O'Brien v Robsyn Pty Ltd [2011] QSC 399

Background: The respondent, Robsyn Pty Ltd, which is now in liquidation, was appointed trustee of the fund pursuant to a trust deed on 23 November 1996. The applicant is a director of the respondent. The respondent was still trustee of the fund at the time of the acquisition of the unit in 2004.

On or about 28 April 2008, by deed of variation in retirement and appointment of trustee, the respondent was removed as trustee and replaced by the applicant, John Thomas O'Brien and Juanita Michelle O'Brien, who were all members of the fund.

On or about 29 July 2011, by a further deed of variation in retirement and appointment of trustee, the applicant was appointed as sole trustee of the fund. The deed of variation of April 2008 was, the applicant acknowledges, poorly drafted, in that clause 14.2 purported to limit the eligibility of a trustee to a corporation whilst at the same time appointing three individuals.

However, section 12 of the Trusts Act allows members to appoint a person as a new trustee, that section having application notwithstanding the terms of any trust deed pursuant to section 10 of the Trusts Act.

I note for completeness that section 17A of the Superannuation Industry (Supervision) Act 1993 allows self-managed superannuation funds to have trustees who are individuals as long as they are members of the fund.

The unit's registration of title was not transferred from the respondent to the new trustees when the respondent was removed in April 2008 or, for that matter, when the applicant became the sole trustee on or about 29 July 2011.

The respondent was wound up on 20 July 2011, and as correspondence between the solicitors for the applicant and respondent demonstrates, the liquidator has refused to acknowledge the applicant's asserted ownership of the unit as trustee of the fund.

In a letter dated 24 August 2011 to the applicant's solicitor the respondent's solicitor enclosed a current title search for the property which records the registered owner as Robsyn Pty Ltd, without any reference to the fund.

The respondent's solicitor wrote, "It is our client's position that it is the registered owner of the property by virtue of section 46 of the Land Title Act 1994 (Queensland)." The letter foreshadowed an intention to deal with the property in the absence of any application.

The applicant's solicitor confirmed an intention to make application to correct the registered title. By a letter in response on 29 August 2011 the respondent's solicitor asserted the applicant did not have capacity to become a trustee of the superannuation trust because she had entered into bankruptcy on 9 July 2007. That assertion was wrong.

While a person with the applicant's name is listed as a bankrupt on the National Personal Insolvency Index that person is not the applicant. The applicant is not and never has been a bankrupt.

The letter of 29 August 2011 went on to assert, "In any event, your client can not overcome section 46 of the Land Title Act 1994 (Queensland)." The letter emphasized the liquidator's statutory obligations to deal with company assets expeditiously and set a deadline of 2 September 2011 within which it required the applicant to make an application.

The unit is held in trust for the fund. The unit's title registration was not changed when there was a change in the identity of the trustee of the fund, however the evidence filed in support of the application demonstrated without contradiction that regardless of whether the title registration correctly identified the current trustee the unit was held in trust for the fund.

The records of the fund accountants of many years standing indicate that the unit is an asset of the fund. The financial statements and reports of the fund record the payment made for the purchase and record the property as an asset of the fund.

The minutes of a meeting of 17 May 2002, the day on which the contract was executed, record the resolution of the directors of Robsyn Pty Ltd in its capacity as trustee of the JT & PM O'Brien Superannuation Fund, that the company enter into and execute the sale contact in its capacity as trustee of that fund.

The file of Edward Kann, the solicitor acting for the purchaser in that sale, reveals that originally a contract for the purchase was entered into by John and Patricia O'Brien as purchasers, but was rescinded at Mr O'Brien's request as it was intended the unit should be purchased for the fund.

Mr Kann's file contains a letter by facsimile of 14 May 2002 by Mr O'Brien to Mr Kann documenting that request. Mr Kann's file also contains a copy of an email of the same date by him to the vendor's solicitor conveying the request. Further, a letter by the vendor's solicitor dated 21 May 2002 refers to the purchaser as "Robsyn Pty Ltd ATF for JT & PM O'Brien Superannuation Fund".

In accordance with the abovementioned request a further contract was entered into with the purchaser named as Robsyn Pty Ltd as trustee of the JT & PM O'Brien Superannuation Fund. In the contract where the purchaser is named the words "as trustee of the JT & PM O'Brien Superannuation Fund" appear in different writing to the preceding words "Robsyn Pty Ltd".

