Judgment
1These are my reasons for having made the following orders and directions today:
"1A. The Court directs the plaintiffs to serve an amended Originating Process by 4pm on 20/9/11 claiming final relief by way of declaration as to the plaintiffs' beneficial ownership of the Shares as hereinafter defined.
Mr Ron Dean-Willcocks be appointed until further order as Receiver over the shares in Unique World Group Pty Ltd ACN 087 848 011 registered in the name of Allco Securities Pty Ltd ACN 058 845 832 ("Shares"), upon the plaintiffs giving to the Court usual undertaking as to damages.
Mr Ron Dean-Willcocks be permitted to:
(a)sell the Shares;
(b)do all other such things and acts which are consequent to and necessary for a sale of the Shares; and
(c)otherwise exercise all the powers conferred by s 420 of the Corporations Act 2001 (Cth) in relation to the Shares.
Upon completion of the sale of the Shares, the sale proceeds be held in trust by Mr Ron Dean-Willcocks pending determination of the claim for final relief or earlier order.
The plaintiffs to give Allco Finance (Australia) Limited (Receivers and Managers Appointed) 5 days notice of any application for orders or directions in relation to the proposed distribution of the sale proceeds.
Costs reserved.
The Court directs that these orders be entered forthwith.
The Court lists the matter for directions at 10am on 4 October 2011.
The Court grants liberty to restore on 3 days' notice."
2The defendant, Allco Securities Pty Ltd ("Allco Securities"), is the holder of 673,422 shares in the capital of Unique World Group Pty Ltd ("Unique World").
3Each of the plaintiffs says that a part of that parcel of shares in Unique World is held by Allco Securities in trust for that plaintiff.
4Allco Securities has no directors. Its sole member is Allco Finance Australia Pty Ltd ("Allco Finance"), a company currently under the control of receivers and managers. At various times up to January 2009, persons in office as directors of Allco Securities ceased to be directors, the last being Mr Veal who resigned on or about 30 January 2009. Since that time, no steps have been taken by Allco Finance, as the sole member of Allco Securities, to appoint replacement directors or otherwise to cause appropriate administration to be in place in relation to Allco Securities. There has been, for example, no application by the sole member for orders for winding up on the just and equitable ground and the appointment of a liquidator: compare CIC Insurance Ltd v Hannan & Co Pty Ltd [2001] NSWSC 437; (2001) 38 ACSR 245.
5The shares in Unique World appear to represent a major asset of Allco Securities; and the plaintiffs consider themselves to be beneficially entitled to those shares to the exclusion of any interest on the part of Allco Securities itself - except, no doubt, such limited interest as may accrue from any right of indemnity that Allco Securities has as trustee coupled with a right to resort to trust property to satisfy the indemnity.
6The affidavits of Mr Veal, Mr Jones and Mr Coe show that there is a serious question to be tried as to the existence of the beneficial entitlements the plaintiffs claim.
7By an originating process filed in court on the 9th of September, Allco Securities claimed relief as follows:
"1. Mr Ron Dean-Willcocks be appointed as Receiver over the shares in Unique World Group Pty Ltd ACN 058 345 832 in its capacity as nominee trustee ("Shares").
2.Mr Ron Dean-Willcocks be permitted to:
a. sell the Shares;
b. do all other such things and acts which are consequent to and necessary for a sale of the Shares; and
c. otherwise exercise all the powers conferred by a s 420 of the Corporations Act (Cth) 2001 in relation to the Shares.
Interlocutory relief in terms of orders 1 and 2 hereof.
The proceeds of the sale of the Shares be held in trust by Mr Ron Dean-Willcocks pending final determination of the indentify [sic] of the beneficial owners of the Shares.
Costs.
Such further or other orders as the Court deems fit."
8Upon the hearing of the application, Allco Finance had leave to make submissions without becoming a party. Its attitude, as expressed to the court by its solicitor, was that it did not object to the grant of the relief sought save insofar as it might contemplate the determination by the receiver himself of the question of beneficial interests and the existence of trusts and resultant entitlements to the Unique World shares.
