Pleash v Bezel Pty Ltd

Case [2024] FCA 1440

FEDERAL COURT OF AUSTRALIA

Pleash v Bezel Pty Ltd [2024] FCA 1440

File number(s): NSD 1160 of 2021
Judgment of: CHEESEMAN J
Date of judgment: 13 December 2024
Catchwords:

CORPORATIONS – application by company and its liquidator to recover loans made to related companies – where sole director of the related companies purportedly executed deeds of forgiveness in relation to the loans – whether loans to be construed so as to reconcile  inconsistencies on the face of the deeds or otherwise rectified – whether the loans were forgiven as a result of the forgiveness deeds – whether company has standing to recover any debt owed as a result of a deed of variation replacing the trustee – Held: relief granted

EQUITY – whether estopped from recovering the loans on the basis of reliance on the alleged forgiveness deeds and/or waiver – whether the loans were made by the company in its capacity as a corporate trustee or in its own right – whether the debt choses are trust property – Held: waiver not established, estoppel not established, applicants entitled to relief
Legislation:

Bankruptcy Act1966 (Cth) s 82

Corporations Act 2001 (Cth) s 1317

Federal Court Rules 2011 (Cth) r 30.21(b)

Australian Consumer Law (Qld) s 236

Civil Liability Act 2003 (Qld) s 60

Property Law Act 1974 (Qld) s 228

Cases cited:

Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; 216 CLR 109

Commissioner of Taxation v The Trustee for the Michael Hayes Family Trust [2019] FCAFC 226; 273 FCR 567

ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; 388 ALR 128

Fitzgerald v Masters [1956] HCA 53; 95 CLR 420

Fowler v Fowler [1859] EngR 598; (1859) 4 De G & J 250; 45 ER 97

Jaken Properties Australia Pty Ltd v Naaman [2023] NSWCA 214

NGI Savannah Living Communities Pty Ltd v Dunne & Ors [2023] QSC 273

Ramage v Waclaw (1988) 12 NSWLR 84

Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd [2024] FCAFC 17; 302 FCR 375

SeymourWhyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2019] NSWCA 11; 99 NSWLR 317

Simic v New South Wales Land and Housing Corporation [2016] HCA 47; 260 CLR 85
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 274
Date of last submissions: 26 February 2024
(additional affidavit received 16 February 2024)
Date of hearing: 24-25 October 2023, 6 February 2024
Counsel for the Applicants / Cross-Respondent: Ms H Mann
Solicitor for the Applicants / Cross-Respondent: Bartier Perry Lawyers
First Respondent: Did not appear
Counsel for the Second Respondent / Cross-Claimant: Mr G.T Gibson KC with Mr A.J.H O’Brien
Solicitor for the Second Respondent / Cross-Claimant: Enyo Lawyers
Third Respondent: Did not appear
Fourth Respondent:  Did not appear

ORDERS

NSD 1160 of 2021
BETWEEN:

BLAIR PLEASH IN HIS CAPACITY AS LIQUIDATOR OF ETARIP PTY LTD (IN LIQUIDATION) (ACN 164 972…

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AGLC
Pleash v Bezel Pty Ltd [2024] FCA 1440
Case
[2024] FCA 1440
Decision Date

CaseChat Overview and Summary

In Pleash v Bezel Pty Ltd, the applicants, Pleash and Bezel, sought to recover loans made to related companies. The dispute centred on whether these loans were forgiven through deeds of forgiveness executed by the sole director of the related companies, Mr Dunne. The court was required to determine whether the loans should be construed to reconcile inconsistencies on the face of the deeds, or otherwise rectified, and whether the loans were forgiven as a result of the forgiveness deeds. Additionally, the court had to decide whether Bezel, as the liquidator, had standing to recover any debt owed as a result of a deed of variation replacing the trustee.

