Supreme Court New South Wales Medium Neutral Citation: In the matter of Bevillesta Pty Limited [2011] NSWSC 1378 Hearing dates: 14 November 2011 Decision date: 16 November 2011 Jurisdiction: Equity Division - Corporations List Before: Barrett J Decision: 1. Order that the interlocutory process of Top Ryde Funding Pty Ltd filed on 14 October 2011 be dismissed. 2. Grant leave to Dana Terese Rahme to file a notice of motion seeking leave to amend in conformity with the reasons published by me on 16 November 2011. 3. Direct that any such notice of motion be filed and served not later than 23 November 2011 and be returnable before me at 9.30am on 30 November 2011. 4. Direct that the question of costs in relation to the interlocutory process of Top Ryde Funding Pty Ltd be listed before me for oral argument not exceeding fifteen minutes at 9.30am on 30 November 2011. Catchwords: PROCEDURE - form of initiating process - "creditors' trust" created by deed of company arrangement - trust deed creates procedure for proof of debts to establish status as beneficiary - various provisions of corporations legislation "incorporated into" trust deed by reference - person dissatisfied with rejection of proof by trustees files interlocutory process in proceeding in which voluntary administrators obtained directions as to establishment of creditors trust - "funder" of trust maintains that the person's application is a nullity because (a) filed in completed or spent proceeding (b) embodied in interlocutory process that can only be used to make an application under Corporations Act and (c) a trust instrument cannot confer jurisdiction on the court - "funder's" objections well taken but do not lead to finding of nullity - the situation is one of irregularity under Civil Procedure Act s 63 amenable to amendment under s 64. Legislation Cited: Civil Procedure Act 2005, ss 58, 63, 64. Corporations Act 2001 (Cth), Part 5.3A, s 439A, s 1321. Corporations Regulations 2001 (Cth), reg 5.6.54(2). Supreme Court (Corporations) Rules 1999, rule 2.2, Form2, Form 3. Uniform Civil Procedure Rules 2005, rules 6.2, 6.3, 6.4, 13.4, 14.28. Cases Cited: Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd (1989) 17 NSWLR 734. Harkness v Bell's Asbestos and Engineering Ltd [1967] 2 QB 729. Raworth v Parker (1855) 2 K&J 163; 69 ER 736. Re Bevillesta Pty Ltd [2011] NSWSC 417; (2011) 84 ACSR 215. Wain v The Earl of Egmont (1834) 3 My & K 445; 40 ER 170. Whitmore v Turquand (1860) 1 J & H 444; 70 ER 821; affirmed (1861) De G F &J 107; 45 ER 819. Category: Interlocutory applications Parties: Martin John Green and Peter Paul Krejci as Voluntary Administrators of Bevillesta Pty Limited - Plaintiffs Top Ryde Funding Pty Limited - Applicant Dana Terese Rahme - Respondent Representation: Mr F Kunc SC - Applicant Mr G D McDonald - Respondent Middletons - Applicant Solon Lawyers - Respondent File Number(s): 2011/00099655 Judgment 1Proceedings 2011/00099655 were commenced by an originating process filed on 28 March 2011 by Mr Green and Mr Krejci, who were then the administrators in the voluntary administration of Bevillesta Pty Ltd under Part 5.3A of the Corporations Act 2001 (Cth). 2Mr Green and Mr Krejci sought certain orders and directions concerning procedures by which they might put before creditors for decision a proposal for the adoption of a deed of company arrangement which, in turn, would cause to be created a so-called "creditors' trust". 3The proceedings were heard and determined by Bergin CJ in Eq who, on 10 June 2011, delivered reasons for making orders generally as sought by the voluntary administrators: Re Bevillesta Pty Ltd [2011] NSWSC 417; (2011) 84 ACSR 215. 4Thereafter, Mr Green and Mr Krejci proceeded to place before creditors at the s 439A meeting in the Part 5.3A administration of Bevillesta a report previously circulated; and the creditors, for their part, resolved that Bevellista should execute a deed of company arrangement. 5The deed of company arrangement was duly executed. It is dated 8 July 2011. The parties are Bevillesta, Mr Green and Mr Krejci and Top Ryde Funding Pty Ltd (referred to as the "Funder"). The deed of company arrangement contemplated the execution of a trust deed in a form annexed to the deed of company arrangement. By force of the deed of company arrangement (and upon execution of the trust deed), Bevellista was to be released from all claims of creditors and those creditors were to become beneficiaries under the trust deed. 6The trust deed was also executed on 8 July 2011. Its parties are the Funder, Mr Green and Mr Krejci as the administrators of the deed of company arrangement and Mr Green and Mr Krejci as trustees of the trusts of the trust deed itself. 