However, the solicitor then acting has, in explanation, sworn that he inserted those words contemporaneously with the execution and witnessing of the contract on 17 May 2002. Despite this, the Queensland Land Registry transfer form 1 signed for the transferee by Mr Kann names the transferee as Robsyn Pty Ltd, that is; the words "as trustee of the JT & PM O'Brien Superannuation Fund" were not added to the transfer form.

As a result, the registered owner was recorded as Robsyn Pty Ltd without reference to its ownership being in its capacity as trustee for the fund. While it may have been desirable that the title registration made reference to the fund, there is no requirement in the Land Title Act that real property owned on trust must be so identified in the register.

Moreover, the failure to do so does not preclude a registered proprietor from holding real property on trust. The reliance on the respondent's solicitor in correspondence upon section 46 of the Land Title Act which provides that a certificate of title of a lot is conclusive evidence of the indefeasible title of the lot was misconceived and not an argument relied on at the hearing of the application. When there was a change of trustee the trust property vested in the new trustee pursuant to section 15 of the Trusts Act.

The first hearing: It is a requirement of section 47(1)(B) of the Corporations Act that the Court give leave to a party beginning or proceeding with a proceeding against a company which is being wound up or in insolvency. The applicant sought such leave at the hearing of the application on 16 September 2011.

In view of the fact that the proceeding is concerned with the correction of the unit's title registration and that the unit is, and on the evidence has long been, an asset of the superannuation fund and is not an asset of the company which is in liquidation, I took the view this was an appropriate case in which to give leave to proceed with the application, and by these reasons I confirm that leave is given.

At the hearing of the application the respondent's counsel submitted that the hearing should be adjourned with an order that the proceeding continue as if started by claim in accordance with rule 14 of the Uniform Civil Procedure Rules, thus allowing the dispute between the parties to be properly set out in pleadings.

The respondent's counsel referred in particular to rule 11, "a proceeding may be started by application if (a) the only or main issue in the proceeding is an issue of law and a substantial dispute of fact is unlikely". That argument was unconvincing. There was a strong body of evidence in support of the conclusion that the unit was held on trust for the fund and that the applicant is the present trustee.

A substantial dispute of fact was unlikely and the only remaining issue in the proceeding was an issue of law. It was not a matter which called for the dispute between the parties to be properly set out in pleadings. In support of its argument that the proceeding should be adjourned and there be an order that the proceeding continue as if started by claim, the respondent's counsel submitted that would allow the respondent to be in a position to counterclaim for any liabilities it incurred while as acting as a trustee of the super fund.

The respondent's counsel submitted in his outline of argument that those liabilities could potentially include outstanding body corporate fees, as well as the body corporate legal costs as a petitioning creditor.

Those submissions were not materially developed in the course of oral argument, and no submissions were made as to why a counterclaim would be necessary to pursue those aspects rather than them being addressed in argument on the application, in particular as to the appropriate orders to be given.

Another argument in the respondent's outline of submissions was, "Further, it may well be appropriate for the Australian Prudential Authority or the Australian Tax Office to be joined as third party to the proceeding for the reasons set out in paragraph 19-21 of the affidavit of Scott Taylor sworn 16 September 2011".

The paragraphs in the affidavit referred to spoke of the issue of correspondence on the 14th of September 2011 indicating to the applicant's solicitor it did not appear that its client at any stage provided notice to the Australian Prudential Regulation Authority or the Australian Taxation Office in relation to Mr O'Brien and Ms Juanita O'Brien becoming disqualified persons under the Superannuation Industry (Supervision) Act. They asked to be informed if they were correct in that regard, and at the time of the swearing of the affidavit of Mr Taylor there had apparently been a failure to respond to that statement. Again, this aspect of the written submissions was not materially developed in oral submissions.

In the course of argument, when the respondent's counsel was attempting to mount an argument that some doubt lingered on the factual issue of whether or not the unit was held in trust for the fund, it was explained that subpoenas it had caused to issue to third parties involved in the original conveyance of the unit had not been responded to.

There was no record of the content of those subpoenas on the Court file, and the respondent's counsel when asked by me to ascertain what documents were being pursued by those subpoenas was unable, after a short adjournment, to answer that question, apparently because he was unable to raise his instructing solicitor, who was not physically present, by telephone.

The applicant's counsel contended that such materials would inevitably be materials of the kind which had already been produced in the applicant's affidavit evidence, and that such material removed any element of doubt. That submission was likely correct, but I held some misgivings as to the adequacy of the instructions which had been given to the respondent's counsel.

