Amcus Pty Limited v Hurst Rentals Pty Limited

Application

1. Mr Rafidi then applied, by originating process filed on 22 February 2017, for an order, pursuant to (CTH) Corporations Act 2001, s 601AH, that ASIC reinstate Inavas; and alternatively an order (said to be pursuant to s 601AD(2) and (4)) that ASIC transfer the Zurich policy proceeds held by it to the plaintiff. In his supporting affidavit, Mr Rafidi deposed that his object was to obtain the moneys from ASIC and pay them to himself, and then once again deregister the company, as a solvent company, via a "creditor's voluntary winding up"; in a later affidavit he corrected this to a "members' voluntary winding up". Thus the application was still advanced on the misconceived basis that Mr Rafidi was entitled to the proceeds of the policy because he was the life insured.
2. In a letter dated 3 April 2017, ASIC indicated that it would not oppose the reinstatement of the company, on its usual conditions. However, when the application came before the court on 1 May, I was not then prepared to accede to it - chiefly because it seemed to me that, on the plaintiff's own case, it was intended to deal with the company's property in a manner inconsistent with the legal obligations of directors, and of the company as trustee of the Inavas Superannuation Fund, [1] by paying the proceeds of the policy, being its only known asset, to Mr Rafidi, rather than holding it on the trusts of the superannuation fund to which they appeared to belong; [2] and secondly on the basis that it might be possible, if as seemed likely the fund was a trust asset, to appoint a new trustee of the fund without reinstating Inavas.
3. Subsequently, on 17 June 2017, Mr Rafidi established a new superannuation account (number 10767XX) under the umbrella of the Netwealth Superannuation Master Fund, of which Netwealth Investments Limited is the trustee. This fund appears to be a compliant resident regulated superannuation fund, to which an existing superannuation interest could be rolled over; the Product Disclosure Statement contains the following statement: More details Transferring assets into Super Accelerator You may be able to transfer in assets to Super Accelerator from another complying superannuation entity in the form of a rollover from that entity to your Super Accelerator account. Information Guide 2a: Operating your Super Accelerator account

1. On 18 August, the plaintiff lodged submissions which proposed orders, said to be pursuant to (NSW) Trustee Act 1925, s 70 and s 71, to the effect that: 1. the fund held by the Commonwealth on account of the trust of which Inavas was the trustee vest in Netwealth as trustee of the Netwealth Superannuation Master Fund, account 1076790; 2. consequentially or alternatively, Netwealth as trustee of the Netwealth Superannuation Master Fund, be appointed new trustee of the fund held by the Commonwealth on account of the trust of which Inavas was the trustee.
2. As such orders would have affected ASIC, on 21 August I directed that the originating process be amended and served on ASIC. An amended originating process claiming orders under the Trustee Act was filed and served on ASIC on 28 August; it sought orders to the effect that: 1. the fund held by the Commonwealth on account of the trust of which Inavas was the trustee vest in Netwealth as trustee of the Netwealth Superannuation Master Fund, account 1076790; 2. consequentially or alternatively, Netwealth as trustee of the Netwealth Superannuation Master Fund, be appointed new trustee of the fund held by the Commonwealth on account of the trust of which Inavas was the trustee; and 3. ASIC pay the fund to Netwealth as trustee of the Netwealth Superannuation Master Fund, account 1076790.
3. In a letter of 1 September 2017, ASIC responded that: 1. all trust property of a deregistered company belonged to the Commonwealth; 2. all non-trust property of a deregistered company belonged to ASIC; 3. ASIC was the only party legally able to deal with the property of Inavas; 4. ASIC did not intend to take any steps on behalf of Inavas to assert, exercise, enforce or waive any rights of the company; if the company wished to do so, it must first be reinstated; 5. because Inavas was deregistered, the proceeding as against it was a nullity; [3] 6. para (3) of the relief sought was an order compelling ASIC to transfer trust property to Netwealth. While ASIC had a discretion under s 601AF to do an act on behalf of a deregistered company, an order compelling it to do so would not be made; [4] 7. the better approach would be to seek orders under the Trustee Act - which ASIC would not oppose - that: 1. the fund held by ASIC under s 601AD(2) vest in Netwealth as trustee of the Netwealth Superannuation Master Fund; and 2. Netwealth be appointed as trustee of the fund for the benefit of the plaintiff.
4. The plaintiff's solicitor replied that orders would be sought to the effect suggested by ASIC, and those were the orders sought when the matter came before me on 4 September 2017.