7Upon execution of the trust deed, three things of significance happened: (a) the claims of persons who were creditors of Bevellista in respect of matters predating 16 February 2011 were, by force of the deed of company arrangement provisions, released and barred; (b) the persons with such claims became entitled to seek to come in as beneficiaries of the trusts of the trust deed with respect to a trust fund thereby constituted, which trust fund was made up principally of money provided by the Funder; and (c) the deed of company arrangement then terminated, leaving the former creditors of Bevellista with such rights as accrued to them by virtue of the trust deed. 8The property the subject of the trusts of the trust deed is a fund of money. The trustees declare that they hold the fund on trust for "the Deed Administrators and the Admitted Beneficiaries". The term "Admitted Beneficiaries" is defined as follows: " Admitted Beneficiary means any Trust Beneficiary whose Trust Claim is accepted fully, partially or contingently by the Trustees in accordance with this Deed or is the subject of a decision by the Court pursuant to clause 9.3 of this Deed (to the extent the Court orders that the Trust Claim ought to be admitted to proof by the Trustees) and remains owing as at the date the Interim Dividend and the Final Dividend are paid." 9"Trust Beneficiary" is defined in this way: " Trust Beneficiary means a person who has a Trust Claim or claims to have a Trust Claim." 10A "Trust Claim" means a claim that a former creditor of Bevillesta has under the deed. 11The deed contains detailed provisions for establishing matters relevant to the question whether a person is entitled to be recognised as an "Admitted Beneficiary" and, if so, in what amount. Those provisions draw heavily on Corporations Act procedures with respect to the proof of debts in the winding up of a company. The process is conceptually and procedurally similar to the proof of debt process (with the trustees under the trust deed playing a decision-making role generally equivalent to that of a liquidator). Numerous provisions of the Corporations Act and Corporations Regulations are said by the trust deed to be "incorporated into" the trust deed "as if they were fully set out herein" and as if certain substitutions of wording were made (for example, for "liquidator" substitute "trustees"). 12The foregoing is by way of perhaps over-long introduction to the matter immediately at hand. On 6 October 2011, Dana Terese Rahme filed an interlocutory process in proceedings 2011/00099655, that is, the proceedings that resulted in the orders made by Bergin CJ in Eq consequent upon her Honour's decision of 10 June 2011. By her interlocutory process, Mrs Rahme purported to make an application under regulation 5.6.54(2) of the Corporations Regulations and s 1321 of the Corporations Act . She sought two orders as follows: "1. An Order that the applicant's Proof of Debt, dated 4 August 2011 in the amount of $922,231.01 be admitted in full, or such part as the Court determines, by the Defendants as the Trustees of the Creditors Trust of Bevillesta Pty Limited. 2. An Order that the applicant's Proof of Debt, dated 4 August 2011 in the amount of $1,598,417/38 be admitted in full, or such part as the Court determines, by the Defendants as the Trustees of the Creditors Trust of Bevillesta Pty Limited." 13Thereafter, on 14 October 2011, the Funder filed an interlocutory process in proceedings 2011/00099655 seeking an order under rule 13.4 of the Uniform Civil Procedure Rules 2005 that Mrs Rahme's interlocutory process of 6 October 2011 be dismissed. There is an alternative claim under rule 14.28 that the interlocutory process be struck out. The Funder's contention is thus that Mrs Rahme's application discloses no reasonable cause of action or is an abuse of process. 14The claims in Mrs Rahme's interlocutory process are claims against the trustees. No issue was raised as to the standing of the Funder to seek to intervene, as it has by its own interlocutory process, in a matter that appears to be one between Mrs Rahme and the trustees only. 15In order to understand the case the Funder seeks to make, it is necessary to refer to clauses 9.1 and 9.2 of the trust deed, which are as follows: " 9.1 Admissibility and adjudication of Trust Claims (a) Upon termination of the DOCA all Claims of Creditors against the Company shall extinguish and shall become Trust Claims against the Trust Fund pursuant to this Deed. (b) The Trustees shall call for formal proofs of debt in support of any Trust Claims from Trust Beneficiaries pursuant to those parts of the Corporations Act and Corporations Regulations incorporated into this Deed by clause 9.2 of this Deed for the purpose of deciding whether to admit that Trust Claim pursuant to this Deed as an Admitted Claim. (c) Interest shall not accrue or be payable on any Trust Claim from the Appointment Date. (d) A Trust Beneficiary has 21 days from being notified of the Trustees' decision under clause 9.1(b) of this Deed to file with the Court and serve on the Trustees any appeal or other application in relation to the Trustees' decision. The Trustees will not pay a Final Dividend until the Court appeal or application has been determined. (e) Only Admitted Beneficiaries are entitled to