Sutherland and MacKinnon v Di Paolo
[2015] VSC 552
•13 October 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2015 000148
IN THE MATTER OF ALITALIA CONCRETE PTY LTD (ACN 004 881 707) AND ALITALIA CONSTRUCTIONS PTY LTD (ACN 074 780 206) AND DI PAOLO PTY LTD (ACN 074 499 344) AND ALITALIA GROUP PTY LTD (ACN 096 118 535)
BETWEEN
| KEITH LAURENCE SUTHERLAND AND HAMISH ALAN MACKINNON (IN THEIR CAPACITIES AS THE TRUSTEE OF THE ALITALIA GROUP TRUST) | Applicants |
| and | |
| DANIEL MARCO DI PAOLO AND MARCO RENATO DI PAOLO | Respondents |
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JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1 October 2015 |
DATE OF JUDGMENT: | 13 October 2015 |
CASE MAY BE CITED AS: | Sutherland & MacKinnon v Di Paolo & Anor |
MEDIUM NEUTRAL CITATION: | [2015] VSC 552 |
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TRUSTEES – Application for judicial advice as to appropriate method of sale of industrial property – Public auction preferred method – Order 54 of Supreme Court (General Civil Procedure) Rules.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr C T Moller | Madgwicks |
| For the First Respondent | Mr M J Hoyne | Lennon Mazzeo |
| For the Second Respondent | Mr N Evans | Thomson Geer |
HIS HONOUR:
Introduction
The applicants are trustees of the Alitalia Group Trust. They were appointed as trustees by the Court in substitution for a previous trustee.
The respondents are the two beneficiaries of the trust: Marco Di Paolo (Marco) and Daniel Di Paolo (Daniel). They are brothers and the directors of the former trustee. The appointment of the present applicants was made in proceedings arising from a dispute between the brothers.
The trustees are taking steps to liquidate the trust’s assets, including a property at Queens Parade, Fitzroy North (the Property). They have taken the usual steps, namely, engaging agents, obtaining a valuation, obtaining advice as to how best to sell the assets.
A dispute has arisen between the beneficiaries as to the manner in which the Property should be sold.
Given the existence of the dispute between the brothers in general and this dispute about the method of sale of the Property in particular, the trustees, by summons filed 24 September 2015, seek judicial advice from the Court under Order 54 of the Supreme Court (General Civil Procedure) Rules.
Rival Contentions
Marco wants the Property sold by way of an expression of interest or tender. He has received advice from a real estate agent that these are the best methods of sale for the Property. He has also stated that, unless the Property is sold by either of those methods, he will refuse to sign documents necessary to enable the Property to be transferred to the trustees.
Daniel wants the Property sold by public auction. He has also obtained advice from a real estate agent. He has instructed his solicitors to make an application to the Court seeking orders that the Property be sold by public auction.
The trustees take no position on the courses advanced by the beneficiaries although, as between expression of interest and tender, they prefer the latter because it is more likely to attract genuine purchasers.
Consideration
The essence of Marco’s submission is that a public auction is unlikely to achieve the highest price and that a tender, or more particularly an EOI campaign, was preferable because of the peculiar nature of the Property and the required or anticipated price. The condition and use of the Property is such that much due diligence would be required and expected, and this was best achieved outside the time constraints of a public auction.[1] Much reliance was placed on the Jones Lang Lasalle[2] report. It was submitted that it was the most comprehensive and persuasive. It was pointed out that other reports also preferred the non-auction method (Savilles[3] and Colliers).[4]
[1]The property is an industrial site in North Fitzroy with some contamination issues.
[2]‘Letter of Advice, Subject Property: 81-89 Queens Parade, Fitzroy North’, prepared by Ms Claire A Wright and Mr Chris Smirnakos, Jones Lang LaSalle Advisory Services Pty Ltd dated 9 September 2015.
[3]‘Sale Recommendation – 81-89 Queens Parade, Fitzroy North’, prepared by Mr Clinton Baxter, Mr Nick Peden, and Mr James Lockwood, Savilles (VIC) Pty Ltd, Licensed Estate Agent dated 9 September 2015.
[4]‘Marketing and Sales Submission for 81-89 Queens Parade, FITZROY NORTH’, Colliers Internatonal dated 11 September 2015.
The essence of Daniel’s submission is that a public auction provides for transparency which is necessary given the acrimonious dispute between the brothers. It avoided suspicion. Further, the auction process could in any event be adapted to account for, to the extent that this was considered necessary, the suggested difficulties referred to by Marco.
There was no dispute as to the applicable principles. Trustees may approach the Court if they are in doubt as to any course of action they are contemplating, whether it concerns the rights of beneficiaries, the performance of any duty or the exercise of any discretion. In Re Atkinson (dec’d),[5] Gillard J said:
Where an executor or trustee is in doubt as to the course of action it should adopt, it is always entitled to take the opinion of the court as to what it should do.