9This highlights an anomalous aspect of the application as originally framed. It sought what is essentially interlocutory relief (appointment of a receiver) in the absence of any articulated claim for final relief such as a declaration that the 673,422 shares in Unique World are held as to particular numbers for the respective plaintiffs upon particular trusts.
10Section 67 of the Supreme Court Act 1970 is in these terms:
"The Court may, at any stage of proceedings, on terms, appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient so to do."
11The words "by interlocutory order" are significant. They reflect a general expectation that a receiver should be appointed as an interlocutory measure to facilitate the determination of some claim for final relief. In the present case, the plaintiffs became victims of what Austin J, in Commonwealth of Australia v ABC2 Group Pty Ltd [2009] NSWSC 1442 at [7], described as "the pitfall that one sometimes encounters in Equity Division proceedings, that the interlocutory relief is regarded as so important that the plaintiff omits to seek a final order".
12In the course of the hearing, the plaintiffs were given leave to amend their originating process to incorporate a claim for final relief by way of declaration as to their beneficial ownership of the shares in question. It was directed that an amended originating process incorporating that additional claim be served by the 20th of September 2011.
13It would have been quite inappropriate for the receiver himself to determine such beneficial entitlements. Except where parties themselves agree on some other mechanism, the determination of legal rights is the function of a court. In some cases, the court will confide the task or part of it to a referee but the decision of a referee is not binding or enforceable unless later adopted by the court: Uniform Civil Procedure Rules 2005, Division 3 of Part 20.
14With the claim for final relief properly articulated so that it is the court that will in due course decide the question of beneficial entitlements to the Unique World shares, the justice of the case could be seen to warrant the appointment of a receiver of the Unique World shares held by Allco Securities.
15The categories of case in which such an appointment is appropriate are not closed but several such categories are well established. One of them is where trust assets are in jeopardy. Mr Condon referred me, in that connection, to the decision of Warren J (as her Honour then was) in Yunghanns v Candoora No. 19 Pty Ltd (No. 2) [2000] VSC 300; (2000) 35 ACSR 34. That was a case where property, undoubtedly subject to trusts, was in jeopardy and proceedings for the determination of entitlements were in train. The court appointed a receiver to safeguard the property pending the determination of the claim for final relief.
16In the present case, it is not yet established that the Unique World shares are trust property but, as I have said, it is arguable that they are and that Allco Securities holds them on trust for the plaintiffs. That is sufficient, to my mind, to form the foundation for the appointment of a receiver if what I am generally describing as jeopardy is shown.
17As to that, the absence of governance mechanisms within Allco Securities means that the company is unable to function. Things are in a state where the company said to be a trustee simply cannot act and, in particular, cannot discharge the responsibilities flowing from any trusts to which its property is subject. Circumstances of corporate paralysis or deadlock have in the past been seen to justify appointment of a receiver: see, for example, McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603. The court would readily appoint a provisional liquidator in the case of such deadlock but could do so only at the request of someone with standing to petition for winding up who had actually done so. The plaintiffs do not appear to be in that position vis--vis Allco Securities. The distinction between a provisional liquidator and a receiver is, in a functional sense, not great: Re United Medical Protection Ltd [2002] NSWSC 413; (2002) 41 ACSR 623.
18The overall circumstances are thus such as to require that the property concerned be taken into the control of the court and put into the hands by an appropriate person who, as the court's appointee, will bring into court, in connection with the determination of the substantive proceedings, the property itself or the proceeds of its sale if it is sold. The plaintiffs have a sufficient interest to seek such an appointment.
19The plaintiffs asked that the receiver be given a power of sale. Because of the nature of the property and the surrounding circumstances, that was an appropriate course.
20Mr Dean-Willcocks consented to be appointed as receiver. He is a registered liquidator. That being so, there was no need for him to give security.
21The plaintiffs by their counsel proffered the usual undertaking as to damages. That was most desirable, given the drastic nature of the interim remedy : National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 . The appointment was made upon that undertaking.
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Decision last updated: 16 September 2011