Rossignoli v Rossi Recycling Pty Ltd
[2019] VSC 220
•5 April 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2018 02512
| PAUL GIOVANNI ROSSIGNOLI | Plaintiff |
| v | |
| ROSSI RECYCLING PTY LTD (ACN 056 188 562) | First Defendant |
| GLEN ROSSIGNOLI | Second Defendant |
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JUDGE: | CONNOCK J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29 March and 5 April 2019 |
DATE OF RULING: | 5 April 2019 |
CASE MAY BE CITED AS: | Rossignoli v Rossi Recycling Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2019] VSC 220 |
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PRACTICE AND PROCEDURE — Whether two proceedings should be managed, heard and determined together — Rule 9.12 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) — Parts 2.1, 2.2 and 2.3 of the Civil Procedure Act 2010 (Vic) — Common factual elements in each proceeding — Reduction in risk of inconsistent findings of fact — Common main witnesses.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Farrands | Slater & Gordon Limited |
| For the First Defendant | Mr J Edgar (solicitor) | Frenkel Partners |
| For the Second Defendant | Dr M Barrett | Dunemann Sutherland Pty |
HIS HONOUR:
An issue has arisen as to whether this proceeding (Receiver Appointment Proceeding) should be managed and heard together with proceeding S CI 2018 00737 (Trustee Removal Proceeding).
Brief background to Trustee Removal Proceeding
Stated briefly, the Trustee Removal Proceeding was commenced by Mr Glen Rossignoli on 28 February 2018 against his father, Mr Paul Rossignoli, and two corporate trustees, Rossi Recycling Pty Ltd (as trustee for the Rossignoli Property Trust) (Rossi Recycling) and Buckland Valley Pty Ltd (as trustee for the Rossignoli Trust No 3 and the Heatherdale Property Trust) (Buckland Valley).
It is alleged in that proceeding that Mr Glen Rossignoli is:
(a) the holder of 2 out of 12 shares issued in Rossi Recycling;
(b) an object of the Rossignoli Property Trust; and
(c) an object of the Rossignoli Trust No 3 and the Heatherdale Property Trust.
It is further alleged that Mr Paul Rossignoli is (amongst other things):
(a) the sole director, secretary and controlling mind and will of Rossi Recycling and holds 50 per cent of its shares;
(b) the sole director, secretary, shareholder and controlling mind and will of Buckland Valley;
(c) an object of the Rossignoli Property Trust; and
(d) an object of the Rossignoli Trust No 3 and the Heatherdale Property Trust.
It is alleged that Rossi Recycling (as trustee for the Rossignoli Property Trust) owns a recycling and waste management business known as Eastern Recycling, which is described in some of the filed material as one of the Rossignoli family businesses (Eastern Recycling). It is further alleged that the Eastern Recycling business operates from two adjoining properties in Ringwood (Rossignoli Properties), and that since about 2012 it has been managed by Mr Glen Rossignoli as general manager, with assistance from a management team and other staff.
Issues have arisen in relation to, amongst other things, the Eastern Recycling business and allegations are made in the Trustee Removal Proceeding regarding breaches of duty and other alleged misconduct by Mr Paul Rossignoli, Rossi Recycling, and Buckland Valley. The relief sought in the Trustee Removal Proceeding includes:
(a) injunctions restraining the defendants from dealing with various trust property or affecting the Eastern Recycling business in particular ways;
(b) an order removing Rossi Recycling as trustee of the Rossignoli Property Trust and an order appointing a new trustee;
(c) an order that the trust property of the Rossignoli Property Trust vest in the new trustee;
(d) an order removing Buckland Valley as trustee of the Rossignoli Trust No 3 and the Heatherdale Road Trust and an order appointing a new trustee; and
(e) an order that the trust property of the Rossignoli Trust No 3 and the Heatherdale Road Trust vest in the new trustee.
Upon the return of an application for interlocutory injunctions by summons filed on 28 February 2018 by Mr Glen Rossignoli in the Trustee Removal Proceeding, the defendants, by their counsel, gave detailed undertakings to the Court that they would not conduct themselves in particular ways in relation to the relevant trusts and certain property and businesses (Trustee and Director Undertakings).
Upon the return of a further application by summons filed on 24 August 2018 by Mr Glen Rossignoli for orders associated with an alleged breach of the Trustee and Director Undertakings, Mr Paul Rossignoli gave additional undertakings regarding how he would and would not conduct himself in relation to aspects of the trusts, certain property and businesses the subject of the Trustee Removal Proceeding (Further Director Undertakings).
