Distinctive FX9 Pty Limited v Statewide Developments Pty Limited

Judgment 1BARRETT JA: Emmett JA will deliver the first judgment. 2EMMETT JA: By notice of motion filed on 10 January 2013, the appellant, Distinctive FX 9 Pty Limited (Distinctive), seeks the grant of leave, nunc pro tunc, to proceed against the respondent, Statewide Developments Pty Limited (Statewide). The need for such leave is prompted by an order for the winding-up of Statewide. Section 471B of the Corporations Act 2001 (Cth) (the Corporations Act) provides that, where a company is being wound up by the Court, a person cannot begin or proceed with a proceeding in a court against the company, or in relation to property of the company, or enforcement process in relation to such property, except with the leave of the Court and in accordance with such terms, if any, as the Court imposes. 3On 3 December 2012, Beazley P concluded that, contrary to the contentions of the appellant, and having regard to the provisions of the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules, the bringing of an appeal is the commencement of a proceeding for which leave is required pursuant to s 471B. No application had previously been made for leave to proceed. That question arose on the hearing of an application by Statewide for security for the costs of the appeal. Her Honour concluded that there was no power for the Court to deal with the application for security for costs. Accordingly, her Honour declared that the proceeding be stayed. I understand that order to be no more than a recognition by her Honour of the effect and operation of s 471B of the Corporations Act. 4Beazley P's declaration prompted the notice of motion of 10 January 2013. In circumstances that are not entirely clear, a direction was given that the application for leave to proceed be heard at the same time as the appeal, assuming leave to proceed were granted. It is not clear what has happened to the application for security for costs, but I assume that that has not been proceed with. 5The proceeding in which the orders were made, from which appeal has now been brought, is curious. By amended summons of 11 May 2012, Statewide sought an order pursuant to s 74MA of the Real Property Act 1900 that two caveats be withdrawn. On 8 June 2012, the primary judge provided answers to two questions that had been posed on behalf of the appellant. It is by no means clear how those questions arose in the proceeding before his Honour and it is instructive that, having formulated the questions, his Honour observed that it was unclear to him how the answer to those questions led to the resolution of the question as to whether the caveats should be removed. I shall return to that point shortly. 6The questions that were posed for the primary judge concerned the effect of the Trustee Act 1925. Specifically, the questions concerned the validity of the appointment of a new security trustee under an instrument described as "Security Trust and Intercreditor Deed" (the Security Deed). By the Security Deed, security was created in favour of lenders to Statewide. At the time, Statewide was the registered proprietor of real property situated in New South Wales. The security consisted of legal mortgages of the real property and an equitable charge over all of the assets of Statewide. The security was granted in favour of BWA Custodians Limited (BWA), as security trustee. There were subsequent changes of the security trustee and the questions posed for and answered by the primary judge concerned the effectiveness of the changes of the security trustee. 7On 19 August 2009, BWA, which had changed its name to BOSI Security Services Limited, retired and CBA Corporate Services (NSW) Pty Limited (CBA) was appointed as security trustee. By deed of 20 December 2011, CBA retired and AET Structured Finance Services Pty Limited (AET) was appointed as security trustee. 8The real property in question was the subject of mortgage AD202132 by Statewide in favour of BWA (the Mortgage). By transfer dated 11 September 2009, registered under the Real Property Act, the Mortgage was transferred to CBA. By transfer dated 20 December 2011, which was also registered under the Real Property Act, CBA transferred the Mortgage to AET. Thus, the registered proprietor of the Mortgage, given by Statewide to secure its indebtedness under the Security Deed, has at all times been the security trustee appointed under the Security Deed or the replacement security trustee appointed under deeds of appointment. 9Receivers and managers were appointed to Statewide by the security trustee under the powers conferred by the Security Deed. It is not suggested that any of those steps were taken otherwise than in accordance with the interests of the creditors to whom obligations were owed under the Security Deed, which were secured by the Mortgage. It now appears that the security trustee, as mortgagee, has, in the exercise of the power of sale conferred by the Mortgage, sold the real property in question and the proceeds have been received by the receivers and managers. 10The interest sought to be protected by the caveats, which are not presently before the Court, arose out of an agreement dated 22 April 2008 (the April Agreement) between Statewide and Azure Property Group Pty Limited (Azure), a predecessor in title of the appellant. By the April Agreement, Azure agreed to instruct its solicitors to withdraw a statutory demand against Statewide and Statewide agreed and confirmed that it was liable and committed to pay to Azure all of the commissions and invoices outstanding under an agency agreement in relation to the development of the real property in question made between Azure and Statewide. Statewide and Azure also agreed that there was also an offset for rent in respect of the commissions and invoices. 