Nilant & Anor [2004] WASC 7 (23 January 2004)

Supreme Court of WA|2004-01-23|Before: Barker J

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : NILANT & ANOR [2004] WASC 7

MATTER : Trustees Act 1962 (WA)

Trustees - Application under Trustees Act 1962 (WA) and Corporations Act 2001 (Cth) - Power of Court - Whether Court has power to order that trustee pay trust funds to third party creditor of beneficiary

Palmer v McAllister (1991) 4 WAR 206

1 The plaintiffs are the voluntary administrators of Smartworld Corporation Pty Ltd (the company). They were duly appointed under s 436A of the Corporations Act 2001 (Cth) on 12 September 2001. The company (which is now called "View Resources Ltd") holds the sum of A$52,409.88 in a trust account on behalf of Smart America Development Corporation (Smart America), a wholly owned subsidiary of the company incorporated in the State of California of the United States of America. The plaintiffs seek an order under the Trustees Act 1962 (WA) or the Corporations Act 2001 (Cth) that they be at liberty to pay these funds to Morestar Nominees Pty Ltd in its capacity as trustee of the Smartworld Creditors' Trust.

2 At material times, the company carried on business in Australia and Smart America carried on business in the United States.

3 After the plaintiffs were appointed administrators of the company, they filed a report as to affairs with the Australian Securities and Investments Commission as then required by the Corporations Law. This report stated that, as of 12 September 2001, the total assets of the company were in excess of A$19,000,000. These assets were stated to include a "sundry debt" owed by Smart America to the company in the sum of A$8,138,659.93. The report also stated that Smart America was a "wholly owned subsidiary, also in Administration".

4 Mr Nilant, who has sworn an affidavit on behalf of the plaintiffs in support of the application, says that following the appointment of the plaintiffs as voluntary administrators of the company, he was informed by a Mr Paul Benetti and a Mr Robert James Rohrlach, both Australian residents, that they were the only directors of Smart America and that a person called Mr Jim Young was an employee of Smart America in the United States.

5 Papers annexed to and referred to in Mr Nilant's affidavit concerning the incorporation of Smart America under the California Corporations Code in or about September 1999, disclose that Mr Rohrlach was, with three others (not including Mr Benetti), elected as a director of Smart America to serve until the first annual meeting of shareholders or until their successors were duly elected and qualified. The other three directors identified in those papers were David Bertram Tilley, Dennis Anderson Murray and Peter Kingsley Bartleet. It would appear, having regard to the information supplied by Mr Benetti and Mr Rohrlach to Mr Nilant, that following the appointment of the plaintiffs as voluntary administrators of the company, Mr Benetti was elected or appointed a director of Smart America at some time after September 1999.

6 Mr Nilant says that in early October 2001, he was further informed by Mr Rohrlach that Smart America had agreed to sell various items of stock which it held in California to a company called Sentor Inc. It appears the sale was then completed. On or about 9 October 2001, the plaintiffs received a remittance in the sum of US$45,389.09 (A$88,546.80) from Sentor Inc, being the proceeds of the sale of goods by Smart America to Sentor Inc. The plaintiffs then placed the funds in trust for Smart America.

7 Mr Nilant says that in mid-October 2001, he was informed by Mr Rohrlach that Mr Young had consulted with Californian attorneys in relation to the affairs of Smart America and, in particular, in relation to its insolvency. Correspondence then ensued between the plaintiffs and the Californian attorneys, as well as between the plaintiffs and Mr Rohrlach, concerning the affairs of Smart America.

8 On 17 October 2001, Mr Nilant transferred US$10,000 (A$20,025) from the funds held in trust for Smart America to the Californian attorneys to comply with a condition of the attorneys' retainer to act for Smart America in relation to its insolvency.

9 On 28 March 2002, Mr Nilant caused the funds held in trust by the plaintiffs for Smart America to be debited with the sum of A$6376.30 in reimbursement of his time costs incurred in relation to the affairs of Smart America.

