Jax Quickfit Franchising Systems Pty Ltd as Trustee for the Jax Quickfit Franchising Systems Unit Trust [2012] NSWSC 1114

Supreme Court New South Wales

Medium Neutral Citation: Jax Quickfit Franchising Systems Pty Ltd as Trustee for the Jax Quickfit Franchising Systems Unit Trust [2012] NSWSC 1114 Hearing dates: 25 May 2012 Decision date: 20 September 2012 Jurisdiction: Equity Division Before: Davies J Decision: 1. Jax Quickfit Franchising Systems Pty Limited ("JQFS") would be justified in defending, and doing all things necessary or reasonably incidental to conducting the defence of, all allegations made against JQFS in the Federal Court proceedings No NSD 402 of 2010, except in relation to the substantive issue of the scope of the JQFS unit trust, provided that and for so long as counsel maintain the view that JQFS has reasonable prospects of successfully defending those proceedings. 2. Without limiting order 1 above, JQFS would be justified in taking the following action: (a) resisting the relief claimed or foreshadowed against JQFS in the Federal Court proceedings, provided that and for so long as counsel maintain the view that JQFS has reasonable prospects of so doing; (b) taking whatever procedural steps are open to JQFS to invite the Federal Court to resolve the substantive issue of the scope of the JQFS unit trust before allowing any breach of trust claim to proceed and prior to the determination of any other issues in the Federal Court proceedings; (c) taking no position on the substantive issue of the scope of the JQFS unit trust, and submitting to whatever decision the Federal Court may make on that question; (d) giving an undertaking to the Federal Court that, if and to the extent that the Federal Court finds that the Jax Quickfit franchising business (or any part of it) is subject to the terms of the JQFS unit trust, JQFS as trustee will act consistently with that decision, including if necessary bringing proceedings to recoup any monies incorrectly paid to the joint venture parties and redistributing the proceeds to the trust beneficiaries; (e) maintaining that the application by the plaintiffs in the Federal Court proceedings for leave under s 237 of the Corporations Act 2001 (Cth) ought to be determined before JQFS is required to plead to the substance of the breach of trust and oppression claims made or foreshadowed against it; (f) in respect of any breach of trust claim brought with leave under s 237 of the Corporations Act - defending that claim by: i. relying upon clauses 18.1 and 18.5 of the JQFS unit trust deed; and/or ii. applying for relief under s 85 of the Trustee Act 1925 (NSW); (g) defending, or resisting the grant of leave to bring, or applying to strike-out or summarily to dismiss, the claims of oppression and misleading or deceptive conduct and the claim that the resolutions passed at the meeting of directors on 14 January 2011 were invalid or ineffective, provided that and for so long as counsel maintain the view that JQFS has reasonable prospects of successfully defending, resisting the grant of leave to bring, or applying for such strike-out or summary dismissal, as the case may be. 3. JQFS would be justified in using the assets of the JQFS unit trust, to the extent that those assets (including any receipts from the Jax Quickfit franchising business which may be found in the Federal Court proceedings to be assets of that trust) are sufficient, for the purpose of taking the action described in orders 1 and 2 above, and without prejudice to JQFS's entitlement, to the extent that such assets are insufficient, to use other assets or funds for the purpose of taking the action described in orders 1 and 2 above. 4. JQFS's costs of the present proceedings be paid out of the assets of the JQFS unit trust, to the extent that those assets (including any receipts from the Jax Quickfit franchising business which may be found in the Federal Court proceedings to be assets of that trust) are sufficient, and without prejudice to JQFS's entitlement, to the extent that such assets are insufficient, to recoup those costs from other assets or funds. 5. Order that no person is to have access to the Confidential Exhibit marked DCT-2 without the leave of a judge of the Court. 6. Grant JQFS liberty to apply on 3 days' notice. Catchwords: TRUSTS AND TRUSTEES - application for judicial advice - Federal Court proceedings commenced against trustees and others - whether and to what extent trustees justified in defending proceedings - what interlocutory steps should be taken - reliance on defence by other defendants Legislation Cited: Corporations Act 2001 (Cth) Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth) Trustee Act 1925 Cases Cited: Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247 Re Lenyco Pty Ltd [2010] NSWSC 1094 Category: Interlocutory applications Parties: Jax Quickfit Franchising Systems Pty Ltd as Trustee for the Jax Quickfit Franchising Systems Unit Trust (Plaintiff) Representation: Counsel: TGR Parker SC & L T Livingtson (Plaintiff) Solicitors: Thompson Eslick Solicitors (Plaintiff) File Number(s): 2011/413129