Australian Securities and Investments Commission v Letten

Supreme Court of NSW|2021-07-05|Before: Slattery J

Judgment

On 23 February 2018, the Council of the City of Sydney ("the Council"), the plaintiff in these proceedings, sold a leasehold car parking space (the "car space") owned by Chadhope Pty Ltd ("Chadhope") to pay overdue council rates in the amount of $22,062.74. The Council sold the car space under powers conferred upon it under Local Government Act 1993, s 713(2). This and related provisions (discussed in more detail below) authorise local government authorities to sell land such as this car space for rates which had been unpaid for five years. At the time of the sale, Chadhope had long been deregistered from the Register of Companies by the Australian Securities and Investment Commission ("ASIC").
By its Summons filed 6 May 2021 in this proceeding, the Council sought orders under Uniform Civil Procedure Rules 2005 ("UCPR"), r 55.9 that the net surplus sale proceeds in the amount of $51,171.66 from the car space be paid into Court. The Council took this course in order to remove itself from any contest concerning entitlements to the net proceeds of sale. Orders were made and the funds were paid into Court.
By a Motion filed in the proceedings on 18 May 2021, the Council sought orders under UCPR, r 55.9(6) that its costs in these proceedings of $21,334.21 be paid from the surplus proceeds of sale that the Council had paid into Court. This Motion was heard in the Applications List on 5 July 2021.
A second Motion is now before the Court. In that Motion, two persons associated with the deregistered company, Chadhope, Ms Celia McAndrew and Mr Christian Roger de Robillard ("the Chadhope parties") seek a range of relief against the Council relating to the Council's conduct of the sale of the car space. The Chadhope parties' claims for relief under their Motion raise issues that include the following: the Council's authority to sell the car space, whether any rates were overdue to the Council at the time the car space was sold, whether the Council has properly accounted for the proceeds of sale of the car space, delays in the sale, and whether the Council's expenses, charges and legal fees associated with the sale were properly incurred. In the meantime, the Chadhope parties resisted the payment out of Court of any money to the Council.

