluate it as appropriate, in what are less than optimal circumstances, to issue such vesting orders to Mr Jebb - based essentially upon my consideration that there is no other viable alternative entity for the Shares in all the circumstances.
Thirteenth, the vesting orders, once effective, would permit Mr Jebb to invoke s 234(d) - but, in my view, only for Mr Jebb to commence (hypothetically) a fresh action, if he has a basis, to complain of his own statutory oppression by Superior Lawns and to seek relief pursuant to Pt 2F.1. The making of vesting orders for Mr Jebb could be supported in principle with an eye, therefore, to Mr Jebb (hypothetically) then commencing a fresh statutory oppression action against Superior Lawns (subject to limitation of action rights that may prove challenging for Mr Jebb, if raised): see Belgravia Nominees Pty Ltd v Lowe Pty Ltd [2017] WASCA 127; (2017) 51 WAR 341. Obviously the vesting orders would not be issued with a view to supporting Mr Jebb's substitution for T Co as plaintiff in the existing COR 59 of 2011 litigation, since on my assessment that substitution application is likely to fail.
Fourteenth, of course, I am not presently dealing with a plaintiff substitution application by Mr Jebb in COR 59 of 2011, made subsequent to vesting orders being made in his favour. For the future assistance of the parties, however, and particularly for T Co's liquidators and its many creditors, I should indicate now my fundamental difficulties of principle with any such foreshadowed plaintiff substitution application made by Mr Jebb, were it to be made in future (after a taking effect of vesting orders upon the present application).
Fifteenth, I am of the view, substantively, that not only would T Co be non-suited in COR 59 of 2011 once these vesting orders took effect, but also, that that setback is not likely to be ameliorated by any viable prospect of a seamless plaintiff substitution in COR 59 of 2011 ‑ to render Mr Jebb a viable replacement plaintiff in that action to pursue the litigation to a trial outcome. My base reason for that view is that the requirements of Pt 2F.1 of the Corporations Act require the party with standing to pursue the relief for statutory oppression. This must be a person who meets the requirements of s 234. And that must be so both at the time when the application under s 233 is begun and also until a judgment is given upon that application.
The as foreshadowed substitution application, therefore, of Mr Jebb as a replacement plaintiff in COR 59 of 2011 manifests a base in principle deficiency. Mr Jebb might attain at best, future status as a distinct member like entity. But he would hold then only a distinct cause of action (if any) from the member entity that commenced the action, namely, T Co. Mr Jebb could not continue T Co's statutory oppression cause of action as then, a former member of Superior Lawns. His substitution as plaintiff would not be legitimate.
A duality of changing plaintiffs over time in a continuing statutory oppression action is not, on my assessment, ameliorated by Mr Jebb's arguments that the Trafalgar Trust, for which both members have acted as trustee, is still the same trust with a residual equitable ownership over the Shares. That is simply an irrelevant consideration in this environment.
Equitable ownership of shares held under a trust arrangement does not feature as a relevant consideration, on my assessment, in this context. The stipulated and required underlying criteria is for corporate membership in this realm. Part 2F.1 of the Corporations Act provides that it is only the legally recognised shareholder found in the register of the corporation. That is the relevant and required criterion. Underlying considerations towards equitable ownership of shares are simply not to the point. To that end, see the discussions in Niord and in Treadfel, to which I have referred. Nor do I evaluate s 1072E(9) as bearing upon this qualifying requirement for a plaintiff seeking relief under a federal statutory cause of action given by the Corporations Act.
Mr Jebb's 'Reply' submissions advocating his substitution as plaintiff in COR 59 of 2011
Arguments were advanced by Mr Jebb by his 31 July 2017 submissions by 'reply', contending his substitution as plaintiff in the existing litigation of COR 59 of 2011 was not problematic and that such orders were appropriate.
Matters advanced included Mr Jebb's argument that s 7(6) of the Trustees Act in its references to the powers, authorities and discretions of a new trustee extended to that trustee in every respect, as if the new trustee had originally been appointed 'both before and after all the trust property becomes by law or otherwise vested in him' (par 11). Indeed, Mr Jebb's reply submissions and by his amended minute of relief contended for orders retrospectively vesting the Shares in Mr Jebb to take effect as and from 16 June 2006: see also pars 10 - 18.
I reject Mr Jebb's construction as advanced towards s 7(6), in terms of the potential retrospective validation as he contended for.
