Elite Transport Holdings Pty Ltd v Elite Transporting Services Pty Ltd (In Liquidation) [2011] FCA 85

FEDERAL COURT OF AUSTRALIA

Elite Transport Holdings Pty Ltd v Elite Transporting Services Pty Ltd (In Liquidation) [2011] FCA 85 Citation: Elite Transport Holdings Pty Ltd v Elite Transporting Services Pty Ltd (In Liquidation) [2011] FCA 85

Parties: ELITE TRANSPORT HOLDINGS PTY LTD (ACN 135 968 197) v ELITE TRANSPORTING SERVICES PTY LTD (IN LIQUIDATION) (ACN 113 106 111) and MARK ROUFEIL IN HIS CAPACITY AS LIQUIDATOR OF ELITE TRANSPORTING SERVICES PTY LTD (IN LIQUIDATION)

File number(s): NSD 1120 of 2009

Judge: YATES J

Date of judgment: 11 February 2011

Catchwords: CORPORATIONS – claim by liquidator to property alleged to be trust property – whether applicant replaced the first respondent as trustee of a discretionary trust before the order for the winding-up of the first respondent was made

Cases cited: Kane v Radley-Kane [1999] 1 Ch. 274

Date of hearing: 31 January 2011, 8 February 2011

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 26

Counsel for the Applicant: Mr D Allen

Solicitor for the Applicant: Proctor & Associates

Solicitor for the Respondents: Ms F Reynolds of Turkslegal

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1120 of 2009

BETWEEN: ELITE TRANSPORT HOLDINGS PTY LTD (ACN 135 968 197)

Applicant

AND: ELITE TRANSPORTING SERVICES PTY LTD (IN LIQUIDATION) (ACN 113 106 111)

First Respondent

MARK ROUFEIL IN HIS CAPACITY AS LIQUIDATOR OF ELITE TRANSPORTING SERVICES PTY LTD (IN LIQUIDATION)

Second Respondent

JUDGE: YATES J DATE OF ORDER: 11 FEBRUARY 2011 WHERE MADE: SYDNEY

THE COURT:

1. Grants leave to the applicant, pursuant to s 471B of the Corporations Act 2001 (Cth), to proceed against the first respondent. 2. Declares that the applicant is the trustee for the Elite Transport Holdings Trust ABN 59 075 694 255. 3. Orders that the applicant pay the respondents' costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1120 of 2009

BETWEEN: ELITE TRANSPORT HOLDINGS PTY LTD

(ACN 135 968 197)

Applicant

AND: ELITE TRANSPORTING SERVICES PTY LTD (IN LIQUIDATION) (ACN 113 106 111)

First Respondent

MARK ROUFEIL IN HIS CAPACITY AS LIQUIDATOR OF ELITE TRANSPORTING SERVICES PTY LTD (IN LIQUIDATION)

