Westpoint Management Ltd (in Liq) (Receivers and Managers Appointed) (in Its Capacity as trustee for the Warwick Cinema Syndicate Trust) v Sunjet Pty Ltd (in Its Capacity as trustee for the Sunjet Unit Trust)
[2006] WASC 313
•22 SEPTEMBER 2006
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WESTPOINT MANAGEMENT LTD (IN LIQ) (RECEIVERS AND MANAGERS APPOINTED) (IN ITS CAPACITY AS TRUSTEE FOR THE WARWICK CINEMA SYNDICATE TRUST) -v- SUNJET PTY LTD (IN ITS CAPACITY AS TRUSTEE FOR THE SUNJET UNIT TRUST) & ORS [2006] WASC 313
CORAM: MARTIN CJ
HEARD: 22 SEPTEMBER 2006
DELIVERED : 22 SEPTEMBER 2006
FILE NO/S: CIV 1947 of 2006
BETWEEN: WESTPOINT MANAGEMENT LTD (IN LIQ) (RECEIVERS AND MANAGERS APPOINTED) (IN ITS CAPACITY AS TRUSTEE FOR THE WARWICK CINEMA SYNDICATE TRUST) (ACN 074 148 431)
Plaintiff
AND
SUNJET PTY LTD (IN ITS CAPACITY AS TRUSTEE FOR THE SUNJET UNIT TRUST) (ACN 083 575 179)
First DefendantWARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN ITS CAPACITY AS TRUSTEE FOR THE WARWICK ENTERTAINMENT CENTRE UNIT TRUST) (ACN 054 246 918)
Second DefendantFAIRPARK INVESTMENTS PTY LTD (IN ITS CAPACITY AS TRUSTEE FOR THE FAIRPARK PROPERTY TRUST UNITHOLDERS) (ACN 082 884 955)
Third DefendantGOLDEN SUN GROUP INVESTMENTS PTY LTD (ACN 083 336 716)
Fourth DefendantIVYSKY PTY LTD (ACN 083 292 700)
Fifth DefendantTRANSVILLE HOLDINGS PTY LTD (IN ITS CAPACITY AS TRUSTEE FOR THE TRANSVILLE UNIT TRUST) (ACN 083 442 602)
Sixth DefendantSNOWRANGE NOMINEES PTY LTD (IN ITS CAPACITY AS TRUSTEE FOR THE SNOWRANGE UNIT TRUST) (ACN 083 553 986)
Seventh DefendantMR MAN KAN (AS TRUSTEE FOR THE KAN FAMILY TRUST)
Eighth DefendantMS MUI FUNG (AS TRUSTEE FOR THE KAN FAMILY TRUST)
Ninth DefendantFONG CHONG HOON (AS TRUSTEE FOR THE F HOON FAMILY TRUST)
Tenth Defendant
Catchwords:
Application for directions under s 92 of Trustees Act 1962 - Declarations sought that the terms of both a mortgage and a charge do not secure moneys owed by the plaintiff or alternatively, directions for the rectification of the terms of mortgage and charge to provide that the terms in neither secure moneys owed by the plaintiff - Scope of power conferred upon the Court by s 92 - Where plaintiff company has been wound up and provisional liquidators have been appointed as the joint and several liquidators of the company
Costs - Direction sought for reasonable legal costs and disbursements incurred in relation to the summons for directions and the substantive proceedings, including any liability for the defendants' costs
Legislation:
Trustees Act 1962 (WA), s 92
Result:
Application allowed
Category: B
Representation:
Counsel:
Plaintiff: Mr C G Colvin SC
First Defendant : No appearance
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : No appearance
Sixth Defendant : No appearance
Seventh Defendant : No appearance
Eighth Defendant : No appearance
Ninth Defendant : No appearance
Tenth Defendant : No appearance
Solicitors:
Plaintiff: Mallesons Stephen Jaques
First Defendant : No appearance
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : No appearance
Sixth Defendant : No appearance
Seventh Defendant : No appearance
Eighth Defendant : No appearance
Ninth Defendant : No appearance
Tenth Defendant : No appearance
Case(s) referred to in judgment(s):
Featherby v Grljusich, unreported; SCt of WA; Library No 980238; 1 May 1998
Nilant & Anor [2004] WASC 7
Perpetual Trustees WA Ltd as Executor of the Will of Goyder (Dec) v Goyder, unreported; SCt of WA; Library No 990138; 24 March 1999
Re Atkinson, deceased [1971] VR 612
MARTIN CJ: The Court has before it an application by Westpoint Management Ltd ("Westpoint") (In Liq) (Receivers and Managers appointed) (in its capacity as trustee for the Warwick Cinema Syndicate Trust) for orders in the following terms: namely, that the Court give directions that the plaintiff is justified in commencing proceedings against Suncorp Metway ("Suncorp") Ltd in respect of the following or similar claims being; firstly, a declaration that on a proper construction of the terms of a mortgage dated 1 October 2002; the mortgage does not secure moneys owed by the plaintiff to Suncorp in its personal capacity that are unrelated to the Warwick Cinema Syndicate Trust; and secondly, a declaration that on a proper construction of the terms of the charge dated 1 October 2002 registered with ASIC the charge does not secure moneys owed by the plaintiff to Suncorp in its personal capacity that are unrelated to the Warwick Cinema Syndicate Trust.