The current status of the policy proceeds

1. It is necessary to bear in mind that this application concerns a fund of less than $29,000, and for that reason too strict insistence on proof of every matter, when there does not appear to be any interest adverse to that of the plaintiff, would risk incurring costs entirely disproportionate to the issue.
2. From the life insurance policy application form, referred to above, it can reasonably be concluded that Inavas was the trustee of an employer-sponsored superannuation fund which was intended to comply with ITAA s 23F, of which Mr Rafidi was a member; and that Inavas insured his life and held the policy in that capacity. Upon maturity of the life policy, the proceeds were payable to Inavas as trustee of the superannuation fund, and would be held by the trustee and on the trusts of the fund. For the sake of convenience, I shall refer to that superannuation fund as the "Inavas Superannuation Fund".
3. ITAA, s 23F - which was introduced in 1964, repealed and replaced in 1965, [5] and ultimately repealed in 1987 - conferred tax-free status on employer sponsored superannuation funds that complied with its requirements. [6] ITAA s 23F granted an exemption from tax [7] for the income of a superannuation fund established by an employer for the benefit of employees [8] or their dependants on their retirement where the fund satisfied all the section's specified requirements. The exemption applied to all income of the fund, other than private company dividends and other non-arm's length income. Any employer could establish a superannuation fund for employees, governed by a trust deed or rules and vested in a trustee; the employer could be the trustee.
4. Although s 23F was repealed in 1987, its repeal did not affect the existence or terms of any superannuation fund which had previously complied with its requirements and thus enjoyed tax exempt status; the repeal of s 23F meant only that such a fund was no longer entitled to tax exempt status under s 23F. For present purposes, the significance of this is that the existence and terms of the Inavas Superannuation Fund was unaffected by the repeal of s 23F; in particular, Inavas continued to hold the policy on Mr Rafidi's life upon the trusts of the Inavas Superannuation Fund.
5. In order to understand the current status of the Zurich policy proceeds held by ASIC, it is necessary to appreciate the effect of the legislation in force at the time of the deregistration. Inavas was deregistered under the Corporations Law of 1990. Corporations Law, s 574(1), as then in force, had the effect that upon the Australian Securities Commission (as it then was) cancelling the registration of a defunct company, the company was dissolved. It thereupon necessarily ceased to be the trustee of any trust of which it was formerly trustee. Upon its deregistration, the property of Inavas - including the Zurich life policy - vested in the ASC. Corporations Law, s 576(1), as then in force, provided: (1) Where, after a company has been dissolved, there remains in this jurisdiction or elsewhere outstanding property of the company, the estate and interest in the property, at law or in equity, of the company or its liquidator at the time when the company was dissolved, together with all claims, rights and remedies that the company or its liquidator then had in respect of the property vests by force of this section in the Commission.
6. In distinction from the present regime, s 576 did not make separate provision in respect of the vesting of property which had been held by the company on trust. However, that there was some difference in respect of trust property was recognised in s 577, which relevantly provided: 577 Outstanding interests in property: how disposed of (1) Upon proof to the satisfaction of the Commission that there is vested in it by force of section 576 any estate or interest in property, whether solely or together with any other person, of a beneficial nature and not merely held in trust, the Commission may get in, sell or otherwise dispose of, or deal with, that estate or interest or any part of that estate or interest as it sees fit.
7. In other words, the Commission was not empowered to deal with and dispose of property of the deregistered company that was "merely held in trust"; such property remained vested in the Commission.
