Trevan v Giezekamp, in the matter of DITPJG Holdings Australia Pty Ltd

Introduction 1 By an interlocutory process filed on 10 August 2023, the plaintiffs seek an order pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) that a receiver and manager be appointed over the property, assets, and undertaking of The DITPJG Holdings Australia Unit Trust (the Trust) or, alternatively, over the land known as 11 Eileen Street, Hadfield, Victoria (the Hadfield property or the property). 2 The Hadfield property is the principal asset of the Trust. The trustee of the Trust is the second defendant, DITPJG Holdings Australia Pty Ltd (the company). As its name signifies, the Trust is a unit trust. The units in the trust are held by the second plaintiff and the third defendant, respectively. The second plaintiff is the trustee of a trust associated with the first plaintiff, David Ian Trevan. The third defendant is the trustee of a trust associated with the first defendant, Paul Jacques Giezekamp. The company has two issued shares. One share is held by Mr Trevan, who is a director and secretary of the company. The other share is held by Mr Giezekamp, who is also a director and secretary of the company. 3 In the principal proceeding, the plaintiffs seek an order that the company be wound up on the just and equitable ground: s 461(1)(k) of the Corporations Act 2001 (Cth) (the Corporations Act). 4 I am persuaded that a receiver and manager should be appointed to the property, assets, and undertaking of the Trust.