A Council Sells a Car Space and a Contest Arises about the Proceeds of Sale

The evidentiary background consists of the Council's evidence supporting the orders for the payment into Court and the Chadhope parties' evidence questioning the conduct of the Council. Much of the evidence is uncontested, although some of it is not.
The car space is situated in the Darling Harbour area of Sydney. In April 1995, the car space, otherwise known as Lot 440 in a strata plan (which need not be identified in these reasons) became the subject of a 99-year lease, from the Darling Harbour Authority to Garbett Pty Limited, the developer of the site. The Darling Harbour Authority subsequently became part of the Sydney Harbour Foreshore Authority ("DHFA").
In October 1995 the second of the Chadhope parties, Mr de Robillard, says he purchased two car spaces in the strata plan, being Lot 440 and Lot 441 which were associated with an apartment purchase in the same strata plan. Only the former of these is relevant for present purposes. Throughout these reasons the car space will from time to time be referred to as Lot 440. This purchase took effect by Chadhope becoming the lessee. Mr de Robillard has explained to the Court in oral submissions that Chadhope was a service company that he had used for his legal practice.
The Chadhope parties claim that in 2002 Ms McAndrew purchased the two car spaces, Lot 440 and Lot 441, from Chadhope, although the evidence supporting that contention is obscure.
In May 2005 Mr de Robillard and Ms McAndrew married. Not long after that in July 2005 Chadhope was deregistered by ASIC from the register of companies. The effect of the deregistration was that the car space vested in ASIC. Before the Chadhope parties' Motion of 5 July 2021, no application had been made since 2005 by either of the Chadhope parties to reinstate Chadhope to the register. In 2008 the Council became aware that Chadhope had been deregistered.
The Council says that in 2017 it formed the view that rates due on the car space were unpaid. The Chadhope parties contend there is no evidence that the Council passed any resolution to sell the car space. But the materials contain what appears to be a resolution of Council dated 26 June 2017 authorising the sale. Moreover, after 2017 the Council acted as though it had resolved to sell the car space.
In October 2017 the Council served a notice of intent to sell the car space on an address it had for Mr de Robillard at 180 Phillip Street Sydney, claiming that some $21,045.54 in rates had remained unpaid on the car space for more than five years. And in February 2018 it served a similar notice on ASIC claiming that by then the sum of $23,164.37 in rates remained unpaid on the car space for more than five years. In February 2018 the Council advertised the property for auction in May that year. In some of the early documents, the Council appears to have mistakenly referred to the owner of the property as Garbett Pty Ltd but all the notices gave correct title details and most of the notices correctly described the lessee of the car space as Chadhope.
In March 2018 ASIC suggested one option for any surplus proceeds of sale was to pay the funds to ASIC's "Unclaimed Money Team", and that former officeholders of the company could consult that team to obtain its requirements for making a claim. In July 2018 ASIC made clear that it had no objection to the Council taking possession of the car space in order to grant vacant possession to the purchaser at settlement.
Legal advice in March 2018 to the Council indicated that by reason of Local Government Act, s 714, which prohibits the sale of Crown land including land held by authorities such as the DHFA, the Council had no power to sell the car space. The Council thereafter arranged to sell only the leasehold.
Shortly prior to the scheduled auction of the car space, the Council and Ms McAndrew corresponded about the Council's entitlement to proceed with the sale. By this time property vested in the DHFA was being managed by Property NSW. The Council was committed to a sale on 23 May 2018. On 11 May 2018 it declined a suggestion by Property NSW that the auction be postponed in order to allow the tenant to be contacted.
But by 17 May 2018 the Council, through its accounts receivable manager, Ms Inna Skougarevskaya, made contact with Ms McAndrew asking her to contact it urgently. On 18 May Ms McAndrew contacted the Council threatening an injunction against the sale, claiming that the car space had been transferred to her superannuation fund. She also contended the strata managers of the strata plan had been addressing correspondence to her superannuation fund "as the registered owner of the property". She questioned the accumulation of the amount of rates being claimed and why there was then such a "sudden rush" to sell the car space.
In reply on 18 May 2018 the Council asked Ms McAndrew to provide proof of ownership of the car space by her superannuation fund. The Council offered that if such proof was supplied the Council would provide full payout figures eliminating the need for the Council to proceed with the auction.