Second Respondent

JUDGE: YATES J DATE: 11 FEBRUARY 2011 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 16 December 2009 an order was made in this Court that the first respondent be wound-up. The second respondent was appointed as liquidator. 2 By application filed on 30 August 2010 the applicant sought various declarations and other relief in relation to its claimed office as trustee of a trust called The Elite Transport Holdings Trust (the Trust) and as to its ownership of certain property as trust property of the Trust, comprising various motor vehicles and trailers. 3 The essential question before the Court on that application was whether this property, at the time the winding up order was made on 16 December 2009, was owned by the first respondent or whether it was owned by the applicant as the claimed trustee of the Trust. 4 On the second day of the hearing of the application the applicant was granted leave to file an amended application seeking additional relief. However, as events have now transpired, the applicant does not press its claim to that additional relief or, indeed, certain other relief. All that the applicant now seeks is the relief claimed in paragraphs 1 and 2 of the amended application. In essence the applicant seeks a declaration that it is the trustee of the Trust. 5 The second respondent is without funds. He has prepared and filed an affidavit which has been read. He neither consents to nor opposes the relief now sought by the applicant. He has said that he submits to the orders of the Court, save as to costs. For completeness I should also record that the second respondent made clear that this was his position when this matter was originally set down for hearing. Although he sought, at that time, to be excused from further attendance, I made clear that I would be assisted by the attendance of an appropriate legal representative on behalf of the second respondent at the hearing. The second respondent has complied with that request. 6 The applicant relies principally on an affidavit sworn by Mario Peter Lomonaco on 26 August 2010. Mr Lomonaco was a director of the first respondent in the period 24 February 2005 to 24 March 2009. He is currently a director of the applicant. 7 The first respondent was incorporated on 24 February 2005. It carried on business as an interstate transport company. 8 On 1 July 2008 the Trust was established pursuant to a Deed of Settlement executed on that day by David Salvatore Cassaniti as settlor and the first respondent as trustee. The Trust Fund is defined in the Deed of Settlement as including "all money, investments and property paid or transferred to or accepted by the trustee as additions to the Settled Sum". The Settled Sum is identified as the sum of $10.00. 9 Clause 13 of the Deed of Settlement provides in part: POWERS OF APPOINTER TO REPLACE TRUSTEE The Appointer may at any time and from time to time by deed or by notice in writing delivered to the Trustee remove any Trustee hereof in its absolute and unfettered discretion and the right to remove any Trustee hereof and to appoint new or additional Trustees hereof by deed or notice in writing is hereby vested in the Appointer PROVIDED HOWEVER that the Settlor shall not be eligible to be appointed Trustee. Such removal or appointment shall take effect from the date of such notice. … 10 The Appointer is identified in the Deed of Settlement as Peter Karabatsos. Mr Karabatsos was appointed as a director of the first respondent on 24 February 2005 and remains in that office. 11 Clause 6 of the Deed of Settlement provides for the powers of the trustee. Importantly, sub-clause (l) provides that those powers specifically include the power: (l) to deal in any manner whatsoever with the Trustee in its personal capacity or as trustee of other trusts, funds, or otherwise or to any company or partnership in all respects as if there were two separate parties to the dealings notwithstanding that the Trustee is a shareholder, director, member or partner of such company or partnership or related to any wife, husband, child or children of the Trustee; 12 The significance of this power lies in the "general and highly salutary principle of law that a trustee cannot validly contract with himself", save where, for example, there is an express or necessarily implied power in the settlement: Kane v Radley-Kane [1999] 1 Ch. 274 at 279. Clause 6(1) is such a power. 13 According to Mr Lomonaco's affidavit of 26 August 2010, as a director of the first respondent, he resolved that the first respondent should cease trading in its own capacity and that all future trading would be by the first respondent in its capacity as trustee of the Trust. He further resolved that all of the first respondent's assets be transferred to the Trust and that all staff employed by the first respondent be employed by it as trustee of the Trust. These resolutions are evidenced by copies of minutes apparently signed by Mr Lomonaco which relate to two separate meetings on the morning of 1 July 2008. No objection was taken to the tender of the copies of the minutes. 14 According to the minutes of the first of the two meetings, the following resolutions were passed: The Director resolves that Elite Transporting Services Pty Ltd ceases to trade in its own capacity from the date of this meeting. It was further resolved that all future trading be carried out by Elite Transporting Services Pty Ltd in its capacity as trustee of The Elite Transport Solutions Trust ABN: 99 623 526 735 It was further resolved that all assets be transferred to Elite Transporting Services Pty Ltd in its capacity as trustee of the Elite Transport Holdings Trust ABN: 59 075 694 255 It was further resolved that all staff will be employed by Elite Transporting Services Pty Ltd in its capacity as trustee of The Elite Transport Staffing Trust ABN: 24 340 622 968 15 According to the minutes of the second of the two meetings, the following resolutions were passed: That Elite Transporting Services Pty Ltd transfer all assets owned by it in its own capacity to The Elite Transport Holdings Trust ABN: 59 075 694 255. That pursuant to the executed minutes, Elite Transporting Services Pty Ltd be appointed the trustee of the Elite Holdings Trust and will no longer trade in its own capacity. That the consideration for the transfer of the assets be equivalent to the current amounts outstanding on any lease or finance facility attributable to these assets. That the transfer relates to the assets in schedule 1 which is attached. 