Bechara v Sotrip Pty Limited

Judgment 1The question in this case is whether a property in Queensland, sufficiently described for present purposes as "the Railway Street property", was at the time of its sale by Sotrip Pty Limited in 2008 part of the trust property subject to a deed of settlement of which Sotrip Pty Limited claims to have become the trustee in November 1998. 2The present application is brought by Sotrip NSW Pty Limited and Reliance Financial Services Pty Limited. Their contention is that the Railway Street property was purchased by Sotrip Pty Limited as trustee of the settlement to which I have referred and that Sotrip NSW Pty Limited became trustee of the settlement in August 2009 in succession to Australian Currency Barter Exchange Pty Limited which had in turn replaced Sotrip Pty Limited as trustee in March 2006. The applicants seek declaratory relief accordingly. 3The applicants say that each appointment of new trustee (first, Australian Currency Barter Exchange Pty Limited and later Sotrip NSW Pty Limited) was made in exercise of a power to appoint given by the trust instrument, which also provided that the replaced trustee must vest the trust property in the new trustee. 4The applicants rely on a number of documents to which I shall come, together with the evidence of Sam Peter Cassaniti who was, at the time of the alleged establishment of the trust in 1998, an accountant practising in Liverpool. The trust ostensibly created by the deed of November 1998 was in the nature of a family discretionary trust for the benefit of Sam Peter Cassaniti and his family. 5The contentions of the applicants are challenged by the fourth respondent, Mr Rafidi. Although he has not taken any positive step (by way of interlocutory process in the nature of cross claim) to claim an interest of his own in the Railway Street property, Mr Rafidi maintains that an oral arrangement to which he became party at the time of the purchase of the property caused him to have an interest in it. For that reason he made, through his counsel, submissions against the grant of the relief the applicants seek. 6Counsel for the applicants took issue with the "standing" of Mr Rafidi, pointing out that he had become a bankrupt in 2000 and attained his discharge in 2008, so that any interest he may have had in the Railway Street property by reason of events in 1998 vested in his trustee in bankruptcy in the year 2000 under s 58(1)(a) of the Bankruptcy Act 1966 (Cth) and his discharge from bankruptcy in 2008 did not bring about any revesting of that interest in him. In that respect, discharge differs from annulment, the effect of which, as regards any remaining property, is to cause the property to "revert" to the former bankrupt under s 154. There is no like provision in the case of discharge. 7But as I have said, Mr Rafidi does not positively assert any claim in these proceedings. He was made a party by the applicants. He is entitled to make submissions against the grant of the relief sought and, in so doing, to point to matters that would support the proposition that he acquired an interest in the property at the time of the acquisition. 8The problem for Mr Rafidi in that respect is that the reading of his affidavit was precluded by the rules of court, because of his non-attendance for cross-examination. The only affidavit read by his counsel was a short affidavit by the trustee in bankruptcy. 9I should also mention that Sotrip Pty Limited was subjected to winding up by order of this court made in March 2010. The liquidator, at an earlier stage, sought and was granted a direction that he would be justified in causing Sotrip Pty Limited not to take an active part in these proceedings. This was because the liquidator has no material enabling him to engage in meaningful decision-making. 10I turn now to the documents on which the applicants rely. I begin out of chronological order with financial statements of the Mudgeeraba Trust for years ended 30 June 2000 to 2008 inclusive. Sam Peter Cassaniti gave evidence that these were prepared under his supervision from primary records kept by him. If he intended to say that he supervised the preparation of accounts year by year on an ongoing basis, this cannot be so. As he acknowledged in his affidavit, Sam Peter Cassaniti was in prison from 30 September 2005 to 25 July 2008 and was "held in very restrictive conditions and not able to attend to my financial affairs". I therefore do not accept that financial statements prepared after 30 June 2005 were prepared under Mr Cassaniti's supervision, assuming as one would assume, that the statements were prepared progressively year by year at the end of each year. He was in no position to supervise any accounting work during the period I have mentioned. 11There is, however, no reason not to accept his evidence as to the earlier years. 12The financial statements are in any event in consistent form. They include a balance sheet which each year records as an asset "Land at cost" of $362,159 and trust funds consisting principally of "Gifts to trust" to the extent of $369,703.24 plus a $10 contribution by a settlor. This presentation is consistent through the years. 