Thorne Developments Pty Ltd v Thorne

Case [2016] QCA 63

SUPREME COURT OF QUEENSLAND

CITATION:

Thorne Developments Pty Ltd v Thorne & Anor [2016] QCA 63

PARTIES:

THORNE DEVELOPMENTS PTY LTD
ACN 109 570 194
(appellant)
v
SUZANNE MAREE THORNE
(respondent)
ATTORNEY GENERAL OF QUEENSLAND
(intervenor)

FILE NO/S:

Appeal No 6679 of 2015
SC No 10187 of 2014

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:


Supreme Court at Brisbane – [2015] QSC 156

DELIVERED ON:

18 March 2016

DELIVERED AT:

Brisbane

HEARING DATE:

16 February 2016

JUDGES:

Gotterson and Morrison and Philippides JJA
Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER:

The appeal be dismissed with costs.

CATCHWORDS:

CORPORATIONS – FORMATION – REGISTRATION OR INCORPORATION – DEREGISTRATION – where the appellant was trustee of a family discretionary trust – where the appellant was deregistered – where the Commonwealth became a trustee by operation of s 601AE(1) of the Corporations Act 2001 (Cth) upon the appellant’s deregistration – where the respondent was appointed as a trustee during the period of the appellant’s deregistration – where the appellant was subsequently reinstated – where it was accepted that the Commonwealth becoming a trustee did not preclude appointment of a trustee under the s 12(1)(h) of the Trusts Act 1973 (Qld) or the Deed of Trust – whether the respondent’s appointment pursuant to the Deed of Appointment was a valid appointment under s 12(1)(h) of the Trusts Act 1973 (Qld)

EQUITY – TRUSTS AND TRUSTEES – APPOINTMENT, REMOVAL AND ESTATE OF TRUSTEES – APPOINTMENT OF NEW TRUSTEES – UNDER POWER – VALIDITY OF EXERCISE OF POWER – OTHER PARTICULAR CASES – where the appellant was trustee of a family discretionary trust – where the appellant was deregistered – where the respondent was appointed as a trustee during the period of deregistration under a deed of appointment – where the appellant submitted that the Deed of Appointment did not validly appoint the respondent as a trustee – where it was not contested that dissolution and deregistration were the same for the purposes of s 12(1)(h) of the Trusts Act 1973 (Qld) – where the appellant submitted the factual basis for the appointment was an erroneous belief of the appointor that deregistration of the appellant left the office of trustee vacant – where the appellant submitted the appointment was ineffectual as it was made on an erroneous basis – whether the respondent was validly appointed as a trustee

EQUITY – TRUSTS AND TRUSTEES – APPOINTMENT, REMOVAL AND ESTATE OF TRUSTEES – RETIREMENT OR REMOVAL – REMOVAL BY THE COURT – GROUNDS FOR REMOVAL – where the Deed of Trust provided that the trustee must vacate office if the trustee becomes subject to any bankruptcy law – where the respondent was served with a bankruptcy notice – where the appellant submitted that service with a bankruptcy notice made the respondent subject to a bankruptcy law – where the appellant further submitted that the respondent became subject to any bankruptcy law by seeking to set…

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Thorne Developments Pty Ltd v Thorne [2016] QCA 63
Case
[2016] QCA 63
Decision Date

CaseChat Overview and Summary

In the case of Thorne Developments Pty Ltd v Thorne, the appellant, Thorne Developments Pty Ltd, which was the trustee of a family discretionary trust, challenged the validity of an appointment of a new trustee made during its period of deregistration. The primary judge had found the appointment valid, a decision that was upheld on appeal. The appellant argued that the appointment was invalid because it was based on an erroneous belief that deregistration had left the office of trustee vacant, whereas the Commonwealth had in fact become a trustee by operation of law upon deregistration. The Court of Appeal found that the primary judge's conclusion that deregistration constituted a "dissolution" for the purposes of the Trusts Act 1973 (Qld) was correct and that the Deed of Appointment did not need to expressly invoke the relevant statutory provision to be effective. The Court further found that the appointment was validly made upon the factual basis of the appellant's deregistration, regardless of any erroneous beliefs held by the person making the appointment. The appeal was dismissed with costs.