She responded by supplying a contract for the sale of the car space by Chadhope to herself "as trustee for Celia McAndrew Super Fund". The contract dated 14 January 2015 was executed under the seal of Chadhope as vendor and expressed a consideration of $54,350. She also supplied an undated Transfer of the car space to herself "as trustee for Celia McAndrew Super Fund" under the Real Property Act 1900, which was apparently executed under the common seal of Chadhope and expressed a consideration for the transfer of $54,350. The transfer was probably executed in October 2015 as stamp duty was paid upon it and on the contract on the 30 October 2015. The transfer identified a Lot 440 in a different strata plan, not the strata plan for the car space. This appears to be the result of a typographical error. The accounts for Ms McAndrew's superannuation fund show that an amount of $54,400 with a notation of "Re Chadhope purchase", was debited to the fund in January 2015. In June 2017 Ms McAndrew gave notice of her claimed interest in the car space to the owners of the strata plan and for that purpose she made a statutory declaration that she was the owner of a leasehold interest in Lot 440.
But Chadhope did not exist in either January or October 2015 and was incapable of contracting to sell the car space to Ms McAndrew. Whatever be the effect of the attempt to pass title by a non-existent corporation (as to which see: Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409; (1996) 7 BPR 14,858; (1996) NSW ConvR 55-787), the evidence does not show that the October 2015 transfer was ever registered in Ms McAndrew's name on the certificate of title for Lot 440. On that evidence, the Council proceeded with the sale in May 2018 upon the basis that the named registered proprietor of the car space was Chadhope, which had been deregistered in 2005.
On 21 May 2018 at 2:15pm, the Council asked for further information including transfer documents referencing the correct folio identifier for Lot 440. But Ms McAndrew's email in reply on 21 May 2018 at 3:07 PM indicates that she did not provide proof that she was the registered proprietor of Lot 440 and she said "I am happy to discuss repayment of rates, once you establish how the liability came about."
Ms McAndrew continued to insist that the sale be postponed. Consistent with her position that the Council's authority to sell the property should be challenged, she requested a range of other information through her solicitors. She wanted evidence: that the auction had been advertised in accordance with Local Government Act, s 715(1)(a); that the Council had resolved to sell the leasehold interest in Lot 440; and that the Council had certified that rates and charges were overdue on the subject land under Local Government Act, s 713(3).
On 22 May 2018, the day before the auction of Lot 440, the Council responded to the solicitor for Ms McAndrew through its own solicitor. The Council supplied the newspaper advertisement for the auction, the certification pursuant to Local Government Act, s 713(3), the copy of the resolution of the Council, and the invoice showing the full amount of rates and charges that would need to be paid in order to have the property withdrawn from sale. The sum claimed by the Council was $25,959.83, which was comprised of overdue rates and charges in the amount of $22,062.74, together with other expenses including title searches, advertising agency costs, valuation fees and legal costs. The Council's solicitor contended that it had not received documentation showing that Ms McAndrew had purchased the property and claimed on its behalf that the Council was within its rights to proceed with the sale.
In subsequent correspondence the same day, 22 May 2018, the Council's solicitor pointed out that the Transfer provided by Ms McAndrew's solicitor did not refer to the correct title and that no explanation had been given as to why Ms McAndrew had failed to register the transfer for over two years. The Council's solicitor also said: "In addition, the obligation was on your client to ascertain whether there were any outstanding rates at the time of purchase which could have easily been done by ordering a standard rates notice. The city is unable to delay the auction for one month as proposed as the process that the city must follow would require a new gazettal notice to be published, which would result in a delay of at least three months. Rates on this lot have been outstanding since 2003 and the city considers that it is appropriate to proceed with the auction is planned."
The auction proceeded on 23 May 2018. Ms McAndrew was an unsuccessful bidder at the auction, but the car space was sold for $80,000 to other purchasers. Maddocks Lawyers acted for the Council as vendor on the sale. The purchasers of the car space were registered on the title in August 2018.