13This takes me to the main item of documentary evidence, which is a form of trust deed bearing the date 19 November 1998. This is the day on which Sotrip Pty Limited was incorporated and on which Sam Peter Cassaniti became its sole director. The trust deed is in familiar form. The parties are David Salvatore Cassaniti, as settlor, and Sotrip Pty Limited as trustee. Also dated 18 November 1998 is a consent of Patricia Guiliana Cassaniti, then Sam Peter Cassaniti's wife, to act as appointor of the trust and a letter from David Salvatore Cassaniti expressed to enclose the $10 settlement sum. 14There are purported minutes of a meeting of the directors of Sotrip Pty Limited attended by Sam Peter Cassaniti alone on 19 November 1998, he being the sole director. The minutes record that Sam Peter Cassaniti was chairman and that the chairman informed the meeting that David Salvatore Cassaniti had requested the company to act as trustee of a trust to be known as the Mudgeeraba Trust. Just how Sam Peter Cassaniti, the sole person present, might have gone about so informing the "meeting", is best left to the imagination. The meeting then resolved that the company accept appointment as trustee and execute the trust deed under its seal. 15There was obviously no "meeting" of the sole director but the minutes of the purported meeting, signed by Sam Peter Cassiniti, may be accepted as evidence of a determination made by him as sole director. I should add that the trust deed put into evidence appears to be executed under the company's common seal. 16Sotrip Pty Limited entered into a contract for the purchase of the Railway Street property on 3 December 1998 for a price of $350,000. In May 2005 Patricia Giuliana Cassaniti appointed Sam Peter Cassaniti as an additional appointor under the trust deed. This was done pursuant to a power in the trust deed. The appointment was on the basis that the two appointors were capable of acting jointly or severely. 17On 30 March 2006, the day on which a liquidator of Sotrip Pty Limited took office by order of the court, Patricia Giuliana Cassaniti, as appointor, removed Sotrip Pty Limited as trustee of the trust and appointed Barter Currency Exchange Pty Limited as new trustee. No move was made, it seems, to have the Railway Street property transferred from Sotrip Pty Limited to the new trustee. The registered proprietor remained Sotrip Pty Limited, the company in liquidation. 18Sotrip Pty Limited sold the Railway Street property in 2008. The transfer was signed for the company by its liquidator. 19On 31 August 2009, a deed of appointment and retirement of trustee was executed, the parties being Australian Barter Currency Exchange Pty Limited, Sotrip NSW Pty Limited and Sam Peter Cassaniti. By that deed, Sotrip NSW Pty Limited became trustee of the Mudgeeraba Trust in the place of Australian Barter Currency Exchange Pty Limited 20On the face of these documents, the proposition for which the applicants contend is made out, namely that Sotrip Pty Limited acquired the property in 1998 as trustee of the Mudgeeraba Trust; that Australian Barter Currency Exchange became the trustee in place of Sotrip Pty Limited in March 2006 and was, at that point, entitled to the property as against Sotrip Pty Limited; that Sotrip Pty Limited nevertheless did not transfer the property to Australian Barter Currency Exchange Pty Limited; that when Sotrip Pty Limited sold the property and received the proceeds in 2008, it was bound to account to Australian Barter Currency Exchange Pty Limited for those proceeds which had become trustee in its place; and that, since 31 August 2009, the entitlement of Australian Barter Currency Exchange Pty Limited has been instead an entitlement of Sotrip NSW Pty Limited as the successor trustee. 21Counsel for Mr Rafidi made several submissions in support of the proposition that the matters to which I referred should not be taken at the face value I have just outlined. 22The first submission is that it is of significance that Sotrip Pty Limited, when purchasing the property in 1998 and then when selling it in 2008, did not represent itself on the face of the documents, or at all, as a trustee. As regards the sale, this is no doubt explained by the fact that the sale was under the control of the liquidator and that the liquidator had no knowledge of the matters to which I have referred, of if he did, did not accept them, or did not accept them to an extent sufficient to cause him to represent the company as contracting as trustee. 23My view is that this is not a significant matter at all. A person who acts as trustee in purchasing property is in no way obliged to disclose to the vendor or in the contract that the purchase is made as trustee. Those advising trustees may well take the view that life will be simpler if they do not volunteer such information, since otherwise the other party, because concerned about the possibility of accessorial liability for breach of trust, may wish to be satisfied that the trustee has the requisite power and that no breach of trust is involved in the transaction. The purchaser trustee can avoid such inquiries and investigations by not volunteering that it is contracting as trustee. 