Sando Australia Pty Limited v Australian Securities and Investment Commission

[2019] NSWSC 402

Supreme Court

New South Wales

Medium Neutral Citation:

Sando Australia Pty Limited v Australian Securities and Investment Commission [2019] NSWSC 402

Hearing dates:

9 April 2019

Date of orders:

09 April 2019

Decision date:

09 April 2019

Jurisdiction:

Equity

Before:

Hallen J

Decision:

The Court:

 

(a) Orders, pursuant to s 70 of the Trustee Act 1925 (NSW) that Sando Australia Pty Ltd (ACN 001 104 703) be appointed as trustee of the Grandview Trust.

 

(b) Orders, pursuant to s 71 of the Trustee Act that the rights of the mortgagee, Iago Holdings Pty Limited, a company that has been deregistered, in respect of registered mortgages numbered Y130092 and Y130094 (as varied by registered Variation of Mortgage number E565288) over the land referred to in Certificate of Title folio identifier 7/258061, vest in Sando Australia Pty Ltd, as the trustee of the Grandview Trust, on such terms as the mortgages were held by Iago Holdings Pty Ltd.

 

(c) Makes no order as to the Plaintiffs’ costs to the intent that it, and he, will bear its, and his, own costs of the proceedings.

 

(d) Orders that the costs of the Defendant, calculated on the ordinary basis, be paid by the Plaintiffs.

 (e) Orders that the balance of the relief claimed in the amended Summons be dismissed.

Catchwords:

EQUITY – Trusts and trustees – appointment of trustee – where former trustee of trust deregistered – whether new trustee of the trust should be appointed under s 70 of the Trustee Act 1925 (NSW) – where vesting order under s 71 of the Trustee Act sought in respect of mortgages held by previous trustee upon trust – whether vesting order should be made

  CORPORATIONS – deregistration – application to reinstate company which was former trustee – Unnecessary to decide as new trustee appointed and property vested in new trustee

Legislation Cited:

Corporations Act 2001 (Cth)
Trustee Act 1925 (NSW)

Cases Cited:

The Estate of Roberts (1983) 20 NTR 13; (1983) 70 FLR 158

Category:

Principal judgment

Parties:

Sando Australia Pty Limited (first Plaintiff)
Charles Russell Muller (second Plaintiff)
Australian Securities and Investment Commission (Defendant)

Representation:

Counsel:
Mr D C Price (Plaintiffs)
No appearance (Defendant)

  Solicitors:
Shaddicks Lawyers (Plaintiffs)
No appearance (Defendant)

File Number(s):

2019/35043

Judgment – EX TEMPORE (revised)

1. HIS HONOUR: These are proceedings in which the Plaintiffs, Sando Australia Pty Limited (“Sando”) and Charles Russell Muller (“Mr Muller”) seek the following relief in an amended Summons filed on 10 March 2019:

“1. An order, pursuant to s 70 of the Trustee Act 1925 (NSW), or the Court’s inherent jurisdiction that:

a. Sando Australia Pty Limited be appointed as trustee of the Grandview Trust; or

b. Sando Australia Pty Ltd be appointed as trustee of the Grandview Trust in substitution for Iago Holdings Pty Limited; or

c. Sando Australia Pty Ltd be appointed as trustee of the Grandview Trust in substitution for Sando Holdings Pty Limited;

2. An order pursuant to s 71 of the Trustee Act 1925 (NSW) that the rights of the mortgagee pursuant to registered mortgages Y130092 and Y130094 (as varied by registered variation of mortgage number E565288) over the land having Certificate of Title, Folio Identifier 7/258061 vest in Sando Australia Pty Ltd as trustee of the Grandview Trust on such terms as the mortgages were held by Iago Holdings Pty Limited.

3.   In the alternative to Orders 1 and 2:

a. an order that the deed made on 24 December 1990 and executed by Charles Russell Muller, and Iago Holdings Pty Limited and purportedly by Sando Holdings Pty Limited be rectified by replacing the words “Sando Holdings” with “Sando Investments” wherever the words “Sando Holdings” appear in that deed; and

b. an order that a copy of this order be endorsed on the said deed.

