Equuscorp Pty Ltd v Hallcorp Management Pty Ltd [1999] QSC 446

~lb60 State Reporting Bureau -TRANSCRIPT OF PROCEEDiNGS Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION FRYBERG J No 7560 of 1999 EQUUSCORP PROPRIETARY LIMITEL) and HALLCORP MANAGEMENT PTY LTD BRISBANE .. DATE 07/09/99 JUDGMENT REVISED COPfES fSSUED State Reporting Bureau OateJ.S;IO/ Tclcl'!t'"1L': (07) .12-t7 .t\(,1) F:I'C (1l7) .12-t7 55.12 -- 1 of 10 -- "'.' 070899 T10/JAP22 M/T 6116/99 (Fryberg J) HIS HONOUR: The applicant applies for an interlocutory injunction to restrain the rnspondent from forfeiting its units in a unit trust pursuant to a certain notice given by the respondent to it. 10 The applicant is a unit holder in a trust called The Pelican Sands Timeshare Trust. That trust is a unit trust constituted pursuant to a trust deed executed in 1986. Under it a trust fund is created and provision is made for the issue of units to persons who, being unit holders, shall 20e" be the beneficiaries of the property of the trust. They are, however, not the only parties to the trust deed. The other parties include a trustee which at present is 30 Permanent Trustee Company Limited and a manager which initially was a company called Jarrah Holdings Proprietary Limited but which is now the respondent. The manager is given certain rights and acquires certain obligations under C) the trust deed. It is unnecessary to elaborate upon them. 40 C)There are, at present, 2,703 issued units in the trust. The applicant is the beneficial owner of 1,502 of them. The sole business of the trust is to operate a holiday resort at Tugun called, unsurprisingly, Pelican Sands Beach Resort. 50 The deed provides a formula for unit holders to become entitled to use accommodation in the resort according to rules set out in the trust deed. 60 2 JUDGMENT ---... _-_._---------- . -- 2 of 10 -- 07089~ T10/JAP22 M/T 6116/99 (Fryberg J) Since early this year the applicant has been engaged in various pieces of litigation against the respondent and the trustee. Three actions have been conducted in the Supreme Court of Victoria and one in this Court apart from the present action. Two of the Victorian proceedings are completed; the third is on-going. On 10 May this year the applicant gave notice pursuant to the trust deed of a meeting for the purpose of passing a resolution to wind up the trust. The winding up of the trust is provided for in clause 36. It is unnecessary to go into detail in relation to that clause. It suffices to say for present purposes that it provides for the termination of the trust in four defined cases one of which is the giving of the relevant notice. Upon termination the trustee has to call in and convert into money the property of the trust. That meeting was held on 26 May. In the meantime, on 12 May the respondent, purporting to act in exercise of its powers under clause 13.07 of the deed, issued all unit holders a notice of special levy accompanied by an annexure purporting to calculate the amount of the special levy. The total amount levied exceeded $200,000 of which the applicant's share was over $110,000. The applicant did not pay that amount and has not paid it. It raises a number of challenges to the levy. I shall refer to them later. 3 JUDGMENT 10 20 30 40 50 60 -- 3 of 10 -- 070899 T10/JAP22 M/T 6116/99 (Fryberg J) On 26 May the uni t holders I Ileeting resolved to wind up the trust. Pursuant to clause 31;.01 (b) of the trust deed, the trust therefore terminated 4l) days after the date of that resolution, namely on 5 July this year. The notice of special levy required to be paid on 12 June 1999. The applicant did not pay. Subsequently, on 20 July 1999 the respondent issued a notice of forfeiture which was in these terms: "Hallcorp Management Pty Ltd in its capacity as manager under the deed dated 21 April 1986 ... hereby give you notice in your capacity as the holder of the units referred to below that you have failed to pay for at least two months the overdue levies also described below as relating to the said units, and hereby gives you further notice that in the case of each unit the payment of arrears of levy shown below is required to be paid in full on or before 20 August 1999. In the event of non-payment by the time specified above the units will be forfeited and thereafter sold or otherwise disposed of in accordance with the provisions set out in clause 14 of the said trust deed, together with interest at the rate of 18 per cent per annum on the moneys unpaid [sic]." It is that purported and foreshadowed forfeiture which the applicant now seeks to restrain. It has submitted that it has an arguable case on a number of grounds. The first arguable ground which it proposed was that the notice of the special levy was defective. Several reasons were advanced for this. None of them particularly impresses me. They depend upon the wording of the trust deed to some extent, but they also depend upon matters of fact which have not been explored in evidence in some cases, notwithstanding the opportunity to put forward evidence or to cross-examine a relevant witness. 4 JUDGMENT 10 20 c··· 30 c 50 60 -- 4 of 10 -- 070999 T11/ST5 M/T 6116/99 :Fryberg J) One of them at least raises :.ssues for the first time at this hearing. I see no reason to embark upon an elaborate analysis in relation to them A stronger ground is the question of whether the manager had 10 power to issue notice of forfeiture after the trust had terminated. It will be recalled that the trust terminated on 5 July but the purported notice of forfeiture was issued on 20 July. It seems to me strongly arguable that with the exception of a minor and irrelevant function under clause 36.05, the termination of the trust effectively terminated the role of the manager. If that is so, of course the manager no longer had any power to perform any of the functions vested in it under the trust deed, nor any right to remuneration in respect of any activities conducted after the coming into force of the resolution on 5 July. It would follow that the notice was, therefore, invalid. Of course, I only have to decide whether there is a good arguable case along these lines, and I am easily satisfied that there is. Clause 36.03, as I have mentioned already, plainly provides for the getting in of the trust property and vests that function in the trustee. If that argument is correct, it arguably means that the forfeiture notice is bad, and if 5 JUDGMENT 20 30 40 50 60 -- 5 of 10 -- 070999· T11/STS M/T 6116/99 ~Fryberg J) that is so then any purported forfeiture would consequently be invalid. The second issue is the balance of convenience. Here the major consideration, unusually, is the position of a third 10 party, the trustee. The trustee is not a party to the present litigation because it is not the trustee which has the power of forfeiting units, but the manager under the trustee. Nonetheless it is the trustee's interests which can be radically affected either by a forfeiture or by the 20 grant of an injunction as sought by the applicant. The trustee has appeared and been represented before me by the same legal team as has represented the respondent. 