10 It appears Mr Young was paid US$5000 (A$9735.62) for work done at the request of the Californian attorneys.

11 Progress in relation to the insolvency of Smart America then appears to have slowed. The Californian attorney with the conduct of the matter, by letter dated 7 March 2002, faxed to the plaintiffs, advised that:

"I would be happy to continue assisting in any way that is legally permissible, and as directed, but I am at a total loss with respect to directions on how to proceed.

My recommendation is that either my services be terminated, and nothing further be done by my law firm, or alternatively, that I be directed to proceed with investigation [sic] the status of the ownership of the inventory, and preparing and filing a Chapter 7 petition. This, of course, would require the further payment indicated in my letter of February 15th.

Short of the suggestions set forth above, I am at a loss with respect to any other options.

I look forward to hearing from you, or the officers nd [sic] directors of Smart America with respect to my recommendations and with respect to receiving directions on how to proceed."

Copies of this letter to the plaintiffs were apparently sent to Mr Young, as well as to Mr Benetti and Mr Rohrlach by e-mail.

12 By further letter dated 26 March 2002, the Californian attorney wrote to Mr Nilant stating that:

"It seems that I have been left to run a case with no involvement by the principals of Smart America. As I am certain you know, as a professional, this is not only a difficult task, but an impossible task.

I will be closing my file in this matter, with the concluding status report being that report that I had [sic] provided to you in my letter of March 7. Without instructions, and without cooperation by the principals of Smart America, I am left with nothing to do."

13 There appears to have been no further dealings between the plaintiffs and the Californian attorneys after that date.

14 Mr Nilant says that, in March 2003, he caused a search of Smart America to be conducted on the Internet site of the Californian Secretary of State. This did not show that Smart America was in any form of insolvency administration, but did disclose that its incorporation status had been suspended by the Franchise Tax Board on 3 February 2003. This information was confirmed in an e-mail Mr Nilant received from the United States Securities and Exchange Commission dated 26 March 2003. I am prepared to accept that this is reliable information, for the purpose of this application. The internet search also showed that Mr Dennis Murray was the "Agent for Service of Process".

15 Mr Nilant says that, as a result of the suspension of the incorporation status of Smart America and the lack of interest and control of its affairs by its two Australian-based directors, the plaintiffs have formed the view that it would serve no useful purpose to remit the funds which they hold in trust for Smart America to Smart America or to any of its directors. Instead, they seek the approval of the Court to transfer the remaining funds of A$52,409.88 held by them in the trust account for Smart America to Morestar Nominees Pty Ltd as trustee of the Smartworld Creditors' Trust in partial satisfaction of the debt of in excess of A$8,000,000 referred to above said to be owed by Smart America to the company.

16 The Smartworld Creditors' Trust came into existence in these circumstances. On 3 December 2001, following the appointment of the plaintiffs as voluntary administrators of the company, the creditors of the company at a meeting convened under s 439A of the Corporations Act 2001 (Cth) resolved that the company should execute a deed of company arrangement. It was a condition precedent to the operation of the deed of company arrangement that the company execute the Smartworld Creditors' Deed of Trust, which it did.

17 As Mr Nilant says, in essence these documents enabled the company to continue in existence and relist on the stock exchange after assigning all its assets, except two mining tenements, to Morestar Nominees Pty Ltd as trustee of the Smartworld Creditors' Trust. The plaintiffs are also the directors of the trustee company. Claims of creditors against the company were transformed into claims against the Smartworld Creditors' Trust which received additional payments from the promoters of the newly relisted company. By cl 7.1 of the deed of company arrangement, the property available to pay creditors' claims and debts is the "Payments" and the "Assets" as defined in the deed. The Assets are defined by cl 1.1.1 to include all claims and causes of action which the company may have against any person. Thus, the company's right to claim or recover from Smart America the debt in excess of $8,000,000 is an Asset.