The central legal issue before the Court was whether the appointment of the respondent as a trustee of the family discretionary trust during the period of the appellant's deregistration was valid under s 12(1)(h) of the Trusts Act 1973 (Qld). The Court considered whether deregistration of a corporate trustee constituted a "dissolution" for the purposes of the Trusts Act, and whether the erroneous belief of the appointor that deregistration had left the office of trustee vacant rendered the appointment invalid. The Court concluded that the primary judge's findings on these matters were correct. The Court found that the concepts of dissolution and deregistration were not different, and that deregistration triggered the power of the appointor to appoint new trustees. The Court also found that the erroneous belief of the appointor did not invalidate the appointment, as the appointment was validly made upon the factual basis of deregistration, regardless of the appointor's reasoning. The Court held that the appointment was a valid exercise of the power of appointment under the Trust Deed and the Trusts Act.

The Court of Appeal held that the primary judge's determination that deregistration constituted a "dissolution" for the purposes of the Trusts Act was correct. The Court found that the appellant's deregistration triggered the power of the appointor to appoint new trustees under s 12(1)(h) of the Trusts Act. The Court further held that the appointment was validly made upon the factual basis of deregistration, regardless of any erroneous beliefs held by the person making the appointment. The Court rejected the appellant's argument that the appointment was invalid because it was based on an erroneous belief that deregistration had left the office of trustee vacant. The Court found that the Deed of Appointment correctly identified the factual circumstance of deregistration that triggered the exercise of the power of appointment. The Court of Appeal therefore dismissed the appeal and upheld the primary judge's finding that the appointment was valid.

The final orders of the Court were that the appeal be dismissed with costs. The Court of Appeal found no merit in the appellant's appeal and confirmed the primary judge's decision that the appointment of the respondent as a trustee of the family discretionary trust was valid. The Court found that the appointment was validly made upon the factual basis of the appellant's deregistration, and that the erroneous belief of the appointor did not invalidate the appointment. The Court therefore dismissed the appeal and ordered that the appellant pay the costs of the appeal.

Orders

Orders of the court

The appeal be dismissed with costs.