The parties did not correspond again until 30 June 2020, when Ms McAndrew wrote to enquire what other documentation might be required for Ms McAndrew's superannuation fund to claim the proceeds of sale. Ms McAndrew contends that she unsuccessfully attempted to telephone the solicitor for the Council more than seven times between 7 July and 30 September 2020 seeking an answer to her letter of 30 June. She says that her calls were not returned.
But the correspondence from Ms McAndrew caused the Council to correspond with ASIC about how it should deal with the proceeds of the sale. The Council pointed out that powers were conferred upon it under Local Government Act, s 720 and that the Council had advice that it could transfer the remaining funds to Ms McAndrew on the basis that she has an equitable right to the funds. ASIC responded indicating that it was content that the Council comply with Local Government Act, s 720 and would not insist that any surplus sale proceeds from the deregistered company be forwarded to ASIC's Unclaimed Monies Unit.
But the Council reconsidered the material available to it. On 3 September 2020, the Council wrote to Ms McAndrew expressing the following conclusion: "The city has considered the material provided by you and concluded that you do not hold an interest in the land, as required [under Local Government Act, s 720]. Chadhope Pty Limited was deregistered in 2005 but the transfer you have provided is dated 2015. The city has therefore reached the conclusion that the transfer of the land was not able to be effected."
On 20 November 2020 Ms McAndrew requested an account from the Council and a copy of any legal advice the Council had, establishing that she had no equitable interest in Lot 440 at the time of the sale on 23 May 2018. She also queried why the Council had not yet dealt with the funds in trust. The short answer to that presumably was the uncertain ownership of those funds.
On 4 December 2020 Ms Hannah Reid, the principal lawyer for the Council, confirmed that Ms McAndrew did not have a claim over the proceeds and contended that the rates had been properly assessed under Local Government Act, s 554. Further correspondence took place between the parties which did not advance the issues any further. Eventually the Council referred the matter to external solicitors, Maddocks Lawyers, who commenced these proceedings by Summons on 6 May 2021.
At the time of commencement of these proceedings, Mr Norman Lucas, the solicitor on the record for the plaintiff at Maddocks Lawyers, deposed to the Council incurring costs by reason of instructing Maddocks Lawyers to prepare and file a Summons and affidavit in support of Ms Lauren Lowe, and a Motion of 18 May 2021 and supporting affidavits, costing a total of $14,334.21.
In an affidavit dated 17 June 2021 Mr Lucas further deposed to the Council incurring additional legal costs of $2,471 in further legal work since the commencement of the proceedings including corresponding with Ms McAndrew, finalising a Notice of Motion and preparing for a call at the hearing on 22 June.
By the time the matter came on for hearing on 5 July 2021, Mr Lucas deposed in an affidavit of 1 July 2021 that the Council had incurred total legal costs of $21,515.21, which could be broken down into professional fees in the amount of $17,352, filing fees in the amount of $4,146 and expenses of $17.21.
All the memoranda of fees issued by Maddocks Lawyers to the Council were attached to these various affidavits.
The proceedings were mentioned in a callover before Ward CJ in Eq on 30 June 2021 and fixed for hearing before me on 5 July 2021. This resulted in a complaint by Ms McAndrew to Ms Bianca Kelly, a solicitor at Maddocks Lawyers, that Ms McAndrew did not have an opportunity to explain that the matter was not ready to proceed. Her complaints to Ms Kelly about the matter not being ready seem largely to have been overtaken by events, as Ms McAndrew's "statement of evidence" of 28 June 2021 and the Chadhope parties' Motion of 5 July 2021 covered the same general subject matter.
Finally, Maddocks Lawyers provided a bundle of documents for the hearing on 5 July 2021, which contained a detailed breakdown of the professional costs incurred in respect of seven invoices to the Council issued between 26 February 2021 and 1 July 2021.
At the hearing on 5 July 2021 the parties moved on their Motions and read their evidence subject to sworn affidavits of Mr Lucas of 1 July 2021 and of Ms McAndrew of 28 June 2021 being filed. The proceedings were adjourned for further argument (of no more than one hour) to 12 August 2021. In anticipation of that argument the Court indicated it would give directions within a few days after 5 July. But it has been necessary after reading all the evidence for the Court to give more detailed consideration to the proper course to be followed, and in order adequately to deal with all the issues raised in these proceedings, so that the time on 12 August 2021 can be used productively to bring the matter to finality.