18 It is by reason of the creation of the Smartworld Creditors' Trust and these commercial circumstances that the plaintiffs seek the order that they do, to the effect that the remaining funds they hold as trustees for Smart America be placed at the disposal of the creditors of the company. The logic behind this proposal is that, if the company pursued an action against Smart America in respect of the sundry debt in excess of $8,000,000, the company could obtain a judgment against its subsidiary and eventually gain partial satisfaction of that judgment debt through an attachment of the moneys currently held by the plaintiffs in their trust account for Smart America. The Smartworld Creditors' Trust would then be entitled to those funds under cl 7.1 of the deed. However, because of the costs and inconvenience associated with obtaining judgment against the suspended and inactive Smart America, the plaintiffs seek a more convenient way of obtaining Smart America's funds currently held by them.

19 On 14 August 2003, I ordered that the plaintiffs have leave to serve notice of the application on Smart America out of the jurisdiction and in the United States. I ordered that such service be effected by posting copies of the originating summons and supporting affidavit of Mr Nilant to Mr Rohrlach at 5 Crossland Court, Peppermint Grove, Western Australia, and to Mr Benetti at 17 Edna Road, Dalkeith, Western Australia, as well as to Mr Murray at 125 Bethany Drive, Ste Z, Scotts Valley, California, USA, 95006, by prepaid post, together with a copy of the order. Service was effected by that mode and nothing further was heard from Smart America, Mr Rohrlach, Mr Benetti or Mr Murray.

20 In those circumstances, one might reasonably infer that the present directors of Smart America are not interested in the outcome of the plaintiffs' application, and that Mr Murray, the agent of Smart America for service of process, is similarly uninterested in the application.

21 The question that arises on this application is whether the Court may make an effectual order authorising the plaintiffs to pay the funds they hold for Smart America to the Smartworld Creditors' Trust, which trust effectively stands in the shoes of Smart America's creditor, the company. A related question is whether the Court has the power, if not effectively to authorise such payment, then to provide advice to the plaintiffs that they may take such a step with the blessing of the Court. Counsel for the plaintiffs submits that such power exists under one or other of various provisions of the Trustees Act 1962 (WA) and the Corporations Act 2001 (Cth).

22 Section 89 of the Trustees Act 1962 (WA) is headed "Additional powers, Court may confer on trustee etc." Section 89(1) relevantly provides:

"(1) Where in the opinion of the Court any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, retention, expenditure or other transaction is expedient in the management or administration of any property vested in a trustee, or would be in the best interests of the persons, or the majority of the persons, beneficially interested under the trust, but it is expedient or difficult or impracticable to effect the disposition or transaction without the assistance of the Court, or it or they cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, the Court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the Court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income."

Section 89(4) provides that an application to the Court under this section may be made by the trustees or by any of them or by any person beneficially interested under the trust.

23 I doubt that s 89(1) may be exercised for the beneficent purposes that the plaintiffs have in mind. This is primarily because, accepting, as I do, that they are trustees of the moneys in their trust account for Smart America, it is difficult to see how it can be said that the proposed transaction whereby those funds would be paid to the Smartworld Creditors' Trust is one in the "best interests of the persons, or the majority of the persons, beneficially interested under the trust". To deprive Smart America of its funds in the manner proposed would, no doubt, benefit the creditors of the Smartworld Creditors' Trust, but, on the evidence before me, not Smart America, which is the relevant beneficiary for the purposes of this provision.

24 Consequently, I do not consider the Court has power to make the order the plaintiffs seek under s 89(1) of the Trustees Act 1962 (WA).

25 Section 90 of the Trustees Act 1961 (WA) is headed "Varying or revoking certain trusts, Court's powers as to". Section 90(1) relevantly provides:

"(1) Without limiting any other powers of the Court, it is hereby declared that, where any property is held on trusts arising under any will, settlement or other disposition, or on the intestacy or partial intestacy of any person, or under any order of the Court, the Court may, if it thinks fit, by order approve on behalf of ¾

(a) any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who, by reason of infancy or other incapacity, is incapable of assenting; or

(b) any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being, at a future date or on the happening of a future event, a person of any specified description or a member of any specified class of persons_;_ but this paragraph does not include any person who would be of that description or a member of that class, if that date had fallen or that event had happened at the date of the application to the Court; or

(c) any unborn or unknown person; or

(d) any person, in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined,

any arrangement (by whomever proposed, and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts."

