JUDGE:	CAMERON J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 August 2018
DATE OF JUDGMENT:	9 November 2018
CASE MAY BE CITED AS:	Watts Eagle Services Pty Ltd v Passon
MEDIUM NEUTRAL CITATION:	[2018] VSC 682

---

CORPORATIONS – Appeal from Magistrates’ Court – Entitlement to dividends – Where shareholder declared bankrupt – Whether entitlement to dividends vested in bankruptcy trustee – Bankruptcy Act 1966 (Cth) ss 58, 116 considered – Settlement agreement in related proceedings – Whether shares assigned under agreement – Property Law Act 1958 (Vic) s 134 considered – New point raised on appeal – Whether prejudicial to respondent – Whisprun Pty Ltd v Dixon (No 2) [2003] HCA 48; (2003) 200 ALR 447 considered.

---

APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr D C Harrison	Macpherson Kelley
For the Respondent	-	Mr A Flower, FCG Legal Pty Ltd

HER HONOUR:

What is this case about?

This case concerns whether Watts Eagle Services Pty Ltd (‘WES’) breached its constitution and failed to pay proper dividends to Claudette Passon (‘Ms Passon’).

The matter was heard before his Honour Magistrate Braun at the Magistrates’ Court in Melbourne on 19 and 20 September 2017. His Honour gave judgment on 20 September 2017. His Honour determined that WES had committed the alleged breach, and gave judgment for Ms Passon in the amount of $25,454, plus interest of $2,081.65 and costs in the amount of $9,481.

WES is appealing the final orders made by his Honour, pursuant to s 109 of the Magistrates’ Court Act 1989 (Vic).

Summary of decision

For the reasons that follow:

(1) Grounds 1, 2 and 3 of the appeal are allowed.

(2) Ground 4 of the appeal is dismissed.

(3) Ground 5 of the appeal is allowed.

Background

The matters arising out of Ms Passon’s shareholding in WES have had a well-worn history through the courts.

WES is a company, trading as ‘Victorian State Home Loans’ (‘VESL’). It was formerly controlled by Ms Passon’s late husband. It was agreed between the parties that up to 9 March 2011, Ms Passon held legal title to 140 of 200 total shares in WES.

On 9 March 2011, Ms Passon was declared bankrupt. Mr Peter Robert Vince was her trustee in bankruptcy (‘the trustee’). Clearly, as at that date, all of Ms Passon’s divisible property vested in the trustee.

The Federal Magistrates’ Court proceeding

Following her bankruptcy, Ms Passon claimed that she held her 140 shares in WES (‘the disputed shares’), not in her own right, but as trustee for her children, Tea-Rose, Angus and Mietta (‘the children’).

This claim was contested by the trustee, who subsequently commenced proceedings in the Federal Magistrates’ Court in February 2012 in which he sought a declaration that the shares held…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Watts Eagle Services Pty Ltd v Passon

Details

AGLC: Watts Eagle Services Pty Ltd v Passon [2018] VSC 682
Case: [2018] VSC 682
Decision Date: 9 November 2018

CaseChat Overview and Summary

Watts Eagle Services Pty Ltd (Appellant) appealed against a decision of the Magistrates’ Court, which had held that the Appellant was not entitled to dividends declared by the company. The Respondent, Passon (Defendant), had been a shareholder in the company but had subsequently been declared bankrupt. The Appellant claimed that it was entitled to dividends declared by the company, but the Respondent argued that his entitlement to dividends had vested in his bankruptcy trustee. The Appellant further argued that the Respondent had assigned his shares in the company to a third party under a settlement agreement in related proceedings, and that the third party was therefore entitled to the dividends.

The court was required to decide whether the Respondent's entitlement to dividends had vested in his bankruptcy trustee, and whether the Respondent had assigned his shares in the company to a third party under the settlement agreement. The court considered sections 58 and 116 of the Bankruptcy Act 1966 (Cth), which provide that a bankrupt's property vests in the trustee, and that the trustee has the rights and powers of the bankrupt in relation to the property. The court also considered section 134 of the Property Law Act 1958 (Vic), which provides that an assignment of shares is effective when the assignor delivers a duly executed instrument of assignment to the assignee, or to a person authorised to receive it on the assignee's behalf.

The court held that the Respondent's entitlement to dividends had indeed vested in his bankruptcy trustee, and that the Appellant was not entitled to pay the dividends to the Respondent. The court further held that the Respondent had not assigned his shares in the company to a third party under the settlement agreement, as the agreement did not contain any provision for the assignment of shares. The Appellant had raised a new point on appeal, arguing that the Respondent had assigned his shares to a third party under an earlier agreement. However, the court held that it was not appropriate to consider this new point, as it would be prejudicial to the Respondent.

The court dismissed the appeal, and held that the Appellant was not entitled to pay the dividends to the Respondent. The court did not make any orders in relation to the new point raised by the Appellant, as it considered it inappropriate to do so.

Orders