Bastion v Gideon Investments (No.2) [2000] NSWSC 959

Reported Decision : [2000] 35 ACSR 466 [2000] 18 ACLC 854

New South Wales Supreme Court

CITATION : Bastion v Gideon Investments (No.2) [2000] NSWSC 959 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 1890/00 HEARING DATE(S) : 13 October 2000 JUDGMENT DATE : 13 October 2000

PARTIES : Geoffrey Trent Hancock (A) Gideon Investments Pty Ltd (In liq) (D) JUDGMENT OF : Austin J

COUNSEL : J Sexton SC (A) SOLICITORS : Dibbs Crowther & Osborne (A) CATCHWORDS : CORPORATIONS - liquidators - whether liquidator should be appointed receiver and manager - clause automatically terminating appointment of corporate trustee EQUITY - equitable remedies - appointment of liquidator as receiver and manager LEGISLATION CITED : Corporations Law s 479(3) CASES CITED : Mariconte v Batiste [2000] NSWSC 288 Re GB Nathan Pty Ltd (in liq) (1994) 24 NSWLR 674 DECISION : Liquidator to be appointed receiver and manager with powers to realise assets, wind up trust and make distributions of the trust assets; receiver to report to a meeting of beneficiaries.

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

FRIDAY 13 OCTOBER 2000

1890/00 . MAUREEN CATHERINE BASTION V GIDEON INVESTMENTS PTY LTD (IN LIQ) (NO.2)

JUDGMENT

1 HIS HONOUR: My judgment delivered on 6 October 2000 dealt with two interlocutory applications by the liquidator of Gideon Investments Pty Ltd ('Gideon'). I decided it was appropriate to give the liquidator directions under s 479 (3) of the Corporations Law that he would be justified in recognising a trust of which Gideon was trustee, in recognising investors who established claims as beneficiaries of the trust, and in treating the assets of Gideon as assets of the trust. 2 I considered whether it would be better for the liquidator to discharge the duties of trustee of the trust as agent for Gideon, the trustee, or to appoint the liquidator as receiver and manager of the assets of the trust. I decided it was appropriate to appoint the liquidator as receiver and manager with an express power of sale of the assets of the trust, in order to avoid difficulties for third parties who might be unsure of the liquidator's power to give a good title to trust assets. 3 I said I would make orders appointing the liquidator as receiver and manager with a power of sale, requiring him to realise the assets of the trust, convene a meeting of beneficiaries, and account to Gideon as trustee for the net proceeds of realisation. Then he could, as liquidator of Gideon, discharge the duty of the trustee to distribute the net assets to the beneficiaries. On the assumption that the process of realisation may take three months, I contemplated ordering a meeting of beneficiaries to be held about three months from now, at which the receiver's report on the realisation of the assets of the trust would be considered. 4 The matter returned to me this morning for the purpose of making orders to give effect to my reasons for judgment. Counsel for the liquidator has, however, drawn my attention to two difficulties. 5 The first is that my reasons for judgment overlooked a provision of the draft trust instrument which has the effect that the office of trustee comes to an end automatically if the trustee, being a corporation, goes into liquidation. The effect of that clause, given my view that there is a trust in terms of the draft trust instrument, is that Gideon is no longer the trustee. It holds trust assets and since it is no longer the trustee under the trust instrument, it must hold those assets as constructive trustee. Therefore it would still be feasible to proceed along the lines contemplated by my reasons for judgment. But the liquidator submits that it would be preferable to extend the ambit of the office of receiver and manager to confer on him to power to do what may be necessary to wind up the affairs of the trust and distribute its property, in that capacity rather than as agent for Gideon as constructive trustee. 6 I agree that his position and powers would be clearer if I extend the office of receiver and manager in that fashion, and I shall do so. My orders will empower the receiver and manager to make distributions to the beneficiaries of the trust, but they will not provide any protection for him from subsequent claims by persons who say that they are beneficiaries. A court-appointed receiver may apply to the Court for directions, and that is a step which may be appropriate in this case at some future stage: see Re GB Nathan Pty Ltd (in liq) (1994) 24 NSWLR 674; Mariconte v Batiste [2000] NSWSC 288. 7 Secondly, further evidence has been provided to me today, showing that the realisation of the assets of the trust will be rather more complicated than my reasons for judgment implied. The late Mr Bastion was either a director or shareholder (or both) of some 23 companies in addition to Gideon, in Australia, Hong Kong, New Zealand, the British Virgin Islands and Vanuatu. The liquidator has located 27 bank accounts in various names which appear to be associated with Gideon or Mr Bastion. Additional claims are being received which may upon proper investigation be accepted as claims by beneficiaries of the trust. There is a mortgagee of the company's Melbourne unit and the liquidator has challenged the validity of the mortgage. That dispute may lead to litigation. The liquidator has identified assets in the hands of other entities associated with Mr Bastion, and assets in the hands of the trustee of his bankrupt estate and Mrs Bastion, against which he may have tracing claims. 8 In these circumstances he suggests that he be ordered to report to a meeting of beneficiaries in the near future, and that the matter be stood over for further mention before me after that meeting has taken place. I accept that the realisation of the assets of the trust will be more complicated and prolonged than the evidence before me on the earlier occasion implied, and therefore it would be inappropriate to fix a time at this stage for completion of the process of realisation. Nevertheless I am concerned that the receivership should not drag on for so long that all available assets are consumed in the costs of the receivership. I shall consider such issues when the matter returns to me, at which time I should have the benefit of the receiver's report to the beneficiaries and their response to it at the meeting. 9 I shall make the orders sought by the liquidator in the draft short minutes of orders handed up this morning. * * * * * * * * * *