Built NSW Pty Limited v Nique Enterprises Pty Limited

Relevant legal principles 8Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 5.2 relevantly provides: (1) This rule applies if it appears to the court that: (a) the applicant, having made reasonable inquiries, is unable to sufficiently ascertain the identity or whereabouts of a person ("the person concerned") for the purpose of commencing proceedings against the person, and (b) some person other than the applicant ("the other person" ) may have information, or may have or have had possession of a document or thing, that tends to assist in ascertaining the identity or whereabouts of the person concerned. (2) The court may make either or both of the following orders against the other person: (a) ..., (b) an order that the other person must give discovery to the applicant of all documents that are or have been in the other person's possession and that relate to the identity or whereabouts of the person concerned. ... 9UCPR r 5.3(1) relevantly provides: If it appears to the court that: (a) the applicant may be entitled to make a claim for relief from the court against a person ("the prospective defendant") but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and (b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and (c) inspection of such a document would assist the applicant to make the decision concerned, the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief. 10It is apparent from these provisions that an order for preliminary discovery under UCPR r 5.2 may be made against anyone for the purpose of determining the identity of a prospective defendant. An order may only be made under UCPR r 5.3 against a prospective defendant for the purpose of obtaining information in order to determine whether or not to commence proceedings against that defendant. In both cases, an applicant must establish that it has made reasonable enquiries to obtain the information it seeks. 11In order to obtain preliminary discovery for the purpose of determining the identity of a proposed defendant, the applicant must also relevantly establish that the proposed claim has an apparently sustainable basis: Stewart v Miller [1979] 2 NSWLR 128 at 139-40. 12In order to obtain preliminary discovery for the purpose of determining whether or not to commence proceedings, the applicant must relevantly establish that it "may be entitled to make a claim for relief". It is not necessary for the applicant to show a prima facie or pleadable case. However, it is necessary for the applicant to show that there is reasonable cause to believe that the applicant may have a right of action resting on some recognised legal ground: Hatfield v TCN Channel Nine Pty Ltd [2010] NSWCA 69; (2010) 77 NSWLR 506 at [47]ff per McColl JA.

Other relevant facts 13The date for practical completion under the subcontract was 28 April 2012 and it appears that disputes concerning Nique Enterprises' performance under that contract first arose in or about February 2012. 14It appears from material before the court that Nique Enterprises ceased to be the trustee of the WT Bihari Family Trust on or about 21 September 2012. At the time of its liquidation it had no assets. 15On 15 May 2014, Gadens, the solicitors for Built NSW, wrote to the liquidators and to the solicitors acting for the respondents to the motion seeking the documents that Built NSW now seeks. In both letters, Gadens pointed to an apparent discrepancy between the ABN shown in the description of Nique Enterprises as the contracting party (ABN 292 780 187) and the ABN shown for Nique Enterprises in the liquidators' report to creditors (ABN 58 000 692 991). Both letters state that the liquidators' report did not enable "our client to identify the current trustee of the Trust or permit our client to understand the indemnity (if any) to which Nique or that trustee is entitled for the purpose of understanding our client's rights pursuant to s 197 of the Act". The reference to "s 197 of the Act" is a reference to s 197 of the Corporations Act 2001 (Cth), which relevantly provides: (1) A person who is a director of a corporation when it incurs a liability while acting, or purporting to act, as trustee, is liable to discharge the whole or a part of the liability if the corporation: (a) has not discharged, and cannot discharge, the liability or that part of it; and (b) is not entitled to be fully indemnified against the liability out of trust assets solely because of one or more of the following: (i) a breach of trust by the corporation; (ii) the corporation's acting outside the scope of its powers as trustee; (iii) a term of the trust denying, or limiting, the corporation's right to be indemnified against the liability. 16Neither the liquidator nor the respondents' solicitors responded to Gadens' letters.