Relevant Statutory Background

The Council's power to sell the car space to recoup itself in respect of unpaid rates is conferred and regulated by Local Government Act, Chapter 17 Enforcement, Part 2, Division 5.
A local government authority's primary power to sell land within its local government area for unpaid rates is conferred by s 713, which provides as follows: "713 Sale of land for unpaid rates and charges (1) For the purposes of this Division, a rate or charge is overdue if - (a) in the case of vacant land, it has remained unpaid for more than one year, or (b) in the case of any other land, it has remained unpaid for more than 5 years, from the date on which it became payable. (2) A council may, in accordance with this Division - (a) sell any land (including vacant land) on which any rate or charge has remained unpaid for more than 5 years from the date on which it became payable, and (b) sell any vacant land on which any rate or charge has remained unpaid for more than one year but not more than 5 years from the date on which it became payable, but only if - (i) the council obtains a valuation of the land from the Valuer-General, and (ii) the total amount of unpaid rates or charges on the land exceeds the valuation, and (iii) the council sells the land within 6 months after the date when the council received the valuation. (3) The council must not sell any such land unless the general manager or the public officer certifies in writing - (a) what rates and charges (including overdue rates and charges) are payable on the land, and (b) when each of those rates and charges was made and how it was levied, and (c) when each of those rates and charges became payable, and (d) what amounts are payable by way of overdue rates and charges on the land, and (e) what amounts are payable by way of rates and charges (other than overdue rates and charges) on the land. (4) The council may, in the case of adjoining parcels of land (whether in the same or different ownerships) each of which may be sold under this Division - (a) sell them separately or as a single parcel and under whatever conditions of sale it considers proper, and (b) do such things as it considers appropriate for the purpose of selling the land at its full value."
Division 5 prohibits a council from selling an interest in Crown land: s 714. Section 715 imposes on a council several prerequisites relating to the giving of notice in respect of the sale of land under Division 5. It provides as follows: "715 Notice of proposal to sell land (1) Before selling land under this Division, the council must - (a) fix a time and place for the sale, and (b) give notice of the proposed sale by means of an advertisement published in the Gazette and in - (i) a newspaper circulating in the area or part of the area in which the land is situated that is published in print form at intervals not exceeding 26 days, or (ii) a manner that the council is satisfied is likely to bring the notice to the attention of persons who may be interested in purchasing the land, and (c) take reasonable steps to ascertain the identity of any person who has an interest in the land, and (d) take reasonable steps to notify each such person (and the Crown, if the land concerned is owned by the Crown) of the council's intention to sell the land under this Division. (1A) The time fixed for the sale must be no earlier than 3 months and no later than 6 months after the date on which an advertisement is first published in the manner determined by the council in accordance with this section. (2) If, before the time fixed for the sale - (a) all rates and charges payable (including overdue rates and charges) are paid to the council, or (b) an arrangement satisfactory to the council for payment of all such rates and charges is entered into by the rateable person, the council must not proceed with the sale."
Land sold under Division 5 must be sold by public auction: s 716. Any purchase money paid to the council must be first applied to expenses in connection with the sale and then in respect of rates and charges: s 718.
The Council's position is analogous to that of a mortgagee exercising a power of sale, who under the general law would hold any excess sale proceeds on trust for the mortgagor. But s 720 creates a special statutory trust in respect of the proceeds of sale of land sold under Division 5 and gives a council power to pay the purchase money to the person or those persons who in the opinion of the council are "clearly entitled to it". Section 720 provides as follows: "720 What if the purchase money is more than the amounts owing? (1) Any balance of the purchase money must be paid into the council's trust fund and held by the council in trust for the persons having estates or interests in the land immediately before the sale according to their respective estates and interests. (2) The council may pay the balance of the purchase money or any part of the balance to or among the persons who are, in its opinion, clearly entitled to it, and the receipt of the person to whom any payment is so made is an effectual discharge to the council for it."
But here the Council has not used s 720 because of its inability to determine who was clearly entitled to the funds, so it decided to pay them into Court. After a sale by auction under Division 5, a council is empowered to transfer leases of land owned by the Crown to purchasers freed of all claims except certain obligations owing to the Crown itself: s 724.
Section 725, importantly for present purposes, provides that transfers by a council in the exercise of powers conferred under this Division are not invalid because of procedural irregularities: "725 Transfers not invalid because of procedural irregularities A transfer or conveyance issued by a council under this Division is not invalid merely because the council has failed to comply with a requirement of this Division with respect to the sale of the land to which the transfer or conveyance relates."
The Chadhope parties point to a number of claimed procedural irregularities in the Council's sale of the car space but, even if established, those irregularities will not vitiate the sale. The Chadhope parties may have rights and damages against the Council if irregularities were established, although the Chadhope parties do not say that the car space was sold at an undervalue.
A trustee of funds in the position of the Council is entitled to pay those funds into court under Trustee Act 1925, Part 4 and UCPR, r 55.8 - r 55.11. UCPR r 55.9(6) provides that a person paying money into Court may by motion in the proceedings seek an order that that person's costs be payable from the money. That is what the Council has done in these proceedings. Funds may only be paid out of Court pursuant to directions of the Court by motion in the proceedings in which they were paid in: r 55.11. That is what the Chadhope parties have now attempted to do in these proceedings.
The Court cautioned the parties on 5 July 2021 as to its concern that the whole of the funds in Court were likely to be consumed by legal costs if their Motions were pursued and contested to the full. Regrettably that warning has not been observed.

