JLS Carriers Pty Ltd v Graham & Seda

[1998] QSC 78

IN THE SUPREME COURT
OF QUEENSLAND  Writ No.  157 of 1997
CAIRNS

[JLS Carriers PtyLtd v Graham & Seda]

BETWEEN:                JLS CARRIERS PTY.LTD.  Trading as Trustee for

John & Lynette Guy Management Trust

Plaintiff
AND:  DAVID JOHN GRAHAM

First Defendant

AND:DAVID JOHN GRAHAM acting as Trustee for the John Graham Family Trust

Second Defendant

AND:SEDACOVE PTY.LTD.  acting as Trustee of the North Queensland Entertainment Machines Unit Trust

Third Defendant

REASONS FOR JUDGMENT
  BEFORE THE HONOURABLE JUSTICE JONES

DELIVERED THE 27TH DAY OF APRIL 1998

This hearing involves applications arising in two separate matters -

W157/97 JLS Carriers Pty.Ltd., as Trustee for John & Lynette Guy Management Trust -v- David John Graham and Sedacove Pty.Ltd., as Trustee for N.Q. Entertainment Machines Unit Trust and Anor.

App.4/98   Re Sedacove Pty.Ltd.

On 6 June, 1996 David John Graham as trustee for the John Graham Family Trust sold to J.L.S. Carriers Pty.Ltd., as trustee for the John and Lynette Guy Management Trust, for a price of $330,000.00, 600 units of the NQ Entertainment Machine Unit Trust.  This latter trust carried on the business of the provision of amusement machines and furniture to various venues in North Queensland.  The 600 units on the face of the agreement appeared to represent 50% of the total business although in a recent affidavit Mr. Graham asserted that it represented some 32% of the business.  In either view, the units constitute a substantial interest in the business and its assets.

The trustee of the unit trust is Sedacove Pty.Ltd., of which there are two directors, Mr. Graham and Mrs.  Guy.

A serious dispute has arisen between Mr. Graham on the one hand and Mr. and Mrs. Guy on the other concerning the operation of the business.

The first application came before me as an urgent application on 25 November, 1997 on which date I made orders by consent which included an order restraining Sedacove Pty.Ltd., "from transferring, selling, disposing of, encumbering, mortgaging, pledging in any manner or dealing with or parting with possession of any of the property mentioned in Schedules "A" and "B".."

The matter came before me on 8 December, 1997 when a further order was made in similar terms in the expectation that the parties, by negotiation, would resolve their differences.  However, those negotiations were not successful.

The next application was founded on an allegation that the first defendant, Mr. Graham, acting on his own behalf, and/or in his capacity as director of Sedacove Pty.Ltd., was in contempt of the earlier order.  This application came before me on 9 March, 1998 on which date I adjourned the matter to the 23 March, 1998 for further consideration.

On 23 March, 1998 I indicated that on my construction of the terms of the order of 8 December, 1997 that there had been a breach of that order even though it may have occurred unwittingly by Mr. Graham.  Further, on the evidence adduced by Mr. Graham there was a suggestion that the conduct which I considered was in breach of the order may have resulted in benefit, rather than harm, to the trust business.

Also on the 23 March, 1998 Lynette Guy, in her capacity as a contributory and officer of Sedacove Pty.Ltd., brought an application for the appointment of Bruce Pountney Milner as an official liquidator of the company.   

In the light of my indication that the parties sought further time to pursue negotiations to resolve their differences rather than have a provisional liquidator appointed, I adjourned the matter the 1st April, 1998 to facilitate those negotiations.  Again the negotiations were unsuccessful.

When the matter came on before me on 1st April, 1998  a situation existed where there was no trust between the directors of Sedacove Pty.Ltd., and where the managing director, Mr. Graham, was refusing to discuss concerns with the other beneficiaries of the trust business.  It was necessary for there to be some circuit-breaker to the escalating disputes which would occur if the business was allowed to continue under the present management. Mr. and Mrs.  Guy proposed the appointment of Mr. Bruce Pountney Milner as the provisional liquidator of the trustee company Sedacove Pty.Ltd. 

Sedacove Pty.Ltd., does not carry on business in its own right but simply acts as trustee.  To have effective control of the business so as to avoid the escalation of disputes of the kind which have already arisen it is necessary for a new trustee to be appointed.

The court has an undoubted power to remove the trustee and to appoint a new one. This arises pursuant not only to the Trusts Act 1973 but as part of its inherent jurisdiction.

In Miller -v- Cameron (1936) 54 CLR 572 at pp.580-1 Dixon J. (as he then was) said:-

"The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee.  In deciding to remove the trustee the court forms a judgment based upon considerations, possibly large in number and varied in character, which combined to show that the welfare of the beneficiaries is opposed to his continued occupation of the office.  Such a judgment must be largely discretionary.  A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised."

The beneficiaries of the trust here are the John and Lynette Guy Management Trust and the John Graham Family Trust.  The Guy Management Trust in acquiring an interest in the business, did so in the expectation that its directors and shareholders, Mr. and Mrs.  Guy, would play a part in the control of the business as well as being entitled to recover a share of the profits.

Mr. Graham asserts that Mr. and Mrs. Guy do not have the capacity to run the business as effectively as himself and for this reason he has made the business decisions without any consultation with, or accounting to, either of them.  They object to this behaviour and they now have concerns about the proper administration of the trust business.  Mr. Graham further asserts that the appointment of a liquidator will have a deleterious effect on the business.  Whether this is so or not the existing situation cannot continue.

A similar situation to this was encountered in Re Whitehouse (1982) Qd.R 196 where at p.206 Macrossan J. (as he then was) said:-

"In the present case, while giving credit to C.M. Whitehouse for his part in building up the assets of the trust and while acknowledging that his disputes with the two beneficiaries may be due, in part, to unavoidable clashes of personality, I think, nevertheless, that the disputes and the state of animosity which exists have been attributable to him to an extent sufficient to make me apprehensive as to his future administration of the trust..  I am however moved to act by his obstructive attitude and by his general unwillingness to attend promptly to the beneficiaries' rights and by the deficiencies which have been permitted to exist in the keeping of proper accounts and in the general administrations of the trusts, all of which have accompanied the animosity which has existed in the past and which will, in my estimation, if uncorrected, continue in the future."

I understand that the parties intend to continue to negotiate in the hope of resolving their differences.  This process is to be encouraged.  But the process will be facilitated, in my view, by the appointment of an independent person to take control of the business to ensure that its assets are used appropriately and more importantly to provide an account to each of the beneficiaries of the business affairs. 

In the circumstances I deem it appropriate to place the trustee company in the hands of Bruce Pountney Milner as provisional liquidator and at the same time to appoint him trustee of the trust business North Queensland Entertainment Machines Unit Trust.  I order accordingly. 

I propose to adjourn both applications to 27 April, 1998.

I reserve the costs of the applications in each of the proceedings.