Wealthlab Pty Ltd v Dovetail 009 Pty Ltd
[2024] VSC 406
•11 July 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL LAW DIVISION
COMMERCIAL LIST
S ECI 2024 03229
| WEALTHLAB PTY LTD (ACN 600 040 391) (AS TRUSTEE OF THE JACKSON FAMILY TRUST) and ORS (according to the attached schedule) | Plaintiffs |
| v | |
| DOVETAIL 009 PTY LTD (ACN 610 511 530) (AS TRUSTEE OF THE DOVETAIL 009 UNIT TRUST) | Defendant |
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JUDGE: | Gorton J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 July 2024 |
DATE OF JUDGMENT: | 11 July 2024 |
CASE MAY BE CITED AS: | Wealthlab Pty Ltd v Dovetail 009 Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2024] VSC 406 |
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TRUSTS – Where unitholders in a trust created to develop a property apply to have a receiver appointed to trust assets – Where trustee consents to the appointment – Where doubt as to trust’s financial position and inadequate books of account or records provided to unitholders – Where secured creditor already in possession – Just and convenient to appoint receiver – Receiver to take subject to rights of secured creditor – Natas Investments Pty Ltd v Think Partitions Pty Ltd [2020] VSC 653 – Supreme Court Act 1986 (Vic) s 37(1).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr D Porteous | Strongman & Crouch |
| For the Defendant | Mr C Bloomfield (granted leave to appear on behalf of the defendant) | N/A |
HIS HONOUR:
For the purpose of developing a childcare centre at 14 Station Street, Aspendale, Mr Cameron Bloomfield arranged for the establishment of the Dovetail 009 Unit Trust (‘the Trust’), of which Dovetail 009 Pty Ltd, the defendant, is the trustee. Dovetail 009 Pty Ltd is also the registered proprietor of the land at 14 Station Street, Aspendale. Mr Cameron Bloomfield is the sole director of Dovetail 009 Pty Ltd and the sole director and beneficial shareholder in its parent company. In order to fund the development, units in the trust were issued and sold to investors, and money was borrowed from Aspendale Finance Co Pty Ltd, which is associated with ‘Pioneer Wealth Group’. There is no suggestion that Aspendale Finance Co Pty Ltd is other than a genuine, arms-length financier of the development. Its loan was secured by a registered mortgage. The plaintiffs are, together, the holders of 750,000 of the 830,000 units that have been issued (according to a file provided by Mr Bloomfield). In this proceeding, the plaintiffs are applying for an order appointing Mr Matthew Jess, a registered liquidator, as receiver and manager to the assets and undertakings of the trust. Mr Jess consents to being so appointed. Mr Bloomfield consents to the application. The only other unitholder of which the plaintiffs are aware, based on the file provided by Mr Bloomfield, lives overseas and has indicated that he does not oppose the application.
At the hearing of the application, Mr Bloomfield appeared for Dovetail 009 Pty Ltd and confirmed its consent to the making of the order.[1] He also said that he could not currently access the financial records of Dovetail 009 Pty Ltd because they were stored in an online accounting software package, the subscription had not been paid, and they could not be accessed without the subscription being renewed.
[1]I granted a dispensation from the requirement in r 1.17 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) that a company not take any step in a proceeding other than by a solicitor to enable Mr Bloomfield to represent Dovetail 009 Pty Ltd at the application.
The application has been brought because the development has not proceeded as anticipated and the plaintiffs have faced difficulties ascertaining its current state and Dovetail 009 Pty Ltd’s financial situation.