As I have now said, on my assessment, in an environment of an exercise of federal jurisdiction by a state court, s 7(6) of the Trustees Act is not of the genre of law picked up via s 79(1) of the Judiciary Act to be potentially applicable in the exercise of federal jurisdiction undertaken within COR 59 of 2011. Nor would it be a state law that would apply of its own force within the federal jurisdiction. Moreover, it cannot undermine or detract from the express terminology of s 234 of the Corporations Act.
Mr Jebb also argued that APT Finance Pty Ltd v Bajada [2008] WASCA 73 (Pullin JA & Newnes AJA) was of assistance and had perhaps been previously overlooked. However, it is apparent from my review of the Bajada reasons that the scenario under consideration there by the Court of Appeal was very different to the present foreshadowed plaintiff substitution application in COR 59 of 2011.
Bajada only dealt with the one continuing and current cause of action for debt. It was not concerned with the implications of a transmission by law in terms of the ownership of shares.
Bajada was concerned with principles applicable under state law concerning legal and equitable assignments of debt. Within that context the decision considered the appropriate plaintiff party to advance existing litigation in such circumstances of multiple assignments of the underlying debt.
In that very different context, Pullin JA and Newnes AJA rendered observations concerning O 18 r 6(2) and O 18 r 7(2) of the Rules of the Supreme Court, as regards the correct plaintiff to pursue that cause of action for debt: see [34] ‑ [39] of those reasons.
Assuming for the moment O 18 of the Rules of the Supreme Court may potentially be picked up in COR 59 of 2011 via s 79(1) of the Judiciary Act as applicable federal laws, such local procedural rules will not be of any force - to an extent that they are inconsistent with the underlying regime of Pt 2F.1 of the Corporations Act. Procedural rules of court, applicable from whatever origin, could not detract from, undermine or otherwise alter the substantive provisions of the Corporations Act which confer private rights by a statutory oppression action. See by analogy Wheeler J's observations in Morgan v Banning (1999) 20 WAR 474 (a limitation of action case), and recently applied in Belgravia. Contentions to the contrary as advanced by Mr Jebb's submissions in reply, on my assessment, are misconceived.
Within par 3.12 of Mr Jebb's reply submissions a further submission is advanced towards the suggested force of Bajada, in these terms:
No new claim is involved here; the plaintiff (who is entitled to stand in the shoes of the former trustee) merely acquires by way of transmission the same interest (ie ownership of the shares) as founded the former trustee's oppression claim.
By my assessment, that submission is also wrong. It displays a conceptual fallacy that ignores the required membership criteria (ie, shareholder standing) towards COR 59 of 2011. That an underlying trust remains the same beneficiary throughout, despite different trustees, is simply neither here nor there as an issue of legal relevance in this context, on my assessment.
Mr Jebb's substitution submission erroneously seeks to elevate the phenomenon of a continuing equitable ownership via a trust, as an issue of relevance to the administration of a corporation's share register. The Pt 2F.1 provisions of the Corporations Act are not concerned with equitable ownership of shares or with trusts over shares. Rather, they are concerned with the office of a member of the corporation, for the purpose of rendering an assessment about the corporation's potentially oppressive conduct vis-à-vis such a member, or in the limited further scenarios allowed beyond membership, as expressly allowed under s 234.
Whether a member acts in a capacity of trustee or otherwise over their shares is irrelevant in this context. Whether that member might at the end of the day hold rights for which they are accountable as a fiduciary to underlying beneficiaries of a trust, is a distinct side consideration. It is a consideration that is wholly irrelevant to the foreshadowed plaintiff substitution application of Mr Jebb in COR 59 of 2011.
Conclusions
None of the state law based palliatives as suggested by Mr Jebb towards his future plaintiff substitution in COR 59 of 2011, on my assessment, are likely to prove viable - in a sense that they might safely be viewed now as facilitating Mr Jebb's likely future substitution as plaintiff for T Co and his viable future pursuit of the COR 59 of 2011 litigation.
To the contrary, Mr Jebb would not have sufficient standing to continue the COR 59 of 2011 litigation, in the event of vesting orders made to him upon his present application. He might, however, hypothetically, commence a fresh action, once COR 59 of 2011 is ended.
