In the matter of JR Enterprises Pty Ltd as trustee for the JR Enterprises Unit Trust (No 3); Application by John Anthony Musca and Andrew Jolliffe (No 2)

Representation: Counsel:
Proceeding 2020/00304314
S J Philips (Plaintiffs)
Proceeding 2025/00136362
H Mann (Plaintiffs)
Solicitors:
Proceeding 2020/00304314
Denina Legal (Plaintiffs)
RBHM Commercial Lawyers (Defendants)
Proceeding 2025/00136362
Bartier Perry Lawyers (Plaintiffs)

File Number(s): 2020/00304314
2025/00136362

Publication restriction: Nil

JUDGMENT

1. On 19 May 2025, I delivered reasons for judgment and made orders in these two related proceedings: In the matter of JR Enterprises Pty Ltd as trustee for the JR Enterprises Unit Trust (No 2); Application by John Anthony Musca and Andrew Jolliffe [2025] NSWSC 491 (the Primary Judgment).

2. These reasons for judgment assume familiarity with, and adopt terms defined in, the Primary Judgment.

Judicial Advice Application: Orders regarding distribution of funds

3. In the Primary Judgment, I made directions, in respect of the Judicial Advice Application, that the Trustees would be justified in retaining, from the moneys held by them following the sale of the Business and the Land, various sums in respect of a number of contingent liabilities (at [218(1)]). In addition, I made a direction that the Trustees confer with Jada and Wylie's Securities regarding the timing and manner of the distribution of the balance of the funds held by them and, in the event that there was a dispute about those matters, the Trustees file any Interlocutory Process seeking advice in relation to those matters, together with any supporting evidence (at [218(6)]).

4. On 10 June 2025, the Trustees filed a Notice of Motion and a supporting affidavit of their solicitor, Mr Gavin Stuart.

5. Following the exchange of submissions, the outstanding issues were resolved by agreement, and I made the following orders on 17 June 2025:

“(1) Pursuant to s 63 of the Trustee Act 1925 (NSW) the Plaintiffs would be justified in treating the total balance of $6,618,376.71 held on trust and any interest thereon as being apportioned between the business and the land as to:

(a) 48.4% held on trust in respect of the sale of the Land;

(b) 51.6% held on trust in respect of the sale of the Business.

(2) Pursuant to s 63 of the Trustee Act 1925 (NSW) the Plaintiffs would be justified in retaining the amounts set out in orders 1(b) and 1(c) of the Orders of the Court made on 19 May 2025 from the distribution of the amount held on trust in respect of the sale of the Business.

(3) Pursuant to s 63 of the Trustee Act 1925 (NSW) the Plaintiffs would be justified in retaining the amounts set out in orders 1(a) and 1(d) of the Orders of the Court made on 19 May 2025 as to 48.4% from the distribution of the amount held on trust in respect of the sale of the Land and as to 51.6% from the distribution of the amount held on trust in respect of the sale of the Business.

(4) Order 1(e) of the Orders of the Court made on 19 May 2025 be set aside.

(5) Further to order 3 of the orders of the Court made on 19 May 2025, pursuant to s 63 of the Trustees Act 1925 (NSW) the Plaintiffs would be justified in paying the legal and accounting costs (inclusive of the costs of the Notice of Motion filed on 10 June 2025) in the amount of $273,687.28 out of the assets of the trust:

(a) as to 48.4% from the funds held on trust in respect of the sale of the Land; and

(b) as to 51.6% from the funds held on trust in respect of the sale of the Business.

(6) Pursuant to s 63 of the Trustee Act 1925 (NSW) the Plaintiffs would be justified in distributing the remaining amounts held on trust (after retention or deduction of the amounts set out in Orders 2, 3, and 5 of these orders), as follows:

(a) Funds held on trust in respect of the sale of the Land, to Wylie’s Securities Pty Ltd and Jada Investment Pty Ltd in equal shares; and

(b) Funds held on trust in respect of the sale of the Business to JR Enterprises Pty Ltd.

(7) Pursuant to s 63 of the Trustee Act 1925 (NSW) the Plaintiffs would be justified in reducing by $89,073.12 the amount distributable to Wylie’s Securities Pty Ltd for the purposes of Order 6(a).”

6. As a result, a substantial sum of money which was previously held by the Trustees in respect of the sale of the Land will now be distributed, with one half of those funds being payable to Jada pursuant to order 6(a) above.

