Solicitors:
Craddock Murray Neumann (Plaintiffs)
Russell C Byrnes (Defendants)
File Number(s): 2017/118269
[2]
Nature and history of the proceedings
By Originating Process filed on 20 April 2017 and Points of Claim filed on 11 May 2017, the Plaintiffs, Mr Adam Preiner in his capacity as liquidator of RMATA Cutelli Pty Ltd (in liq) ("Company") and the Company seek a declaration that a property situated at Hurstville Grove, New South Wales, is held on resulting trust for the Company, or alternatively in such proportions as the Court determines. The Defendants, Mr and Mrs Cutelli, are the two directors of the Company and also its equal shareholders. In the course of the hearing, the Plaintiffs accepted that Mr and Mrs Cutelli had contributed a small portion of the monies used to purchase the Hurstville Grove property, and now seek a declaration that the Company is the beneficial holder of 95.71% of the property and, to the extent necessary, that Mr and Mrs Cutelli hold the property, as to 95.71%, on resulting trust for the Company. The Plaintiffs also seek an order for the appointment of trustees for sale of the property under s 66G of the Conveyancing Act 1919 (NSW). The liquidator also alleges that the application of the Company's funds to purchase the Hurstville Grove property and several other transactions are unreasonable director-related transactions for the purposes of s 588FDA of the Corporations Act 2001 (Cth).
I should first address the history of the proceedings and the evidence led in them. The Plaintiffs rely on the liquidator's, Mr Preiner's, affidavit dated 18 April 2017 and an exhibit containing relevant documents. Mr Preiner there refers to the circumstances of his appointment as liquidator to the Company and to his investigation into the Company's affairs and his attempts to obtain books and records relating to the Company. Mr Preiner's affidavit and its exhibit refers to the contract for sale of commercial property owned by the Company at Peakhurst, New South Wales ("Peakhurst property") entered into in October 2013 and to documents recording the settlement, including dealings with monies received on that sale. Mr Preiner also refers to the circumstances in which, in November 2013, about a month after the Company received the proceeds of sale of the Peakhurst property, Mr and Mrs Cutelli acquired the Hurstville Grove property. Mr Preiner also refers to a transaction by which the balance of the director's loan account, which had a debit balance of $537,629 at 30 June 2012, was reduced to nil at 30 June 2013, and exhibited documents establishing that matter, and indicated that he was not able to locate any record of consideration passing to the Company in respect of that transaction. Mr and Mrs Cutelli did not lead evidence to seek to establish that any payment had been made to the Company in that respect. Mr Preiner also refers to several withdrawals made from the Company's bank accounts, although he fairly acknowledged that one of those accounts had two signatories in addition to Mr and Mrs Cutelli.
Mr Preiner also refers, in evidence led without objection, to advice received from the Company's accountant that he had advised Mr Cutelli that the Company would incur a capital gains tax liability on the sale of the Peakhurst property. Mr Preiner's affidavit and his exhibit also refers to dealings between the Company and the Australian Taxation Office from April 2015, including the issue of a penalty notice to the Company for a failure to lodge its fringe benefits tax on time in April 2015; a default assessment warning in September 2015; and letters to the Company advising of overdue tax debts, a notice of assessment of penalty for failing to provide a document and a notice of income tax assessment in November 2015.
Mr Preiner refers to a creditor's statutory demand subsequently issued by the Deputy Commissioner of Taxation in March 2016 which he understood related to unpaid capital gains tax, in the context of the Company's failure to lodge a tax return for the financial year ended 30 June 2014, and the Commissioner's deeming the Company liable for capital gains tax as a result of the sale of the Peakhurst property. I refer to questions which have subsequently arisen as to the basis of that assessment below. The Deputy Commissioner of Taxation brought winding up proceedings against the Company in the Federal Court of Australia in June 2016 and, on 17 August 2016, the Company was wound up and Mr Preiner was appointed as its liquidator. It is common ground between the parties that the relation-back date for the purposes of the voidable transaction provisions is 21 June 2016.