An alternative claim in the proceedings for which directions are sought is that the terms of the mortgage be rectified so as to provide that the mortgage does not secure moneys owed by the plaintiff to Suncorp in its personal capacity that are unrelated to the Warwick Cinema Syndicate Trust; and secondly, that the terms of the charge be rectified so as to provide that the charge does not secure moneys owed by the plaintiff to Suncorp in its personal capacity that are unrelated to the Warwick Cinema Syndicate Trust.
A direction is also sought in terms that for the purposes of paying its reasonable legal costs and disbursements incurred in association with the summons for directions, the plaintiff is justified in having recourse to the property of the Warwick Cinema Syndicate Trust.
The plaintiff seeks a further direction in terms that for the purpose of paying its reasonable legal costs and disbursements incurred in accordance with the substantive proceedings referred to, including any liability which may arise for the defendants' costs, the plaintiff is justified in having recourse to the property of the Warwick Cinema Syndicate Trust.
The application for directions is brought pursuant to s 92(1) of the Trustees Act1962 (WA) which is in the following terms:
"Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power of discretion vested in the trustee."
There have been many cases dealing with the scope of the power conferred upon the Court by s 92 of the Trustees Act 1962 (WA). One such case is the case of Nilant & Anor [2004] WASC 7. In that case, Barker J cited a passage from the text Dal Pont & Chalmers, Equity and Trusts in Australia and New Zealand, (2nd ed, 2000) at 668 in which the authors referred to the statutory jurisdiction as follows:
"This statutory jurisdiction is intended essentially for private advice by the court to trustees as to what course of action they should follow … or defended; (b) it is desired to effect an early distribution of an estate; and (c) the trustee is in doubt as to the extent of her or his powers under the trust instrument."
The authors go on:
"Types of advice which may be sought include questions in connection with the rights and interests of beneficiaries or creditors, jurisdictional queries, whether further inquiries should be made in certain circumstances, the ascertainment of any class of beneficiaries or creditors, the furnishing of accounts, the settling of minor administration problems, and the approval of dealings with the trust property."
The authors also observe:
"The procedure should not be used to determine substantive issues, such as issues of interpretation of the trust document which involve the question of breach of trust by any of the trustees; for the purpose of securing additional powers for the trustees; and for resolving a contest between the trustees or other parties to a trust. Nor should it be used to determine respective rights of beneficiaries. These are matters in respect of which beneficiaries are entitled to initiate proceedings."
Because of the reservations upon the extent of the power referred to in the last paragraph of that passage, when a dispute was brought before me as a Commissioner of this Court in the case of Perpetual Trustees WA Ltd as Executor of the Will of Goyder (Dec) v Goyder, unreported; SCt of WA; Library No 990138; 24 March 1999, which related to the substantive question of whether or not property fell within the scope of a deceased estate, rather than deal with the matter pursuant to s 92, I suggested that the proceedings be treated as proceedings for declaratory relief instead. The matter then proceeded on that basis.
Similarly, in the case of Featherby v Grljusich, unreported; SCt of WA; Library No 980238; 1 May 1998, Parker J held that it was not open to the Court to make directions under s 92 concerning the amount of remuneration to which the trustees were properly entitled for their administration of a trust. In his view, that issue did not fall within the phrase "respecting the management or administration of that property".
His Honour was also of the view that the relief being sought was not by way of directions, but rather by way of a decision and consequential order by way of resolution of a dispute as to the quantum of the remuneration of the trustees. The orders sought with respect to costs in this case are, I think, different in character to those considered in Featherby v Grljusich because they do not involve any attempt to determine the amount of those costs other than by the imposition of the requirement that the costs be reasonable.