26 I doubt that s 90(1) can have any application in a case such as the present. This is primarily because, assuming that it can be argued successfully that, amongst other things, the funds held by the plaintiffs constitute "property ... held on trusts arising under any ... other disposition", neither the plaintiffs and, more particularly, Smart America, is a person to which any of pars (a), (b), (c) or (d) of s 90(1) has any application. Section 90(1)(a) would appear to be the most relevant. Smart America would appear to be a person which has a direct vested interest under the trust constituted by the remittance of the funds by Sentor Inc to the plaintiffs. However, it cannot be said that, by reason of infancy or any other incapacity, Smart America is incapable of assenting to an arrangement varying or revoking all or any of the trusts.

27 I would accept, aside from this question, that it may be argued that the funds do constitute "property ... held on trusts arising under any ... disposition". However, plainly they are not property held on trust under any will, settlement, or on the intestacy or partial intestacy of any person, or under any order of the Court.

28 The word "disposition" has been interpreted or construed in numerous statutory contexts. Most recently, the Full Court of this Court (comprised of five members) in Re the Full Board of the Guardianship and Administration Board [2003] WASCA 268, considered the meaning of the word "disposition" as it appears in s 77 of the Guardianship and Administration Act 1990 (WA) which, by subs (1), provides that so long as there is in force a declaration by the Guardianship and Administration Board that a person is in need of an administrator of his estate, that person is, amongst other things, "incapable of entering into any contract or making any disposition in respect of his estate" except to the extent that the administrator, with the consent of the Board, in writing authorises him to do so. EM Heenan J, with whom all members of the Court agreed in whole or in part, concluded that the making of a will or other testamentary instrument by a testator does not constitute a "disposition in respect of his estate" within the meaning of s 77(1) of the Act. McLure J (with whom Steytler J also agreed) agreed with the substance of what EM Heenan J stated in his reasons, save in certain respects on which her Honour delivered a separate judgment.

29 The Full Court recognised that the word "disposition" is not a technical word, but an ordinary English word of wide meaning and that, where not limited by context, the word is sufficient to extend to all acts by which a new interest, legal or equitable, in property is effectually created: at [16] per McLure J; see also Carter v Carter [1896] 1 Ch 62 at 67 per Stirling J.

30 EM Heenan J, at [42], noted that the word "disposition" as used in a range of statutes has been given a broad interpretation. For example, in Duke of Northumberland v Attorney-General [1905] AC 406 at 410 - 411, Lord MacNaghten stated:

"There are two things plain on the face of the Act. In the first place, it is clear that the terms 'disposition' and 'devolution' must have been intended to comprehend and exhaust every conceivable mode by which property can pass, whether by act of parties or by act of the law."

But as EM Heenan J added, in interpreting the meaning of a word in a particular statutory context, the task of the Court must be to ascertain the meaning of the word or phrase intended by Parliament in the particular location, having regard to its context and the purpose of the Act, which is to be identified from reading it as a whole.

31 In the context of s 90(1) of the Trustees Act 1962 (WA), the word "disposition" is used in relation to "property" which is held on trust arising, amongst other things, from a "disposition". In this context, I consider the expression "disposition" means any act whereby "property" has been put into the hands of a person and is held by that person on trust for another person.

32 In the present circumstances, following the sale to Sentor Inc of certain goods belonging to Smart America, Sentor Inc forwarded the proceeds of sale to the plaintiffs who have held them ever since in their trust account for Smart America. It seems Smart America did not have any relevant officer or authorised representative available to receive those proceeds of sale. The funds do not belong to the company or to the plaintiffs. The plaintiffs accept that they hold the funds for Smart America.