Between the commencement of these proceedings in April 2017 and late 2017, the Court granted several extensions of time to permit Mr and Mrs Cutelli to file substantive affidavit evidence in the proceedings, which ultimately did not occur. By affidavit dated 27 November 2017, Mr Russell Byrnes, a solicitor then newly retained by Mr and Mrs Cutelli, contended that the Company's tax liability appeared to relate to a capital gains tax liability for the 2014 tax year and that no tax return had been filed by the Company, and that no capital gains tax would be payable having regard to the value of the Company's fixed assets shown in its 2013 accounts. Mr Byrnes also refers to his instructions as to Mr and Mrs Cutelli's difficult financial circumstances and aspects in which the proceedings had not been properly prepared by them for hearing. Mr Byrnes submitted that Mr and Mrs Cutelli wished to investigate the amount of capital gains tax payable by the Company and any penalty properly imposed by the Deputy Commissioner of Taxation. Brereton J then allowed a further extension of time to Mr and Mrs Cutelli to file and serve their evidence.
When the matter was listed for hearing on 29 January 2018, Mr and Mrs Cutelli again sought to defer the hearing. I noted that the proceedings had been on foot for about nine months and that Mr and Mrs Cutelli were in default of multiple orders for the filing and service of their affidavit evidence. The Plaintiffs then led their evidence and I heard the submissions of Mr Martin, who appeared for them. For reasons set out in an ex tempore judgment delivered on that date, I allowed further time for Mr and Mrs Cutelli to lead evidence in opposition to the application, to 16 February 2018, with no further evidence to be led after that date, and stood the matter over to 20 February 2018 for further hearing. I also noted the liquidator's undertaking that he would consent to Mr and Mrs Cutelli and their legal representatives having access to taxation records in respect of the Company.
Mr and Mrs Cutelli relied on further affidavits of Mr Byrnes dated 16 and 20 February 2018 at the next listing of the matter on 20 February 2018. Mr Byrnes refers to further inquiries that he had made as to the basis of the Company's tax assessment in 2014, both before and after the listing of the matter on 29 January 2018, and also refers to bankruptcy proceedings that another creditor had brought against Mr Cutelli, apparently based on a judgment debt. Mr Byrnes refers to further information provided by the Deputy Commissioner of Taxation that suggested that the Company's tax assessment was not for capital gains tax but for the sale of trading stock, and also refers to a discussion with the Company's former accountant who had expressed doubt as to the basis of that assessment. Mr Byrnes raised the possibility that if the tax assessment was based on the sale of trading stock, then the Company may have been able to take into account other tax losses that were available to it. Mr Byrnes suggested that the liquidator should lodge an objection to the assessment although, I interpolate, he was not funded to do so. Mr Byrnes also refers to an offer by Mr and Mrs Cutelli to pay the costs of liquidation and the costs of the proceedings, which it appears they could not do other than from the proceeds of sale of the Hurstville Grove property, as to which the Plaintiffs claim a substantial interest.
On 20 February 2018, for reasons set out in an ex tempore judgment, I granted approval for Mr and Mrs Cutelli to perform or exercise certain functions or powers of the Company, in lodging objections with the Deputy Commissioner of Taxation in relation to the Company's tax assessments, and further adjourned the matter to 20 March 2018. I also noted an undertaking of Mr and Mrs Cutelli, by their solicitor, to use their best endeavours expeditiously to exchange contracts for the sale of the Hurstville Grove property and take certain other steps. No further evidence was led as to the outcome of the orders that I had previously made, and there was no evidence that a sale of that property had occurred, when the matter was relisted before me on 20 March 2018.
At the hearing before me on 20 March 2018, Mr Preiner relied on the affidavit dated 19 March 2018 of his solicitor, Mr Dennis Olthof, which refers to evidence led by Mr Byrnes in the bankruptcy proceedings brought by a third party against Mr Cutelli in the Federal Circuit Court of Australia. Mr Olthof's affidavit annexed Mr Byrnes' affidavit affirmed 27 February 2018 in the bankruptcy proceedings, which indicated, in respect of these proceedings that:
"The Plaintiff[s] ha[ve] closed [their] case in [these proceedings] and [Mr Cutelli] has no defence to such claim which has been stood over by the Supreme Court to 20 March 2018 to allow [Mr Cutelli] and his wife to file an objection to the 2014 tax assessment of the Company on behalf of the Company."