The court found that the applicants were entitled to relief as they sought. The deeds of forgiveness executed by Mr Dunne did not effectively forgive the loans, and thus the applicants could recover the amounts claimed. The court rejected the argument that Bezel was estopped from recovering the loans, or that the waiver or estoppel applied. The court found Mr Dunne to be an unimpressive and unreliable witness, and did not accept his evidence unless supported by independent evidence or against his interest. The court concluded that the applicants were entitled to recover the loans, and granted judgment in their favour against Bezel and MP01. The cross-claim by MP01 was dismissed. The court also made procedural orders to facilitate the determination of costs and case management.

Orders

Orders of the court

1. Pursuant to r 30.21(1)(b)(i) of the Federal Court Rules 2011 (Cth), the proceeding continue generally against the first respondent.

2. Order 1 is to take effect nunc pro tunc.

3. Judgment in favour of the second applicant in the sum of $338,015 against the first respondent.

4. Judgment in favour of the second applicant in the sum of $520,500 against the second respondent.

5. The cross-claim dated 9 October 2023 be dismissed.

6. Subject to orders 7 to 9, the first and second respondents pay the applicants’ costs of the proceeding.

7. In the event that a party wishes to seek an alternative costs order, that party is to file and serve by 4 pm, 17 December 2024 written submissions (limited to two pages) addressing the alternative costs order that is sought.

8. In the event that an application is made for an alternative costs order by filing and serving submissions in accordance with order 7, any party seeking to oppose the making of the alternative costs order is to file and serve written submissions (limited to two pages) addressing the basis of their opposition to the alternative costs order by 4 pm, 19 December 2024.

9. Any application for an alternative costs order will be determined on the papers.

10. Any submissions filed and served pursuant to orders 7 to 8 are to be emailed to the Associate to Cheeseman J at the time they are served.

11. In the absence of an application being made in accordance with orders 7 to 8 above, within the timeframes stipulated, order 6 will take effect.

12. The proceeding in so far as it relates to the third respondent be listed for case management on 20 December 2024.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

No evidence was filed or read by Bezel.BACKGROUND Based on the evidence, I make the following findings relevant to the issues in dispute in this proceeding.EtaripIncorporation Etarip was incorporated on 24 July 2013. At that time and until 8 September 2015, the sole director and sole shareholder of Etarip was Frances Margaret Wolff. Ms Wolff at that time was in a personal relationship with Mr Dunne. Mr Dunne replaced Ms Wolff as the sole director and sole shareholder from 8 September 2015. At all times relevant to this proceeding, Mr Dunne has owned and controlled Etarip, in his capacity as sole director and sole shareholder. In their joint concise response dated 23 December 2021, Bezel and MP01 allege that prior to its entry into liquidation in or around February 2020, Etarip was the trustee of a discretionary trust known as the Etarip Trust and had limited operations, largely confined to the making of the Bezel Loan and the MP01 Loan and the receipt of $1.1 million from Battistin Builders Pty Ltd. In their joint concise response, Bezel and MP01 make no reference to Etarip having been replaced as trustee of the Etarip Trust on 21 April 2019 by reason of the Etarip Variation Deed.The Etarip Trust On or about 5 August 2013, Ms Wolff executed on behalf of Etarip, the Etarip Discretionary Trust Deed (Etarip Trust Deed) which established the Etarip Trust. The copy of the Etarip Trust Deed in evidence is undated. Mr Dunne deposes to the deed being executed on or about 5 August 2013. The applicants do not contend to the contrary. Etarip was appointed as the trustee of the Etarip Trust. Mr Dunne was named as the Principal as defined in the Etarip Trust Deed. The Etarip Trust Deed creates two classes of beneficiary. Class A beneficiaries comprise the Principal and categories of person related to or through him or otherwise appointed as beneficiaries by him as Principal. Class B beneficiaries comprise companies in which any Class A beneficiary is a director or shareholder and their related bodies corporate, trusts in which any Class A beneficiary is a beneficiary and partnerships in which any Class A beneficiary is a partner. The Etarip Trust Deed confers the power to lend and to borrow money on the trustee. Clause 9.6 provides as follows:(Power to Lend) to lend by way of a secured or unsecured loan or loans to any person firm or corporation which may be made at call or for a period of time, at a rate of interest or no interest and with or without security. Clause 9.17 provides as follows: (Power to Borrow Money) to raise or borrow any money in any manner whatsoever either alone or jointly with another or others (including but without limitation by way of overdraft account, letters of credit or bill acceptance and discounting facility) from the Trustee in the personal capacity of the Trustee or from any other person or from any bank, financial institution, company or trust on terms and conditions and for purposes as the Trustee may in its absolute discretion decide and to secure the repayment of any moneys so raised or borrowed or raised by or for any other person including the Trustee in the personal capacity of the Trustee by way of mortgage, charge or other security of the whole or any part or parts of the Fund with or without power of sale and no mortgagee advancing money on any mortgage charge or other security purporting to be made under this power shall be concerned as to the necessity for any such borrowing or as to the purpose for which it is required or to see to the application thereof;