16 The schedule to those minutes identifies the assets as being various motor vehicles and trailers. 17 No challenge has been made by the second respondent to the validity of the resolutions. 18 Of some significance is the fact that there is in evidence an extract from the Australian Business Register which records that, as at 25 August 2010: (a) an Australian Business Number (ABN) existed for the trustee for The Elite Transport Holdings Trust (which is not the ABN for the first respondent); (b) the ABN status was shown to be active from 1 July 2008; (c) the GST status was shown to be effective from 1 July 2008; (d) the trust in question was a discretionary trust (the kind of trust evidenced by the Deed of Settlement), and (e) the main business location was a location having the 2164 postcode (which the evidence shows to be the postcode for Wetherill Park, the principal place of business recorded for the first respondent). 19 There is also evidence that Business Activity Statements have been lodged in the name of the Trust with the Commissioner of Taxation. Copies of the statements for the 1 July 2008 to 30 September 2008 quarter are in evidence. 20 This evidence points persuasively to the fact that the Trust, as established by the Deed of Settlement, was indeed in existence and carrying on trading activity from 1 July 2008 under its own ABN. There is an inference available to me that, as recorded in the minutes, trading by the first respondent in its own capacity had ceased on 1 July 2008 and that trading on and from 1 July 2008 was carried on at Wetherill Park by the first respondent as trustee of the Trust, using the assets and staff described in the minutes. In the absence of evidence to the contrary, I am prepared to so find. 21 The applicant was registered on 20 March 2009. Its principal place of business since that date has been at Wetherill Park. 22 On 1 July 2009 the applicant, the first respondent and Mr Karabatsos entered into a Deed of Appointment and Retirement of Trustee of Discretionary Trust. In that deed the applicant is identified as "the New Trustee", the first respondent is identified as the "Retiring Trustee" and Mr Karabatsos is identified as "the Appointor". The Deed provides for the retirement of the first respondent as the trustee of the Trust and the appointment by Mr Karabatsos of the applicant as the new trustee of the Trust in place of the first respondent. The Deed also records the agreement of the applicant to "be bound by and observe and administer the trusts, powers, discretions and obligations conferred by" the Deed of Settlement. It is by force of this Deed that the applicant claims to be the trustee of the Trust. 23 I am satisfied that the applicant is the new and sole trustee of the Trust on and from 1 July 2009. I am therefore prepared to make the declaration that is now sought by the applicant in paragraph 2 of the amended application. 24 The respondents seek an order for costs. The applicant does not resist the contention that it should pay the costs relating to the preparation and filing of the second respondent's affidavit. The applicant does, however, resist an order that it pay the respondents' costs of the hearing. Its principal submission in that regard is that the attendance of the respondents at the hearing was unnecessary. That submission overlooks the fact that, on the issues then arising on the application and the affidavits filed in relation thereto, I requested the attendance at the hearing of a legal representative on behalf of the respondents. The submission also overlooks two other events. When the matter was first called on for hearing the applicant announced that it was not ready to proceed because of a misunderstanding between the applicant and its solicitors about representation, leading to an absence of preparation by counsel for the hearing. Whilst this represents an unsatisfactory state of affairs, I was prepared to grant a short adjournment to enable counsel some opportunity to prepare, chiefly with a view to assisting the Court. The respondents were, however, ready to proceed on the basis that I have previously stated. This adjournment caused delay and prolonged the attendance of the respondents' solicitors at the hearing on that day. The second event was the granting of a further adjournment sought by the applicant to adduce additional evidence with respect to ownership of the claimed trust property as at 1 July 2008. In light of the limited relief that is now claimed, events have shown that adjournment to have been unnecessary. The granting of the adjournment nevertheless further prolonged the attendance of the respondents' solicitors. 25 In my view the appropriate exercise of discretion, in all the circumstances, is to order the applicant to pay the respondents' costs. 26 There is one further matter I should mention. It has come to my attention that the application commencing this proceeding was filed in the winding up proceeding. In my view that course was not appropriate. The appropriate course was to commence a new proceeding. However, in light of the fact that the matter has now been heard, and in light of the fact that a very limited question was involved which can be resolved by the relief that I am prepared to grant now, it would not be within the overarching purpose of s 37M of the Federal Court of Australia Act 1976 (Cth) to delay the matter further by requiring the applicant to commence a new proceeding. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.

Associate: Dated: 11 February 2011