participate in any interim Dividend or Final Dividend and the Trustee shall reject any proof of debt for a Trust Claim which is not an Admissible Proof or to which clause 9.6 of this Deed applies and shall ignore that Trust Claim for the purposes of calculating the value of the Admitted Claims and the amount of the Interim Dividend or Final Dividend. (f) The rights of the Admitted Beneficiaries are limited to the Trust Fund. 9.2Application of the Corporation Act Section 544 and Subdivisions A, B, C, D and E (other than sections 563B and 564) of Division 6 of Part 5.6 of the Corporations Act, Corporations Regulations 5.6.37 and 5.6.39 to 5.6.72 (inclusive and other than Corporations Regulations 5.6.43A, 5.6.54 and 5.6.70A) of the Corporations Regulations are incorporated into this Deed and the Trustees and Trust Claims under this Deed, as if they were fully set out herein and as if: (a) references to the liquidator were references to the Trustees; (b) references to winding up were references to the operation and performance of this Deed; (c) references to creditor were references to Trust Beneficiary; and (d) references to the court were references to Court as defined in this Deed." 16The Funder maintains that Mrs Rahme was notified of the trustees' decision in respect of her two proofs of debt (a decision, in each case, to reject the proof) by a letter dated 15 September 2011 addressed to Mrs Rahme care of her solicitors (there does not appear to be any evidence of how the letter was communicated or when it reached its addressee); that she had, in terms of clause 9.1(d), twenty-one days after being so notified in which to "file with the Court and serve on the Trustees any appeal or other application in relation to the Trustees' decision"; that her application filed on 6 October 2011 does not answer the description "any appeal or other application in relation to the Trustees' decision"; and that any step Mrs Rahme now takes to file and serve an application will be outside the time allowed by clause 9.1(d). 17The Funder does not say that Mrs Rahme did not act within the specified twenty-one day period. Rather, the Funder argues, the steps that Mrs Rahme did take - filing and service of the interlocutory process of 6 October 2011 - were beset by defects of a fatal kind such that Mrs Rahme cannot be regarded as having initiated an "appeal or other application in relation to" the trustees' decisions to reject the two proofs of debt. 18The first point the Funder makes is that the proceedings 2011/00099655 had been completed and were, as it were, "spent" following the making by Bergin CJ in Eq of orders in consequence of the reasons of 10 June 2011. On that basis, it is said, those proceedings were not in existence as a context in which or platform from which Mrs Rahme's application could be launched; and the only course procedurally available to her was to commence a new proceeding by some appropriate initiating process. 19Second and in the same vein, it is said by the Funder that an interlocutory process in Form 3 under the Supreme Court (Corporations) Rules 1999 - the document Mrs Rahme used - is (and an originating process in Form 2 would be) an impermissible vehicle for advancing an "appeal or other application" as envisaged by clause 9.1(d) of the trust deed. This is because an interlocutory process (like an originating process) can, under rule, 2.2, only be used for "an application required or permitted by the Corporations Act to be made to the Court" and, by no stretch of the imagination, is a clause 9.1(d) "appeal or other application" one "required or permitted" by the Corporations Act . 20Third, the Funder says that it is a fundamental misconception to think that clause 9.2 invests the court with jurisdiction. The most it does is to cause various forms of words drawn from the Corporations Act and the Corporations Regulations to be treated, under the trust deed, as if they were actually set out in it; and if those words, as notionally contained in the trust deed, purport to create jurisdiction in the court, they are attempting to do something that the provisions of a trust instrument simply cannot do and are for that reason inoperative and superfluous. 21There is clear merit in all these contentions advanced by the Funder. A trust instrument obviously cannot give powers to the court. The court can adjudicate disputes between a trustee and a beneficiary (or a person claiming to be a beneficiary or to be entitled to be regarded as a beneficiary) in exercise of its general equitable jurisdiction. A claim by a beneficiary (or a person claiming to be a beneficiary or to be entitled to be regarded as a beneficiary) to an interest in a particular trust fund is plainly not a claim under the Corporations Act or the Corporations Regulations . And such a claim plainly does not arise as part of or as a necessary incident of a proceeding in which the court has determined claims for relief by a company's Part 5.3A administrators seeking the court's guidance as to materials they should place before the company's creditors for the purpose of their decision-making at a meeting. 