4.   In the further alternative to Orders 1 and 2;

a. an order pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) that the Australian Securities & Investment Commission (ASIC) reinstate the registration of Iago Holding Pty Limited, deregistered on 13 October 1991;

b. an order pursuant to s 461 of the Corporations Act 2001 (Cth) that Iago Holdings Pty Limited be wound up;

c. an order that Schon Condon of Condon & Associates, practising at Level 6, 87 Marsden Street, Parrammatta, NSW, 2150 be appointed as liquidator of Iago Holdings Pty Limited;

d. an order that Sando Australia Pty Limited pay the costs of ASIC

5.   Such further or other order as the Court considers appropriate.”

2. Because of the relief sought in paragraph 4 of the amended Summons, the Australian Securities and Investment Commission (“ASIC”) was joined as the only Defendant in the proceedings. I shall refer to its role in the proceedings later in these reasons.

Background Facts

3. I have taken some of the following facts from the Plaintiffs’ written Outline of Submissions dated 2 April 2019. The facts set out below are supported by the affidavit evidence read in the proceedings. Where necessary, I have supplemented those facts by other evidence.

4. On 13 June 1974, by a Deed of Settlement, Charles R Muller Pty Ltd settled the Grandview Trust. The trustee appointed by the Deed of Settlement was Iago Holdings Pty Ltd (“Iago”). The only function, and activity, of Iago, was to act as the trustee of the Grandview Trust.

5. Mr Muller was specified to be, and remains, the “Principal” of the Grandview Trust, with powers and obligations to exercise certain rights as provided in the Deed of Settlement.

6. It is not necessary, for the purposes of these proceedings, to set out, at length, the terms of the Grandview Trust. It is sufficient to say that it appears to be in the form of a discretionary trust in which members of Mr Muller’s immediate, and extended, family are the discretionary objects. The “residuary beneficiaries” are defined as “the children of the Principal” and the trust fund was to be applied for the benefit of the beneficiaries.

7. Iago was an Australian proprietary company limited by shares that was first registered in March 1973. Until February 1992, Mr Muller was a director of Iago.

8. On 24 December 1990, the directors of Iago, being Mr Muller, and his two sons, Craig Francis Muller and Scott Richard Muller, resolved to wind up Iago on the basis that it had no purpose, Mr Muller, as the Principal of the Grandview Trust having terminated its appointment as trustee of the Grandview Trust by written notice. The power to remove the trustee of the trust was given to Mr Muller, as the Principal, pursuant to Clause 26 of the Deed of Settlement. By the resolution, Mr Muller was “authorised to lodge the relevant document with the Corporate Affairs Commission to have the company struck off the register”.

9. Iago was deregistered in about February 1992.

10. In a Deed dated 24 December 1990 (“the 1990 Deed”), in which Mr Muller, Iago, and a company called Sando Holdings Pty Limited were parties, Mr Muller purported to change the trustee of the Grandview Trust. Erroneously, the 1990 Deed referred to “Sando Holdings Pty Ltd”, instead of “Sando Investments Pty Ltd”, as the trustee appointed in place of Iago.

11. The 1990 Deed, however, was executed using the common seal of Sando Investments Pty Ltd. Mr Muller signed the 1990 Deed as the Principal of the Grandview Trust, as a director/secretary of Iago, and as the director/secretary of Sando Holdings Pty Limited.

12. Sando Holdings Pty Limited is an Australian proprietary company limited by shares that was first registered in October 1989. It appears to be a company that has nothing to do with the Muller family. In fact, Mr Muller stated in his affidavit that he has never had any involvement with that company. It appears to be a company that conducts business in Western Australia.

13. On 23 February 2011, Sando Investments Pty Ltd changed its name to Sando. A copy of the notification of the resolution to change the company’s name was given to ASIC.

14. In 1988, Mr Muller and his de facto partner, Ms Virginia Furze, were, and they remain, tenants in common of land located at East Kurrajong, a suburb located in the north-west Sydney basin, in the state of New South Wales (“the Kurrajong property”).

15. On 21 December 1988, Mr Muller and Ms Furze each mortgaged his, and her, interest, respectively, in the Kurrajong property, to Iago to secure a loan of $160,000, and a loan of $60,000, respectively. (The power to grant a loan was given to the Trustee by Clause 8(b) of the Deed of Settlement.)

