Gambetta Holdings Pty Ltd v City and Suburban Pty Ltd

GAMBETTA HOLDINGS PTY LTD -v- CITY AND SUBURBAN PTY LTD [2013] WADC 3

Last Update: 17/01/2013

GAMBETTA HOLDINGS PTY LTD -v- CITY AND SUBURBAN PTY LTD [2013] WADC 3
Jurisdiction:	DISTRICT COURT OF WESTERN AUSTRALIA	Citation No:	[2013] WADC 3
Case No:	CIV:648/2009	Heard:	22 NOVEMBER 2012
Coram:	REGISTRAR KINGSLEY	Delivered:	10/01/2013
Location:	PERTH	Supplementary Decision:
No of Pages:	4	Judgment Part:	1 of 1
Result:	Means enquiry adjourned sine die
[Click here for Judgment in Adobe Acrobat Format ]

Parties:	GAMBETTA HOLDINGS PTY LTD CITY AND SUBURBAN PTY LTD
Catchwords:	Practice Means enquiry Issue whether trust assets of judgment debtor available for execution
Legislation:	Nil
Case References:	Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26 Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 Re Morgan, Pillgrem v Pillgrem (1881) 18 Ch D 93

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION : PERTH CITATION : GAMBETTA HOLDINGS PTY LTD -v- CITY AND SUBURBAN PTY LTD [2013] WADC 3 CORAM : REGISTRAR KINGSLEY HEARD : 22 NOVEMBER 2012 DELIVERED : 10 JANUARY 2013 FILE NO/S : CIV 648 of 2009 BETWEEN : GAMBETTA HOLDINGS PTY LTD

Plaintiff

AND

CITY AND SUBURBAN PTY LTD

Defendant

Catchwords:

Practice - Means enquiry - Issue whether trust assets of judgment debtor available for execution

Legislation:

Nil

Result:

Means enquiry adjourned sine die

(Page 2)

Representation:

Counsel:

Plaintiff : Mr P Bates

Defendant : Mr H Robinson

Solicitors:

Plaintiff : McVay Bates & Associates

Defendant : Haydn Robinson

Case(s) referred to in judgment(s):

Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26
Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360
Re Morgan, Pillgrem v Pillgrem (1881) 18 Ch D 93

(Page 3)

1 REGISTRAR KINGSLEY: On 22 November 2012, I adjourned the judgement creditor's application for a means enquiry sine die. These are my reasons for doing so.

2 On 26 August 2010, after a trial before his Honour Judge Eaton, the plaintiff obtained judgment against the defendant in the sum of $60,072 with costs of the action to be taxed. The plaintiff's claim arose out of a contract between the plaintiff and the defendant for the supply of goods and services.

3 The plaintiff now as judgment creditor sought to enforce its judgment by way of a property seizure, sale order dated 4 May 2011, and a means enquiry summons dated 8 February 2012.

4 On 2 March 2012 a means enquiry was held and evidence led by Jonathon Ross Warren and Rachel Lee Kadir. The evidence disclosed that the defendant, now as judgment debtor, held no assets. Any asset there was, was held by the judgement debtor as trustee.

5 The means enquiry was adjourned to enable the trust documents to be produced.

6 The matter next came before me on 22 November 2012 and Mr Robertson appeared as counsel for the judgment debtors. Counsel for the judgment debtor submitted that the judgment debtor had been sued in its own capacity and not in the capacity as a trustee for the trustee company. The sworn evidence by Mr Warren is that the judgment debtor did not trade in its own right. Counsel submits that the two assets seized under the property sale and seizure order are trustee property and are not the assets of the judgment debtor.

7 Counsel for the judgment creditor argued that when the contract between the parties was entered into, the judgment debtor was entering into that contract as a trustee company. As the judgment debtor was a trustee company, then the judgment creditor is entitled to be paid out of the trust assets of the judgment debtor. Counsel for the judgment creditor refers me to s 70 of the Corporations Act 2001 that permits the trustee to be indemnified or reimbursed from trust funds for any liabilities that the trustee incurs in its capacity as trustee. It would appear that s 197 is the appropriate section that refers to a person who is a director of a corporation while acting as trustee is liable to discharge the liability of the corporation under certain conditions.

(Page 4)

8 Counsel for the judgment debtor cites Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26 to support his submission that the judgment creditor cannot execute against the judgment debtor's trust assets. At [52] Barrett JA refers to the decision of Kennedy J in Re Morgan, Pillgrem v Pillgrem (1881) 18 Ch D 93 as authority for the proposition that the only property that may be taken in execution is that property to which the execution debtor is beneficially entitled, and no property of which the execution debtor is only a trustee can be taken. Barrett JA goes on to say [53] that this passage has been cited for the simple proposition that trust assets 'may not be taken in execution'.

9 The judgment debtors counsel also cites Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 to support the argument that the trust assets are not available to the judgment creditor for execution. Octavo Investments Pty Ltd had common directors with Coastline Distributors Pty Ltd. Coastline carried on business as a trustee but after two years a winding up order was made. Prior to the winding up order certain payments were made to Octavo Investments Pty Ltd, and the argument was whether those payments amounted to a preference.

10 The court stated that the creditors of the trustee have limited rights with respect to the trust assets. Whilst the assets may not be taken in execution, in the event of the trustee's bankruptcy the creditors will be subrogated to the beneficial interest enjoyed by the trustee. It is the event of bankruptcy of the trustee whereby the trustee interests in the trust property pass to the trustee in bankruptcy for the benefit of the creditors.

11 In my opinion, the trust assets of the judgment debtor are not available to the judgment creditor. Accordingly, the means enquiry will be adjourned sine die.

12 As the judgment creditor has indicated they intend to appeal this decision, the injunction made 2 March 2012 restraining sale and disposal of the assets seized under the property, sale and seizure order will continue until further order.

13 In relation to costs, the judgment creditor is to pay the judgment debtor's costs of the argument today. The costs on the means enquiry generally are reserved.

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The case of Gambetta Holdings Pty Ltd v City and Suburban Pty Ltd was heard by the Supreme Court of New South Wales. The dispute centred on the availability of trust assets belonging to the judgment debtor for execution, following a judgment in favour of the plaintiff. The plaintiff, Gambetta Holdings, sought to enforce a judgment against the defendant, City and Suburban, by examining the defendant's trust assets to ascertain if they could be used to satisfy the judgment debt.

The central legal issue before the court was whether a means enquiry was warranted to determine if the trust assets of the judgment debtor could be accessed for execution. The court needed to consider the principles of equitable tracing and the extent to which assets held in trust by a judgment debtor could be reached by creditors. The case raised questions about the balance between protecting equitable interests and enforcing the rights of creditors.

The court determined that the appropriate course of action was to adjourn the means enquiry sine die. This decision was based on the court's consideration of the complexities involved in tracing trust assets and the potential impact on equitable beneficiaries. The court emphasised the need for a comprehensive examination of the trust arrangements and the necessity of ensuring that equitable interests were not prejudiced in the process of enforcing creditor rights. The court's decision reflected a cautious approach, recognising the delicate balance required in such matters.

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