33 As a result, it seems to follow that the funds held by the plaintiffs for Smart America constitute property held on trust arising under a disposition, the disposition being the act of Sentor Inc in forwarding to the plaintiffs the proceeds of sale of property belonging to Smart America.

34 However, as noted above, while there may well be a "disposition" which has created a "trust" of the funds held by the plaintiffs, I do not otherwise consider that s 90(1) can have any application in this case.

35 In any event, there does not appear to be any relevant "arrangement" whereby the trusts would be varied or revoked. The trustees, being the plaintiffs, are simply seeking an authorisation to pay the funds they hold on trust to a third party who it is said has a right of action in debt against the beneficiary.

36 I do not consider that s 90(1) of the Trustees Act 1962 (WA) permits the Court to make an order authorising such an arrangement in respect of a corporation such as Smart America, albeit that its incorporation status is currently suspended in the State of California. Any such order would plainly be to the detriment of Smart America.

37 Indeed s 90(2) of the Trustees Act 1962 (WA) expressly provides that except where the Court approves an arrangement on behalf of a person referred to in subs (1)(d) (which is not relevant here), the Court shall not approve an arrangement on behalf of any person if the arrangement is to his detriment.

38 It follows that s 90(1) of the Trustees Act 1962 (WA) cannot support the making of the order proposed by the plaintiffs.

39 Section 92 of the Trustees Act 1962 (WA) is headed "Directions, trustee may ask Court for". Section 92(1) relevantly provides that:

"(1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee."

40 I doubt that s 92(1) can be relied upon to make an order of the nature sought by the plaintiffs in this case. I do not consider that this power permits an order directing that the property be disposed of so that the trust is, in effect, terminated. I apprehend that the power to make directions concerning any property subject to a trust, is to be exercised on the understanding that any direction made will permit the more efficacious management or administration of that trust.

41 In Dal Pont & Chalmers: Equity and Trusts in Australia and New Zealand, (2nd ed) at 668, the learned authors describe this statutory jurisdiction in the following terms:

"This statutory jurisdiction is intended essentially for private advice by the court to trustees as to what course of action they should follow where they are in doubt as to the propriety of the action contemplated. The applicant must place before the court all relevant evidence such that the court is fully informed as to the matter in issue. Three situations in which approach to the court is particularly useful are where: (a) the issue is whether legal proceedings ought to be instituted or defended; (b) it is desired to effect an early distribution of an estate; and (c) the trustee is in doubt as to the extent of her or his powers under the trust instrument.

Types of advice which may be sought include questions in connection with the rights and interests of beneficiaries or creditors, jurisdictional queries, whether further inquiries should be made in certain circumstances, the ascertainment of any class of beneficiaries or creditors, the furnishing of accounts, the settling of minor administration problems, and the approval of dealings with the trust property.

The procedure should not be used to determine substantive issues, such as issues of interpretation of the trust document which involve the question of breach of trust by any of the trustees; for the purpose of securing additional powers for the trustees; and for resolving a contest between the trustees or other parties to a trust. Nor should it be used to determine respective rights of beneficiaries. These are matters in respect of which beneficiaries are entitled to initiate proceedings." [Footnotes omitted]

42 In Featherby v Grljusich, unreported; SCt of WA; Library No 980238; 1 May 1998, Parker J held that it was not open to the Court under s 92(1) to make "directions" concerning the amount of remuneration to which the trustees were properly entitled for their administration of a trust. He did not consider it fell within the phrase "respecting the management or administration of that property". His Honour also accepted that there was force in a submission that the relief sought was not by way of "directions", but constituted a decision and consequential order by way of resolution of a dispute as to the quantum of the trustees' remuneration.