Relief Sought on the Chadhope Parties' Motion

The Chadhope parties' Motion makes the following claims for relief, numbered as follows: 1. procedural relief, granting leave for the filing of the Chadhope parties motion and for the hearing of that motion with the Council's motion; 2. that the Council file an affidavit setting out all the facts, circumstances and documents relating to the following matters concerning the sale of the car space: - 1. contractual arrangements between the Council and any real estate agents and solicitors relating to the sale of the car space; 2. all receipts and evidence of expenses relating to the sale of the car space; 3. details of how the proceeds of sale of the car space were invested by the Council and any income received therefrom before the proceeds were paid into Court; 4. all correspondence and legal advice received by the Council in relation to the sale of the property; 5. all Council records relating to the car space from 1995 through to 23 May 2018; 6. an examination as to why the Council had not disbursed the surplus proceeds of sale of the car space between May 2018 and June 2020; and 7. a copy of land titles office searches obtained by the Council showing whether Ms McAndrew had ever been deregistered as the sole proprietor of lots 83, 440 or 441 in the car space strata plan showing 1. leave to join the law firm, Maddocks Lawyers as a party to these proceedings; 2. in order that the Council and the law firm Maddocks Lawyers pay the Chadhope parties' costs and expenses relating to their Motion; 3. that all surplus proceeds of sale be paid out of Court to Ms McAndrew within seven days "in full discharge of the Council duties as trustee of the said funds"; and 4. that the deregistered company formerly known as Chadhope Pty Ltd be reinstated pursuant to Corporations Act 2001 (Cth), s 601AH(2).
Some of the relief the Chadhope parties seek can be granted but some of it has procedural or evidentiary deficiencies at this stage. The numbered paragraphs of the relief the Chadhope parties seek are dealt with below.
As to (1), there is little controversy about the procedural aspects. The Court will allow the Motion to be filed, with Mr de Robillard and Ms McAndrew as the applicants on the Motion. Their claim to the funds in Court should obviously be formalised in accordance with UCPR, r 55.11. But unless there is a basis to "otherwise order", and as the Court does not see any such basis, the rules direct that they should not be joined as defendants to the Council's Summons: UCPR, r 55.9 (4). And there is enough evidence already to demonstrate that the Chadhope parties have an arguable claim to interest in the funds in Court, although, as will be seen below, it is not without its difficulties.
Accordingly, the Court will grant leave for the Chadhope parties to file their Motion in the ordinary way in the Court's Registry and it will be made returnable before the Court at 9am on 12 August 2021. It is procedurally efficient for the Chadhope parties' Motion to be heard with the Council's Motion and the Court will so order.
Joining Maddocks Lawyers. As to (3) and (4), there is no apparent basis to join Maddocks Lawyers as a party to these proceedings. None of the evidence filed in support of the Chadhope parties' Motion suggests that the Chadhope parties have any cause of action against Maddocks Lawyers. They are merely the solicitors acting on behalf of the Council on the sale and in these proceedings. The correspondence they have sent and the affidavits that they have filed appear to be the product of the provision of entirely conventional legal services upon the sale by the Council of real property for unpaid rates and in respect of proceedings by Summons for the payment of the proceeds of sale into Court. Nothing in the Chadhope parties' oral submissions on the Motion suggest how such a cause of action might arise, or might ever arise, based on evidence yet to be gathered.
Moreover, the joinder of Maddocks Lawyers would make it unlikely that the Council could continue to retain the firm, which itself need then to obtain separate representation, as might Maddocks Lawyers. The lack of a basis for the application together with these severe procedural disadvantages suggest that the pressing of this application may be an abuse of process. But the Court does not have to decide that. It is enough to dismiss the application that there is no basis for it. For these reasons, unless the Chadhope parties can articulate a proper basis for this claim for relief the Court will on 12 August dismiss the application to join Maddocks Lawyers as a party.
Otherwise, the Chadhope parties' Motion essentially seek two types of relief. The first type of relief (Order (5)) is the payment of the funds out of Court to them. The second type of relief is (Order (2)) the various claims made against the Council in respect of the sale of the car space. But both these types of relief would be available to Chadhope. Whether it is available to the Chadhope parties is very doubtful. The relief sought cannot be pursued with certainty until Chadhope is reinstated to the register of companies under Corporations Act, s 601AH(2). That is what must first be considered.
Reinstating Chadhope. As to claim for relief (6), the reinstatement of Chadhope is one of two possible courses that can be followed to resolve contests about the proceeds of sale of the car space. The other course is to follow ASIC's suggestion that the money be paid to it and dealt with as unclaimed moneys. But that is not the preferred course. The Court has already considered the evidence in this case and is able to decide entitlements to the funds in Court when the appropriate evidence is in place. Given the course of these proceedings so far, it is more efficient for the Court itself to complete consideration of the matter rather than put it in the hands of ASIC to be reconsidered.