8. On 1 July 1998, s 576(1) (and the related provisions in Div 8 of Pt 5.6 of the Corporations Law) were superseded by a new Ch 5A of the Corporations Law, and ASIC was authorised to deal with property which had vested in it prior to the commencement of Chapter 5A - which included property which had vested in ASIC by operation of s 576(1) - as if the property were vested in it under (new) section 601AD. [9] Thus from 1 July 1998, ASIC had, in relation to the property of the Inavas Superannuation Fund (including the Zurich life policy) which vested in ASIC on 4 March 1996, "all the powers of an owner" (s 601AD(4)). Section 601AE(1) provided that if property vested in ASIC under subsection 601AD(2) was held by the company on trust, ASIC may continue to act as trustee; or apply to a court for the appointment of a new trustee; while s 601AE(2) provided that property not held by the company on trust was to be dealt with as unclaimed moneys under Pt 9.7. As Barrett J observed in Danich Pty Ltd; Re Cenco Holdings Pty Ltd, s 601AE as a whole made more explicit the message in the former s 577 that ASIC's powers of dealing and disposal, as well as ultimate resort to the unclaimed moneys provisions, did not apply to property held in trust by the dissolved company, which was to remain in ASIC indefinitely, still impressed with the relevant trusts. [10] Upon commencement of the (CTH) Corporations Act 2001, the ownership of and rights, powers and duties in relation to the relevant property arising in ASIC by virtue of the Corporations Law provisions became the equivalent ownership, rights, powers and duties under the corresponding provisions of the Corporations Act. [11]
9. In 2007, the relevant provisions of the Corporations Act were further amended, by the (CTH) Governance Review Implementation (Treasury Portfolio Agencies) Act 2007, [12] so that s 601AD (Effect of deregistration) now relevantly provides that trust property of a deregistered company vests in the Commonwealth, and non-trust property in ASIC: (1A) Trust property vests in the Commonwealth On deregistration, all property that the company held on trust immediately before deregistration vests in the Commonwealth. If property is vested in a liquidator on trust immediately before deregistration, that property vests in the Commonwealth. This subsection extends to property situated outside this jurisdiction. (2) Other company property vests in ASIC On deregistration, all the company's property (other than any property held by the company on trust) vests in ASIC. If company property is vested in a liquidator (other than any company property vested in a liquidator on trust) immediately before deregistration, that property vests in ASIC. This subsection extends to property situated outside this jurisdiction. (3) Rights and powers in respect of property Under subsection (1A) or (2), the Commonwealth or ASIC takes only the same property rights that the company itself held. If the company held particular property subject to a security or other interest or claim, the Commonwealth or ASIC takes the property subject to that interest or claim. Note: See also subsection 601AE(3) - which deals with liabilities that a law imposes on the property (particularly liabilities such as rates, taxes and other charges). (3A) [Commonwealth to have all powers of an owner] The Commonwealth has, subject to its obligations as trustee of the trust, all the powers of an owner over property vested in it under subsection (1A). Note: Section 601AF confers additional powers on the Commonwealth to fulfil outstanding obligations of the deregistered company. (4) [ASIC to have all powers of an owner] ASIC has all the powers of an owner over property vested in it under subsection (2). Note: Section 601AF confers additional powers on ASIC to fulfil outstanding obligations of the deregistered company.
10. However, while trust property is now vested in the Commonwealth and not ASIC, ASIC may, for and on behalf of the Commonwealth, perform all the duties and exercise all the powers of the Commonwealth as trustee in relation to assets held on trust by the Commonwealth. [13]