22The consequence, the Funder says, is that Mrs Rahme's interlocutory process of 6 October 2011 is a nullity. She should have filed a statement of claim or summons ( Uniform Civil Procedure Rules , rules 6.2, 6.3 and 6.4) not referring to any corporations legislation and seeking some declaratory or other appropriate relief calculated to establish the entitlement that the trustees' letter of 15 September 2011 did not admit. Furthermore, the Funder maintains, it is now too late for Mrs Rahme to retrieve the position - either by filing some new initiating process or by seeking to amend her interlocutory process - since neither of those courses would cause her "appeal or other application in relation to" the trustees' decision to be filed and served within the specified period of twenty-one days. 23I disagree. The orders Mrs Rahme seeks are intelligible, given the provisions of the trust deed that adopt, even by importing the words of legislative provisions, a system of proof of debts to establish the identities and interests of persons who are to participate in the trust fund as beneficiaries. It is true that the definition of "Admitted Beneficiary" refers to "a decision by the Court pursuant to clause 9.3 of this Deed" ("Court" being defined as any court having jurisdiction to determine matters under both the Corporations Act and the Trustee Act 1925, as this court does), but that does not mean that the deed makes an ineffective attempt to vest jurisdiction in the court. The clause itself makes it tolerably clear that the application on which such a decision of the court would be made is an application brought in the court's general non-statutory jurisdiction. Each order actually sought by Mrs Rahme, if made, would be, I suppose, in the nature of a mandatory injunction and, while that is probably not the ideal remedy in a case where a person claims recognition as a beneficiary by a trustee holding a fund upon trust for a person's creditors (see, for example, Wain v The Earl of Egmont (1834) 3 My & K 445; 40 ER 170), the intent is sufficiently clear. 24Section 63 of the Civil Procedure Act is in these terms: (1) This section applies to proceedings in connection with which there is, by reason of anything done or omitted to be done, a failure to comply with any requirement of this Act or of rules of court, whether in respect of time, place, manner, form or content or in any other respect. (2) Such a failure: (a) is to be treated as an irregularity, and (b) subject to subsection (3), does not invalidate the proceedings, any step taken in the proceedings or any document, judgment or order in the proceedings. (3) The court may do either or both of the following in respect of proceedings the subject of a failure referred to in subsection (1): (a) it may, by order, set aside the proceedings, any step taken in the proceedings or any document, judgment or order in the proceedings, either wholly or in part, (b) it may exercise its powers to allow amendments and to make orders dealing with the proceedings generally. (4) The court may not take action of the kind referred to in subsection (3)(a) on the application of any party unless the application is made within a reasonable time and, in any case, before the party takes any fresh step in the proceedings after becoming aware of the failure." 25Mrs Rahme's interlocutory process was not properly or appropriately filed "in" the "proceedings" commenced by the originating process of Mr Green and Mr Krejci upon which Bergin CJ in Eq made orders in June 2011. But that interlocutory process itself embodies or initiates "proceedings" in its own right, being proceedings between Mrs Rahme and the trustees. In Harkness v Bell's Asbestos and Engineering Ltd [1967] 2 QB 729, Lord Denning MR said at 735, in relation to an English rule of court relevantly indistinguishable from s 63: "This rule should be construed widely and generously to give effect to its manifest intentions. I think that any application to the court, however informal, is a 'proceeding'. There were 'proceedings' in being at the very moment that the plaintiff made his affidavit and his solicitor lodged it with the registrar ." 26That is the position in this case also. As in Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd (1989) 17 NSWLR 734 (at 753), the steps Mrs Rahme took of filing the interlocutory process and serving it on the trustees were steps by which she began proceedings against the trustees. 27There was, in respect of those proceedings, a failure to comply with the rules of court (rules 6.2, 6.3 and 6.4 as to the appropriate form of initiating process). Bearing in mind what I have said about the relief actually claimed, that is a failure "in respect of . . . manner, form or content" or "in any other respect". Section 63(2) therefore denies the invalidity for which the Funder contends - subject, however, to the possibility that the court may, pursuant to s 63(3)(a), order that the proceedings or some step or document be set aside. 