But is it necessary to reinstate Chadhope? Ms McAndrew claims an equitable interest in the funds in Court. If she succeeds in establishing such an interest it may not be necessary to reinstate Chadhope. But her claim, or that of her superannuation fund, to an equitable interest in the funds in Court is doubtful. The interest upon which she relies is as a purchaser under a contract for sale of the car space from Chadhope. But this alleged equitable interest was created well after Chadhope was deregistered, which appears to be one of the reasons why the Council declined to recognise her interest. Even if it is accepted that her superannuation fund paid out money in 2015, it is unclear that Chadhope received that money or that the money has been accounted for Chadhope's benefit upon the sale of the car space, so as to bind its conscience to the equitable interest she claims. Ms McAndrew does not claim to have been a shareholder of Chadhope.
If Ms McAndrew's claim to an equitable interest in the funds in Court fails, a less uncertain course is for Mr de Robillard to attempt to reinstate Chadhope now. The evidence establishes already that Mr de Robillard has an interest in its reinstatement, and it was the last identifiable registered proprietor of the car space. Upon reinstatement there will be little argument about Chadhope's entitlement to the funds in Court, provided the usual evidence to justify payment out of Court (see below) is advanced.
Ordinarily relief reinstating Chadhope under s 601AH(2) would be sought by summons, not by motion in other proceedings such as these. But the Court will overlook that deficiency, now that the Chadhope parties' Motion is to be filed. The Court is prepared to treat the Chadhope parties' Motion as sufficient to apply to reinstate Chadhope. When that Motion for reinstatement comes on for hearing, the applicants for Chadhope's reinstatement will have to establish that they have satisfied the requirements of s 601AH(2).
The Court has made the Motion returnable on 12 August. The Court can consider reinstatement of the company on that date provided ASIC has been given adequate advance notice that the application will be heard on 12 August. The Court will direct that that be done by 4pm on 9 August.
Payment out of Court. As to claim for relief (5), if Chadhope is reinstated on 12 August, it can pursue its application for the payment of funds out of Court, subject to the Council's claims on its Motion. Ordinarily an applicant for the payment of funds out of Court under UCPR, r 55.11 must establish a number of matters: (1) that the plaintiff is entitled to the funds paid into Court; (2) whether there are any other persons who may be entitled to the funds in Court; and (3) whether notice has been given to all other persons who are potentially entitled to the funds in Court, so they have an opportunity to make a competing application for the funds: Re La Trobe Capital & Mortgage Corp Limited [2009] NSWSC 1118.
If Chadhope is reinstated, its position as the registered proprietor of the car space which the Council sold will prima facie establish its entitlement to the funds in Court. But the Court will need evidence as to whether any other persons may be entitled to the funds in Court. In the case of real estate sold by a mortgagee or by an authority in the position of the Council, the minimum requirement to establish the identity of any other persons with an interest in the funds in Court is by reference to pre-sale caveats on the title to the property which was sold. And if there were caveats on its title before sale, then the caveators should be given notice of the present claim to the funds in Court.
As to claim for relief (2), the fundamental question is how the issues raised by this claim for relief should be permitted to be pursued. An important purpose of UCPR, r 55.8 - r 55.11 is to free trustees from the burden of managing contests about the proper entitlement to funds held by them on trust. The giving of relief to trustees under the summary procedure of Trustee Act, Part 4 need not be, and ordinarily should not be, mingled with other claims against the trustee.
Here by reason of Local Government Act, s 720 the Council stands in a position of a trustee in respect of the surplus proceeds of sale and the Council has appropriately availed itself of Trustee Act, Part 4. If the Chadhope parties want to pursue an action against the Council challenging the sale of the car space, then they can do so in other proceedings or by way of a properly pleaded cross-claim in these proceedings. But the Court will not permit those complaints to be agitated as part of the summary Trustee Act, Part 4 procedure.
The Court will therefore not require as part of the payment out of Court that the Council file an affidavit about the various matters into which the Chadhope parties wish to enquire, including sale expenses, investment of the proceeds of sale, legal advice about the sale of the property, Council records about the car space between 1995 and 2018, the Council's management of the proceeds of sale between May 2018 and June 2020, Ms McAndrew's position as a possible registered proprietor of the property, or any other similar matters.
The only issue of these issues that might perhaps have required determination at this stage is any contest between Ms McAndrew's claim to the funds in Court and Chadhope's claim to those funds. But both Ms McAndrew and Mr de Robillard disclaim any conflict between them. They are married and both appeared together on the application. No such dispute exists.
If the Chadhope parties or Chadhope itself want to pursue such claims it is up to them to take initiative once the present payment out of Court issues are resolved. Dealing with those issues separately and later is strengthened by Local Government Act, s 725, which prevents any defects that might be found in the Council's sale process from invalidating the conveyance of the car space in 2018.