Mr Byrnes also noted that:
"The Plaintiffs' claim in the Supreme Court proceedings will result in the whole of the sale proceeds of the unit being paid to it on the basis that [Mr and Mrs Cutelli] hold the unit in trust for the Company and have no equity themselves in it."
Mr Byrnes indicated, in the course of oral submissions, that he had neglected to note, in that affidavit, the relatively small contribution made by Mr and Mrs Cutelli to the purchase of the Hurstville Grove property. Mr Preiner, fairly, did not seek to resile from his recognition of that small contribution and the fact that it should be recognised in the proportion of that property over which any resulting trust was imposed.
It seems to me that Mr and Mrs Cutelli's doubts as to the amount of the assessment of tax made by the Deputy Commissioner of Taxation and the extent of the Company's tax debt are not relevant to the substance of the claims against them, which depend, inter alia, upon the proposition that they applied the sale proceeds of the Company's Peakhurst property due to the Company to purchase the Hurstville Grove property, without ascertaining the amount of or seeking to discharge its tax obligations or other debts. No attempt was made over an extended period by the Company (or Mr and Mrs Cutelli) to challenge the relevant tax assessment; no application was brought by Mr and Mrs Cutelli to terminate the winding up; and there is no realistic prospect of a successful application by Mr and Mrs Cutelli to terminate the winding up where they are not in a position to discharge the Company's debt to the Deputy Commissioner of Taxation as it presently stands, absent a successful challenge to it, or to pay the liquidator's remuneration and costs. It ultimately does not matter whether the amount that the Company owes to the Deputy Commissioner of Taxation would have been a lesser amount, had the Company or Mr and Mrs Cutelli brought a successful challenge to the assessment at an earlier point, where that would be relevant to a distribution of the Company's assets in the liquidation, not to whether the Company has a proper claim against Mr and Mrs Cutelli in these proceedings.
The Court must now determine the claims that have been brought by the Company and the liquidator, notwithstanding that one can be sympathetic to the personal difficulties that Mr and Mrs Cutelli face by reason of the deterioration of Mr Cutelli's health and their present financial position.
[3]
The Plaintiffs' claim that the Hurstville Grove property is held on resulting trust
Turning now to the substance of the Plaintiffs' claim against Mr and Mrs Cutelli, I have referred above to the evidence that the Company sold the Peakhurst property on 8 October 2013 for $5.175 million. After discharging a loan on that property, the amount of $696,573 was transferred to Mr and Mrs Cutelli and applied by them to the purchase of the Hurstville Grove property. The Plaintiffs claim that transaction gave rise to a resulting trust over substantially all of the Hurstville property, on the basis that the Company contributed substantially all of the purchase price of the Hurstville Grove property. Mr and Mrs Cutelli did not admit, in their Defence, the disposition of the sale proceeds of the Peakhurst property or that they used its sale proceeds to acquire the Hurstville Grove property. Mr and Mrs Cutelli also denied, by their Defence, that a resulting trust arose in favour of the Company as a result of it having contributed the entirety of the purchase price.
The evidence led by Mr Preiner at the hearing on 29 January 2018, including solicitors' correspondence, trust account ledger records and the account statement in Exhibit P2, establishes that substantially all of the funds used by Mr and Mrs Cutelli to purchase the Hurstville Grove property were derived from the sale of the Company's Peakhurst property in October 2013. The Plaintiffs' claim for a resulting trust turns on the proposition that the real purchaser of the Hurstville Grove property, or at least the 95.71% interest in it for which they contend, was the Company and not Mr and Mrs Cutelli, so far as the Company's money had been applied to fund the purchase; there was no relationship or presumption of advancement between the Company and Mr and Mrs Cutelli to rebut the existence of a resulting trust; the advance of funds by the Company to Mr and Mrs Cutelli was not a loan and did not reflect any other commercial relationship; and the Hurstville Grove property should be declared to be held on resulting trust for the Company, in the 95.71% interest for which the Plaintiffs contend.