Rather, they simply direct the trustee as to the source from which those costs may be drawn, subject of course to the overriding responsibility of the trustee, to only take reasonable remuneration and reimbursement for costs properly and reasonably incurred.
The question of the extent of this power was also considered in a Victorian decision in the case of Re Atkinson, deceased[1971] VR 612, and although not dealing with a statutory provision in precisely the same terms, the general approach to be taken by trustees in circumstances such as those revealed by this case was dealt with by Gillard J where his Honour observed at 615:
"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. If in doubt as to whether or not it should take legal proceedings, then it is entitled to apply to the court for directions on the matter."
His Honour gives authorities for that proposition and his Honour goes on:
"If the executor or trustee then followed the direction of the court it would be protected from any claim by a beneficiary or creditor arising from its action or inaction in accordance with the court's direction."
Further authorities are given for that proposition. His Honour goes on:
"In cases of real doubt, the proper course for a personal representative or trustee to adopt is to seek the court's decision as to whether or not action should be brought, otherwise the representative or trustee might find itself paying the costs of any proceedings which a court might subsequently say were not 'properly incurred'."
His Honour goes on at 615 ‑ 616:
"On an originating summons seeking such direction, however, a court is not bound to investigate the evidence in order to make a finding that on the material before it the proposed proceedings will or will not be successful. It has merely to determine whether or not the proceedings should be taken."
That is the approach that I intend to take in this case. The conclusion that I arrive at after reviewing those authorities is that there is ample power within s 92 to make the directions that have been sought by the liquidators of the trustee company in this case. In order to explain those directions it is appropriate to identify the nature of the substantive proceedings in respect of which directions are sought and I do that by reference to the affidavit of Andrew John Birch sworn 6 September 2006.
There are two affidavits of Mr Birch, one of which is provided on a confidential basis and which I have read. I will return to the orders appropriately made in respect of that affidavit in due course. Dealing with the affidavit in respect of which no confidentiality orders are sought, Mr Birch deposes that on or about 3 February 2006, an application was made for the appointment of provisional liquidators of the trustee company. On 9 February 2006, this Court made orders for the appointment of provisional liquidators and on 11 April 2006 orders were made winding up the plaintiff company and appointing the provisional liquidators as the joint and several liquidators of the company.
Mr Birch further deposes that Westpoint was trustee of the Warwick Cinema Syndicate Trust and the 60 Market Street Trust. He deposes to the fact that the Warwick Cinema Syndicate Trust is a unit trust created for the purposes of property investment in property known as the Warwick Cinema Complex which is located at 639 Beach Road, Warwick in Western Australia. The Market Street Trust is a trust created for the purposes of investment in and development of a hotel complex situated at 60 Market Street, Melbourne in Victoria.
In relation to the Warwick Cinema Syndicate Trust, during August of 2002, as Mr Birch deposes, negotiations took place between Westpoint on behalf of the Warwick Cinema Syndicate Trust and Suncorp in respect of the provision of a line of credit to Westpoint in its capacity as trustee of the Warwick Cinema Syndicate Trust. Those negations came to fruition and on 1 October 2002 the company provided Suncorp with a first ranked fixed and floating charged over:
"[T]he undertaking of Westpoint and all of its property relating to the Warwick Grand Cinemas at Warwick Entertainment Centre, 639 Beach Road, Warwick, Western Australia."
This was registered with ASIC. On the same day, a first ranking real property mortgage over the property on which the cinema complex is situated was granted.
Turning then to the Market Street Trust, Mr Birch deposes that by letter dated 29 August 2005 Suncorp offered to provide Westpoint with a further line of credit in its capacity as trustee for the Market Street Trust. He further deposes that in or about August 2005 Westpoint as trustee for the Market Street Trust entered into a loan facility agreement with Suncorp as financier. On or about 13 September 2005, Westpoint in its own capacity and as trustee for the Market Street Trust provided Suncorp with a first ranking fixed and floating charge over Westpoint's assets and the assets of the Market Street Trust. This charge was registered with ASIC.
Following the appointment of the provisional liquidators in February of 2006, by letters dated 3 March 2006, Suncorp appointed two persons as joint and several receivers and managers of the property the subject of the Warwick Cinema Syndicate Trust charge and the Warwick Cinema Syndicate Trust mortgage.