30 The evidence discloses that if the units are forfeited, the applicant will not only be deprived of property rights of some millions of dollars but also will lose the right to vote in respect of its units and to influence the winding up in any way. That is plainly a serious detriment. On the '. 40 other hand, however, it shows that the trustee also will suffer a detriment. The purpose of the levy was to raise funds to overcome a shortfall in the finances of the trust. The applicant 50 contends that it cannot be required to pay a certain amount of those funds because they are required to be spent by reason of costs orders in connection with the litigation to which I have referred to earlier. 60 6 JUDGMENT ( -- 6 of 10 -- 07099~ T11/ST5 M/T 6116/99 ~Fryberg J) That is something which may he ultimately resolved in the litigation, although I cannOl: see how it could be at the moment without the trustee bHing joined. Be that as it may, the immediate point is that the trust is in need of funds and the forfeiture weapon is the best which it has available 10 to compel the applicant to put up the money. The applicant has offered to pay the disputed money into Court, but that does not overcome the inconvenience to the trustee. The trustee is a substantial public trustee company of long standing and no doubt is raised on the material before me as to its ability to pay any amounts which the Court may ultimately order it to pay. It seems to me that this is a factor of some importance. It does not necessarily outweigh the need for the applicant to have an injunction, but it does suggest the need to tailor the terms of any injunction to suit the circumstances of the case. In my view the applicant should have the injunction which it seeks, provided of course, the usual undertaking as to damages is offered. If the respondent and the trustee were to offer to the Court an undertaking along the lines of the usual undertaking as to damages, I would be prepared to make it a condition of the grant of the injunction that the applicant pay the amount levied to the trustee. 7 JUDGMENT 20 30 40 50 60 -- 7 of 10 -- 70999 - T12/JMG11 M/T 1/99 & li053/99 (Fryberg J) For the respondent it was ar~Jued that certain undertakings which I will have marked as l;xhibit 2 were adequate to protect the position of the applicant and that it should be required to give an undertaking in the form to which I have just referred only as a fall-back position. The undertakings offered by the respondent and the trustee do not really seem to me to be adequate and moreover are too particular in their application to enable me on the hearing of an interlocutory injunction to form a view as to whether the applicant is adequately protected. The applicant has contended that if I am to make its injunction conditional in any way it should be conditional upon terms which have been proposed to me in writing and which I will have marked as Exhibit 3. Again, that proposal seems to me to suffer from the same defect as that of the respondent, namely, it tends to be very specific about bills of costs and other matters without clearly covering the case and perhaps also tries to obtain an advantage for the applicant to which it may not be entitled. It does not seem to me to be appropriate to make conditions of that nature in the present case. One matter which that exhibit does cause me to think about, however, is this: the dispute does seem to revolve around the magnitude of the legal expenses incurred by the respondent and/or the trustee in litigating against the applicant. 8 JUDGMENT 10 20 30 50 60 ( ( I ~_/ -- 8 of 10 -- 70999 - T12/JMG11 M/T 1/99 & t)053/99 (Fryberg J) condition on the plaintiff that it pay the amount of the levy to the trustee. Whether there should be other conditions or undertakings required must await the determination of the unresolved 10 matters concerning taxation to which I have referred. At the moment, I would not be prepared to order any other conditions or undertakings than those to which I have made reference. 20 I propose at the moment to adjourn the matter until -~ tomorrow. 30 HIS HONOUR: I order, upon the applicant giving the undertakings which were given to Mr Justice Byrne, in terms of the undertakings given to His Honour by the respondent. I 40 !.', 50 .j. 60 10 JUDGMENT -- 9 of 10 -- 70999 - T12/JMG11 M/T 1/99 & 1)053/99 (Fryberg J) I would be prepared, provided the applicant were willing to undertake to pay the costs 0:: a taxation in the first instance, to make further conditions by way of agreement between the parties relating to taxation along the lines that the respondent co-operate in a taxation and pay the 10 costs of the taxation if it were successful. If the applicant is able to demonstrate a prima facie right to a taxation, I would further be prepared, provided an undertaking to pay the costs of the taxation in the first 20 instance were offered, to not: require the applicant to pay the outstanding debt to the respondent unless the latter ( were prepared to offer the undertakings to cooperate in relation to the taxation and to pay the costs of the 30 taxation if it or the trustee were unsuccessful in it. That, however, is not something which I am prepared to do at the moment, because it has not been demonstrated to me that c there is either the right or the ability in the applicant to have the bill taxed. c I propose to adjourn the proceedings until tomorrow to enable the parties to consider the terms of an order and to deal with the matter at the end of my list tomorrow. I 50 would ask that the parties bring in a draft order providing for the injunction upon the usual undertaking as to damages and if the respondent is willing to offer the usual undertaking as to damages or something tailored close to it regarding repayment of the amount, then to impose a 9 JUDGMENT -- 10 of 10 --