The principles relating to the circumstances in which a resulting trust should be imposed were helpfully summarised by Vickery J in Ying Mui Pty Ltd & Ors v Hoh (No 3) [2017] VSC 29; (2017) 119 ACSR 577 at [337]ff, where his Honour referred to Calverley v Green (1984) 155 CLR 242 and Lam v Lam [2016] VSC 298 at [20] and observed that:
"It is accepted that in certain circumstances (most often but not exclusively confined to the acquisition of property arising in the course of a personal relationship), equity presumes, absent a presumption of advancement, that the registered proprietor intends that the person who provides the purchase money for the acquisition of the property will own the property beneficially to the extent of the beneficial interest corresponding to the proportion of purchase money supplied." [footnotes omitted]
His Honour also noted that it is well established that, for a resulting trust to arise, the purchase money must have been provided by the purchaser with the character of purchase money and not as a loan, and referred to Ong v Lottwo Pty Ltd (in liq) [2013] SASCFC 57; (2013) 116 SASR 280 as authority that a resulting trust will not arise where monies are provided by way of gift, loan or on some other commercial basis. His Honour also observed that any presumption of a resulting trust arising from a contribution of purchase monies can be rebutted or qualified by evidence of a contrary intention.
In this case, as I held above, the Company provided the portion of the purchase price of the Hurstville Grove property for which the Plaintiffs contend from the proceeds of sale of the Peakhurst property; there is no evidence to suggest that the money was provided by gift by the Company to the Plaintiffs, which would have constituted an obvious breach of directors' duties, or by way of loan or on any other commercial basis; and there is no evidence of a contrary intention that would rebut the presumption of a resulting trust. Given the way in which the Plaintiffs put their case, it is not necessary to deal with whether, if Mr and Mrs Cutelli had misappropriated the Company's funds, the property acquired with those funds would also be held for the Company on resulting trust: see, for example, the cases referred to in Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81; (2016) 91 NSWLR 732 at [39].
Mr Byrnes submitted, in oral submissions, that the Court should exercise a discretion not to declare a resulting trust, where the effect of doing so, as distinct from making an award of compensation for damages in favour of the Company for the amount of money applied to purchase the Hurstville Grove property and statutory interest, would be to deprive Mr and Mrs Cutelli of the appreciation in the value of the property, and leave them in a poor or very poor financial position, and potentially disadvantage any trustee in bankruptcy appointed to Mr Cutelli and his creditors. First, it seems to me that it would not be a proper exercise of a discretion that is to be exercised judicially, rather than by sympathy for the poor financial position of a defendant, to reason in that manner. A second difficulty with that submission is that Mr Byrnes appears to have put to the Federal Circuit Court that there would be no utility in Mr Cutelli's bankruptcy, because imposition of a resulting trust will have the result that there will be no funds in Mr Cutelli's bankrupt estate and no payment to any creditors or his trustee in bankruptcy, and then put to me that a resulting trust should not be imposed because it will adversely affect the outcome of the bankruptcy. Those propositions are true alternatives and both cannot be accepted.
A third difficulty with that proposition is that, as Mr Byrnes ultimately accepted in submissions, the effect of imposition of a resulting trust is that the Company and its creditors will obtain access to its interest in the Hurstville Grove property, which was substantially acquired with its funds; funds realised from the sale of the property will then be applied by the liquidator to meet the Company's proper liabilities to its creditors, including the Deputy Commissioner of Taxation, and the liquidator's proper remuneration and costs; and any surplus, including any surplus derived from a successful appeal against the amount of the debt claimed by the Deputy Commissioner of Taxation, would be available to the Company's contributories, namely Mr Cutelli, or his trustee in bankruptcy, and Mrs Cutelli. Although that result may be less advantageous to Mr and Mrs Cutelli than allowing them the value of the appreciation of a property substantially acquired with the Company's funds, there is nothing that is either illogical or unjust in that result.
I have also had regard to the fact that the declaration of a resulting trust may impact upon third parties dealing with Mr and Mrs Cutelli, so far as it recognises a proprietary interest held by the Company in the property, which allows it to assert its interest in the property in priority to the claims of unsecured creditors of Mr and Mrs Cutelli. The third party which had brought bankruptcy proceedings against Mr Cutelli did not seek to intervene in the proceedings, although it was on notice of them, so as to assert any competing interest as a reason not to recognise a resulting trust. It seems to me that no basis not to declare that resulting trust has been established.