Background

Background to the litigation

PHILIPPIDES JA: Background The appellant, Thorne Developments Pty Ltd, was the trustee of a family discretionary trust known as the Thorne Family Trust No 3 (the Trust) under a Deed of Trust made on 21 June 2004. The appellant was deregistered on 4 December 2011. At that time its sole director was Brett John Thorne (Mr Thorne), who was subsequently declared bankrupt on 26 March 2012. On 4 September 2013, the appellant’s registration was administratively reinstated by ASIC pursuant to s 601AH(1) of the Corporations Act 2001 (Cth). This occurred at the request of Mr Thorne’s trustee in bankruptcy, who, upon the appellant’s reinstatement, appointed a Mr Casey as its sole director. By Deed of Appointment dated 22 August 2012, Mr Thorne, as nominator under the Trust Deed, [1] appointed his wife, the respondent, as well as his brother, Craig Thorne, as trustees of the Trust. Craig Thorne relinquished his office prior to the appellant’s reinstatement.[1]See cl 16.3 of the Trust Deed. The appellant failed at first instance in obtaining declarations as to the invalidity of the appointment of the respondent, whilst the applicant was deregistered, as a trustee of the Trust. The learned primary judge held that:(a)the Deed of Appointment validly appointed the respondent as a trustee of the Trust;(b)the contention that the appointment of the respondent as trustee was not a bona fide exercise of the power of appointment was without substance;(c)the respondent was not required by cl 17.1 of the Trust Deed to vacate the office of trustee. At first instance, the appellant also raised a constitutional issue concerning the proper construction of Ch 5A Pt 5A.1 (s 601AD – s 601AH) of the Corporations Act. It provides that upon deregistration, a company ceases to exist (s 601AD(1)). All the property that the company held on trust immediately before deregistration vests in the Commonwealth (s 601AD(1A) which holds it subject to its obligations as trustee (s 601AD(3A)). If property vests in the Commonwealth under s 601AD(1A), it may continue to act as trustee or apply to a court for the appointment of a new trustee (s 601AE(1). The issue raised was whether s 601 constituted an exclusive code, which was inconsistent with s 12 of the Trusts Act 1973 (Qld), with the consequence that the respondent was precluded from being appointed as a trustee unless the Commonwealth so consented and a court so ordered. That issue was determined against the appellant. The Attorney-General for Queensland elected to intervene on the appeal and filed an outline addressing the constitutional issue. However, at the hearing of the appeal, the appellant indicated that the constitutional issue was conceded and that the Attorney-General’s submissions were accepted. In particular, the appellant accepted, as the Attorney-General submitted, that while the effect of s 601AE(1) of the Corporations Act was that the Commonwealth became a trustee by operation of law on deregistration of the appellant, that did not preclude the appointment of a trustee under s 12(1)(h) of the Trusts Act or the Deed of Trust.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The primary judge observed:[8]“The concepts of dissolution and deregistration are not different. That is made clear by s 601AD(1) of the [Corporations Act] that expressly states that a company ceases to exist on deregistration. The fact that there is provision for reinstatement of a deregistered company in certain circumstances does not alter the nature of deregistration when it takes effect. Section 12(1)(h) of the [Trusts Act] identifies the circumstances which affect the capacity of a corporate trustee to act as trustee and which warrant the exercise of the power of the appointor under the relevant trust deed to appoint new trustees. Deregistration of the corporate trustee fits within that description. The word ‘dissolved’ in s 12(1)(h) of the [Trusts Act] should be construed as covering deregistration of a company under part 5A.1 of Chapter 5A of the [Corporations Act].The fact the deed of appointment incorrectly identified the source of power for making the appointment of the new trustees as clause 16.3 of the trust deed rather than s 12(1) of the [Trusts Act] and overlooked the statutory vesting of the trust property in the Commonwealth as the automatic consequence of the deregistration of the applicant is of no significance, as the deed of appointment correctly identified the factual circumstance of deregistration of the applicant that triggered the exercise of the power of appointment.” (emphasis added)[8][2015] QSC 156 at [47]-[48].Consideration The appellant challenged the conclusion reached in the last paragraph extracted above. It is significant to note that, in so doing, the appellant did not challenge the primary judge’s determination that “dissolution” included deregistration. There was no argument that s 12(1)(h) of the Trusts Act was inapplicable because there was no dissolution of a corporate trustee.[9][9]In that regard, as noted, ground 2.6 was not pursued. An argument advanced by the appellant was that s 12(1)(h) of the Trusts Act could not be availed upon because the Deed of Appointment did not expressly invoke that provision may be immediately dismissed. There was no requirement that the Deed of Appointment do so and there is no substance in the argument that the provision was only applicable if expressly invoked. The appellant’s principal submission was, however, that the trial judge should have concluded that the Deed of Appointment was ineffectual for the purposes of s 12(1)(h) of the Trusts Act. It was contended that her Honour erred in finding that the factual circumstance on which the appointment was made was the appellant’s deregistration. Rather, it was contended that the factual basis for the exercise of the power was the erroneous belief of the appointor (the nominated person) that deregistration had brought about a vacancy in the office of trustee, whereas there was no vacancy because of the operation of s 601AD. In this regard, reliance was placed on the reference in recital D of the Deed of Appointment to the belief of the nominating person that, consequent upon the deregistration of the appellant, the office of Trustee of the trust had become vacant and that it had been “determined … that it [was] necessary, appropriate, convenient and/or expedient” that the appointees be appointed to be trustees of the Trust. Reference was also made to the agreement and acknowledgement in cl 6 “that these presents service only to effect the appointment of the Appointees to the office of Trustee of [the Trust] as provided for herein by reason of the vacancy of that office due to the deregistration of the erstwhile trustee …”.