16. On 18 October 1990, the sum secured by the mortgage given by Ms Furze to Iago, was reduced from $60,000 to $28,436 pursuant to a Variation of Mortgage registered on, or about, that date.

17. A search of the title to the Kurrajong land, obtained in August 2018, reveals that each of the mortgages, and the Variation of Mortgage, remains registered on title.

18. The directors of Iago overlooked the fact that it was the registered mortgagee of the Kurrajong property. No steps were taken to transfer the benefit of the mortgages over the Kurrajong property to Sando prior to Iago being deregistered, or at any time thereafter, and until shortly prior to the commencement of these proceedings.

19. On 28 February 2017, Mr Muller became aware that:

1. the 1990 Deed referred to Sando Holdings Pty Ltd instead of Sando Investments Pty Ltd; and

2. Iago remained registered as the mortgagee of the Kurrajong property, despite it having been deregistered many years previously.

20. On 13 September 2018, an application was made to ASIC to reinstate Iago upon the basis that it “should not have been deregistered because at the time of deregistration it was a mortgagee of land pursuant to a registered mortgage”.

21. By letter dated 19 October 2018, ASIC declined to reinstate the registration of Iago because “based upon the information available to us, we are not satisfied that the Company should be reinstated. We have formed this view because the Company was voluntarily deregistered …and the reasons and supporting documentation provided does not satisfy us that the Company should not have been deregistered…If you wish to pursue reinstatement of the Company, a reinstatement application may be made to a court for an order that ASIC reinstate the Company”.

22. In an affidavit sworn on 25 January 2019, Ms Furze states that she seeks to have the mortgage over her interest in the Kurrajong property discharged. She says that she supports the Plaintiff’s application and consents “to the benefit of the mortgage over my interest in [the Kurrajong property] being vested in Sando Australia Pty Limited”. She also says that she consents to Iago being reinstated.

23. Mr Scott Muller, in an affidavit sworn on 27 January 2019, states that he was a director of Iago “from about 1986 to the date it was deregistered”; that he had been a director, and the secretary of Sando Australia Pty Limited since 2 January 1991; that, at the time of the resolution that Iago be wound up, he had forgotten that it was a mortgagee; that he supports the application brought by the Plaintiffs; that he consents to the benefit of the mortgages over the Kurrajong land being vested in Sando; and that he consents to being a director of Iago if the registration of the company is reinstated.

24. Mr Craig Muller, in an affidavit sworn on 23 February 2019, states that he had been a director of Iago “from about 1986 to the date it was deregistered”; that, at the time of the resolution that Iago be wound up, he had forgotten that it was a mortgagee; that he supports the application brought by the Plaintiffs; that he consents to the benefit of the mortgages over the Kurrajong land being vested in Sando; and that he consents to being a director of Iago if the registration of the company is reinstated.

25. Mr Muller, in his affidavit, states that, at the time of the resolution for the winding up of Iago, he had forgotten that it was a mortgagee; that had it been brought to his attention, he would have ensured that the mortgages held by Iago were transferred to the new trustee of the Grandview Trust prior to Iago being deregistered; and that he was not aware that the 1990 Deed made reference to Sando Holdings Pty Limited instead of Sando Investments Pty Limited until February 2017. Naturally, as the second Plaintiff, he supports the application brought and he consents to the benefit of the mortgages over the Kurrajong property being vested in Sando.

26. Following receipt of the Court file, and because there was no time for a pre-trial directions hearing, on 28 March 2019, I requested my Associate to send to the Plaintiffs’ solicitor, the following email:

“Dear Mr Roche,

As you know, this matter is listed before his Honour on 9 April 2019.

His Honour has considered the documents in the Court file, including the amended Summons filed on 10 March 2019.

Please ensure that there is an affidavit of service of the documents on ASIC, and, if there is any response from ASIC (including the terms of any conditions it requires for reinstatement of the trustee company) that a copy of such correspondence is in evidence.

There should also be evidence regarding compliance with the conditions, if any, the subject of correspondence from ASIC.”