[4]
Orders under s 66G of the Conveyancing Act 1919
The Plaintiffs seek an order under s 66G of the Conveyancing Act in respect of the sale of the Hurstville Grove property, and filed a consent of Mr Preiner and Mr Bailey to be appointed as trustees for sale of that property. Section 66G of the Conveyancing Act relevantly provides that:
Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.
A co-owner in equity can rely on that section since s 66F of the Conveyancing Act defines "[c]o-ownership" as meaning:
"ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common; and co-owner has a corresponding meaning and includes an incumbrancer of the interest of a joint tenant or tenant in common."
The authorities establish that "as a general rule, any co-owner holding at least 50% of a parcel of real property is entitled almost as of right to an order for partition or sale under s 66G of the Conveyancing Act", and such an order will only be refused where, under settled principles, it would be inequitable to permit such an application: Callahan v O'Neill [2002] NSWSC 877 at [8]; Tory v Tory [2007] NSWSC 1078 at [42]; Ross v Ross [2010] NSWCA 301 at [36]; National Australia Bank Ltd v Pasupati [2011] NSWSC 540 at [20]. It would ordinarily not "be a proper exercise of the power to decline relief under s 66G … to refuse an application on grounds of hardship or general unfairness": Hogan v Baseden (1997) 8 BPR 15,723 at 15,723. I am satisfied that an order for sale under s 66G of the Conveyancing Act should be made, where there is otherwise no means by which the liquidator could realise the Company's interest in the Hurstville Grove property so as to satisfy its creditors' claims.
[5]
The Plaintiffs' claims under s 588FDA of the Corporations Act
The liquidator also attacks the application of the proceeds of sale of the Company's Peakhurst property to the purchase of the Hurstville Grove property as an unreasonable director-related transaction within the meaning of s 588FDA of the Corporations Act, in that the Company received no benefit from that payment, and paid those amounts to Mr and Mrs Cutelli from its assets without regard to its potential or actual tax liability or the claims of other creditors, and conferred the benefit of the value of the property on Mr and Mrs Cutelli. Mr and Mrs Cutelli denied, by their Defence, that this transaction was an unreasonable director-related transaction for the purposes of s 588FDA of the Act.
A transaction between a company and a director or his or her close associate is treated as voidable on a winding up of the company if it occurs in circumstances where a reasonable person in the company's circumstances would not have entered into the transaction, under s 588FDA of the Corporations Act. This section applies in respect of, inter alia, a payment made by the company: s 588FDA(1)(a)(i). Whether a reasonable person in the company's circumstances would not have entered into the transaction is determined having regard to any benefits to the company of entering into it; the detriment to the company of entering into it; the respective benefits to other parties to the transaction of entering into it; and any other relevant matter: s 588FDA(1)(c). The test whether such a transaction is unreasonable is objective in character and the matters specified in s 588FDA(1)(c) must be taken into account in determining that: Weaver v Harburn [2014] WASCA 227 at [91]. In Vasudevan v Becon Constructions (Australia) Pty Ltd [2014] VSCA 14; (2014) 97 ACSR 627, the Court of Appeal of the Supreme Court of Victoria held that a disposition may be "for the benefit of" a director where it "legally or financially advantages the director in question regardless of whether it is paid or directed to a close associate of the director" (at [26]) and that the purpose of the section is "to catch director-related transactions of kinds not otherwise liable to avoidance as unfair preferences, uncommercial transactions or unfair loans" (at [28]); see also Angus Carnegie Gordon in his capacity as liquidator of Lyon Form Pty Ltd (in liq) & Anor v Leon Plant Hire Pty Ltd (in liq) & Ors [2015] NSWSC 397 at [88]; Smith (in his capacity as liquidator of Action Paint Ball Games Pty Ltd) v Starke (No 2) [2015] FCA 1119; (2015) 109 ACSR 145 at [104]; Crowe-Maxwell v Frost [2016] NSWCA 46; (2016) 91 NSWLR 414; 111 ACSR 583 per Beazley P (with whom Macfarlan and Gleeson JJA agreed) at [67]-[92].