The Council's Motion

The Council seeks on its Motion to have its costs of these proceedings paid out of the funds in Court. The Chadhope parties oppose this relief. It is desirable that the Council's Motion be dealt with as rapidly as possible so that further unnecessary costs are not incurred by the Council and so that the Council can retire from further involvement after paying trust funds into Court. Achieving this outcome requires the parties to address questions of evidence and of legal principle.
As to the questions of evidence, the Council appears to have put on all its affidavit evidence in support of its Motion, but for some updating material identifying its costs up to and including final argument next week. The Council will be permitted to put on limited evidence estimating its additional costs up to and including 12 August when the Court will attempt to determine its Motion. The Court's review of the Council's evidence shows that it has put on enough evidence to explain what work it has done up to the date of the last appearance.
It is now up to the Chadhope parties to clearly identify the parts of the Council's legal fees which should not be allowed. Ms McAndrew's statement of evidence and the Chadhope parties' oral submissions on 5 July take issue with various parts of the Maddocks Lawyers invoices. But before the matter returns for final argument the Chadhope parties will be required by directions to state in one document their issues with the Council's claim for legal costs and the Court will determine what costs will be allowed based upon that comprehensive statement and any answer to it by the Council.
The parties' submissions have not yet engaged with several questions of legal principle which will need to be addressed on 12 August. The Council submits that it is entitled to all its costs, citing UCPR, r 55.9(6). But that provision is merely facultative and does not speak to the basis on which costs are to be assessed. As the Council is in substance acting as a trustee of the funds which were paid into Court, the most relevant measure of what costs the Council can recover, is an assessment of costs on the indemnity basis as a trustee. It is commonly said that a trustee should be indemnified in respect of costs and other liabilities that were "reasonably and properly incurred" in the execution of the trust. The indemnity is not available if the activity which generated the liability involved a breach of trust or a breach of a duty by the trustee, was beyond the powers given to the trustee, or was criminal or fraudulent in nature: Gatsios Holdings Pty Ltd v Kritharas Holdings Pty Ltd (in liq) (2002) ATPR 41-864; [2002] NSWCA 29. The indemnity is also not available where the liability is "unreasonable or unnecessary" and therefore is not "properly incurred": O'Keeffe v Hayes Knight GTO Pty Ltd (2005) 218 ALR 604; [2005] FCA 389 at [14] and Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39 at [51] and [53] and see in Australian Securities and Investments Commission v Letten (No 17) (2011) 286 ALR 346; (2011) 87 ACSR 155; [2011] FCA 1420 ("Letten") at [14] - [18].
The parties should consider approaching their criticisms of the Council's incurring of costs, and replies to those criticisms, in light of these principles. The Court will proceed to determine the proper amount of costs to be allowed to the Council, at the hearing on 12 August considering the Chadhope parties' criticisms of the Council's claim for costs and the Council's answers to those criticisms.

Conclusions and Orders

For these reasons the Court will make the following orders and directions: 1. Note that for the purposes of these orders, the Motion of the plaintiff ("the Council") dated 18 May 2021 is referred to as "the Council's Motion" and the Motion brought by Cecilia McAndrew and Roger de Robillard as applicants and dated 5 July 2021 will be referred to as "the Chadhope Motion" and the applicants on the Motion will be referred to as the "Chadhope parties"; 2. Grant leave for the Chadhope parties to file the Chadhope Motion in the Court's Registry returnable at 9am on 12 August 2021 before Slattery J; 3. Order that the Council's Motion and the Chadhope Motion be heard together on 12 August for the further period of one hour and thereafter on the papers; 4. Note that the Court declines to join either of the Chadhope parties as defendants to the Council's Summons; 5. The Court notes that it declines to join Maddocks Lawyers, who are currently the solicitors for the Council, as parties to these proceedings and prayer for relief (3) in the Chadhope Motion is liable to be dismissed on 12 August unless the Chadhope parties articulate a proper basis for a claim against Maddocks Lawyers; 6. Adjourn the Council's Motion and the Chadhope Motion for further hearing to 12 August 2021 for further directions; 7. The Chadhope Motion (including for relief under Corporations Act, s 601AH(2) to reinstate Chadhope to the register of companies) should be served on ASIC by 4pm on Monday 9 August 2021; 8. Direct the Council to file and serve any further evidence of and estimating its additional costs up to and including 12 August 2021 by 4pm on 9 August 2021; 9. The Chadhope parties should serve upon the Council and provide to the Court by 4pm on 10 August a written statement clearly identifying the legal work, charge out rates, disbursements and other items in the Council's claim for legal costs which the Chadhope parties dispute and which they claim should not be deducted from the funds in Court ("the disputed fees schedule"); and 10. The Council should provide any statement in reply to the disputed fees schedule by 4pm on 11 August.

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: 05 August 2021

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (9)

Cited By (3)