The Trustee Removal Proceeding has been the subject of a number of directions hearings, and interlocutory steps are well advanced. For example, substantive affidavit material has been filed and by orders made on 22 February 2019, the parties were provided with an opportunity to make further discovery and file and serve any expert reports.
There are many factual and other issues that exist between the parties in the Trustee Removal Proceeding, including disputes regarding the conduct of the business, the actions of the trustees, the conduct of Mr Paul Rossignoli and Mr Glen Rossignoli and others, the nature of the relationship between Mr Paul Rossignoli and Mr Glen Rossignoli, the financial position and affairs of Eastern Recycling and the position going forward. These matters are addressed in extensive affidavit material and expert reports filed by the parties.
Brief background to Receiver Appointment Proceeding
By originating motion filed on 29 November 2018, Mr Paul Rossignoli commenced the Receiver Appointment Proceeding. The named defendants are Rossi Recycling, as first defendant, and Mr Glen Rossignoli, as second defendant. All of these parties are parties to the Trustee Removal Proceeding and it will be recalled that Mr Paul Rossignoli is the sole director and secretary of Rossi Recycling, the trustee of the Rossignoli Property Trust.
The relief sought by an amended originating motion filed on 19 March 2019 in the Receiver Appointment Proceeding comprises, in substance, orders:
(a) appointing Mr Laurence Fitzgerald of William Buck BRS (Vic) Pty Ltd (William Buck) as receiver to certain assets of the Rossignoli Property Trust referred to below;
(b) that the receiver take control and operation of such of those assets of the Rossignoli Property Trust as comprise the business of the trust known as Eastern Recycling for the purposes of preparing the business for sale by public tender, and then so offering it for sale, as soon as practicable; and
(c) that the remuneration of the receiver be as set out in the affidavit of Mr Laurence Andrew Fitzgerald affirmed on 29 November 2018 and be paid from the assets of the trust according to the remuneration as specified in that affidavit.
Briefly, it is said that:
(a) Mr Paul Rossignoli was the founder and principal funder of Eastern Recycling, that it is ‘currently run through a family trust’, and that the order is sought because the running of the business has become unworkable;
(b) Mr Paul Rossignoli is no longer prepared to support the business financially, without which the business has no medium to long-term viability;
(c) the value of the business will disappear unless its value is realised by sale; and
(d) the second defendant, Mr Glen Rossignoli, and his siblings have been trying to buy the business or otherwise get control of it since 2016 and want to own it, and that Mr Glen Rossignoli will likely participate in the sale process.
It is contended that a sale by a receiver achieves the primary object of protecting for the benefit of the beneficiaries of the trust the current value in the Eastern Recycling business by converting that current value to cash. The alternative of doing nothing until the separate dispute about who should be the trustee in the Trustee Removal Proceeding is resolved is asserted to be something that will destroy the business and therefore is not an option.
Mr Glen Rossignoli opposes the application for the appointment of a receiver. Among other things, he contends that the appointment of a receiver will almost certainly irreparably destroy the Eastern Recycling business, which is the only asset of the Rossignoli Property Trust.
It is evident that there are many factual and other issues between the parties in the Receiver Appointment Proceeding, including disputes as to the financial position and affairs of Eastern Recycling, whether the Eastern Recycling business is in any jeopardy in the medium to long term, and various aspects of the conduct of Mr Paul Rossignoli and Mr Glen Rossignoli and their ability to engage or work together. These matters are addressed in extensive affidavit material filed by each of the parties.
There have been a number of directions hearings in the proceeding and its interlocutory steps are also well advanced.
Submissions
At a directions hearing in the Receiver Appointment Proceeding on 15 March 2019, the Court raised with the parties the question of whether consideration had been given to the management and hearing of the two proceedings together, and provided the parties with a further opportunity to consider the position. It was in this context that the matter arose again at the directions hearing on 29 March 2019, and submissions were made. The plaintiff in the Trustee Removal Proceeding, Mr Glen Rossignoli, submitted that the two proceedings must be heard together. The plaintiff in the Receiver Appointment Proceeding, Mr Paul Rossignoli, submitted that the proceedings should not be heard together.