The likelihood is that Mr Jebb's foreshadowed application to be substituted as plaintiff in COR 59 of 2011 to replace T Co, will likely be refused. It is opportune to render that future assessment presently as I am essentially requested by all parties and by T Co's liquidators: see the reference in Bajada [44], to Staughton LJ's observations in Kings Quality Homes Ltd v AJ Paints Ltd [1997] 3 All ER 267 and an endorsement of that principle locally by their Honours at [46] of Bajada.
The parties shall now have these reasons for a time without any orders made ‑ to consider their positions. In short, the position is that, if moved, I would issue vesting orders in the terms of par 1, par 4 and par 5 of Mr Jebb's amended minute of 31 July 2017, but at Mr Jebb's and T Co's likely peril. I would reserve all other issues as to costs.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: PATRICK GERARD GLADWYN JEBB AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENT TRUST -v- SUPERIOR LAWNS AUSTRALIA PTY LTD [2017] WASC 335 (S)
CORAM: KENNETH MARTIN J
HEARD: 18 JANUARY & 14 FEBRUARY 2018
DELIVERED : 22 FEBRUARY 2018
FILE NO/S: CIV 1179 of 2017
MATTER :An application pursuant to s 78 and s 79 of the Trustees Act 1962 (WA) for a vesting order in respect of the Trafalgar West Investment Trust
BETWEEN: PATRICK GERARD GLADWYN JEBB AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENT TRUST
Plaintiff
AND
SUPERIOR LAWNS AUSTRALIA PTY LTD
DefendantLIQUIDATORS OF TRAFALGAR WEST INVESTMENTS PTY LTD (IN LIQ)
Interested Party
Catchwords:
Vesting orders - Disputation over appropriate costs orders - No orders as to costs as between protagonist parties - Plaintiff to pay the costs of the interested party
Legislation:
Nil
Result:
Costs orders made
Category: B
Representation:
Counsel:
Plaintiff: Mr S Standing & Mr S Leslie
Defendant: Mr M Bennett
Interested Party : Mr D Thompson
Solicitors:
Plaintiff: Zafra Legal
Defendant: Bennett + Co
Interested Party : Barrister Fourth Floor Chambers
Case(s) referred to in judgment(s):
Patrick Gerard Gladwyn Jebb as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2017] WASC 335
KENNETH MARTIN J: My substantive reasons for decision were delivered in this matter on 20 November 2017: see Patrick Gerard Gladwyn Jebb as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2017] WASC 335. At [231] of those reasons I observed in terms:
The parties shall now have these reasons for a time without any orders made - to consider their positions. In short, the position is that, if moved, I would issue vesting orders in the terms of par 1, par 4 and par 5 of Mr Jebb's amended minute of 31 July 2017, but at Mr Jebb's and T Co's likely peril. I would reserve all other issues as to costs.
Subsequent to the parties' lengthy conferral in the wake of those published reasons there was a directions hearing listed for 18 January 2018. It became apparent at that hearing that the parties still needed to consider their positions further concerning the final orders.
On 14 February 2018 at a further hearing, after the parties had exchanged more written submissions concerning their contended orders and rival costs positions, I issued some orders in the terms below - but otherwise I reserved my decisions in regard to the appropriate costs orders.
The orders which I issued on 14 February 2018 giving effect to my published reasons were in the following terms:
1.The 345 ordinary shares and 1 D class share in the share capital of Superior Lawns Australia Pty Ltd (ACN 008 798 007) presently registered in the name of Trafalgar West Investments Pty Ltd as trustee for Trafalgar West Investment Trust be vested in Patrick Gerard Gladwyn Jebb as trustee for the Trafalgar West Investment Trust.
2.Superior Lawns Australia Pty Ltd by its secretary or other proper officer do register the transmission of the shares vested by order 1 in the name of Patrick Gerard Gladwyn Jebb non-beneficially.
3.There be liberty to apply generally.
4.The parties have leave to read the affidavit evidence filed and read in proceedings in any future application for substitution made in COR 59 of 2011.
5.My decision as to costs (on the vesting application) be reserved, to be published in due course.
The ambit of residual conflict to be resolved concerns the appropriate orders as to costs as between the plaintiff and the defendant - given the somewhat unusual, complex and lengthy arguments of fact and law which was the subject matter of my substantive reasons of 20 November 2017.
