Provident Capital Ltd v Agusta Pty Ltd; Agusta Pty Ltd v Provident Capital Ltd

Judgment 1These proceedings concern an application for finance made by Agusta Pty Ltd ( "Agusta" ) in October 2005. An offer was made by Provident Capital Ltd ( "Provident" ) on 16 March 2006, which offer was accepted by Agusta and guaranteed by Ms Nida Ferella, who was at the time a director of Agusta. 2Agusta was described in the loan application and the letter of 16 March 2006 as trustee of the Cavallino Trust ( "the Trust" ). 3The Trust had been established in 1995. It has had a number of names and has had a number of trustees. On 19 April 2005, Mr Gustavo Ferella and Mr Angelo Ferella ( "the Ferellas" ) resigned as trustees of the Trust and were replaced by Riva (NSW) Pty Ltd ( "Riva" ). On 14 October 2005, the Ferellas were declared bankrupt. On 9 February 2006, Riva resigned as trustee and Agusta was appointed trustee by deed dated 9 February 2006: see pages 54-55 of Exhibit A (" the Court Book" ). This deed is signed by Ms Ferella on behalf of both Riva and Agusta. According to Exhibits C and D, Ms Ferella was a director of both these companies on that date. 4By the letter of offer, Provident offered a loan of $5.5million, which offer was accepted by Agusta. Agusta agreed to pay several amounts to Provident even if the loan contemplated by the letter of offer did not proceed: see pages 59-64 of the Court Book. Ms Ferella guaranteed the amounts due from Agusta. The loan did not proceed. Provident sought payment of the amounts due under the loan agreement from both Agusta and Ms Ferella, and following non-payment, Provident commenced proceedings in the District Court. 5On 23 November 2007, Provident obtained judgment in the District Court against both Agusta and Ms Ferella for $119,341 and interest in the amount of $19,225.35 ( "Judgment Debt" ). No appeal was brought by Agusta or Ms Ferella. 6Provident sought to enforce the Judgment Debt obtained by it against Agusta by a writ of execution taken out on 18 June 2009 on a property at Kings Park (" the Property" ) of which Agusta was the registered proprietor. 7On 18 June 2010 it appears that the writ expired and notwithstanding the efforts of Provident to prevent any dealing with the Property between 18 June and 23 June 2010, Riva, on 23 June 2010, was able to lodge a transfer of the Property from Agusta to itself. Riva had earlier complained to the Sheriff about the execution of the writ on the Property and had commenced proceedings in both the District Court and this Court in that connection. The proceedings in the District Court did not proceed but in this Court Riva brought proceedings on behalf of the Trust asserting that Agusta had not been properly appointed and claiming that Riva should be the registered proprietor of the Property. 8Following the lapsing of the writ and the registration of Riva, Riva no longer needed the intervention of the Court to become registered proprietor and the only relief now sought by Riva is the removal of a notation on the title: "AFS97049 NOTE: NO DEALINGS TO BE REGISTERED. REFER ALL INQUIRIES TO LEG 2. SEE LM 220100868" 9Provident maintains that the transfer of the Property by Agusta to Riva falls within s 37A of the Conveyancing Act 1919 (NSW)("the Act") which is in the following terms: "(1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors." 10Ms B Nolan of counsel appears for Provident and Mr J E O'Sullivan of counsel appears for Agusta and Riva. 11Agusta had become the registered proprietor of the Property on 1 May 2006 when the Ferellas, who had been trustees of the Trust until 19 April 2005 executed, a transfer to Agusta from themselves as registered proprietors of the Property. Since the Ferellas were no longer trustees of the Trust, if the Property was Trust property, which both parties accept it was, they were entitled to transfer it to the new trustee. If the Ferellas owned the Property beneficially, then they had no power to transfer the Property because it would pass to their trustee in bankruptcy. There was initially a suggestion, on behalf of Riva and Agusta, that the transfer from the Ferellas to Agusta was invalid because they were, at the time of the transfer, undischarged bankrupts, but I think it was accepted that since they were trustees only they were entitled to transfer the Property to a new trustee, namely Agusta. 12It was also asserted that Agusta was not validly appointed as trustee of the Trust. Whilst it is possible that Agusta was not validly appointed as trustee, I do not think that this has been established. I proceed upon the basis that Agusta was entitled to act as trustee of the Trust in 2006. It was not suggested by either party that the appointment of Riva as trustee in 2008 was an invalid appointment, and so I proceed on the basis that that too was a valid appointment. 