24As a separate matter, the trustee who, in Farrar v Commissioner of Stamp Duties (1975) 5 ATR 364, saw fit to describe himself in the contract as "Trustee for John Joseph Farrar" found out the hard way that, at least in New South Wales in those days, contracting as trustee could cause ad valorem stamp duty to be payable twice. 25In Queensland, as elsewhere, no equitable interest in land can be registered under the Land Title Act 1994, although that Act does allow a person to be registered as a trustee of an interest in land. There is nonetheless nothing to compel a party to state in a contract or dealing that the party is acting as a trustee. Sotrip Pty Limited's failure to make any such open declaration is therefore of no weight as regards the matters before me. 26Counsel for Mr Rafidi next drew attention to a matter which, he said, pointed to a finding that the trust deed had not been executed on 19 November 1998 at all, but rather, in 2001. He pointed to the imprint of stamp duty on the trust deed by means of a stamp dated 17 June 2001. 27The original deed is in evidence, as are copies of it, and a copy of at least one counterpart or duplicate original. The original is stamped at $200 and the counterpart or duplicate original at $2. 28The handwriting of the date on the first page of the original deed (being handwriting of Sam Peter Cassaniti) and the printed stamp duty marking intersect. It was submitted that the writing covers the stamp duty marking, thus indicating that the writing was placed on the paper after that marking had been made and that the court should so find. The writing is in black ink. The marking, by means of a stamp or dye, is in a shade of light grey or blue. On my inspection, I simply cannot say that one was placed on the paper before the other. The black predominates and one cannot read the grey or the blue where the two intersect. But the black is darker and denser. Without the help of a document examiner, the court could not make the finding for which counsel for Mr Rafidi contends. 29There is then the circumstance that stamping did not occur until some two and a half years after the date the deed bears. Sam Peter Cassaniti was asked about this in cross-examination. He said he had no explanation and "maybe just forgot to do it at the time". 30Sam Peter Cassaniti also explained in evidence that, in his experience, the Office of State Revenue will not stamp a duty unless it is dated, so that it would have been practically impossible for him to have the document stamped in June 2001, with a blank date and to write the date in later. While I am inclined to attach little weight to Sam Peter Cassaniti's opinion about the workings of the Office of State Revenue, I was not offered any other evidence on the subject, added to which his account makes objective sense. 31On the evidence before me I cannot find that the trust deed was executed in June 2001, rather than in November 1998. Nor can I find that Sotrip Pty Limited was not acting as a trustee when it bought the Railway Street property. Rather, the evidence causes me to find, on the balance of probabilities, that the document was executed on 18 November 1998, the date it bears, and that, as Sam Peter Cassaniti says, Sotrip Pty Limited acted as trustee in making the purchase. 32I should add that Sam Peter Cassaniti had given evidence of having formed separate trusts for a number of family property ventures involving the acquisition of land in the relevant period. 33The fact that Sam Peter Cassaniti is a convicted fraudster was referred to in the course of the hearing. The possibility that he has concocted the whole of the documents before me exists, I suppose, but I do not consider myself at liberty, on the basis of the evidence, to accept that possibility. It was put to Sam Peter Cassaniti that he had backdated the deed and that it had in fact been executed on or about 17 June 2001. He denied this. 34The outcome therefore is a conclusion that, when the Railway Street property was bought by Sotrip Pty Limited, that company acted as trustee of the Mudgeeraba Trust, so that when the property was sold by Sotrip Pty Limited in 2008, its successor as trustee (Australian Currency Barter Exchange Pty Limited) was entitled, as against Sotrip Pty Limited, to the property and the proceeds of sale; also that Sotrip NSW Pty Limited, as the replacement trustee, is today so entitled as against Sotrip Pty Limited. [SUBMISSIONS ON FORM OF RELIEF] 35The court declares that when the property known as 35 and 37 Railway Street, Mudgeeraba was sold by the first respondent, Sotrip Pty Limited (In Liquidation), it was required to account for the proceeds of sale to Australian Barter Currency Exchange Pty Limited as the then trustee of the trust known as the Mudgeeraba Trust and from 31 August 2009, it was required to account for the proceeds of sale to the first applicant Sotrip NSW Pty Limited as new trustee of the Mudgeeraba Trust appointed on 31 August 2009. [SUBMISSIONS ON COSTS] 36I order that the fourth respondent pay the applicants' costs of the motion.