The position adopted by Suncorp in correspondence following the appointment of those receivers has been to assert that the Warwick Cinema Syndicate Trust charge and the Warwick Cinema Trust Syndicate mortgage each secure repayment of not only the Warwick Cinema Syndicate Trust line of credit, but also the Market Street line of credit; Suncorp has adopted the position that it will only release the Warwick Cinema Syndicate Trust charge and the Warwick Cinema Syndicate Trust mortgage after payment has been made in respect of not only credit advanced in respect of the Warwick Cinema Syndicate Trust, but also in respect of amounts advanced in respect of the Market Street facility.
Mr Birch appropriately acknowledges in his affidavit that the litigation in respect of which directions are sought should preferably be pursued by a newly appointed trustee of the Warwick Cinema Syndicate Trust. This proposition is fairly obvious; because inherent in the circumstances to which I have referred, is the possibility of a claim by the beneficiaries of the Warwick Cinema Syndicate Trust that Westpoint acted in breach of trust. That breach could be said to have occurred by charging the trust property with debts not properly incurred in the course of the conduct of the affairs of the Warwick Cinema Syndicate Trust.
For those reasons it is, I think, fairly obvious that in an ideal world the litigation which would give rise to that issue should be conducted by an entity other than Westpoint. However, Mr Birch deposes to the inquiries that have been made of various entities as to whether they would be prepared to take over the role of acting as trustee of the Warwick Cinema Syndicate Trust and of the responses to those inquiries.
I am satisfied from that evidence that reasonable steps have been taken to secure the appointment of an alternative trustee without success. As Mr Birch deposes, no doubt that is due to the prospects that are created by the very dispute to which I have referred, and in respect of which directions are sought. However, if it is at all possible in the future it is, I think, clear from the circumstances I have described, that if an alternative trustee can be secured that course would be preferable. I proceed on the basis that no such alternative has been located to date and that it may be impossible to locate an alternative trustee ready, willing and able to take appointment unless and until the litigation in respect of which directions are sought has been resolved.
In relation to that litigation, I have been provided with a confidential opinion provided by counsel and I have read it. It is unnecessary for me to refer to its terms, other than to say that consistent with the approach of Re Atkinson, the question I pose for myself is whether, on the basis of the material, the proceedings referred to should be taken.
On the basis of what I have read of the confidential opinion of counsel, I have come to the conclusion that proceedings should be taken and that there should be appropriate directions in those terms. I also refer to a supplementary affidavit from Mr Birch. That affidavit also deals with confidential matters. It is provided to me no doubt consistently with the obligation of full disclosure. I have taken account of the matters referred to in that affidavit. They do not cause me to form any view other than that the directions sought are appropriate and that they should be made.
In short, in my view the commencement of the litigation is reasonable and appropriate and appears to be in the best interests of the unit holders of the Warwick Cinema Syndicate Trust who will be the substantial beneficiaries of the litigation if it is successful. However, I have suggested to counsel that the directions I make should perhaps include the power to settle the dispute and I will invite counsel for Westpoint to suggest terms of such a direction in due course.
I turn now to the orders that are sought with respect to costs. Because of the view that I take in relation to the appropriateness of seeking directions, and as to the prospective beneficiaries of the litigation in respect of which directions are sought, it seems to me to be appropriate to make an order to the effect that the liquidators be entitled to take their costs of this application from the trust property.
For the same reason it is appropriate to make a direction to the effect that the liquidators be entitled to take their reasonable costs of these proceedings, the substantive proceedings in respect of which directions are sought and any liability which may arise for the defendants' costs of the substantive proceedings from the property of the Warwick Cinema Syndicate Trust. However, I would propose to give the unit holders in the Warwick Cinema Syndicate Trust liberty to apply in respect of that direction and any other matter in case matters proceed differently to what might be anticipated at this stage.
I will also make confidentiality orders in the terms proposed by Mr Colvin. The orders I propose to make are:
1.In terms of pars 1, 2, 3 in the plaintiff's originating summons, filed 7 September 2006.
2.The plaintiff would be justified in settling the claims the subject of these orders on terms upon which it is advised by its solicitors are reasonable and having regard to counsel's advice as to the merits of those claims and the costs, delay and risks associated with proceeding to a trial of those claims.
3.The advice of senior counsel and the affidavit of Andrew John Birch dated 21 September 2006 be kept strictly confidential and be placed in a sealed envelope marked "strictly confidential, not to be inspected by any person other than by order of a Judge of this Court and that those documents not be available for inspection by any person other than by an order of a Judge of this Court".
4.Liberty to apply.
2