Derivative Action: Orders to give effect to the Primary Judgment

7. In the Primary Judgment, I determined, in respect of the Derivative Action, that the Judgment Debt had not been paid, and that Jada and Mr Williams remained liable to pay the full amount of that debt to JR Enterprises, together with interest thereon from 14 June 2022 to the date of payment ([210]). I noted that the amount of interest would need to be calculated (at [212]). I further noted that, as a result of the orders to be made in the Judicial Advice Application, a substantial part of the Retained Funds would be distributed by the Trustees to Jada, and that Mr Williams had deposed that on the distribution of such monies he “will immediately pay any balance due by Jada to [JR Enterprises]” (at [215]). Accordingly, I gave the parties “an opportunity to make submissions on the form of orders which should be made in respect of the Derivative Action regarding the enforcement of the Judgment Debt and interest thereon, including whether such orders should be stayed until some period after the distribution of any such funds by the Trustees” (at [215]). Finally, I held that Jada’s application for leave to bring the Proposed Cross Claim against the Trustees in the Derivative Action should be dismissed, with no order as to costs (at [216]).

8. The Wylie Parties have proposed orders dealing with most of those matters.

9. First, the Wylie Parties have calculated the interest which has accrued on the Judgment Debt as at 18 June 2025 as being in the sum of $427,253.42, with interest continuing to accrue in an amount of $425.34 per day until payment of the Judgment Debt. This calculation is not disputed by the Williams Parties.

10. Secondly, the Wylie Parties have proposed an order that the Judgment Debt of $1.5m be paid within seven days of receipt by Jada of the moneys to be distributed by the Trustees to Jada pursuant to order 6(a) of the orders made in the Judicial Advice Application on 17 June 2025 (see paragraph [5] above). The sum to be received by Jada pursuant to that order is expected to be greater than the amount of the Judgment Debt. This order accordingly reflects the position of Mr Williams, as set out at paragraph [7] above, namely, that he will, immediately upon receipt of the funds to be distributed by the Trustees, pay any amount found to be owing by Jada to JR Enterprises.

11. Thirdly, the Wylie Parties have proposed an order that, within seven days of receipt of the funds which are to be distributed to Jada pursuant to order 6(a) of the orders made in the Judicial Advice Application on 17 June 2025, the Williams Parties pay the balance of such funds (after payment of the Judgment Debt) to JR Enterprises as a payment towards the interest that has accrued on the Judgment Debt.

12. The reason for this form of proposed order is that it is anticipated that the amount to be received by Jada pursuant to order 6(a) of the orders made on 17 June 2025 will be greater than the amount of the Judgment Debt, but will be less than the sum of the Judgment Debt and the accrued interest as at the date of receipt. Counsel for the Wylie Parties indicated that his clients’ intention was that the Williams Parties will not be required, by this form of order, to make a payment, within seven days of receipt of funds from the Trustees, in an amount greater than the amount Jada has in fact received.

13. Fourthly, to the extent that any amount of interest remains outstanding after such payments have been made to JR Enterprises following the receipt of funds from the Trustees, the Wylie Parties proposed that they be granted leave to seek such further orders for enforcement as may be necessary. (This order is proposed in circumstances where there are discussions under way between the Williams Parties and the Trustees regarding a proposed form of secured indemnity, which may lead to further amounts being distributed by the Trustees to Jada from the Retained Funds. Any such distribution would likely be of an amount well in excess of any outstanding amount of interest.)

14. There is only one aspect of the findings made in the Primary Judgment which has not been addressed by the Wylie Parties’ proposed orders, namely, the orders to be made in respect of Jada’s application for leave to bring the Proposed Cross Claim. As set out in the Primary Judgment at [216], I have determined that this application should be dismissed, with no order as to costs. I will make an order to this effect.

15. The Williams Parties did not advance any submission to the effect that the orders proposed by the Wylie Parties did not give effect to the Primary Judgment.

16. Instead, the Williams Parties proposed a much wider form of orders with the stated aim of resolving all matters in dispute between the parties. These included orders:

17. providing for the Williams Parties to pay an amount equal to one half of the Judgment Debt plus one half of the accrued interest to Wylie’s Securities, together with an additional amount “to equalise the amounts standing to the credit of Jada and Wylie’s Securities … in the JR Enterprises … accounts”, with “such action to constitute full and final satisfaction of the Judgment Debt and interest thereon and the orders of the Court made on 14 June 2022”;

18. compelling JR Enterprises to make an in specie distribution of all of its assets pursuant to clause 10.2 of the Trust Deed to Jada and Wylie’s Securities, in accordance with a regime set out in those orders;

19. directing Jada and Wylie’s Securities to provide instructions to the accountants of JR Enterprises to amend the accounts of JR Enterprises in various specified respects; and

20. providing that insofar as either Jada or Wylie’s Securities provides a secured indemnity to the Trustees for an amount identified in paragraph [218(1)] of the Primary Judgment, which would cover a share of the potential liabilities of the other party, the party providing the secured indemnity has a right of subrogation out of the remaining assets of the trust held by the Trustees and a right of contribution from the other beneficiary.