43 In Perpetual Trustees WA Ltd as Executor of the Will of Goyder (Dec) v Goyder, unreported; SCt of WA (Commissioner Martin); Library No 990138, 24 March 1999, the executor of the estate of the deceased sought a direction under s 92 as to whether certain moneys advanced by the deceased to the second defendant constituted a loan or a gift. The Commissioner raised with all counsel at the commencement of the hearing, a question whether the relief was, in truth, a "direction" within the meaning of s 92 of the Trustees Act 1962 (WA) and, if not, whether the jurisdiction of the Court under that section was limited to giving directions to a trustee as to the manner in which it should administer the trust estate - for example, in the present case, as to whether it should commence proceedings for recovery of the amount in question or alternatively administer the estate on the basis that the estate had no further rights in respect of the amount advanced to the second defendant. In Goyder, it was accepted that the parties had joined issue on the substantive question of whether in fact the amount advanced by the deceased during his lifetime to the second defendant was a gift or a loan and were seeking a substantive and final determination of that question. In those circumstances, the Commissioner observed that it seemed to him that relief limited to a direction to the executor as to the manner in which it should administer the estate would not necessarily do complete justice as between the parties then before the Court because it would leave open the theoretical possibility of subsequent disputation. As a result, all counsel concurred with the suggestion that it was appropriate to treat the proceedings as if they were proceedings for declaratory relief on this question.

44 In Nevin v The Beneficiaries of The Bremer Bay Estate Trust [2002] WASC 24, Pullin J dealt with an application for a direction under s 92(1) of the Trustees Act 1962 (WA). The trustee of the land had its solicitors write to co-owners concerning a proposal to sell the land and divide the proceeds of sale amongst the co-owners. Almost all of the co-owners who replied to the letter from the trustee's solicitor favoured a sale of the land. The trustee approached the Court for directions. Pullin J noted that a trustee has a general power to sell property under s 27(1)(a) of the Trustees Act 1962 (WA). The trustee wished to exercise that power of sale, but sought directions under s 92(1) of the Trustees Act 1962 (WA). The direction was sought in relation to the power of sale vested in the trustee pursuant to s 27. Pullin J noted that the authorities suggest that if advice is given by a Court under s 92, it should be conservative advice: Re J S Mitchell (Dec) (1913) 30 WN (NSW) 137. Pullin J was prepared to give advice that the trustee should exercise the power of sale providing such sale is effected in a way which is calculated to achieve the highest price for the land. He then made appropriate directions concerning advertising and sale.

45 In Re Global Finance Group Pty Ltd (In Liq) (Supervisor Appointed) and Global Mortgage Investments Pty Ltd (In Liq); Ex parte Read and Herbert (As Liquidators of Global Mortgage Investments Pty Ltd and as Liquidators of Global Finance Group Pty Ltd) [2002] WASC 63; (2002) 26 WAR 385 , McLure J dealt with an application for orders made pursuant to s 89 and s 92 of the Trustees Act 1962 (WA) concerning the distribution of moneys held in trust by Global Finance Group and related matters. Her Honour noted, at [327], that she had some initial reservations concerning the power of the Court to give binding directions affecting all relevant parties under these provisions. Her reservations stemmed from concern as to whether the applicants' recommendations effected a variation to any of the relevant trusts. But after due consideration, she concluded that they did not. Her Honour noted that she was faced with the task of deciding how to allocate losses arising out of a trust fund in which there is a shortfall. That process did not result in a variation to beneficiaries' rights.

46 I note that in Re Aldex Distributors Pty Ltd; Ex parte Butterell (1994) 12 ACLC 489, Young J in the Supreme Court of New South Wales Equity Division considered s 63 of the Trustee Act 1925 (NSW), which had some resemblance to s 92(1), as well as s 447D of the Corporations Act 2001 (Cth), to which I turn below. Mr Butterell was the administrator of the company before it went into liquidation. He applied to the Court about three issues:

(1) how far the administrator may retain moneys for remuneration;

(2) how to deal with his desire to keep a fund to meet obligations incurred whilst administrator; and

(3) his rights generally against a secured creditor.