Background 5 On 8 January 2020, Mr Trevan and Mr Giezekamp entered into a Joint Venture Agreement (the JVA) to acquire and develop the Hadfield property into multi-density townhouses for the purpose of ultimate sale. Uptown Construction & Developments Pty Ltd (Uptown Developments) was identified in the JVA as the builder for the development. Mr Giezekamp had responsibility for the overall co-ordination of the project, liaising with all service providers and suppliers, and the payment of all accounts, amongst other responsibilities. 6 As events transpired, the joint venture was pursued through the Trust with the company acting as trustee. This structure appears to have been used to enable Mr Trevan to contribute funds to the joint venture through his personal superannuation fund. 7 The company acquired the Hadfield property in June 2020 using funds borrowed from Westpac Banking Corporation (Westpac) that were obtained through RAMS Financial Group Pty Ltd (RAMS). Westpac is registered as the mortgagee of the property. Mr Trevan and Mr Giezekamp have guaranteed the repayment of the borrowed funds. 8 The property was also to be developed using borrowed funds. Despite numerous attempts, funding has not been obtained. The venture cannot proceed. Both Mr Trevan and Mr Giezekamp agree that the Hadfield property should be sold, but that is where their agreement ends. 9 Mr Trevan says that his relationship with Mr Giezekamp has broken down irretrievably and that the sale of the property should be pursued through the instrumentality of an independent third party - hence the present application. 10 There are a number of reasons why Mr Trevan says that his relationship with Mr Giezekamp has broken down. 11 First, Mr Trevan is concerned that between 10 January 2020 and 21 February 2020, payments totalling $684,250 were made to Uptown Developments from the company's bank account with Westpac. Mr Trevan has queried this payment. For some considerable time he has unsuccessfully pressed Mr Giezekamp and others for information about it. His evidence is that, having asked to be provided with a receipt from Uptown Developments for this amount, he was recently told by Mr Giezekamp that this sum had been transferred to another builder, Apex Homes Australia Pty Ltd (Apex), and "forfeited". 12 Mr Giezekamp's evidence is that the amount of $684,250 was referred to in a spreadsheet he provided to Mr Trevan on 18 December 2019, and comprises two components: a deposit of $84,250 paid to Uptown Developments (based on 5% of the estimated building cost of the development); and $600,000 paid to Uptown Developments to "lock in the price for the works, as the building contract had not been signed". Mr Giezekamp says that the last-mentioned payment was intended to assist in obtaining construction finance by demonstrating to the intended lender that funding was only required for approximately two thirds of the anticipated construction cost. 13 Mr Giezekamp says that in late June or early July 2020, Uptown Developments revised the period for the build and the price for the work. He says that he informed Mr Trevan of this fact, and that they agreed to change builders. Mr Giezekamp says that, thereafter, he and Mr Trevan signed a construction contract with Adore Homes Pty Ltd (Adore) in mid-July 2020. However, Mr Giezekamp also says that, when making an application for construction finance from the Commonwealth Bank of Australia in about June 2021, he was told by the bank that its preference was that Adore's "sister company", Apex, be the builder. The correspondence that is in evidence confirms Mr Giezekamp's evidence concerning the communications with Mr Trevan on these matters. 14 Mr Giezekamp says that he and Mr Trevan signed a construction contract with Apex on 21 June 2021. The copy of the contract that is in evidence only bears what appears to be an electronic signature for Mr Giezekamp. Mr Trevan says that he has no recollection of signing the construction contract with Apex. 15 Mr Giezekamp says, further, that, after the contract was signed with Adore, he had been told by Adore (Mr Giezekamp did not name any individual) that the money paid to Uptown Developments had been transferred to and received by Adore. He also says that, after signing the contract with Apex, he was informed by Tim Tasci (an individual at Apex) that the money paid by Uptown Developments to Adore had been transferred by Adore to Apex. Mr Giezekamp denies that he told Mr Trevan that the money has been "forfeited". There is no evidence of these transfers beyond Mr Giezekamp's assertions in his affidavit made on 14 September 2023, and no elucidation by Mr Giezekamp as to the status of this money. 16 Mr Trevan is not satisfied with, and is not prepared to act on, Mr Giezekamp's assertions about the payment of $684,250 paid to Uptown Developments. 17 Further, on 14 June 2023, Mr Trevan issued a dispute notice under the JVA seeking, amongst other things, a complete accounting by Mr Giezekamp of all money expended by the company in respect of the joint venture. Mr Giezekamp has not responded to this notice. 18 Secondly, Mr Trevan is concerned that the company has defaulted in its mortgage repayments to Westpac. The evidence is that the company has been in default since 4 April 2023. 19 Mr Trevan says that in June 2023 he was informed by RAMS that a default notice had been issued to the company on 7 March 2023. Mr Giezekamp has management responsibility for the company's dealings with the bank. Mr Trevan says that he did not receive a copy of the default notice and that Mr Giezekamp did not inform him of the default. Mr Trevan is concerned that the default has not been rectified, particularly as he is one of the guarantors of the loan. As at 5 September 2023, the outstanding balance of the loan was $947,216.83. 20 Mr Giezekamp's evidence is that Mr Trevan has not made contributions to payments of the loan, as required by the JVA, since 6 May 2022. Mr Giezekamp says that, on 1 August 2023, he entered into a payment arrangement with RAMS to pay the current arrears, with the next payment to be made by 29 August 2023. Mr Giezekamp did not make this payment. He says that his available finances at that time were deployed in dealing with a family law matter in which he is involved. He says that, on about 28 August 2023, he entered into a further payment plan with RAMS which involves him making a payment of $35,216.83 to Westpac on 29 September 2023. Mr Giezekamp says that he has the capacity to make this payment. 21 Mr Trevan says that he is financially unable to make further payments in respect of the joint venture. He doubts Mr Giezekamp's ability to keep payment arrangements and points to the fact that Mr Giezekamp has provided no evidence as to his present financial capacity beyond his assertion that he will make the required payment by 29 September 2023. 22 This leads me to the third reason why Mr Trevan says that his relationship with Mr Giezekamp has broken down. In November 2020, Mr Giezekamp approached Mr Trevan for a short term loan (four weeks) of $200,000. Mr Trevan advanced the amount to Mr Giezekamp in late November 2020. The loan has not been paid and Mr Trevan has commenced proceedings against Mr Giezekamp in the District Court of New South Wales to recover the sum. This is one of the reasons why Mr Trevan doubts Mr Giezekamp's ability to keep his latest payment arrangement with RAMS. 23 Both Mr Trevan and Mr Giezekamp are anxious for the property to be sold as soon as possible. Mr Giezekamp says that he agreed in May 2023 that the property should be sold. He says, however, that Mr Trevan has refused to execute a contract for sale of the property, which Mr Giezekamp sent on 2 May 2023. 24 Mr Giezekamp's evidence on this matter requires elaboration. On 2 May 2023, Mr Giezekamp wrote (by email) to Mr Trevan saying that, on the following day, he was meeting with an unnamed investor who was interested in purchasing the Hadfield property. Mr Giezekamp attached an automated estimated valuation of the property that he had obtained from CoreLogic. The valuation was for $1,130,000. In his email, Mr Giezekamp said that he would "request" this sum from "the incoming buyer". In a subsequent email that day, Mr Giezekamp calculated $135,987 as the "approximate net figure" which would be available after settlement and paid to Mr Trevan as a "full and final payment" with "all previous agreements [between Mr Trevan and Mr Giezekamp] terminated". The proposed arrangement was not, and is not, acceptable to Mr Trevan.

The parties' positions 25 As noted, Mr Trevan's position is that a receiver and manager should be appointed: there is no finance for the development and the joint venture cannot proceed; the mortgage with Westpac is in default and the property of the Trust, particularly the Hadfield property, is in jeopardy; and he is concerned about Mr Giezekamp's administration of the joint venture, in particular the payment of the $684,250 to Uptown Developments which, he says, has not been properly accounted for. 26 Mr Giezekamp's position is that a receiver and manager should not be appointed. He contends that such an appointment would be costly and unnecessary; that such an appointment would not protect or preserve the Hadfield property or any other assets of the Trust but would place them in peril because the appointment would be an act of default under the terms of the mortgage with Westpac; and that the application is a belated one in circumstances where (on Mr Giezekamp's case) Mr Trevan is in default under the JVA. 27 Mr Giezekamp's position is that, although his relationship with Mr Trevan is strained, this does not mean that they cannot work together to sell the Hadfield property and wind up the Trust by utilising the provisions of the Trust Deed. Mr Giezekamp argues that this will provide a complete and comparatively inexpensive solution to the parties' "issues".