Evidence

Evidence Before The Court

Mr Baskerville has not lodged an address for service. He has not taken any active steps in the proceeding. EVIDENCE Mr Pleash was called for the applicants. The applicants relied on two affidavits of Mr Pleash affirmed on 24 February 2022 and 5 September 2023 and the documents exhibited thereto. When Mr Pleash gave his oral evidence, he swore an oath and adopted the contents of his affidavits. He was cross-examined. MP01 submits that “although not an impressive witness, Mr Pleash’s evidence was largely a vehicle for tendering documents which speak for themselves and thus no credit issues arise.” For present purposes, it suffices to note that MP01 does not directly challenge Mr Pleash’s credit. Mr Pleash was prepared to make concessions where appropriate in the course of his cross-examination. The applicants also relied on an affidavit of Emma Theresa Boyce affirmed on 13 February 2024 in support of its application that the proceeding continue generally against Bezel in its absence. MP01 relied on affidavit evidence from Mr Dunne and from its solicitor, Jay Jih-Hui Tseng. Mr Tseng was not required for cross-examination. On 24 October 2023, I granted leave to MP01 to rely upon paragraphs 1 to 12, 16 and 18 to 25 of Mr Tseng’s affidavit affirmed on 16 October 2023 and pages 1 to 63 and 442 to 572 of exhibit JJT-7 thereto, subject to any final determination as to relevance. Mr Tseng’s evidence concerns various ASIC company searches of Etarip, MP01 and Bezel; documents filed and judgments entered in the Queensland Proceeding; and reports prepared in relation to the liquidation of Etarip. I was subsequently satisfied as the hearing unfolded that Mr Tseng’s evidence was relevant. Accordingly, it will be admitted. As mentioned, Mr Dunne was called by MP01 as a witness. Although this proceeding includes a claim against Mr Dunne for damages pursuant to s 1317 of the Corporations Act 2001 (Cth), that part of the proceeding is presently stayed as mentioned above. MP01 read affidavits affirmed by Mr Dunne on 4 November 2022, 17 February 2023, 9 October 2023 and 17 October 2023. On 13 July 2022, I made orders that any evidence filed or served by the respondents after 22 July 2022 could not be relied upon by the respondents without leave. On 7 June 2023, I made orders granting leave to MP01 to rely on the affidavits of Mr Dunne affirmed on 4 November 2022 and 17 February 2023. Mr Dunne’s affidavit affirmed on 9 October 2023 was filed in accordance with orders made on 5 October 2023. Mr Dunne’s affidavit affirmed on 17 October 2023 sets out clarifications to his affidavit affirmed on 9 October 2023. Similarly to Mr Pleash, when Mr Dunne gave his oral evidence he took an oath and adopted the contents of his affidavits which he had affirmed on his oath. He was cross-examined. His cross-examination occupied most of the hearing. The applicants submit that: (1)Mr Dunne was a very unimpressive witness; (2)Mr Dunne was not a witness of truth; (3)Mr Dunne intentionally misrepresented matters concerning the financial affairs of Etarip to the liquidator; and(4)none of Mr Dunne’s evidence should be accepted unless otherwise proved by contemporaneous records.