As I noted above, the evidence led by Mr Preiner at the hearing on 29 January 2018 establishes that substantially all of the funds used by Mr and Mrs Cutelli to purchase the Hurstville Grove property were derived from the sale of the Company's Peakhurst property in October 2013. That amount was applied to purchase that property notwithstanding that no attempt was made to assess the amount of tax payable by the Company, including on the sale of the Peakhurst property, to set aside an amount to pay that tax, or to lodge a tax return to allow the Deputy Commissioner of Taxation to assess the amount of tax payable. A reasonable person would not have entered that transaction in the Company's circumstances, having regard to the lack of any benefit to the Company of entering into it; the detriment to the Company of entering into it and parting with its remaining funds; and the benefits to Mr and Mrs Cutelli of that transaction, obtained at the expense of the Company's creditors. I am satisfied that that transaction was an unreasonable director-related transaction for the purposes of s 588FDA of the Corporations Act.
The payment to purchase the Hurstville Grove property was made during the relation-back period under s 588FE(6A) of the Corporations Act, so that it was a voidable transaction for the purposes of s 588FE of the Act, if, as I have held, it was an unreasonable director-related transaction. Section 588FF of the Corporations Act allows the Court to make any one or more of the orders set out in the section on the application of a liquidator, where a transaction is voidable because of s 588FE of the Corporations Act. These include an order directing a person to pay to the relevant company an amount equal to some or all of the money that the company has paid under the transaction. I would have made such an order had a resulting trust not been declared in the relevant circumstances, but that order should not be made where a resulting trust has been declared and it would overcompensate the Plaintiffs.
The liquidator also attacks a transaction by which a debit balance or loan account, recorded as owed by Mr and Mrs Cutelli to the Company, was extinguished, without a corresponding receipt of that money by the Company, as an unreasonable director-related transaction within the meaning of s 588FDA of the Corporations Act. Mr and Mrs Cutelli did not admit, in their Defence, the facts relating to the extinction of the loan from the Company, or that that transaction was an unreasonable director-related transaction.
The indebtedness of Mr and Mrs Cutelli to the Company of $537,629 appears to have been discharged during the 2013 financial year. There is no explanation by Mr and Mrs Cutelli of how the relevant loan account came to be extinguished, and there is no evidence of any corresponding receipt by the Company. A reasonable person would not have extinguished that loan without payment or consideration in the Company's circumstances, having regard to the lack of any benefit to the Company of doing so; the detriment to the Company of doing so; and the benefit to Mr and Mrs Cutelli of that transaction, obtained at the expense of the Company's creditors. I am satisfied that that transaction was also an unreasonable director-related transaction for the purposes of s 588FDA of the Corporations Act.
That loan was extinguished during the relation-back period under s 588FE(6A) of the Corporations Act, so that it was a voidable transaction for the purposes of s 588FE of the Act, if, as I have held, it was an unreasonable director-related transaction. The orders that may be made under s 588FF of the Corporations Act, where a transaction is voidable because of s 588FE of the Corporations Act, include an order directing a person to pay to the company an amount that, in the Court's opinion, fairly represents the benefit that the person has received because of the transaction, although I recognise the liquidator did not expressly put the relief it sought on that basis. Mr and Mrs Cutelli did not submit that the benefit they received from extinguishing the loan was less than its face value, for example because it would not have been recoverable in full against them, and they should be required to repay the benefit they received, namely the amount of the loan.
The liquidator also attacks three cash withdrawals totalling $16,670.15 made from the Company's bank accounts, as unreasonable director-related transactions within the meaning of s 588FDA of the Corporations Act. In their Defence, Mr and Mrs Cutelli admitted the relevant withdrawals from the Company's bank account, but denied those transactions were unreasonable director-related transactions
This claim relates to withdrawals from the Company's bank account on 4 March 2014, 25 July 2014 and 23 September 2014. There is no explanation, and no evidence led by Mr and Mrs Cutelli, of how the Company obtained benefit for cash payments made to them and recorded in the bank statements. A reasonable person would not have made the payments constituted by those withdrawals in the Company's circumstances, having regard to the lack of any benefit to the Company of doing so; the detriment to the Company of doing so; and the benefit to Mr and Mrs Cutelli of those payments, again obtained at the expense of the Company's creditors. I am satisfied that these transactions were also unreasonable director-related transactions for the purposes of s 588FDA of the Corporations Act.