11The April Agreement provided that Azure would not exercise any right it might have in relation to the repayment of the debt owing to it by Statewide, apart from the rights of setoff and the right to lodge a caveat over the real property for eighteen months from the date of the agreement. By cl 8 of the April Agreement, Statewide granted Azure a charge over the real property to secure the repayment of the indebtedness to Azure. 12On 15 December 2011, Azure assigned the benefit of the April Agreement to Piara Waters Pty Limited (Piara Waters). On 3 February 2012, Piara Waters assigned the benefit of the April Agreement to Azure Property Group (Holdings) Pty Limited. On 28 March 2012, Azure Property Group (Holdings) Pty Limited assigned the benefit of the April Agreement back to Piara Waters and, finally, on 29 May 2012, Piara Waters assigned the benefit of the April Agreement to the present appellant and applicant for leave to proceed, Distinctive. 13It appears that the real dispute is between Distinctive, on the one hand, and the beneficial owners of the security created by the Security Deed and the Mortgage and charge given pursuant to the Security Deed, on the other hand. The precise nature of the dispute is unclear. What is clear, however, is that the real property that was the subject of the caveat has now been sold. Accordingly, there appears to be no utility at all in considering whether the caveat that had been lodged on behalf of Distinctive should be withdrawn, as was sought in the summons commencing the proceeding. 14It is against that background that the appellant formulated, for the primary judge, two threshold questions in support of its claim. The questions were as follows: 1.Whether the appointment of a new security trustee made pursuant to cl 8 of the Security Deed required a registered deed as referred to in s 6 of the Trustee Act in order to be effective for the trust assets to vest in the new security trustee. 2. Do two trustees have to be appointed to the security trust on replacement of an original trustee, notwithstanding a statement in the Security Deed to the effect that the original sole trustee of the trust estate need only be replaced by another sole trustee. 15As his Honour observed, it is quite unclear how the resolution of those questions will determine the dispute as to the priorities between Distinctive, as successor of Azure, on the one hand, and the creditors of Statewide under the Security Deed, on the other hand. Indeed, his Honour observed that the relevant trust property consisted of mortgage securities and fixed and floating charges. His Honour noted that, with each change of security trustee, those securities had been transferred to the new trustee in accordance with the requirements of the Real Property Act or the Corporations Act, as the case may be, and that the contrary was not suggested on behalf of Distinctive. 16His Honour noted that the point of Distinctive's challenge in relation to the vesting of the trust property was that, absent registration of the deeds of appointment, there could be no effective vesting in favour of the new security trustee. His Honour rejected that reasoning. In his view, neither s 6 nor s 9 of the Trustee Act had the effect for which the appellant contended. Therefore, his Honour concluded that the first question should be answered "no" and that, in effect, was sufficient to dispose of the proceeding. 17The question of whether or not s 6 of the Trustee Act requires the registration of a deed to effect a valid change of trustee and transfer of trust property is a nice one. However, I do not understand how that question was raised in the proceeding before the primary judge. If there is a genuine dispute as to the priorities between Azure and its successors, including Distinctive, on the one hand, and the creditors entitled to the benefit of the security under the Security Deed, on the other hand, that dispute cannot be resolved in this proceeding. None of the parties who claim an interest in the trust property inconsistent with that of Distinctive is a party to this proceeding. In order to resolve the question of priorities, it would be necessary to have, one would have expected, the registered proprietor of the Mortgage, namely, the security trustee, and possibly the receivers and managers appointed to Statewide, as well as its liquidator. 18The relevance of the appointment of the receivers and managers is that it was their actions that resulted in the exercise of the power of sale. Distinctive apparently contends that, because there was a defect in the change in security trustee, the receivers and managers were not validly appointed. It is difficult to see how that has any bearing on the question of the removal of Distinctive's caveats. 19It is by no means clear how the primary judge was persuaded to embark on the questions, but his Honour was apparently assured by the parties, or at least one of them, that the resolution of the questions would resolve the dispute. I do not consider, in the circumstances, that there is any utility at all in granting leave to proceed against Statewide by way of appeal. In all of the circumstances, I consider that leave to proceed should be refused. 20BARRETT JA: I am of the same opinion. I note in addition that it is accepted that nothing remains for Statewide, the only other party to these proceedings besides the appellant, out of the proceeds of enforcement of securities. That further underlines the inutility of this appeal. I agree that the outcome should be as Justice Emmett proposes. 21WARD JA: I agree with the reasons of Justice Emmett and the orders that his Honour proposes. 22BARRETT JA: The order of the Court therefore is that the notice of motion filed on 10 January 2013 be dismissed.