10. Weeden v Rambaldi [2012] FCA 552
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SummaryIn this decision, which is the subject of an appeal, Bromberg J had to consider who was appointed Mr Weeden’s trustee at a creditors’ meeting. At issue was whether either a sole trustee, or joint trustees, had been appointed. That decision would in turn determine the validity of a number of different Notices subsequently filed and, it was argued, made pursuant to the Act by only one of the two trustees in question.
The Court conducted a forensic examination of the circumstances and documentation relating to the meeting before concluding that creditors had appointed a sole trustee, not joint trustees. Accordingly, the Notices the sole trustee had filed and issued were held to be valid. The application was dismissed.
Facts Mr Turner was originally the trustee. At a meeting of creditors, the minutes recorded a resolution as being passed appointing Mr Rambaldi and Mr Yeo as joint trustees in place of Mr Turner.
Following that meeting in a Notice of Objection to Discharge Mr Yeo described himself as the ‘Trustee’. In a later Notice of Objection to Discharge Mr Yeo described himself as a ‘Joint and Several Trustee’. Between 2007 and 2011 Income Assessments addressed to the bankrupt were signed by Mr Yeo as “Joint & Several Trustee”.
Issue The Court had to determine who was appointed to replace the former trustee, Mr Turner. To this end it was necessary to consider whether at a creditors’ meeting Mr Yeo and Mr Rambaldi were jointly appointed as trustees to replace Mr Turner, or whether Mr Yeo was appointed as the sole trustee. Depending on that determination the validity of Notices relating to Mr Weeden’s bankruptcy then fell to be considered.
The validity of the Notices turned on this point because, as is suggested by the description ‘joint trustees’, any power exercised under the Act will only be validly exercised with the ‘unanimous concurrence’ of each joint trustee. In contrast, and not claimed in the instant matter, if trustees were appointed jointly and severally any or all of them may act. No such issues arise with respect to the Notices in the case of a sole trustee.
DecisionThe Court began by outlining the recognised tripartite classification of trustees: sole, joint, or joint and several. His Honour then posed the two propositions that the applicant had to establish to succeed as being:
1. There was an appointment as joint trustees
2. If it was a joint appointment, the making and filing of Notices were not done with the concurrence of the other Trustee.
As to the first proposition Bromberg J noted the presumption in section 257 of the Act that minutes are prima facie evidence of proceedings at creditors’ meetings. Here the minutes referred to Mr Rambaldi and Mr Yeo as being appointed as joint trustees. However, the Court was satisfied that this was rebutted by other evidence. In particular extrinsic documentation supported the conclusion that Mr Yeo was validly appointed as sole trustee.
This other evidence included having regard to the standard practice of three people present at the meeting. This was taken to likely be a good guide to actual practice. In addition contemporaneous records in the form of handwritten notes and a ‘running sheet’ were scrutinised. It was noted that the minutes were not finalised until three days after the meeting. Finally the inherent disincentives associated with a joint appointment were held to support a conclusion that the joint trustee arrangement was unlikely without there being some good reason being evident. On this basis His Honour was satisfied that the minutes were not a reliable and accurate record of the resolution. Rather it was held that Mr Yeo was validly appointed as the sole trustee and hence the impugned Notices were valid.
An order was also made to amend the National Personal Insolvency Index maintained by ITSA, to record Mr Yeo as the trustee of Mr Weeden’s estate.
While it was unnecessary to decide the second proposition noted above, Bromberg J observed that the evidence fell well short of showing concurrence by Mr Rambaldi.
Likewise the possible application of subsection 306(1) also did not fall to be decided, this only being relevant if a joint appointment had been found. However Bromberg J indicated that he would have rejected its operation on the basis that acts required to be done by ‘the trustee’ with respect to the Notices went beyond a ‘formal defect or irregularity’.
Citing the High Court decision of Adams v Lambert (2006) 228 CLR 409, His Honour construed the exercise of a trustee’s or trustees’ powers relating to the Notices in question as being beyond the remedial scope of subsection 306(1), concluding that the nature of such powers suggested validation by the operation of subsection 306(1) was not intended, such that ‘the validity of an act effectuated by a trustee or trustees at the time the act was effectuated, [is considered] to be an “essential” requirement, the absence of which is not capable of validation by s306(1)”[emphasis added].