Briefly, when seeking to resist the proceedings being heard together, counsel for Mr Paul Rossignoli submitted, in substance, that:
(a) the Receiver Appointment Proceeding is further advanced with the remaining interlocutory steps being more limited than in the Trustee Removal Proceeding;
(b) there is a material dispute emerging in the Trustee Removal Proceeding regarding discovery and the production of documents by Mr Glen Rossignoli;
(c) although the evidentiary material did not establish that there was a solvency issue of the Eastern Recycling business in the short term, it was submitted that because of a range of matters, including the two proceedings, there would likely be one in the medium to long term, although the period concerned was not clear on the evidence. I add that during the hearing it was appropriately acknowledged by counsel for Mr Paul Rossignoli that a number of the issues raised had been present for an extended period of time, the business was continuing to operate, and that, on the evidence, it could not be said that the issue was one of extreme urgency. It was also recognised and appropriately acknowledged that the Receiver Appointment Proceeding had not been commenced until after the Trustee Removal Proceeding was commenced;
(d) contrary to the assertions of Mr Glen Rossignoli, the Receiver Appointment Proceeding was being brought in order to protect trust assets;
(e) there is no overlap, or extensive overlap of issues, or questions arising in each of the proceedings and, further, the Receiver Appointment Proceeding would only be a sub-set of the broader Trustee Removal Proceeding because it concerns only the assets comprising the Eastern Recycling business;
(f) because the allegations in paragraph 79(b) of the amended statement of claim in the Trustee Removal Proceeding refer to criminal charges having been laid against Mr Paul Rossignoli, to which he has pleaded not guilty, and the trial of those charges is not due to occur until February 2020, the Trustee Removal Proceeding could not proceed before then if those allegations continued to be pressed by Mr Glen Rossignoli in the Trustee Removal Proceeding;
(g) the Trustee Removal Proceeding may turn out to be otiose if a receiver is appointed or if the relevant trustee is not removed because, in those circumstances, the Eastern Recycling business will be sold in any event. Further, if a new trustee is appointed then that new trustee may also decide to sell the business;
(h) it would be misguided in the context of the Receiver Appointment Proceeding to consider the alternative possibility of removing trustees as sought in the Trustee Removal Proceeding, and further the issue would remain live in any event because even if removed as trustee, Mr Paul Rossignoli, as an alleged object of the relevant discretionary trust, would make another application to have a receiver appointed; and
(i) that it would be a drastic step not to appoint a receiver and get the value of the Eastern Recycling business captured for the benefit of the beneficiaries while it is still a going concern.
Counsel for Mr Glen Rossignoli submitted otherwise. Briefly, it was submitted that:
(a) there is significant overlap between the issues in the two proceedings;
(b) practical and evidentiary issues would arise if the proceedings were heard separately;
(c) hearing the matters separately would necessarily pre-empt and de facto resolve substantial issues that would otherwise arise in the Trustee Removal Proceeding, and such an approach was not appropriate;
(d) the discovery issue referred to would not emerge as an impediment of the kind foreshadowed by counsel for Mr Paul Rossignoli;
(e) there is a dispute between the parties regarding the financial health of Eastern Recycling and its ability to continue, and this is reflected in an affidavit of Mr Glen Rossignoli filed on 28 March 2019 and an expert report of Ferrier Hodgson. In substance, it was submitted that, whilst there are uncertainties, there is no issue of immediate concern;
(f) a substantial part of the basis for each proceeding is related to difficulties between Mr Paul Rossignoli and Mr Glen Rossignoli in relation to the Eastern Recycling business, and these will be part of the circumstances to be considered in each proceeding and at least involve contested questions of fact. By way of example, reference was made to the issue of the financial health of the Eastern Recycling business being intertwined with the alleged conduct of Mr Paul Rossignoli as the controlling mind of the trustee, Rossi Recycling, and these further circumstances would be relevant and should be taken into account in each proceeding;
(g) with respect to the issue of the criminal charges against Mr Paul Rossignoli, this allegation would not be pressed and therefore presents no impediment in relation to the timing of the hearings; and
(h) Mr Glen Rossignoli is confident that the Eastern Recycling business is solvent, and the expert reports relied upon do not go so far as to say that the business is or is likely to become insolvent in the medium to long term, only that its solvency may become uncertain depending upon a number of circumstances.
Disposition
In my view it is plain that the proceedings should be managed together and, subject to further order, should be heard together. There are many considerations that support this conclusion and for present purposes it is sufficient to refer to the following below.