The application was one which the respondent had effectively forced the applicant in to bringing on and bringing on quickly. Notwithstanding my inclination, against that background to then and there give the orders sought by the applicant for the reasons I've already given, I was troubled by the prospect that some of the evidence sought by the subpoenas might become available later in the day and that, while it was admittedly a remote prospect, they might bear materially upon the merits of the application.

I was concerned, in short, not to deprive the respondent of the chance to use the evidence it had sought to gather to present at the application, notwithstanding its failure to do so in time.

Against that background, I reserved my decision and gave leave to the respondent to file and serve affidavit material exhibiting any further evidence on or before Friday, 23 September 2011; leave to the respondent to file and serve a supplementary outline on or before Monday, 26 September 2011, and leave to the applicant to file and serve an outline in reply on or before Wednesday, 28 September 2011. I gave the parties liberty to apply to be further heard, such hearing to be on or before 30 September 2011.

The cross-application: It was apparent at the time of the reserving of the decision that the leave given to the respondent was an indulgence, giving it the chance to file affidavit material, file an outline, and apply to be further heard in respect of the evidence it had apparently sought to obtain by the hearing day.

The respondent did none of those things. Instead, on 28 September 2011 it filed an application applying to the Court for the following orders:

(1) A declaration that the respondent, by its liquidator, is entitled, pursuant to section 72 of the Trusts Act, to realise the unit;

(2) A declaration that the respondent, by its liquidator, is entitled to do all things necessarily consequent upon declaration 1 being made, including but not limited to the appointment of a real estate agent and the determination of the sale/reserve price and any other term of the realisation;

(3) A declaration that the respondent, by its liquidator, is entitled to recoup its costs of realising the asset from the gross sale proceeds;

(4) A declaration that the respondent, by its liquidator, is entitled to pay itself from the gross sale proceeds an amount equal to the unpaid liabilities of the respondent in its capacity as trustee of the trust known as the JT&PT O'Brien Super Fund ("the fund");

(5) further or in the alternative to prayers 1 to 4, a declaration that the respondent, by its liquidator, is entitled, pursuant to section 72 of the Trusts Act, to realise such other assets as may comprise the fund to the extent that the asset is either unavailable for sale or is insufficient to meet the indemnity ("the other assets");

(6) An order that the first respondent, by its liquidator, pay the net sale proceeds from the realisation of the asset or the other assets into Court;

(7) Further or in the alternative to prayers 1 to 6, an order that the applicant in her capacity as joined and several trustee of the fund (along with John Thomas O'Brien and Juanita O'Brien) between 28 April 2008 and 30 June 2011 indemnify the first respondent in respect of any liability that the respondent has incurred in its capacity as trustee of the fund, including but not limited to the judgment debt owing to the body corporate and any liability to the Australian Tax Office;

(8) Further or in the alternative to prayer 7, an order that the applicant in her capacity as joint and several trustee of the fund between 28 April 2008 and 30 June 2011 specifically perform the covenant contained in clause 6.1 of a deed of variation in retirement and appointment of trustees of the fund dated 28 April 2008;

(9) An order that any transfer of the asset by the first respondent to the applicant be stayed until further order;

(10) An order that the applicant indemnify the respondent in respect of the respondent's legal costs in these proceedings.

This second application was filed in the same matter number, 353/11, in which I had reserved my decision. The applicant in its capacity as respondent to the second application contends that a reservation of liberty to apply does not permit a Court to re-open or re-determine in a substantive way a matter already concluded or disposed of. It cites a useful analysis by Wilcox J in Comcare Australia v. Grimes and Anor [1994] FCA 1054; [1994] 121 ALR 485 at 487 of the effect of reservation of liberty to apply orders. However, that analysis is more concerned with the giving of liberty to apply at a time after orders have been made.

The position here is somewhat different in that the timing of the liberty to apply and the bringing of any such application was to precede my decision. Nonetheless, it was quite plain from the orders I gave that the liberty to apply contemplated was restricted to an application arising out of the consequences of discovery of evidence of the kind that the respondent had unsuccessfully sought to subpoena for production before the conclusion of the first hearing.

The filing of the second application in the same matter, 353/11, in which I had reserved my decision, could only have been within the orders I gave if it related to the narrow point mentioned above. It does not.

I acknowledge there may exist circumstances in which, because of some intervening event arising while a decision is reserved, it is proper to seek leave to re-open argument in the proceeding and to do so by the filing of a further application in the same matter. However, there appears to have been no intervening event here which might explain why the second application was brought while my decision was reserved.