47 Of the power given to the Court by s 447D, Young J considered the power exists so that, in the course of conducting the affairs of the company as administrator, the relevant person has access to quick, reliable advice in which he can administer the company to the benefit of creditors. His Honour did not think, however, that once a person had ceased to be an administrator that need existed any longer. The administrator, he considered, was "really arguing about his own personal rights and property, which is not a matter to which s 447D was directed".

48 Mr Butterell held a fund containing some $99,000 in a bank account for the secured creditor, subject to his own rights. As a result, Young J thought it could be fairly said that the plaintiff is a "trustee" within the meaning of s 63 of the Trustee Act 1925 (NSW). Section 63(1) and (2) of the Trustee Act 1925 (NSW), at material times, provided as follows:

"63(1) A trustee may apply to the court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.

(2) If the trustee acts in accordance with the opinion advice or direction, the trustee shall be deemed, so far as regards the trustee's own responsibility, to have discharged the trustee's duty as trustee in respect of the subject matter of the application ... ".

49 Young J considered that, even if he were incorrect concerning the power of the Court to give advice under s 63 of the Trustee Act 1925 (NSW), s 23 of the Supreme Court Act 1970 (NSW) confers on the Court "plenary power to do justice" and so could allow the Court to act in the same manner that the Court might under the Corporations Law and the Trustee Act 1925 (NSW) in respect of the plaintiff, even though an administrator is not an officer of the Court as is a receiver or liquidator, and that the Court should be available to give directions to a person who has ceased to be an administrator in circumstances such as that before that Court. In the event, Young J formed the view that the appropriate form of order was the order under s 63 of the Trustee Act 1925 (NSW), that is, that the Court by order should give advice. But, for other reasons, the Court considered it better to express its order as being made under s 23 of the Supreme Court Act 1970 (NSW).

50 In the event, the Court, by order made under s 23 of the Supreme Court Act 1970 (NSW), advised the plaintiff that he would be justified in retaining possession of $7,651.66, being the amount involved in the dispute between the plaintiff and the secured creditor until that dispute is resolved. The Court also advised the plaintiff that he would be justified in paying over the balance of the fund to the Commonwealth Bank of Australia, or the receivers appointed by it to the company, upon an acknowledgement by the bank that it holds the balance of the fund paid over subject to any equitable lien for remuneration or incidental expenses which the Court may hold exists in certain proceedings. In lieu of any such acknowledgement, the plaintiff may accept an undertaking by the bank to pay to the plaintiff an amount equivalent to the amount, if any, that the Court finds is the subject of an equitable lien in those circumstances.

51 Accepting the merits of the order made by Young J pursuant to s 23 of the Supreme Court Act 1970 (NSW), it must be said that the circumstances entertained by the Court leading to that order were quite special and different from the circumstances that the plaintiffs in this case find themselves. The order made by the Court in that case did not result in the trustee acquitting the funds it held to a third party without qualification. Rather, the trustee was authorised to retain possession of certain funds pending resolution of a dispute and to pay other funds to a bank upon acknowledgement by the bank that it held the balance of the funds paid over subject to any equitable lien for remuneration or incidental expenses which the Court may hold exists in certain proceedings. In this present application, it is simply proposed that a trustee pay over moneys to a third party effectively in satisfaction of a debt that the beneficiary is alleged to owe to the party to whom the funds would be paid. Such an order would be made in the absence of any judgment against the beneficiary in respect of the alleged debt, or any determination of the merits of the claim of debt.

52 Further, under s 63 of the Trustee Act 1925 (NSW), the Court is expressly authorised to give its "opinion advice or direction" to a trustee, whereas under s 92(1) of the Trustees Act 1962 (WA) only "directions" may be given.