First, it well serves the overarching purpose of the Civil Procedure Act 2010 (Vic) (Act) and the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules) in relation to civil proceedings being to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. It is consistent with the obligations placed upon the Court, pursuant to ss 8 and 9 of the Act and the obligations placed upon the parties under Parts 2.2 and 2.3 of the Act. Rule 9.12 of the Rules is also engaged.
Second, a review of the extensive affidavit material filed by the parties in each of the proceedings reveals that the factual background to each has substantial common elements and that a factual overlap does exist on the evidence. It is also apparent from the submissions that cross-examination is considered by the parties to be almost inevitable, which would further complicate the position if the matters proceeded separately, particularly given that Mr Paul Rossignoli and Mr Glen Rossignoli are the primary lay witnesses in each of the proceedings.
Third, given the nature and content of the disputes between the parties it is desirable to seek to hear and determine all the issues in dispute between the parties together.
Fourth, the claims made and relief sought in the Receiver Appointment Proceeding contemplate that it will be necessary for the defendants in the Trustee Removal Proceeding to be released from aspects of the Trustee and Director Undertakings and the Further Director Undertakings given in the Trustee Removal Proceeding.
Fifth, having regard to the submissions made to date and the material before the Court it appears highly likely, if not inevitable, that Mr Glen Rossignoli will submit that other steps, including appointing new trustees, are preferable to appointing a receiver, and that appointing a receiver will destroy rather than preserve the trust assets. I say nothing about the substantive merit of such contentions having not yet considered them.
Sixth, a broad range of circumstances, including overlapping and related factual matters, will fall to be considered in relation to the claim to remove the trustees and the claim seeking a receiver to be appointed. It was apparent from the submissions that the existence of each of the claims is also likely to be submitted to be part of the relevant circumstances in each of the proceedings.
Seventh, the Trustee Removal Proceeding is well advanced in its readiness for hearing, even if not quite as well advanced as the Receiver Appointment Proceeding.
Eighth, if the matters proceed together it will reduce the risk of inconsistent findings or other complications that may arise if findings on particular matters, including credit, are required. It is also an efficient use of judicial resources.
Ninth, as became apparent, the issue regarding the alleged criminal conduct of Mr Paul Rossignoli was a narrow one and is not now to be pressed in the Trustee Removal Proceeding.
Tenth, there are remaining steps in both proceedings — including Mr Paul Rossignoli filing additional affidavit material in the Receiver Appointment Proceeding.
Eleventh, any issue regarding discovery can be appropriately managed by the Court. Further, and as became apparent, it may be that the relevant obligation falls upon Rossi Recycling, although I need not address this further as the parties propose to deal with the issue practically, efficiently, and co-operatively, as they are duty bound to do.
Twelfth, the competing contentions between the parties regarding the purpose for commencing the proceedings, the financial position and affairs of Eastern Recycling, and other factual matters, are not matters that can or should be resolved when seeking to deal with this procedural matter involving judicial management. That said, their very existence serves to underscore the likely overlap of various matters in circumstances where the exercise of judicial discretion is sought by each of the parties involving largely the same factual background.
Thirteenth, the evidence reveals that the issues between the parties have existed for an extended period, that the business is still operating and has employees, and that, having regard to the affidavit of Mr Glen Rossignoli filed on 28 March 2019 in the Receiver Appointment Proceeding, the timing pressure appears not to be as acute as otherwise might have been the case, as was essentially acknowledged by counsel for Mr Paul Rossignoli. On the evidence currently before me, the urgency should not be overstated. If circumstances change then this can be addressed in the light of any changed circumstances.
Fourteenth, speculation as to what might occur depending on different outcomes in the proceedings does not materially assist consideration of the issue before me. In any event, even if it was correct that if the application in the Receiver Appointment Proceeding was not successful and a further application for the appointment of a receiver might then be made by Mr Paul Rossignoli in the circumstances prevailing at that time, this does not alter my conclusion. That may or may not arise and is a matter for another day.
Finally, later in the hearing counsel for Mr Paul Rossignoli responsibly indicated that there was not a problem with the proceedings coming together if a hearing date could be found in the next few months. I add that even if this indication had not been given, my conclusion would not have changed
I have previously directed that the two proceedings be managed together. Having regard to all the circumstances, and mindful of the obligations of the Court and the parties under the Act, I have concluded that it is appropriate to direct that, subject to further order, the Trustee Removal Proceeding and the Receiver Appointment Proceeding be heard together.
I propose to make an order to that effect in the Trustee Removal Proceeding and the Receiver Appointment Proceeding.
I will hear from the parties with respect to any consequential matters and directions.
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