11. Section 601AE (What the Commonwealth or ASIC does with the property) relevantly provides that in respect of trust property, the Commonwealth can continue to act as trustee, or apply for the appointment of a new trustee: (1) Trust property vested in the Commonwealth If property vests in the Commonwealth under subsection 601AD(1A), the Commonwealth may: (a) continue to act as trustee; or (b) apply to a court for the appointment of a new trustee. Note: Under paragraph (1)(a), the Commonwealth may be able to transfer the property to a new trustee chosen in accordance with the trust instrument.
12. Section 601AF (The Commonwealth's and ASIC's power to fulfil outstanding obligations of deregistered company) relevantly permits, but does not require, the Commonwealth to do an act on behalf of the company which the company if it still existed would have been bound to do: 601AF The Commonwealth or ASIC may do an act on behalf of the company or its liquidator if the Commonwealth or ASIC is satisfied that the company or liquidator would be bound to do the act if the company still existed. Note: This power is a general one and is not limited to acts in relation to property vested in the Commonwealth under subsection 601AD(1A), or ASIC under subsection 601AD(2). The Commonwealth or ASIC has all the powers that automatically flow from the vesting of property under that subsection (see subsections 601AD(3A) and (4)) and may exercise those powers whether or not the company was bound to do so.
13. The transitional provisions for the Governance Review Implementation (Treasury Portfolio Agencies) Act 2007, in Schedule 2, Part 2, Division 2 (Transitional provisions for ASIC) relevantly included the following: 3 Trust property held under Part 9.7 of the Corporations Act Any unclaimed property held, immediately before the commencement time, on trust by ASIC to be dealt with under Part 9.7 of the Corporations Act 2001 (as in force at that time) is taken, immediately after that time, to be held by ASIC for and on behalf of the Commonwealth to be dealt with in accordance with Part 9.7 of the Corporations Act 2001 (as amended by Schedule 1 to this Act). 4 Vesting of other assets held on trust by ASIC (1) This item applies to any other assets held on trust by ASIC immediately before the commencement time. (2) At the commencement time, the assets to which this item applies cease to be assets held on trust by ASIC and become assets held on trust by the Commonwealth, without any conveyance, transfer or assignment. The Commonwealth becomes the successor in law in relation to those assets. Note: ASIC may, for and on behalf of the Commonwealth, perform all the duties and exercise all the powers of the Commonwealth as trustee in relation to assets held on trust by the Commonwealth (see subsection 8(6) of the Australian Securities and Investments Commission Act 2001).
14. Prior to the commencement of the Governance Review Implementation (Treasury Portfolio Agencies) Act 2007, the Zurich life policy was held on trust by ASIC, on the trusts of the Inavas superannuation fund. Thus by force of clause 4 of Schedule 2, Part 2, Division 2, the policy thereupon ceased to be held on trust by ASIC and became held on trust by the Commonwealth, but ASIC was empowered for and on behalf of the Commonwealth to perform all the duties and exercise all the powers of the Commonwealth as such trustee.
15. Accordingly: 1. upon deregistration of Inavas, its trust property, including the Zurich life policy, initially vested in ASC, but subject to the trusts on which it was held, relevantly, those of the Inavas Superannuation Fund; 2. in 2007, such property vested in the Commonwealth as trustee; 3. on payment to ASIC of the policy proceeds in 2015, they were vested in the Commonwealth, on the trusts of the Inavas Superannuation Fund; but 4. ASIC may, for and on behalf of the Commonwealth, perform the duties and exercise the powers of the Commonwealth as trustee.
16. The point of this is that the proceeds of the policy, though held by ASIC, remain impressed with the trusts of the Inavas Superannuation Fund. If Inavas were reinstated, it would resume the office of trustee of the Inavas Superannuation Fund, and hold the Zurich policy proceeds now held by ASIC upon those trusts. [14] Alternatively, without reinstating Inavas, a new trustee could be appointed of the Inavas Superannuation Fund; [15] however, a replacement trustee would hold the policy proceeds on the trusts of the Inavas Superannuation Fund, not those of some other trust (such as the Netwealth Fund), and because the trust deed cannot be found, the terms of that trust are not ascertainable.