27. By affidavit sworn on 2 April 2019, Mr Roche gave evidence of the Summons and a number of affidavits having been served on 13 February 2019 on ASIC; he annexed a copy of a letter dated 22 February 2019 from ASIC to which I shall refer; he noted that the conditions 1, 2 and 3 in that letter had been complied with; he stated that a letter, dated 11 March 2019, confirming the service of a copy of the amended Summons, a copy of the affidavit of Craig Muller dated 23 February 2019 and consent of liquidator dated 7 March 2019, together with the date when the matter was listed for the purpose of obtaining a hearing date, had been served upon ASIC; and that he had provided ASIC with a copy of the email dated 28 March 2019 to him from my Associate.

28. The standard form letter, dated 22 February 2019, from ASIC, indicated that ASIC would not oppose the application under s 601AH(2) of the Corporations Act 2001 (Cth) for an order that it reinstate Iago upon the following conditions:

“1. The order sought for reinstatement is in the terms of section 601AH(2) of the Corporations Act, requiring ASIC to reinstate the registration of the company;

2.   The Summons be amended to include ASIC as a defendant in this proceeding, in which case our opposition or consent to the application will be a relevant matter to the Courts [sic] consideration;

3.   The company (if ordered to be reinstated) be wound up and the Court appoints a Liquidator;

4.   The Court order is lodged with ASIC (see notes below) so that the company may be reinstated;

5.   The Liquidator notifies ASIC upon conclusion of the winding up.”

29. An affidavit being a Consent of Liquidator dated 7 March 2019, from Schon Gregory Condon, an Official Liquidator, has been filed.

30. During the course of the hearing, counsel for the Plaintiffs stated from the Bar table, that the amount currently owed by Mr Muller, under the registered mortgage over his interest in the Kurrajong property, was $160,000 and that the amount currently owed by Ms Furze, under the registered mortgage over her interest in the Kurrajong property, was $28,436.

31. It is now intended that the Kurrajong property will be sold by them and the balance of the debts secured by the registered mortgages will be paid out of the proceeds of sale.

32. As matters stand, there is said to be no entity that is able to receive the balance of the secured debts and provide to each of Mr Muller and Ms Furze a discharge, in registrable form, of his, and her, mortgage, respectively, over the Kurrajong property.

The alternative applications

33. In view of the approach of the Plaintiffs at the hearing it is only necessary to deal with the Plaintiffs’ application for the appointment of a new trustee and the vesting of the property of the Grandview Trust in that new trustee.

34. Section 70(1) of the Trustee Act provides that the Court may make an order for the appointment of a new trustee or new trustees, either in substitution for, or in addition to, any existing trustee or trustees, or although there is no existing trustee. Section 70(2) provides that the appointment may be made whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient, difficult or impracticable so to do without the assistance of the Court. Section 70(3) specifically provides that in particular, and without prejudice to the generality of any other provision of the section, the Court may make an order for the appointment of a new trustee in substitution for a trustee which, being a corporation is in liquidation or is dissolved.

35. In The Estate of Roberts (1983) 20 NTR 13; (1983) 70 FLR 158, at 162, it was written that “expedient” means conducive to, or fit or proper or suitable, having regard to “the interests of the beneficiaries, to the security of the trust property and to a sufficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee”.

36. It is submitted that the appointment of Sando is expedient for the following reasons. First, it was always intended by Mr Muller to have Sando Investments Pty Limited appointed as the trustee of the Grandview Trust. The appointment of Sando Holdings Pty Limited was an error that can be rectified easily by the appointment of Sando Investments Pty Limited. Second, the appointment of Sando is consented to by Mr Muller, the Principal of the Grandview Trust. Third, the appointment will avoid the costs of the reinstatement of Iago, which would only be reinstated for the purpose of providing a discharge of the mortgages to the mortgagors. Fourth, the Trust property will be secured as it will be held by a company that there is no intention to wind up at the present time and before the sale of the Kurrajong property. Fifth, the efficient administration of the Trust is facilitated in a just cheap and quick manner.