Consideration 17Although not clear from Gadens' letters, it appears that Built NSW says that it needs to know who the new trustee is for two reasons. First, it submits that it is having difficulty in identifying against whom to make a claim. That difficulty is said to arise from the different ABNs. Second, it submits that it has a direct claim against the new trustee and it seeks the name of the new trustee in order to join it to the proceedings. 18In my opinion, there is little merit in the first submission. It is not clear how the difficulties with the ABNs could be resolved by knowing who the new trustee is. In any event, the difficulty is more apparent than real. It is plain that Built NSW contracted with the Nique Enterprises, which is now in liquidation. It is apparent that the ABN given in the contract is the ABN for the trust, not for the company. That explains why there are different ABNs. However, the fact that Nique Enterprises was purporting to contract on behalf of a trust does not alter the fact that Built NSW was contracting with the company (which is now in liquidation). 19There is, however, more merit in Built NSW's alternative submission. In Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367, the plurality said: We do not understand the general principles concerning the bankruptcy of a trading trustee to be in dispute. It is common ground that a trustee who in discharge of his trust enters into business transactions is personally liable for any debts that are incurred in the course of those transactions: Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319. However, he is entitled to be indemnified against those liabilities from the trust assets held by him and for the purpose of enforcing the indemnity the trustee possesses a charge or right of lien over those assets: Vacuum Oil Co Pty Ltd v Wiltshire, supra. The charge is not capable of differential application to certain only of such assets. It applies to the whole range of trust assets in the trustee's possession except for those assets, if any, which under the terms of the trust deed the trustee is not authorised to use for the purposes of carrying on the business: Dowse v Gorton [1891] AC 190 ; [1891-4] All ER Rep 1230. ... The creditors of the trustee have limited rights with respect to the trust assets. The assets may not be taken in execution (Savage v Union Bank of Australia Ltd (1906) 3 CLR 1170 at 1186; Re Morgan; Pillgrem v Pillgrem (1881) 18 Ch D 93) but in the event of the trustee's bankruptcy the creditors will be subrogated to the beneficial interest enjoyed by the trustee. Vacuum Oil Co Pty Ltd v Wiltshire, supra; Ex parte Garland (1804) 10 Ves Jun 110 at 120; 32 ER 786 at 789; [1803-13] All ER Rep 750. 20The right of indemnity survives the appointment of a new trustee and the old trustee is entitled to enforce it against the new trustee: Agusta Pty Ltd v Provident Capital Pty Ltd [2012] NSWCA 26 at [43]-[45] per Barrett JA (with whom Campbell JA and Sackville AJA agreed). It is at least arguable that the right of subrogation a creditor of an insolvent trustee has extends to the rights of the old trustee to enforce its rights of indemnity and gives it a right to join the new trustee for that purpose. 21In the present case, it is plain that Built NSW may have a right to be subrogated to Nique Enterprises' right to be indemnified out of the assets of the trust in accordance with the principles stated in Octavo Investments. Built NSW has at least an arguable basis for joining the new trustee in order to pursue that right of subrogation. It has sought to obtain the name of the trustee from persons who are likely to know it. They have not responded to Built NSW's request for information. In those circumstances, in my opinion, Built NSW is entitled to preliminary discovery from the respondents in order to obtain the name of the new trustee. 22In the event that Nique Enterprises is not entitled to an indemnity out of the assets of the trust, Built NSW submits that, in the alternative to its claim against the new trustee, it may have a claim against the directors of Nique Enterprises under s 197 of the Corporations Act on the basis that Nique Enterprises has not discharged, and cannot discharge, the liability it may have to Built NSW and it is not entitled to be indemnified fully out of the trust assets solely because, relevantly, there is a term of the trust deed denying, or limiting, Nique Enterprises' right to be indemnified against the liability. Built NSW concedes that it is not entitled to preliminary discovery from Mr Bihari, since he has already been joined as a defendant to the proceedings. On the information Built NSW has, it seems obvious that Nique Enterprises cannot discharge any liability it might have to Built NSW. However, Built NSW says that it does not know whether there is a term of the trust deed denying or limiting Nique Enterprises' right to be indemnified. It says that it needs that information to determine whether to join Ms Monique Bihari and Ms Judith Bihari claiming that they are liable under s 197. 23In my opinion, Built NSW is entitled to the order it seeks. I accept that Built NSW needs to know whether the trust deed contains a term limiting Nique Enterprises' right to be indemnified against Built NSW's claim in order to determine whether it is worthwhile joining Ms Monique Bihari and Ms Judith Bihari to the proceedings on the basis that they are liable under s 197. It has sought unsuccessfully to obtain that information. The likelihood is that Ms Monique Bihari and Ms Judith Bihari have access to the trust deed. Production of it will not be onerous. Consequently, Built NSW is entitled to an order for preliminary discovery against Ms Monique Bihari and Ms Judith Bihari in the terms that it seeks. 24Built NSW has been substantially successful in obtaining the orders it seeks. There is no reason why costs should not follow the event in this case. Originally, preliminary discovery was sought against all respondents in relation to both the trust deed and documents disclosing the new trustee, although, as I have said, Built NSW did not press the application for preliminary discovery against Mr Bihari under UCPR r 5.3. It is not possible to separate the costs of the application under UCPR r 5.2 from the application under r 5.3. The application under r 5.3 did not add any significant time to the application under r 5.2. In those circumstances, in my opinion, the appropriate order is that the respondents pay the applicant's costs in relation to the orders sought in para 3 of the amended motion.

Orders 25The court orders: (1)Pursuant to UCPR r 5.2, the second defendant, Ms Monique Tracey Bihari and Ms Judith Bihari give preliminary discovery of any document which evidences the current trustee of the WT Bihari Family Trust; (2)Pursuant to UCPR r 5.3, Ms Monique Tracey Bihari and Ms Judith Bihari give preliminary discovery of any trust deed in respect of the WT Bihari Family Trust. (3)The respondents to the amended notice of motion filed on 16 May 2014 pay the plaintiff's costs in relation to the orders sought in para 3 of the notice of motion.

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