Consideration 28 Section 57(1) of the Federal Court Act provides that the Court may, at any stage of a proceeding, and on such terms and conditions as it thinks fit, appoint a receiver, by an interlocutory order, "in any case in which it appears to the Court to be just or convenient to do so". 29 In The University of Western Australia v Gray (No 6) [2006] FCA 1825, French J (at [71]) said: 71 The power of the Court to appoint a receiver is statutory. It has its origins, however, as an equitable remedy. An order in the nature of an equitable remedy can be made under s 23 of the Act. The class of circumstances in which such power may be exercised is not closed. Nor are the purposes for which a receiver may be appointed and the powers and conditions attaching to such an appointment. There may be many circumstances of considerable diversity which would warrant such an order and it is important that the discretion not be unnecessarily confined by any particular line of cases to which it has been applied. 30 Although the general ground on which the Court appoints a receiver is the protection or preservation of property, the power is not confined to a closed class of circumstances. 31 In Martyniuk v King [2000] VSC 319, Warren J surveyed the legal principles concerning the appointment of a receiver to trust assets. Her Honour observed (at [14]) that there will be a sufficient foundation for the appointment of a receiver if there has been misconduct, waste, or improper disposition of assets, or if a trust is in a state of disarray, or if the trust property has not been properly managed, or is in danger of being lost, or if it is satisfactorily established that parties in a fiduciary position have been guilty of a breach of duty. These are, of course, examples of when it might be appropriate to appoint a receiver to trust property. Her Honour also noted (at [17]) that it would be appropriate to appoint a receiver where co-trustees cannot agree on the management of the trust, thereby putting the trust property in jeopardy: In the Estate of William Just (deceased) (No 1) (1973) 7 SASR 508 at 514 - 515. 32 The present case is an appropriate one for the appointment of a receiver. I am satisfied that it is just and convenient to do so. The two parties who control the company as equal shareholders, Mr Trevan and Mr Giezekamp, are the two parties to the joint venture. The company, as the trustee of the Trust, is the vehicle for carrying out the joint venture, but the joint venture has stalled and cannot proceed. Mr Trevan and Mr Giezekamp agree that the Hadfield property should be sold - indeed, must be sold - by the company, but they cannot agree on how that should be done. I am satisfied that the relationship between Mr Trevan and Mr Giezekamp has broken down such that they will not reach agreement on that matter, and perhaps other matters involving both the joint venture and the administration of the Trust. 33 Meanwhile, the mortgage to Westpac is in arrears and has been in arrears for some considerable time, with a default notice already having been issued. There is now a substantial risk that the bank will take matters into its own hands, and enforce its rights as mortgagee, as it would be entitled to do. 34 Mr Trevan has also raised serious questions about Mr Giezekamp's administration of the joint venture, including the payment of funds by the company as trustee in circumstances which call for a more complete explanation than Mr Giezekamp has given to date. 35 I am satisfied that there is a prima facie case, with substantial prospects of success, that the final relief that the plaintiffs seek - the winding up of the company - will be granted. If that relief is granted then it can be expected that the liquidator will apply for the appointment of a receiver and manager of the Trust's property, assets, and undertaking as well. In all the circumstances, I am satisfied that the balance of convenience strongly favours the appointment of a receiver and manager now. 36 I acknowledge the real likelihood that Westpac will view the appointment of a receiver and manager as an act of default under its mortgage with the company. However, the company is already in default. With the appointment that is sought, the prospect exists that the bank will be content to leave matters in the hands of an appropriate receiver and manager to realise the Hadfield property. 37 The proposed receiver and manager, Jamieson Andre Louttit, is a registered liquidator and has consented to being appointed as the receiver and manager of the property, assets, and undertaking of the Trust. I am satisfied that he is an appropriate person for appointment. I am also satisfied that he should be given the powers in ss 420(1) and (2) of the Corporations Act. 38 The present application is for the appointment of a receiver and manager on an interim basis. Mr Giezekamp submits that, in these circumstances, the usual considerations of the existence of a prima facie case for final relief, the balance of convenience, and the need for interim relief, are relevant to the exercise of the Court's discretion. However, Mr Giezekamp has not contended that, in the particular circumstances of this case, an undertaking as to damages should be proffered by the plaintiffs as the price for granting the relief they seek; nor have the plaintiffs proffered an undertaking. I have proceeded accordingly.

Disposition 39 Orders 2 and 4 as sought in the interlocutory process dated 9 August 2023 will be granted. The first and third defendants are to pay the plaintiffs' costs. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.