Those withdrawals were made during the relation-back period under s 588FE(6A) of the Corporations Act, so that they were voidable transactions for the purposes of s 588FE of the Act, if, as I have held, they were unreasonable director-related transactions. As I noted above, the orders that may be made under s 588FF of the Corporations Act, where a transaction is voidable because of s 588FE of the Corporations Act, include an order directing a person to pay to the relevant company an amount equal to some or all of the money that the company has paid under the transaction. Such an order should be made in respect of those withdrawals.
[6]
Orders
I am satisfied, for these reasons, that the Court should make substantially the orders sought by the Plaintiffs. I therefore make the following orders:
Resulting trust relief
The Court declares that:
The Second Plaintiff is the beneficial holder of 95.71% of the real property identified as 4/SP74751 and otherwise known as 4/136 Morshead Drive, Hurstville Grove NSW 2220 ("the property").
To the extent necessary, the First and Second Defendants hold the property, as to 95.71%, on a resulting trust for the Second Plaintiff.
The Court orders:
Pursuant to s 66G of the Conveyancing Act (NSW) 1919:
(a) Adam Bernard Preiner and Liam Bailey be appointed trustees for sale of the property;
(b) that the property be vested in the trustees subject to any encumbrances affecting the entirety thereof to be held by the trustees upon statutory trust for sale under Division 6 of Part IV of the Act;
(c) that the trustees in carrying out the statutory trust for sale shall have the following powers:
to conduct the sale and to sell the property either by public auction or by private contract on such terms as the trustees may see fit;
to appoint, terminate or otherwise engage a real estate agent;
to obtain a valuation of the property by employing a registered valuer;
to fix a reserve or minimum price;
to collect the sale proceeds;
to settle the particulars and conditions of sale;
to fix the remuneration to be allowed to any auctioneer, real estate agent or other person; and
to otherwise do all things reasonably necessary to complete the sale of the property including the power to execute any and all necessary conveyances or other documents.
(d) that the trustees on completion of the sale shall distribute the proceeds of sale of the property in the following manner:
in payment and discharge of all mortgages and other encumbrances registered on the title to the property;
in payment of the trustees' commission and costs for time in attendance up to completion of the sale;
in payment of the other costs of sale including, but not limited to, legal costs, advertising costs and agent's commission;
in payment of expenses incurred by the trustees for the purpose of bringing the property up to a condition which would facilitate sale;
in payment of all rates, taxes and insurance and other outgoings on the property;
of the remaining net sale proceeds:
a. 95.71% be paid to the First and Second Plaintiffs;
b. 4.29% be paid to the First and Second Defendants in full and final satisfaction of their interests in the property.
Voidable transaction relief
The Court declares:
That the following transactions are unreasonable director-related transactions within the meaning of s 588FDA of the Corporations Act 2001 (Cth) and are voidable within the meaning of s 588FE(6A) of the Act:
(a) a discharge of indebtedness to the Second Plaintiff by the First and Second Defendants of $537,629 during the 2013 financial year;
(b) withdrawals on the Second Plaintiff's bank account paid to the First and Second Defendants on the following dates and in the following sums:
$9,570.15 on 4 March 2014;
$4,500 on 25 July 2014;
$2,600 on 23 September 2014.
The Court orders:
That pursuant to s 588FF(1) of the Act, the First and Second Defendants pay to the First Plaintiff the amount of $554,299.15 (being the total of the amounts in (4));
Pursuant to s 100 of the Civil Procedure Act 2005 (NSW), that the First and Second Defendants pay to the Plaintiffs interest on any monies which they are ordered to pay as a result of these proceedings.
That the First and Second Defendants pay the Plaintiffs' costs of the proceedings as agreed or assessed.
That the First and Second Defendants provide to the First and Second Plaintiffs or their duly authorised representatives:
(a) access to the property for the purpose of conducting and completing the sale contemplated by these orders;
(b) vacant possession of the property at least 10 calendar days before the date for completion of the sale contemplated by these orders.
[7]
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Decision last updated: 27 March 2018