13The case for Riva and Agusta is that Riva was entitled and required, as trustee, to ensure the transfer of the Property to itself and that Agusta consented to that course by execution of the transfer on 23 June 2010. Prior to that date, the transfer could not be lodged because Provident had lodged a writ on title which writ lapsed on 18 June 2010. There was also a mortgage on title which mortgage was discharged on 23 June 2010 (see second page of Exhibit B). That mortgage would appear to be one to Perpetual Trustee (see Exhibit B), but it was not identified and no details of the amount owing on the mortgage as at 23 June 2010 were provided to the Court. 14Agusta and Riva, by the amended summons filed in this Court, sought declarations that Riva was the registered proprietor of the Property and an order that the Torrens Title register ( the "Register" ) should be amended to reflect that. The summons asserted that Agusta had been invalidly recorded as registered proprietor and did not hold the Property in its own right (see page 2 of the Court Book). Agusta and Riva do not now press for any relief other than the removal of the notation on the Register referred to in [8] above because on the lapsing of Provident's writ, Riva was able to register the transfer. It was accepted by Ms Nolan that the lapsing of the writ did not occur by reason of anything done by Agusta or Riva. Indeed, the lapsing was described by Ms Nolan as resulting from a "bungle" in the District Court registry. It is not clear how exactly the writ came to lapse without being replaced by a new writ, but it is clear that it did so lapse and it is accepted that the reason for the lapse has nothing to do with Riva or Agusta. It appears that the inability of Provident to execute the writ within the 12-month period was a result of action taken by and complaints made to the Sheriff by Agusta. 15In Agusta Pty Ltd as trustees for Cavallino Unit Trust v Official Trustee in Bankruptcy as trustee of bankrupt Estates of Ferella [2008] NSWSC 685 ("Proceedings 4820/06"), Agusta and Riva sought a determination as against the Official Trustee in Bankruptcy that first Riva had been appointed trustee of the Trust and then Agusta had been appointed, and that the Official Trustee in Bankruptcy had no claim on the balance of the sale proceeds obtained from the Point Piper property (that property was the subject, incidentally, of the Provident agreement). Nicholas J noted at [23]: "Initially, [Agusta and Riva] contended that the Ferellas had been replaced as trustees by Agusta, alternatively, by Riva. However, during the course of submissions the case for Agusta was not pressed and the preference for Riva was stated (T pp 175, 181 and 186). I was left with the impression that the plaintiffs accepted the indubitably correct situation that upon the bankruptcy of the Ferellas s 5 and s 58(1) of the Bankruptcy Act 1966 (Cth) operated to vest the rights and powers attached to their units in the defendant so that they became unable to vote for, or to otherwise approve, a change to Agusta under either cl 15(a) or cl 15(b) of the trust deed. (See Wood v W & G Dean Pty Ltd [1929] HCA 44 ; (1929) 43 CLR 77, per Isaacs J.) Accordingly, I have proceeded on the basis that it was Riva which the plaintiffs finally claimed to be the trustee at the relevant time. In support, they relied upon the deed of 19 April 2005 and the remedial deed of 5 April 2006." 16Nicholas J determined that although Riva was the trustee at the relevant time, the Trust assets had not vested in Riva. An appeal was brought by Agusta and Riva ( Agusta Pty Ltd v Official Trustee in Bankruptcy (as trustee of estates of Ferella) [2009] NSWCA 129 ) on specific items to which the Official Trustee in Bankruptcy was held to be entitled but the appeal had no relevance to the current matter, save for the Court of Appeal's acceptance at [15] per Tobias JA (with whom Beazley and Macfarlan JJA agreed) of the principles as set out in [35] of Nicholas J's judgment at first instance. Although Riva was found to be the trustee, as against the Official Trustee in Bankruptcy's contention that the Ferellas were the trustees, the question of whether Agusta was validly appointed was not the subject of determination by Nicholas J. It was agreed before me that the determination by Nicholas J that Riva was the trustee from 2005 was not evidence or binding on me and this concession is clearly correct. 17Mr O'Sullivan's submission, however, seems to rely on the conclusion that Riva was held to be the trustee, as justifying a belief that Riva should become the registered proprietor of the Property. This seems to slide into a proposition that Agusta was not acting in bad faith of Provident because it was merely taking steps in accordance with Nicholas J's determination. 18As I have pointed out, Nicholas J's determination that Riva was the trustee was based upon an agreement between Agusta and Riva that Riva was not replaced by Agusta. In any event, I do not think Riva needs to defend the transfer to it of Trust property in a general sense since by deed of 26 July 2008 it had become trustee. A number of submissions were made by Mr O'Sullivan concerning Riva's knowledge and position. The relevant "person" is the debtor ie Agusta, not the transferee, unless the transferee asserts that it is a bona fide purchaser for value without knowledge of the intent to defraud a creditor.