Rolling over the policy proceeds

1. In those circumstances, there is considerable attraction in the proposal that Mr Rafidi's superannuation entitlement be transferred to another compliant superannuation fund. The plaintiff Mr Rafidi has indicated that he wishes and intends that the Zurich policy proceeds be paid to his newly-established Netwealth superannuation account. However, Netwealth is not a trustee of the Inavas Superannuation Fund, and while, at least theoretically, it could (subject to its consent) be appointed as trustee of that fund, that would be a separate trust and fund from the Netwealth fund; the effect would not be to "merge" the Inavas fund into the Netwealth fund. In any event, there is no evidence of any consent on the part of Netwealth to be appointed as trustee of the Inavas fund, and it is unlikely that it would so consent.
2. The mechanism by which a member's superannuation interest is transferred from one superannuation fund to another is colloquially referred to as a "rollover". While the Inavas trust deed is not available, nonetheless bearing in mind the considerations to which I have referred about the value of the interest at stake, the absence of any apparent adverse interest, and the risk of disproportionate costs, and taking notice of the usual provisions of superannuation funds, it is reasonable to infer that the terms of the Inavas Superannuation Trust Deed would have permitted the "rolling over" of a member's superannuation interest to another compliant fund. I am prepared to infer that the rules of the Inavas Superannuation Fund would have permitted, if not required, the trustee to "roll-over" a member's interest to another compliant fund at the request of the member. As has been mentioned, the Netwealth Superannuation Master Fund appears to be a compliant resident regulated superannuation fund, to which an existing superannuation interest could be rolled over.
3. A "rollover" from the Inavas Fund to the Netwealth Fund would ordinarily involve a payment by the trustee of the Inavas Fund to the trustee of the Netwealth Fund, which is a different concept from appointment of Netwealth as trustee of the Inavas Superannuation Fund. The plaintiff proposes that, Inavas having been dissolved, it be effected by vesting order.
4. The Court may, in its jurisdiction under the Trustee Act, make a vesting order where a corporate trustee has been dissolved. [16] Any doubt in this respect was removed by (NSW) Trustee Act 1925, s 71(2)(h), which provides that the Court may make a vesting order "where a trustee being a corporation is dissolved". The effect of a vesting order is stated in Trustee Act, s 78, which relevantly provides: 78 Effect of vesting order (1) In the case of a vesting order consequential on the appointment of a new trustee, or the retirement of a trustee, the vesting order shall have the same effect as if the persons who before the appointment or retirement were the trustees, if any, had duly executed all proper conveyances of the property for such estate or interest as the Court directs, or if there is no such person, or no such person of full capacity, then as if such person had existed and been of full capacity, and had duly executed all proper conveyances of the property for such estate or interest as the Court directs. (2) In every other case the vesting order shall have the same effect as if the trustee or other person or description or class of persons to whose rights, or supposed rights, the provisions of this Part respectively relate, had been an ascertained and existing person of full capacity, and had executed a conveyance or release to the effect intended by the order.
5. It is subsection (2) that is relevant here. Essentially, the function of a vesting order is to give effect to the rights and obligations of beneficiaries and trustees, in circumstances where a trustee's non-existence, incapacity or recalcitrance frustrates them. Typically, but not invariably, this will involving vesting in a new trustee, or in a beneficiary who is absolutely entitled, where the trustee or former trustee has ceased to exist, is incapable, or has been removed.
6. The effect of vesting the proceeds held by ASIC in Netwealth would be to implement a rollover, as if Inavas were an existing legal entity of full capacity and had executed whatever instrument was necessary to effect a rollover of Mr Rafidi's superannuation interest, at his request, to the Netwealth Fund. Because Mr Rafidi is entitled to have the trustee of his superannuation fund rollover his superannuation interest to another compliant fund, making a vesting order would be entirely consistent with the purpose of such orders: it would effect what Inavas, if it still existed, would be bound to do. It also avoids any need to reinstate Inavas, [17] while ensuring that the asset is invested in and managed by a compliant superannuation fund.

Conclusion

1. My conclusions may be summarised as follows:
2. The existence and terms of the Inavas Superannuation Fund were unaffected by the repeal of ITAA, s 23F; in particular, Inavas continued to hold the policy on Mr Rafidi's life upon the trusts of the Inavas Superannuation Fund. Accordingly, the trust property of Inavas upon deregistration, including the Zurich life policy, initially vested in ASC, but subject to the trusts on which it was held, relevantly, those of the Inavas Superannuation Fund; in 2007, such property vested in the Commonwealth as trustee; and on payment to ASIC of the policy proceeds in 2015, they were vested in the Commonwealth, on the trusts of the Inavas Superannuation Fund.
3. The function of a vesting order is to give effect to the rights and obligations of beneficiaries and trustees, in circumstances where a trustee's non-existence, incapacity or recalcitrance frustrates them. Because Mr Rafidi is entitled to have the trustee of his superannuation fund rollover his superannuation interest to another compliant fund, making a vesting order would be entirely consistent with the purpose of such orders: it would effect what Inavas, if it still existed, would be bound to do, while avoiding any need to reinstate Inavas, and ensuring that the asset is invested in and managed by a compliant superannuation fund.
4. I do not see why the costs should be borne by the trust property, let alone how such an order could be made in the absence of the joinder of Netwealth, which will become the trustee of that property upon making of the vesting order.