21. The Williams Parties explained that they proposed these orders “to try to bring this matter to a complete end and to forestall the need for any further proceedings”, submitting that if such orders were not made, “we will be back here next week or the week after seeking derivative leave to cause [JR Enterprises] to act in a particular way and that is just such an undesirable result that it ought not ever occur”.

22. It is understandable that, in circumstances where the parties have been in litigation for around five years, the business which was previously operated by JR Enterprises was sold around two-and-a-half years ago, and the directors, shareholders and beneficiaries of JR Enterprises are deadlocked, the Williams Parties are eager to bring matters to a conclusion, with each of the parties receiving their share of funds from JR Enterprises and going their separate ways. It would appear to be in all parties’ interests for the distribution of moneys held by JR Enterprises (as well as the significant sums payable to JR Enterprises) to be resolved without the need for further proceedings, which will increase delay and cost, and decrease the amount returned to the beneficiaries.

23. However, the only matter which is currently before the Court is the Derivative Action, whereby the Wylie Parties seek orders for enforcement of the Judgment Debt which is owing to JR Enterprises.

24. In the Primary Judgment, I determined the issues in dispute in the Derivative Action, and gave the parties an opportunity to make submissions on the form of orders to give effect to the reasons for judgment.

25. I am satisfied that the Wylie Parties have put forward a form of orders which gives effect to my reasons for judgment (and, as noted above, the Williams Parties did not submit to the contrary).

26. The Williams Parties did not articulate any basis on which (absent agreement from JR Enterprises, which is not forthcoming) the Court has power to order that a judgment debt which is payable to JR Enterprises be satisfied by the payment of one half of the that amount to Wylie’s Securities. The Judgment Debt is payable to JR Enterprises as trustee of the Trust, and each of Wylie’s Securities and Jada holds 50% of the units in that Trust. However, the amount available to be distributed to unitholders by JR Enterprises depends not only on amounts received by JR Enterprises, but also on any existing liabilities of JR Enterprises, including any liability to each unitholder in respect of their loan accounts. As the remaining orders sought by the Williams Parties implicitly acknowledge, this in turn requires the preparation of updated accounts of JR Enterprises (and, as outlined in the Primary Judgment, this is a matter in which there has previously been some dispute between the parties).

27. The orders proposed by the Williams Parties are not confined to orders which are said to give effect to the Primary Judgment but extend to other matters well beyond the scope of the issues raised by the pleadings in the Derivative Action. In particular, there is not currently any application before the Court for orders compelling JR Enterprises to take any steps, including to distribute any assets of the Trust or to direct its accountants to make various entries in or amendments to its accounts. Further, as the solicitor for the Williams Parties acknowledged, “the mathematics of how the money would actually be distributed … is very complex”. Any such matters should be determined in the ordinary course, by an application seeking specified relief, with both parties having an opportunity to advance evidence and submissions on the matters in dispute.

28. Finally, in circumstances where no form of secured indemnity has been agreed as between Jada and the Trustees, let alone put in place, it is premature for the Williams Parties to seek orders regarding any rights of subrogation or contribution which may arise as a result of any such indemnity. The Court cannot make a declaration about the effect of a hypothetical indemnity, the terms of which remain the subject of negotiation.

29. For those reasons, I have determined to make orders substantially in the form proposed by the Wylie Parties (subject to the issue of costs, which is addressed below).

Derivative Action: Costs

26. The Wylie Parties were wholly successful in the Derivative Action, which sought relief in respect of the enforcement of the Judgment Debt. The Williams Parties resisted this relief, contending that their obligation to pay the Judgment Debt had been discharged by book entries in the accounts of JR Enterprises which were said to have had retrospective effect as at 30 June 2022. I rejected those contentions and found that the Judgment Debt remained owing to JR Enterprises, with interest accruing from 14 June 2022 to the date of payment.

27. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, if the Court makes any order as to costs, the Court is to order that the costs follow the event, unless it appears to the Court that some other order should be made as to the whole or any part of the costs.

28. Accordingly, the starting point must be that the Wylie Parties, having obtained, on behalf of JR Enterprises, the relief sought in the Derivative Action, are entitled to their costs, unless the Court is satisfied that some other form of order should be made.

29. The Williams Parties submitted that the costs of the Derivative Action should be borne by JR Enterprises, or alternatively that there should be no order as to costs.

30. This submission was advanced, essentially, on the basis that the costs of the proceeding could have been avoided by JR Enterprises taking some action, in the performance of its duties as trustee of the Trust, which would have obviated the need for the Derivative Action.