[5][1971] VR 612, 615.
The practice and procedure applicable on applications such as the present is comparable to that for directions applications made by liquidators and administrators under the Corporations Act.[6] As is well known from such applications, the Court will be reluctant to give advice on commercial or business decisions. However, there are exceptions. For instance, in Sanderson v Classic Car Insurance Pty Ltd,[7] Young J said that it is proper for a liquidator to seek directions ‘to protect him[self] against accusations of acting unreasonably’[8]. In Re Ansett Australia Ltd (No 3),[9] Goldberg J indicated that the Court would give directions of an ‘issue of propriety or reasonableness’[10] was concerned.
[6]See Re Pasminco Ltd (subject to deed of company arrangement); McCluskey v Pasminco Ltd (No 2) (2004) 49 ACSR 470 [7]; Corporations Act 2001 (Cth).
[7](1985) 10 ACSR 115.
[8]Ibid 117.
[9](2002) 115 FCR 409.
[10]Ibid [3].
This is such a case. The beneficiaries take opposing views as to how the Property should be sold. One has already foreshadowed legal proceedings for orders that it be sold by his preferred method.[11] The other has refused to sign documents transferring title of the property to the trustees (which transfer is necessary to achieve a sale) unless it is sold by his preferred method.[12]
[11]Daniel Di Paolo, who wants a sale by auction.
[12]Marco Di Paolo, who wants a sale by expressions of interest or tender.
Whatever method of sale the trustees adopt, they will be subject to criticism, and likely challenged, by the beneficiary whose preferred method is not adopted.
In the circumstances, the trustees seek the advice of the Court as to what method of sale should be adopted. The application is properly made and I propose to give appropriate advice and direction.
In my opinion, the more desirable course is for the sale to be by public auction. The trustees are content with a public auction and even suggested, in a letter dated 3 September 2015,[13] that based on advice, this was an appropriate method of sale.
[13]Letter of K L Sutherland (joint trustee) to Thomson Geer Lawyers, 3 September 2015.
The experts differ as to the appropriate method of sale of the Property. Without the benefit of cross-examination, there is no ability to test the various propositions and facts that inform the particular opinion. In many cases, this is required if the Court is to give judicial advice, given the purpose and binding nature of the advice. However, I consider that given the submissions of the parties and the nature and context of the application, I am able to give such advice and determine the matter without the need to incur any further costs and delay.
Although the matter is not free from difficulty, and there are, as may be expected, pluses and minuses each way, I consider that a public auction is preferable for the following reasons. First, I consider that in this case, transparency in relation to the conduct of the actual sale is of the first importance, particularly in circumstances where there is mutual distrust, suspicion, and where the tender process would be conducted by the trustees, with the beneficiaries not being privy thereto, unless they make a request and it is acceded to. This is not a desirable state of affairs, and the trustee is well advised to avoid any potential difficulties or confrontations.
Secondly, I do not consider that a public auction has the suggested disadvantages when assessed against a tender process. Two and perhaps three of the experts do not suggest that it does (CBRE,[14] Vince Carbone[15] and Sutherland Farrelly)[16], and there is no reason why the auction process can and will not take into account the nature of the Property, expected investigation, and due diligence, and set the time framework and marketing and sales pitch accordingly.[17] It is also relevant to note that each expert simply expresses a preference and does not suggest the rival approach is necessarily wrong. Opinions may legitimately differ. Further, as pointed out, the experts do not deal with the acrimonious dispute.
[14]’81-89 Queens Parade Fitzroy North, CBRE Victorian Development Sites Professional Price Maximisation Strategy & Recommendations’ dated 10 August 2015.
[15]’81-89 Queens Parade, Fitzroy North, Marketing Recommendations on behalf of Alitalia Group Trust Pty Ltd’, prepared by Mr Frank Vinci and Mr Joseph Carbone, Vinci Carbone dated June 2015.
[16]‘Alitalia Group Trust, 81-89 Queens Parade, Fitzroy North’, Mr Paul Sutherland, Sutherland Farrelly Pty Ltd dated 17 September 2015.
[17]It is not entirely clear why a longer period is necessarily required. How much longer and why? Parties investigate all sorts of matters before auction.
Thirdly, although achieving the highest price is important, it is not the only relevant factor. Given the accruing of penalty interest and the watchful eye of the mortgagor, the National Australia Bank, some speed is necessary without sacrificing the relevant matters referred to above.
Finally, and in summary, if conducted properly, a public auction is sufficiently flexible to enable the situation to be reached where the best price is obtained in a transparently competitive process within a reasonable time frame. Naturally, I express no view and give no advice beyond my opinion that a public auction is an entirely appropriate mode of sale of the Property in this case.
Orders have been made accordingly. I propose to deal with costs on the papers and the parties should file written submissions not exceeding three pages on or before 16 October 2015.
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