Orders

1. Accordingly, the Court orders that: 1. Pursuant to (NSW) Trustee Act, s 71(2)(h), the assets of the Inavas Superannuation Fund, including the proceeds of Zurich Life policy 02063587 currently held by ASIC consequent upon the deregistration of Inavas Pty Ltd, and any interest accrued thereon, vest in Netwealth Investments Limited as trustee of the Netwealth Superannuation Master Fund, account number 10767XX. 2. There be liberty to apply in the event of any difficulty arising in connection with the implementation of this order.

Endnotes

1. The trust deed for the Inavas Superannuation Fund is not in evidence, and it seems that the plaintiff has been unable to find a copy or any other evidence of its terms; however, it can reasonably be supposed that the interest of Mr Rafidi as a member would not vest, in the sense of becoming payable to him, before retirement - or, possibly, incapacity. As Mr Rafidi is currently aged only 52, it would appear that his superannuation interest would not yet have vested, and that he would not yet be entitled to payment of his superannuation benefit.
2. In more recent affidavits, Mr Rafidi has indicated that he did not intend, in his previous affidavits, to "create a circumstance where funds of proceeds of the subject policy were not being dealt with in accordance with Australian Law". However, regardless of intent, what he initially proposed would have done just that.
3. Citing Amcus Pty Limited v Hurst Rentals Pty Limited (No 2) [2010] NSWSC 239.
4. Citing ANZ v ASIC [2014] VSC 672 at [22]-[24].
5. By Income Tax Assessment Act 1965, No 103 of 1965.
6. For the following summary of s 23F, I am indebted to Cleary, J, The Evolution of the Regulation Governing Superannuation Funds since 1936, (thesis submitted to the Bond University Faculty of Law in fulfilment of the requirements for the Degree of Doctor of Philosophy), October 2010.
7. The exemption was initially granted by ITAA s 23F(7) (1964), renumbered to sub-section (13) (1965), and then (15) (by Income Tax Laws Amendment Act 1981, No 108 of 1981).
8. ITAA s 23F(1) ('employee' included a director, irrespective of whether or not the relationship of master and servant existed between him and the company).
9. Corporations Law, s 1438(1).
10. Danich Pty Ltd; Re Cenco Holdings Pty Ltd [2005] NSWSC 293; 53 ACSR 484 at 489.
11. (CTH) Corporations Act 2001, s 1400 and/or s 1403.
12. Act 74 of 2007, effective 1 July 2007.
13. (CTH) Australian Securities and Investments Commission Act 2001, s 8(6).
14. Danich Pty Ltd; Re Cenco Holdings Pty Ltd at [29].
15. The trust deed (and other trust documents) of the Inavas Superannuation Fund are apparently no longer available, so it is not possible to know what provision was made in the trust deed for appointment of a new trustee. Under s 601AE(1)(b), the Commonwealth could apply for the appointment of a new trustee of the Zurich life policy proceeds now vested in it, but it has not done so, does not appear inclined to do so, and cannot be compelled to do so. In any event the Court has inherent jurisdiction to appoint a new trustee in place of a dissolved corporation: Danich Pty Ltd; Re Cenco Holdings Pty Ltd at [25].
16. Re General Accident Assurance Corporation Ltd [1904] 1 Ch 147; Re Richard Mills & Co (Brierly Hill) Ltd [1905] WN 36; Re Clarke and Solomons' Agreement Trusts (1905) 5 SR(NSW) 498; contra ReTaylor's Agreement Trusts [1904] 2 Ch 737.
17. Although Inavas was deregistered under the Corporations Law of 1990, it could if necessary be reinstated pursuant to Corporations Act, s 601AH; the difficulties that arise in connection with deregistration under pre-1990 legislation do not apply to deregistration under the 1990 Law: Danich Pty Ltd; Re Cenco Holdings Pty Ltd [2005] NSWSC 293; 53 ACSR 484; cf Re Rocha Pty Limited (2016) 310 FLR 149; (2016) 114 ACSR 89; [2016] NSWSC 899.

Amendments 28 September 2017 - Correct formatting errors DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 September 2017