31. In particular, the Williams Parties submitted that, in the performance of its duties, JR Enterprises should have made various adjustments to its accounts, and should have taken steps to require the Trustees to distribute the Retained Funds, and that such steps would have obviated the need for the Derivative Action.

32. I do not accept this submission.

33. As regards the proposition that JR Enterprises should have made various adjustments to its accounts, there was a dispute at the hearing in April and May 2025 as to the nature of any adjustments that should be made. This issue was the subject of expert evidence and extensive written and oral submissions, and was an issue which I decided in the Wylie Parties’ favour.

34. As regards the proposition that JR Enterprises should have taken some action in respect of the distribution of the funds retained by the Trustees, it is unnecessary to determine whether or not JR Enterprises should have taken such a step, given that any such action would not have resolved, or obviated the need for resolution of, the key dispute between the parties in the Derivative Action, namely, whether the Judgment Debt had been repaid as at 30 June 2022 or whether it remained outstanding (which was also resolved in the Wylie Parties’ favour).

35. For those reasons, I am not satisfied that the Williams Parties have established any basis for departing from the general rule that costs follow the event.

36. I will accordingly make an order that the Williams Parties pay the Wylie Parties’ costs of the Derivative Action.

37. On 20 December 2024, the Court ordered that the Wylie Parties’ costs of the application for leave to bring the Derivative Action be costs in the cause in the Derivative Action. It follows that the costs order will extend to the Wylie Parties’ costs of that leave application.

38. Finally, the Wylie Parties sought that the costs order in the Derivative Action include their costs of the Judicial Advice Application.

39. In support of this proposed order, the Wylie Parties contended that "the Williams Parties actively opposed the relief sought by the Trustees (ultimately granted by the Court) and were therefore the unsuccessful parties in [the Judicial Advice Application]".

40. This is substantially the same as a submission made by the Wylie Parties at the hearing in April and May 2025, which I considered and rejected in the Primary Judgment, when dealing with the costs of the Judicial Advice Application (see [131]-[137], and the order at [218(3)]). It would be contrary to the principle of finality for this issue to be reagitated. Even if it were open for this issue to be reagitated, I would have rejected the Wylie Parties’ submission for the reasons set out in those parts of the Primary Judgment.

41. Accordingly, I will make an order in the Derivative Action that the Williams Parties pay the Wylie Parties’ costs of that proceeding, as agreed or assessed, including the costs of the Wylie Parties’ application for leave to bring the Derivative Action. However, for the avoidance of doubt, the order will exclude costs of the Wylie Parties in respect of the Trustees’ Judicial Advice Application or in respect of the application by the Williams Parties to bring the Proposed Cross Claim against the Trustees (see paragraph [14] above).

ORDERS

42. For those reasons, I make the following orders in the Derivative Action (proceeding 2020/00304314).

43. Declare that:

(a) the amount of $1,500,000 which the First and Third Defendants were ordered on 14 June 2022 to pay to the Second Defendant (the Judgment Debt) has not been paid, and the full amount of the Judgment Debt remains outstanding; and (b) interest is payable by the First and Third Defendants to the Second Defendant on the outstanding amount of the Judgment Debt and, as at 18 June 2025, interest has accrued in the amount of $427,253.42.

2. Order that, within seven days of the receipt by the Third Defendant of the funds which are to be distributed by the plaintiffs in proceeding numbered 2025/136362 (Trustees), pursuant to order 6(a) of the orders made in that proceeding on 17 June 2025, the First and Third Defendants:

(a) pay the amount of $1,500,000 to the Second Defendant in satisfaction of the Judgment Debt; and (b) pay the balance of such funds as are received by the Third Defendant as a payment towards the amount of the interest that has accrued on the Judgment Debt as at the date of such payment. (For the avoidance of doubt, in the event that the amount received by the Third Defendant from the Trustees exceeds the amount of accrued interest, the Third Defendant is required to pay only the amount of the accrued interest.)

3. Grant leave to the Plaintiffs to seek further orders for enforcement of the Judgment Debt and the interest on the Judgment Debt.
4. Order that the Notice of Motion filed by the First and Third Defendants on 13 March 2025, seeking leave to file a cross-claim against the Trustees, be dismissed with no order as to costs.
5. The First and Third Defendants pay the Plaintiffs’ costs of the proceeding incurred since 1 September 2024, as agreed or assessed, which costs:

(a) include the costs of the application for leave to bring the Derivative Action; and (b) exclude any costs of the Plaintiffs in respect of the Notice of Motion referred to in order (4) above or in respect of proceeding 2025/136362.

6. Liberty to restore the proceeding on 7 days’ written notice with respect to the enforcement of these orders.

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