Further, there is no explanation why the issues sought to be agitated in the second application were not properly agitated in the course of the first application or, alternatively, agitated by way of a cross-application brought at the hearing of the first application.

A significant issue underlying the second application is the very issue on which I reserved judgment; namely, whether the unit is, in truth, an asset of the fund. For that issue to be agitated through the second application, at least indirectly, is an approach tending to undermine the strong emphasis in the authorities on the importance of the finality of proceeding.

The respondent could have, but did not, file a cross-application of the present kind in order that it be heard in conjunction with the applicant's application in the same matter number. Indeed, some of the issues it seeks to raise were touched on in its submissions at the first hearing. For all of these reasons, I was disposed to dismiss the second application. However, lest I was overlooking an issue properly raised relevant to my reserved decision, I, in fairness, permitted its counsel to make submissions on the merits.

Having done so, I agree with the applicant's argument that it is inappropriate for much, if not all, of the relief sought to be pursued in a summary way.

I note the seeking of orders 1, 2 and 9 implicitly acknowledges that the subject property is held on trust. It, of course, was the property the subject of the first application in respect of which the decision was reserved.

As mentioned in argument, at the first application arguments inferentially raised by the nature of the orders sought in the second application were not raised. Some others, at least implicitly arising out of the second application, were ventilated. The point, of course, is that they all were open for argument at the first application.

As to orders 3 and 6, they effectively seek the sanction of this Court of the liquidator's costs in an indeterminate amount. The question of whether the liquidator is entitled to seek costs and the amount of those costs is a matter which requires a hearing as to the issues involved.

Orders 4, 6, 7 and 8 seem to seek this Court to allow the liquidator to unilaterally determine, without a hearing, whether each item the liquidator asserts is a liability of the trust fund is in fact a liability of the trust fund. Again, they are issues of a kind which, if not resolved, require hearing as to the issues.

Order 5, does not appear to be an issue of relevance to the proceeding with which this Court was first concerned.

I agree the summary relief sought is inadequate for the proper ventilation of the issues raised in the application, at least to the extent those issues go beyond those already determined earlier in my decision today. In particular, the items of liability or expenditure to which the respondent lays claim would need to be individually assessed to ascertain whether the qualifying criteria for recovery is satisfied. It is simply not possible, on the materials filed, to properly determine the extent of the trustee's entitlement to indemnity or recoupment against trust assets.

In the course of what was ultimately quite lengthy argument in respect of the indemnity issue, it appeared likely that an appropriate form of proceeding would be an application for the taking of an account; see Warne v. GDK Financial Solutions Pty Ltd; Billingham v. Parbery [2006] NSWSC 259 [194]. The ventilation of this issue, in particular, in the course of argument prompted me to inquire of the parties whether they may be able to reach common ground as to an order additional to my foreshadowed granting of the first application, designed to allow the orderly preservation of the proceeds of sale of the unit pending the resolution of such proceeding as the respondent may initiate in respect of the indemnity issue.

It struck me, in doing so, that it would be in the interests of all parties for some common ground to be reached in order to promote the future orderly conduct of any remaining dispute between the parties. The parties, to their credit, reached common ground on this issue.

In respect of the second application, I conclude that in all the circumstances of the case, it ought not have been brought in respect of the matter which was by then reserved for my decision. Even if I am wrong about that, I conclude the nature of the relief sought was inappropriate for pursuit by way of application.

However, I will, in dismissing the second application, make an order reflecting the parties sensible agreement as to the orderly means of progression of their future dealings relating to the unit, its sale, and the proceeds of sale.

Costs: In respect of the first application, my view is that costs should follow the event. But, given the respondent is in liquidation, the applicant contended that order should be against both the respondent and the liquidator and, what's more, should be on the indemnity basis rather than the standard basis.

In my view, setting aside the argument as to whether costs should be on the indemnity or standard basis, it is an appropriate exercise of my discretion to make a costs order against the liquidator in respect of the first application.

I conclude it is appropriate to do so, not merely by reason of the fact that a costs order against Robsyn is likely worthless. I also have regard to the reality that the liquidator must have been the party instructing lawyers in the proceeding. The manner in which the respondent insisted upon the applicant pursuing the matters it had raised in correspondence by filing an application and by filing it quickly reflects an attitude involving a lack of preparedness to wait and in an orderly fashion hear out the applicant, or at least the applicant's solicitors, and properly consider the materials the applicant's solicitor could progressively provide in support of its position.