37. I am satisfied that it is expedient to appoint Sando as the new trustee in circumstances where Iago has been deregistered and where the principal purpose of the appointment is to enable the discharge of the two mortgages. It is also expedient to take this course as it appears that the cause of Iago remaining as the mortgagee was inadvertence by the directors in failing to remember that Iago was a registered mortgagee. It is also clear that Mr Muller, as the Principal of the Trust, did remove Iago as the trustee and intended to appoint Sando as the new trustee, as he was permitted to do under the terms of the Deed of Settlement. Finally, the jurisdiction which this Court has no difficulty in exercising is ancillary to its principal duty, to see that a trust is properly executed. The substitution of the new trustee in the place of original trustee is really non-contentious in this case. Making the order proposed will simply correct the mistake that was made nearly 30 years ago.

38. A consequential order pursuant to s 71 of the Trustee Act is also sought to vest in the new trustee all of the property held for the Grandview Trust.

39. Section 71 of the Trustee Act, relevantly, provides:

(1) The Court may make an order in this Act called a vesting order, which shall have effect as provided in section 78.

(2) A vesting order may be made in any of the following cases, namely:

(a) where the Court appoints or has appointed a new trustee,

(b) where a new trustee has been appointed out of court under any statutory or express power,

…

(h) where a trustee being a corporation is dissolved,

…

(o) where property is vested in a trustee, whether by way of mortgage or otherwise, either solely or jointly with any other person, and it appears to the Court to be expedient to make a vesting order.

(3) The provisions of paragraphs (d), (e), (f), (g), (h), and (i) of subsection (2) extend to a trustee entitled to or possessed of any property either solely or jointly with any other person.

…

(4) Where the order is consequential on the appointment of a new trustee, the property shall be vested in the persons who, on the appointment are the trustees.

…

(6) Subject to the provisions of subsection (4), the vesting order may vest the property in any such person in any such manner and for any 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.

(7) The fact that the order is founded or purports to be founded on an allegation of the existence of any of the matters mentioned or referred to in subsection (2), shall be conclusive evidence of the matter so alleged in any Court upon any question as to the validity of the order.

(8) This section shall not prevent the Court from directing a re-conveyance or the payment of costs occasioned by any such order if improperly obtained, or from making a further vesting order.

(9) Where by reason of the dissolution of a corporation either before or after the commencement of this Act a legal estate in any property has determined, the Court may by order create a corresponding estate and vest the same in the person who would have been entitled to the estate which determined, had it remained subsisting estate.”

40. Thus, the Court may make a vesting order where a corporate trustee has been dissolved. In my view, the jurisdiction for the making of a vesting order has been established.

41. The effect of a vesting order is stated in Trustee Act, s 78, which relevantly provides:

“78 Effect of vesting order

(1) In the case of a vesting order consequential on the appointment of a new trustee, or the retirement of a trustee, the vesting order shall have the same effect as if the persons who before the appointment or retirement were the trustees, if any, had duly executed all proper conveyances of the property for such estate or interest as the Court directs, or if there is no such person, or no such person of full capacity, then as if such person had existed and been of full capacity, and had duly executed all proper conveyances of the property for such estate or interest as the Court directs.

(2) In every other case the vesting order shall have the same effect as if the trustee or other person or description or class of persons to whose rights, or supposed rights, the provisions of this Part respectively relate, had been an ascertained and existing person of full capacity, and had executed a conveyance or release to the effect intended by the order.”

42. In all the circumstances, the Court:

1. Orders, pursuant to s 70 of the Trustee Act 1925 (NSW) that Sando Australia Pty Ltd (ACN 001 104 703) be appointed as trustee of the Grandview Trust.

2. Orders, pursuant to s 71 of the Trustee Act that the rights of the mortgagee, Iago Holdings Pty Limited, a company that has been deregistered, in respect of registered mortgages numbered Y130092 and Y130094 (as varied by registered Variation of Mortgage number E565288) over the land referred to in Certificate of Title folio identifier 7/258061, vest in Sando Australia Pty Ltd, as the trustee of the Grandview Trust, on such terms as the mortgages were held by Iago Holdings Pty Ltd.

3. Makes no order as to the Plaintiffs’ costs to the intent that it, and he, will bear its, and his, own costs of the proceedings.

4. Orders that the costs of the Defendant, calculated on the ordinary basis, be paid by the Plaintiffs.

5. Orders that the balance of the relief claimed in the amended Summons be dismissed.

**********

Decision last updated: 11 April 2019