The application was dismissed with costs to be determined.
A Notice of Appeal has been filed.
The Court conducted a forensic examination of the circumstances and documentation relating to the meeting before concluding that creditors had appointed a sole trustee, not joint trustees. Accordingly, the Notices the sole trustee had filed and issued were held to be valid. The application was dismissed.
Facts Mr Turner was originally the trustee. At a meeting of creditors, the minutes recorded a resolution as being passed appointing Mr Rambaldi and Mr Yeo as joint trustees in place of Mr Turner.
Following that meeting in a Notice of Objection to Discharge Mr Yeo described himself as the ‘Trustee’. In a later Notice of Objection to Discharge Mr Yeo described himself as a ‘Joint and Several Trustee’. Between 2007 and 2011 Income Assessments addressed to the bankrupt were signed by Mr Yeo as “Joint & Several Trustee”.
Issue The Court had to determine who was appointed to replace the former trustee, Mr Turner. To this end it was necessary to consider whether at a creditors’ meeting Mr Yeo and Mr Rambaldi were jointly appointed as trustees to replace Mr Turner, or whether Mr Yeo was appointed as the sole trustee. Depending on that determination the validity of Notices relating to Mr Weeden’s bankruptcy then fell to be considered.
The validity of the Notices turned on this point because, as is suggested by the description ‘joint trustees’, any power exercised under the Act will only be validly exercised with the ‘unanimous concurrence’ of each joint trustee. In contrast, and not claimed in the instant matter, if trustees were appointed jointly and severally any or all of them may act. No such issues arise with respect to the Notices in the case of a sole trustee.
DecisionThe Court began by outlining the recognised tripartite classification of trustees: sole, joint, or joint and several. His Honour then posed the two propositions that the applicant had to establish to succeed as being:
1. There was an appointment as joint trustees
2. If it was a joint appointment, the making and filing of Notices were not done with the concurrence of the other Trustee.
As to the first proposition Bromberg J noted the presumption in section 257 of the Act that minutes are prima facie evidence of proceedings at creditors’ meetings. Here the minutes referred to Mr Rambaldi and Mr Yeo as being appointed as joint trustees. However, the Court was satisfied that this was rebutted by other evidence. In particular extrinsic documentation supported the conclusion that Mr Yeo was validly appointed as sole trustee.
This other evidence included having regard to the standard practice of three people present at the meeting. This was taken to likely be a good guide to actual practice. In addition contemporaneous records in the form of handwritten notes and a ‘running sheet’ were scrutinised. It was noted that the minutes were not finalised until three days after the meeting. Finally the inherent disincentives associated with a joint appointment were held to support a conclusion that the joint trustee arrangement was unlikely without there being some good reason being evident. On this basis His Honour was satisfied that the minutes were not a reliable and accurate record of the resolution. Rather it was held that Mr Yeo was validly appointed as the sole trustee and hence the impugned Notices were valid.
An order was also made to amend the National Personal Insolvency Index maintained by ITSA, to record Mr Yeo as the trustee of Mr Weeden’s estate.
While it was unnecessary to decide the second proposition noted above, Bromberg J observed that the evidence fell well short of showing concurrence by Mr Rambaldi.
Likewise the possible application of subsection 306(1) also did not fall to be decided, this only being relevant if a joint appointment had been found. However Bromberg J indicated that he would have rejected its operation on the basis that acts required to be done by ‘the trustee’ with respect to the Notices went beyond a ‘formal defect or irregularity’.
Citing the High Court decision of Adams v Lambert (2006) 228 CLR 409, His Honour construed the exercise of a trustee’s or trustees’ powers relating to the Notices in question as being beyond the remedial scope of subsection 306(1), concluding that the nature of such powers suggested validation by the operation of subsection 306(1) was not intended, such that ‘the validity of an act effectuated by a trustee or trustees at the time the act was effectuated, [is considered] to be an “essential” requirement, the absence of which is not capable of validation by s306(1)”[emphasis added].
The application was dismissed with costs to be determined.
A Notice of Appeal has been filed.
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