Had it not taken the aggressive position of forcing the applicant to make an application and to do so promptly, it is highly likely that it eventually would have been able to satisfy itself in the proper conduct of its duties and obligations as a liquidator as to the veracity of the claims being communicated to it by the applicant's solicitors.

As to whether I ought order indemnity costs as against the liquidator in respect of the first application, I do not intend to do so. Notwithstanding the criticism implicit in the above observations, once the application was under way there continued the provision of further materials.

I note, by way of example, that earlier the applicant's solicitor had foreshadowed the provision of some further materials, but they had not been received until well after the initiation of the application by the liquidator. That is not to complement the liquidator's abovementioned aggressive attitude to the need for the applicant to bring on an application and to do so quickly, but in my view, that background tempers the appropriate approach to take as to costs in this situation.

For all of those reasons I will in due course order that in respect of the first application the costs of the applicant be met by both the respondent and the liquidator on the standard basis.

In respect of the second application my conclusion, ultimately, is that there should be no order as to costs. That might disappoint both ends of the Bar table. My initial inclination in respect of the second application was that costs ought follow the event. That is to say, that there should again be a costs order as against the respondent.

However, there were a number of factors which in combination caused me to conclude that the more appropriate course is to make no order as to costs. One of those considerations is the circular nature of what was argued before me on the first application and then on the second to the extent that it touched on the indemnity issue.

At the first application it was the respondent's counsel who was arguing that that matter ought be dealt with by way of a proceeding rather than an application and that, in effect, it required proper pleadings. Come the second application and it was the applicant's counsel who was urging a similar view.

Another aspect to which I give weight is that while the respondent's application has failed in the sense that the application for the orders sought is dismissed, it has, at another level, enjoyed success.

The success to which I refer is the preservation of its interests through the orders which the parties are in agreement should be made in respect of the payment into Court of a component of the sale proceeds of the property.

It appears to me that the making of that order is not merely in the interests of the respondent, but plainly also in the interests of the applicant who, doubtless, comprehended in the background to deciding to reach common ground that it was in the interests of the applicant also that such dispute as may remain between the parties is progressed in an orderly fashion.

It is against that background that I have concluded in all of the circumstances it is appropriate to make no order as to costs in respect of the second application.

There was a third application, it was filed on the same occasion as the second, and at a directions hearing to discuss the future conduct of it and the second application it was abandoned and thus dismissed.

I reserved costs as to that third application. It is unlikely that it gives rise to any material costs issue, but nonetheless, in my view, costs should simply follow the event so far as that application is concerned.

In respect of the application filed 2 September 2011 I:

(1) declare that the applicant is the legal owner of the property located at lot 147 on SP140116 County of Stanley Parish of North Brisbane, title reference 50494813 ("the property") as trustee for the JT & PM O'Brien Superannuation Fund;

(2) order the respondent to sign all such documents and to do all such things as may be necessary or convenient to transfer the title of the property from the respondent to the applicant;

(3) order that the respondent and Peter Dinoris pay the applicant's costs of and incidental to the application to be assessed on the standard basis.

In respect of the 11 paragraph application (referred to in my reasons as the second application) filed 28 September 2011, I order:

(a) at any settlement of a contract for the sale of the property located at lot 147 on SP140116 County of Stanley Parish of North Brisbane title reference 50494813 ("the property") entered into by the applicant, the applicant will cause a cheque to be paid into this honourable Court in the sum of $60,000 ("the fund");

(b) in the event that no proceedings are commenced by the respondent within two months of the date of the above payment into Court and served on the solicitors for the applicant, the fund is to be released by this honourable Court to the applicant and an affidavit by the solicitors for the applicant deposing to the fact that no proceedings have been served on them will be sufficient for the purposes of such release;

(c) otherwise, the fund is only to be released by this honourable Court:

(i) to the party/parties nominated in a consent signed by both parties and filed in this proceeding; or

(ii) in accordance with an order of this honourable Court;

(d) either party has liberty to apply on the giving of two business days notice to the other party on any matters necessary to carry into effect the orders and/or directions of the Court dated 7 October 2011;

(3) that there be no order as to costs in respect of this application.

In respect of the four paragraph application (referred to in my reasons as the third application), I order that the respondent and Peter Dinoris pay the applicant's costs of and incidental to the application to be assessed on the standard basis (to remove doubt, the applicant as referred to throughout these orders is Patricia May O'Brien as trustee for the JT&PM O'Brien Superannuation Fund and the respondent is Robsyn Pty Ltd (in liquidation) ACN 073 558 611).