In short, the plaintiff and the defendant each now assert their substantive success upon that application and they say that costs orders should follow the event in their favour. The costs position is elaborated upon in the plaintiff's written submissions as to costs of 12 February 2018. The defendant's contrary position and seeking costs orders against the plaintiff (albeit not on an indemnity basis) can be found in the defendant's written costs submissions of 12 February 2018. There is no need for me to summarise all that written material about rival costs orders.
Respective counsel for the protagonists, Mr Standing for the plaintiff and Mr Bennett for the defendant, elaborated upon the parties' respective rival positions over costs during the course of the oral argument heard on 14 February 2018. From the plaintiff's perspective, Mr Jebb contends that vesting orders have now issued at its behest. Accordingly, he contends he has achieved substantial success. He says that the numerous discretionary factors all invoked against him in the defendant's lengthy materials, and marshalled towards opposing the making of any vesting orders, go to provide a sound basis for his invocation of the usual practice that the so-called successful party should, in accordance with orthodox principles, be entitled to his costs of the application. From that platform Mr Jebb also seeks certain special accompanying orders arising from his giving of discovery and some other unusual and expansive features of the application bearing upon special costs orders as explained in the supporting affidavit of Mr Jebb's solicitor, Mr Leslie, filed 12 February 2018.
From the defendant's perspective, it contends that the essential matter at issue on the application for vesting orders or, as defence counsel called it, the so-called 'killing ground', really concerned the foreshadowed next step, as was openly articulated by Mr Jebb as the rationale for his seeking these vesting orders, namely, his longer term pursuit of a substitution application to see him replace Trafalgar West Investments Pty Ltd as a substituted plaintiff in action COR 59 of 2011, which is pending in this court - but is currently facing a 'death row' jeopardy of being on the court's Inactive Cases List.
The plaintiff in that other litigation, Trafalgar West Investments Pty Ltd, is a corporation currently in liquidation. Its liquidators were given leave to participate and be heard during the current vesting order application - as my primary reasons do indicate at various points concerning the interests of the creditors of Trafalgar West Investments Pty Ltd (in liq).
Mr Bennett for the defendant contends that the foreshadowed substituted plaintiff application by Mr Jebb lay at the heart of the vesting order application -both in terms of legal significance and in terms of the magnitude of time and resources consumed during argument. That submission must be accepted as the reality of the position. Reference was also made by Mr Bennett to the changing position of Mr Jebb during the course of the vesting orders arguments by Mr Jebb, resulting in the plaintiff's amended minute of proposed orders of 31 July 2017, but ultimately then requiring the further attendance and argument by the parties on 2 October 2017 by reason of Mr Jebb's reply submissions received after the first argument, not falling within the scope of a true reply. That was another issue that I dealt with in my primary reasons: see [61] and following. It is certainly true that the conduct of the application on the part of Mr Jebb was less than optimal and did result in a certain element of wastage and, indeed, the need for the second hearing.
For its part, the interested party, namely, the liquidators of Trafalgar West Investments Pty Ltd, seek that their costs be met by either the plaintiff or the defendant as the court sees fit. That, on my assessment, is not unreasonable. The participation of the liquidators through their counsel to indicate its position was, on my assessment, very much in the interests of creditors and was of useful assistance to the court in resolving that somewhat unusual and complex vesting order application by Mr Jebb. They should have their taxed costs from some quarter.
Ultimately, the question of costs is a matter of discretion for the court to apply what are now well traversed principles. Each case is different and requires a bespoke analysis in terms of a just costs outcome. Here, in the circumstances, there are both positives and negatives to be raised on both sides as between the protagonists. Mr Jebb is right in contending that he has succeeded ultimately in obtaining vesting orders. However, a rational reading of my reasons for decision would surely indicate to his advisers that the conclusion has been reached in circumstances bearing heavily upon COR 59 of 2011 and, in that respect, his claims of fulsome success carries a somewhat hollow ring. On the other hand, whilst successful on the 'killing ground', the defendant did also raise a great number of discretionary factors towards opposing the making of vesting orders which ultimately were not accepted. So, to that extent, it may be said that the defendant was not wholly successful in opposing this vesting order application in all respects.
In all the circumstances, my view is that as between the plaintiff and the defendant there should at the end be no order as to costs. That outcome as to costs overall would appropriately and justly sit with the partial successes and failures on both sides by the protagonists. As regards the costs of the liquidators, my view is that those costs should be borne by the plaintiff as, in my view, he bears the greater responsibility of the protagonists for the incurring of those costs overall and so should carry that responsibility.
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