Decision

Reasons for decision

For the reasons I have given I am satisfied that the applicants are entitled to relief substantially in the form they seek against MP01. I will make orders accordingly.CONCLUSION I will make orders granting relief against Bezel and MP01. MP01’s cross-claim will be dismissed. As presently informed, I am inclined to order that the second respondent pay the applicants’ costs on the usual basis. However, I will afford the parties an opportunity to bring forward any submissions they wish to make for a different costs order to that I have foreshadowed. I will make procedural orders to facilitate the costs issue being determined in that way. I will also list the proceeding for case management with a view to ascertaining the applicants’ intentions in relation to that part of the proceeding against Mr Dunne which is presently stayed. I will make orders accordingly.

Ratio Decidendi

Legal Principle Established

As mentioned, Mr Dunne was called by MP01 as a witness. Although this proceeding includes a claim against Mr Dunne for damages pursuant to s 1317 of the Corporations Act 2001 (Cth), that part of the proceeding is presently stayed as mentioned above. MP01 read affidavits affirmed by Mr Dunne on 4 November 2022, 17 February 2023, 9 October 2023 and 17 October 2023. On 13 July 2022, I made orders that any evidence filed or served by the respondents after 22 July 2022 could not be relied upon by the respondents without leave. On 7 June 2023, I made orders granting leave to MP01 to rely on the affidavits of Mr Dunne affirmed on 4 November 2022 and 17 February 2023. Mr Dunne’s affidavit affirmed on 9 October 2023 was filed in accordance with orders made on 5 October 2023. Mr Dunne’s affidavit affirmed on 17 October 2023 sets out clarifications to his affidavit affirmed on 9 October 2023. Similarly to Mr Pleash, when Mr Dunne gave his oral evidence he took an oath and adopted the contents of his affidavits which he had affirmed on his oath. He was cross-examined. His cross-examination occupied most of the hearing. The applicants submit that: (1)Mr Dunne was a very unimpressive witness; (2)Mr Dunne was not a witness of truth; (3)Mr Dunne intentionally misrepresented matters concerning the financial affairs of Etarip to the liquidator; and(4)none of Mr Dunne’s evidence should be accepted unless otherwise proved by contemporaneous records. MP01 counters by submitting that while Mr Dunne was not a particularly persuasive witness, his evidence should not be rejected in its entirety because there are cogent explanations which explain the criticisms the applicants make of Mr Dunne’s evidence. It is necessary for me to assess and make findings in relation to Mr Dunne’s credit and reliability and the extent to which I accept his evidence. I found Mr Dunne to be a singularly unimpressive witness. I have concluded that he was not a witness of truth. In his dealings with the liquidator, and in this Court, Mr Dunne intentionally misrepresented matters concerning the financial affairs and operation of Etarip. I do not accept his evidence except where it is supported by independent evidence or is otherwise against his interest. I have not reached this conclusion lightly. My reasons for reaching this conclusion are addressed below. No evidence was filed or read by Bezel.BACKGROUND Based on the evidence, I make the following findings relevant to the issues in dispute in this proceeding.EtaripIncorporation Etarip was incorporated on 24 July 2013. At that time and until 8 September 2015, the sole director and sole shareholder of Etarip was Frances Margaret Wolff. Ms Wolff at that time was in a personal relationship with Mr Dunne. Mr Dunne replaced Ms Wolff as the sole director and sole shareholder from 8 September 2015. At all times relevant to this proceeding, Mr Dunne has owned and controlled Etarip, in his capacity as sole director and sole shareholder. In their joint concise response dated 23 December 2021, Bezel and MP01 allege that prior to its entry into liquidation in or around February 2020, Etarip was the trustee of a discretionary trust known as the Etarip Trust and had limited operations, largely confined to the making of the Bezel Loan and the MP01 Loan and the receipt of $1.1 million from Battistin Builders Pty Ltd. In their joint concise response, Bezel and MP01 make no reference to Etarip having been replaced as trustee of the Etarip Trust on 21 April 2019 by reason of the Etarip Variation Deed.The Etarip Trust