Based on the material currently before me:
(a) Mr Bloomfield informed the plaintiffs in or around April 2021 that the trustee would raise $1.2 million by issuing units in the trust, that the trustee would otherwise fund the development using a construction facility it had in place with a ‘major bank’, and that various necessary steps for the construction of the childcare centre had already been completed such as the obtaining of a planning permit and the identification of a proposed builder and potential lessees of the centre;
(b) The investment timeframe was expected to be approximately 12 months (until approximately mid-2022), with the units being purchased back at that time out of either the proceeds of the sale of childcare centre or a refinancing, with an expected return of 18% per annum;
(c) There were delays with the build. Some of these may have been due to the COVID pandemic. Some may have been due to Mr Bloomfield’s becoming unwell;
(d) In March 2024, it was apparent that the development was short of funds. Mr Bloomfield raised the possibility of appointing, and said that he had been advised to appoint, an administrator to the trust. No administrator has been appointed;
(e) In or around early 2024, Dovetail 009 Pty Ltd defaulted on its loan and Aspendale Finance Co Pty Ltd took possession of the development;
(f) A balance sheet said to be as at 31 March 2024 and a profit and loss statement said to be for the 100 months ended 31 March 2024 were provided by Mr Bloomfield. The balance sheet indicated as non-current liabilities a loan to ‘Pioneer Wealth’ with a balance of $9,771,830.32 owing, and, also, a loan to ‘Dovetail Group Treasury’ with a balance of $1,603,709.24 owing. The balance sheet otherwise showed that Dovetail 009 Pty Ltd’s liabilities exceeded its assets by more than $8 million;
(g) Mr Bloomfield is the sole director of and shareholder in Dovetail Group Treasury Pty Ltd. He had not informed the plaintiffs, when they purchased their units, that the development would also be financed by a loan from a company controlled by him;
(h) Despite requests being made, Dovetail 009 Pty Ltd, or Mr Bloomfield, has not provided to the plaintiffs proper books of account or cashflow documents or documents evidencing where the plaintiffs’ investment moneys has been spent. The trust deed requires Dovetail 009 Pty Ltd to establish and maintain proper books of account which accurately record all receipts and outgoings in relation to the trust fund and to cause the preparation by an accountant of certified financial statements, and that the unitholder may inspect such statements and books of account. The balance sheet and profit and loss statement provided referred to in para (f) above were not, on their face, prepared by an accountant or certified to give a true and fair view of the financial position and performance of the trust;
(i) Aspendale Finance Co Pty Ltd has enforced its security and is currently in control of, and planning to fund and to complete, the development. The plaintiffs depose that the mortgagee asserts that Dovetail 009 Pty Ltd is in fact indebted to it in the amount of some $10.5 million (that is, some $800,000 more than the balance sheet indicates), expects that a further $825,000 - $850,000 will be required to complete the development and that the development will be completed later this month. It further asserts a lease has been signed with Guardian Childcare and Education, and that the development is likely to have a sale value of $11.5 million to $12.5 million.
I note that Mr Bloomfield, while consenting to the application, did not accept that all of the evidence placed before me was accurate. However, for the purpose of this application only, I accept the above, or at least that there is a proper reason to consider that the above is accurate.
If the above figures are correct, there is a real prospect that there will be surplus funds available after the secured creditor, Aspendale Finance Co Pty Ltd, has been paid out. The surplus funds will be paid by Aspendale Finance Co Pty Ltd to Dovetail 009 Pty Ltd. The surplus funds will be insufficient to pay both the related lender, Dovetail Group Treasury Pty Ltd, and the unitholders.
The Court is able to appoint a receiver ‘if it is just and convenient to do so’.[2] In circumstances where the development has gone contrary to the representations made to the plaintiffs prior to their making of their investment, Dovetail 009 Pty Ltd has not provided access to its books of account and records as required by the trust deed, where there is (according to the balance sheet) a substantial loan to a related entity the existence of which had not previously been disclosed to the plaintiffs, where there is uncertainty as to Dovetail 009 Pty Ltd’s true financial position and reason to consider that financial records have not been maintained in accordance with the obligations under the trust deed, where there is unlikely to be sufficient funds available to both discharge the recorded liability to the related lender and to provide a return to the unit holders, and where Mr Bloomfield consents, it is in my view just and convenient to appoint Mr Jess as a receiver and manager of the assets of the trust to ensure that the trust assets are secured and properly dealt with.[3]
[2]Supreme Court Act 1986 (Vic) s 37(1).
[3]See, eg; Natas Investments Pty Ltd v Think Partitions Pty Ltd [2020] VSC 653, [74]-[75] (Delany J).
I should note that Aspendale Finance Co Pty was given notice of the application but did not appear to seek to be heard on the application. I clarified with counsel for the plaintiffs, and the plaintiffs accepted, that the rights that Mr Jess would have as receiver and manager would be subject to the rights of Aspendale Finance Co Pty under its security documentation. I will reserve liberty to apply.
SCHEDULE OF PARTIES
S ECI 2024 03229
| WEALTHLAB PTY LTD (ACN 600 040 391) (AS TRUSTEE OF THE JACKSON FAMILY TRUST) | First Plaintiff |
| RDCB SUPER PTY LTD (ACN 647 562 178) (AS TRUSTEE OF THE RDCB SUPER FUND TRUST) | Second Plaintiff |
| RAHUL HOLDING PTY LTD (ACN 626 995 212) | Third Plaintiff |
| ALAN BRIGGS | Fourth Plaintiff |
| LOUISE WEST | Fifth Plaintiff |
| -and- | |
| DOVETAIL 009 PTY LTD (ACN 610 511 530) (AS TRUSTEE OF THE DOVETAIL 009 UNIT TRUST) | First Defendant |
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