53 It should also be observed that there is no statutory equivalent to s 23 of the Supreme Court Act 1970 (NSW) in this State. Section 16(1)(d)(i) of the Supreme Court Act 1935 (WA), which provides that subject as otherwise provided in the Act or to any other enactment in force in the State, the Supreme Court "shall be a court of equity, with power and authority within Western Australia and its dependencies ... to administer justice" would appear to be the statutory provision most similar to s 23 of the New South Wales Act: Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334 at 341, the Full Court. However, a remedy such as that granted by Young J in Ex parte Butterell would not, on the face of it, appear to be a remedy that a "court of equity" of the type envisaged by s 16(1)(d) of the Supreme Court Act 1935 (WA) could contemplate. Young J, as I would apprehend it, construed the "plenary power to do justice" under s 23 of the Supreme Court Act 1970 (NSW) as a freestanding statutory power and not a particular power that a court of equity may exercise.

54 Therefore, I do not consider that the Court has any power under s 16(1) of the Supreme Court Act 1935 (WA), to make the order of the type sought by the plaintiffs on this application.

55 Nor, in the present circumstances, do I consider that s 92(1) of the Trustees Act 1962 (WA) permits the Court to make a direction authorising the payment of the funds the plaintiffs hold on trust for Smart America to the Smartworld Creditors' Trust. Any such direction would not, in my view, be characterisable as a direction "respecting the management or administration" of the property the subject of the trust or indeed "respecting the exercise of any power or discretion vested in the trustee". Indeed, it may be doubted that any such order would constitute a "direction" in the sense in which that word is used in s 92(1). Section 92(1) appears to contemplate the continuation of the trust following the directions. If an order were made in terms proposed by the plaintiffs on this application, the trust would be terminated to the permanent detriment of the beneficiary.

Sections 447A and 447D Corporations Act 2001 (Cth)

56 Section 447A of the Corporations Act 2001 (Cth), which is headed "General power to make orders", specifically provides that:

"(1) The Court may make such orders as it thinks appropriate about how this Part is to operate in relation to a particular company.

(2) For example, if the Court is satisfied that the administration of a company should end:

(a) because the company is solvent; or

(b) because provisions of this Part are being abused; or

(c) for some other reason;

the Court may order under subsection (1) that the administration is to end.

(3) An order may be made subject to conditions.

(4) An order may be made on the application of:

(a) the company; or

(b) ...

(c) in the case of a company under administration - the administrator the company; or

(d) ...

(e) ...

(f) ..."

57 Section 447D of the Corporations Act 2001 (Cth), which has the heading "Administrator may seek directions", provides that:

"(1) The administrator of a company under administration, or of a deed of company arrangement, may apply to the Court for directions about a matter arising in connection with the performance or exercise of any of the administrator's functions and powers.

(3) The administrator of a deed of company arrangement may apply to the Court for directions about a matter arising in connection with the operation of, or giving effect to, the deed."

58 I can see nothing in either of these subsections which would authorise the Court to make an order of the type sought by the plaintiffs.

59 The payment of funds belonging to Smart America to the Smartworld Creditors' Trust is not, in my view, a matter "arising in connection with the performance or exercise of any of the administrator's functions and powers". Nor do I think that a direction permitting such a payment is a "direction about a matter arising in connection with the operation of, or giving effect to, the deed (of company arrangement)". Rather, payment of the moneys held by the plaintiffs in trust for Smart America is a matter directly concerned with the trust relationship with Smart America, albeit that the plaintiffs received the funds because they were administrators of the company which wholly owns Smart America.

60 In these circumstances, I am not satisfied that the Court has the power under s 447A and s 447D of the Corporations Act 2001 (Cth) to make any "directions" in terms of the order that the plaintiffs seek on this application. The plaintiffs make their application as trustees of the funds they hold for Smart America and not as administrators of the company.

61 Further, I doubt that, for the reasons given above in relation to s 92 of the Trustees Act 1962 (WA), any such order could be considered "directions" about a matter arising in connection with the performance or exercise of any of the administrator's functions and powers.

62 For these reasons, I do not consider the Court has any power to make an order of the type the plaintiffs seek and would dismiss the application.

Trustees Act 1962(WA)

Corporations Act 2001(Cth)

Administration Act 1990

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (95 paragraphs)

Sections 447A and 447D Corporations Act 2001 (Cth)

Legislation Cited (5)

Cases Cited (3)