28There is no application by the Funder for an order under s 63(2). Indeed, it would have been inconsistent with the stance the Funder took (that Mrs Rahme's interlocutory process is a nullity) to seek an order setting it aside: a nullity has no life or operation and is not susceptible to an order setting it aside or affecting it in any way (except an order bringing it to life). Nor, I might say, would any order setting the interlocutory process aside have been made, if sought. No injustice could possibly have been occasioned to anyone by the use of the wrong form of document. 29Under s 64 of the Civil Procedure Act , the court may order, at any stage of proceedings, that any document in the proceedings be amended. Because Mrs Rahme has embarked on new proceedings, it is open to the court to order that the interlocutory process she has filed be amended. There is no apparent reason why it should not be amended by casting it as a summons or statement of claim between Mrs Rahme as plaintiff and the trustees as defendants, omitting all the prefatory and formal matter referring to the Corporations Act and the Corporations Regulations and then leaving intact the actual claims for relief (but with "Applicant's" changed to "Plaintiff's") - and, if a summons is used, retaining the section immediately before the claims for relief, reading: "On the facts stated in the supporting affidavit of Dana Terese Rahme dated 6 October 2011, the Applicant applies for:" (but with "Applicant" amended to "Plaintiff"). 30Under s 58 of the Civil Procedure Act , the court, when faced with a decision whether to make an order for the amendment of a document, must seek to act in accordance with the dictates of justice. In this case, the ends of justice would be served by allowing a document conveying the relevant claims in the unambiguous terms in which they are now framed to continue in a surrounding verbal context formulated in the procedurally correct way. That conclusion is made particularly apt by the fact that the trustees, in notifying Mrs Rahme of the rejection of her claim, saw fit to refer in their letter to various provisions of the Corporations Regulations referring to proofs of debt in a winding up. 31Because the claims and their basis are clear and the several deficiencies identified by the Funder can be remedied by amendment in the way I have described, the case is not one in which no reasonable cause of action is disclosed or there is abuse of process. It is true that the filing of an interlocutory process has involved a filing fee less than that that would have been attracted by a summons or statement of claim, but that deficiency could be addressed by terms imposed as a condition of any grant of leave to amend. 32I have not so far mentioned that Mrs Rahme filed in court an amended interlocutory process during the hearing of the Funder's application. I need only say that that document maintained the original claims set out at paragraph [9] above (as well as advancing further claims) but did not address fully the matters with which I have dealt in these reasons. 33One concluding comment is warranted. The trustees of a settlement of the kind under discussion cannot necessarily proceed on the footing that, just because the same words are used (or imported), the processes the trust deed lays down are simply a transplanted version of statutory processes that apply to a winding up and that it is simply a matter of following the same procedures under a different enabling instrument. Their duties as trustees may create a need to consider matters that would otherwise not arise for consideration. In Whitmore v Turquand (1860) 1 J & H 444; 70 ER 821 (affirmed (1861) De G F &J 107; 45 ER 819), for example, Page Wood V-C, dealing with a trust for the benefit of creditors and the correct approach to provisions for the establishment of creditors' debts and rights to participate, referred to the duty of a court of equity to prefer substance over form and sometimes to "act in contradiction to the strict words of instruments of this kind"; see also the like observations of the Vice-Chancellor in the earlier case of Raworth v Parker (1855) 2 K&J 163; 69 ER 736. 34The appropriate outcome is as follows: 1. Order that the interlocutory process of Top Ryde Funding Pty Ltd filed on 14 October 2011 be dismissed. 2. Grant leave to Dana Terese Rahme to file a notice of motion seeking leave to amend in conformity with the reasons published by me on 16 November 2011. 3. Direct that any such notice of motion be filed and served not later than 23 November 2011 and be returnable before me at 9.30am on 30 November 2011. 4. Direct that the question of costs in relation to the interlocutory process of Top Ryde Funding Pty Ltd be listed before me for oral argument not exceeding fifteen minutes at 9.30am on 30 November 2011. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 November 2011